Nocopi Technologies posts $1.4M Q3 2026 profit
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
Nocopi Technologies (NNUP) reported revenue of $3,328,815 and net income of $1,397,029 for the three months ended September 30, 2026, compared with $385,800 in revenue and a $26,800 net loss a year earlier. The company said current-year profitability was primarily attributable to significant non-recurring items, including license revenue recognized in connection with a license renewal; the quarter also included a $109,261 unrealized gain on marketable securities.
For the nine months ended September 30, 2026, revenue was $4,679,527 and net income was $862,802, compared with $1,224,800 in revenue and a $59,900 net loss in 2025. Nocopi acquired substantially all of Polymeric’s assets on May 18, 2026, for aggregate consideration of $2,650,000, including $1,900,000 in cash, certain specified liabilities and 500,000 common shares. Customer B accounted for 51% of third-quarter revenue and 70% of net accounts receivable as of September 30, 2026.
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- Moderate pointThird-quarter revenue rose 763%; nine-month revenue rose 282% year over year.
- Moderate pointThird-quarter net income was $1,397,029, versus a $26,800 loss.
- Minor pointNine-month net income was $862,802, versus a $59,900 loss.
- Minor pointPolymeric contributed approximately $1,931,000 in revenue from May 18 through September 30, 2026.
Negative
- Moderate pointOperating cash flow was $365,708 used, versus $657,900 provided in the 2025 period.
- Moderate pointCustomer B represented 51% of third-quarter revenue and 70% of net accounts receivable at September 30, 2026.
Filing Explained
At September 30, 2026, cash and equivalents were $7,292,314; operating activities used $365,708 cash over the nine months.
The company reports completed 2026 common-share sales for cash and 500,000 shares issued for Polymeric; 11,906,664 shares were outstanding on
Cash sales included 266,666 shares for
At
The acquisition still had a
Key Figures
Key Terms
held-to-maturity investments financial
unrealized gain financial
valuation allowance financial
incremental borrowing rate financial
guaranteed minimum royalties financial
acquisition method financial
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
What were NNUP’s third-quarter 2026 revenue and net income?
What were the terms of NNUP’s Polymeric acquisition?
How much net income did Polymeric contribute to NNUP?
AI-generated analysis. How Rhea-AI works. Not financial advice.
United States
Securities and Exchange Commission
Washington, D.C. 20549
Form
(Mark One)
For the quarterly period ended
or
For the transition period from _________________ to ______________
Commission File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices) (Zip Code)
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None.
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
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.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller reporting company | |
| Emerging growth company |
If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
Indicate the number of shares
outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
NOCOPI TECHNOLOGIES, INC.
INDEX
| PAGE | |
| Part I. FINANCIAL INFORMATION | |
| Item 1. Financial Statements | 1 |
| Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2026 and 2025 (unaudited) | 1 |
| Condensed Consolidated Balance Sheets at September 30, 2026 (unaudited) and December 31, 2025 | 2 |
| Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2026 and 2025 (unaudited) | 3 |
| Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2026 and 2025 (unaudited) | 4 |
| Condensed Notes to the Condensed Consolidated Financial Statements (unaudited) | 5 |
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 17 |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk | 21 |
| Item 4. Controls and Procedures | 21 |
| Part II. OTHER INFORMATION | |
| Item 1. Legal Proceedings | 22 |
| Item 1A. Risk Factors | 22 |
| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 22 |
| Item 3. Defaults Upon Senior Securities | 22 |
| Item 4. Mine Safety Disclosures | 22 |
| Item 5. Other Information | 22 |
| Item 6. Exhibits | 22 |
| SIGNATURES | 23 |
i
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
NOCOPI TECHNOLOGIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenues | ||||||||||||||||
| Licenses, royalties and fees | $ | $ | $ | $ | ||||||||||||
| Product and other sales | ||||||||||||||||
| Total revenues | ||||||||||||||||
| Cost of revenues | ||||||||||||||||
| Licenses, royalties and fees | ||||||||||||||||
| Product and other sales | ||||||||||||||||
| Total cost of revenues | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating Expenses: | ||||||||||||||||
| Research and development | ||||||||||||||||
| Sales and marketing expenses | ||||||||||||||||
| Professional and consulting expenses | ||||||||||||||||
| Compensation and related taxes - general and administrative | ||||||||||||||||
| Other general and administrative expenses | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| Net Income (Loss) from Operations | ( | ) | ( | ) | ||||||||||||
| Other Income (Expense): | ||||||||||||||||
| Interest income | ||||||||||||||||
| Unrealized gain on marketable securities | ||||||||||||||||
| Interest expense and bank charges | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total Other Income, net | ||||||||||||||||
| Income (Loss) before provision for income taxes | ( | ) | ( | ) | ||||||||||||
| Provision for income taxes | ( | ) | ( | ) | ||||||||||||
| Net Income (Loss) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Net income (loss) per common share, basic and diluted | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Weighted average common shares outstanding - basic and diluted | ||||||||||||||||
The accompanying unaudited condensed notes are an integral part of these unaudited condensed consolidated financial statements.
| 1 |
NOCOPI TECHNOLOGIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, 2026 | December 31, 2025 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Marketable securities - equity securities | ||||||||
| Held-to-maturity investments - short term, amortized cost | ||||||||
| Accounts receivable less $ | ||||||||
| Inventory, net of allowance $ | ||||||||
| Interest receivable | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total Current Assets | ||||||||
| OTHER ASSETS: | ||||||||
| Held-to-maturity investments - long- term, amortized cost | ||||||||
| Property and equipment, net | ||||||||
| Goodwill | ||||||||
| Intangible assets, net | ||||||||
| Long-term receivables | ||||||||
| Operating lease right of use assets | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses and other liabilities | ||||||||
| Stock compensation payable | ||||||||
| Purchase consideration payable – holdback, current | ||||||||
| Operating lease liability – current | ||||||||
| Total Current Liabilities | ||||||||
| NON-CURRENT LIABILITIES: | ||||||||
| Accrued expenses, non-current | ||||||||
| Purchase consideration payable – holdback, long-term | ||||||||
| Operating lease liability – non-current | ||||||||
| TOTAL NON-CURRENT LIABILITIES | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies (Note 13) | — | |||||||
| STOCKHOLDERS' EQUITY: | ||||||||
| Preferred stock, $ | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders' equity | ||||||||
| Total Liabilities and Stockholders' Equity | $ | $ | ||||||
The accompanying unaudited condensed notes are an integral part of these unaudited condensed consolidated financial statements.
| 2 |
NOCOPI TECHNOLOGIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Nine Months Ended September 30, | ||||||||
| 2026 | 2025 | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Adjustments to reconcile net income (loss) to net cash provided by (used in ) operating activities | ||||||||
| Depreciation | ||||||||
| Amortization | ||||||||
| Unrealized gain on marketable securities | ( | ) | ||||||
| Stock based compensation | ||||||||
| Amortization of operating lease right of use asset | ||||||||
| Accretion of discount related to held-to-maturity investments | ( | ) | ||||||
| Inventory reserve | ||||||||
| Changes in Assets and Liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventory | ( | ) | ( | ) | ||||
| Interest receivable | ( | ) | ||||||
| Prepaid and other current assets | ( | ) | ||||||
| Long-term receivables | ( | ) | ||||||
| Accounts payable | ||||||||
| Accrued expenses and other liabilities | ( | ) | ||||||
| Operating lease liability | ( | ) | ( | ) | ||||
| Accrued expenses, non-current | ||||||||
| Net cash (used in) provided by operating activities | ( | ) | ||||||
| INVESTING ACTIVITIES | ||||||||
| Purchase of fixed assets | ( | ) | ||||||
| Purchase of marketable securities - equity securities | ( | ) | ||||||
| Purchase of held-to-maturity investments | ( | ) | ||||||
| Acquisition of business (including $50,000 payment of purchase consideration - holdback) | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| FINANCING ACTIVITIES | ||||||||
| Issuance of common stock for cash | ||||||||
| Proceeds from exercise of warrants | — | |||||||
| Net cash provided by financing activities | ||||||||
| Net cash increase (decrease) for period | ( | ) | ||||||
| Cash and Cash Equivalents | ||||||||
| Cash - beginning of period | ||||||||
| Cash - end of period | $ | $ | ||||||
| Supplemental Disclosure of Cash Flow Information | ||||||||
| Cash paid for: | ||||||||
| Interest | $ | $ | ||||||
| Income Tax | $ | $ | ||||||
| Supplemental Disclosure of Non-Cash Investing and Financing Activities | ||||||||
| Operating lease right of use asset and operating lease liability pursuant to ASC 842 | $ | $ | ||||||
| Issuance of common stock for services | $ | $ | ||||||
| Operating lease right of use asset and operating lease liability due to modification pursuant to ASC 842 | $ | $ | ||||||
| Derecognition of the carrying amounts of the operating right of use asset and operating lease liability associated with the terminated portion pursuant to ASC 842 | $ | $ | ||||||
| Shares issued for acquisition of a company | $ | $ | ||||||
| Purchase consideration payable - holdback | $ | |||||||
| Net assets acquired in acquisition of Polymeric: | ||||||||
| Accounts receivable, net | $ | $ | ||||||
| Inventory | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Property and equipment, net | ||||||||
| Goodwill | ||||||||
| Intangible assets, net | ||||||||
| Operating lease right of use assets | ||||||||
| Accounts payable | ( | ) | ||||||
| Accrued expenses and other liabilities | ( | ) | ||||||
| Operating lease liability – current and non-current | ( | ) | ||||||
| Net assets acquired | $ | $ | ||||||
The accompanying unaudited condensed notes are an integral part of these unaudited condensed consolidated financial statements.
| 3 |
NOCOPI TECHNOLOGIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2026 AND 2025
(Unaudited)
Common stock $0.01 Par Value | Additional Paid-in | Accumulated Other Comprehensive | Accumulated | |||||||||||||||||||||
| Shares | Amount | Capital | Income | Deficit | Total | |||||||||||||||||||
| Balance at December 31, 2025 | $ | $ | $ | $ | — | $ | ( | ) | $ | |||||||||||||||
| Stock-based compensation | — | — | — | — | ||||||||||||||||||||
| Issuance of common stock for cash | — | — | ||||||||||||||||||||||
| Net loss | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||
| Balance at March 31, 2026 | — | ( | ) | |||||||||||||||||||||
| Stock-based compensation | — | — | — | — | ||||||||||||||||||||
| Common stock adjustment | ( | ) | — | — | — | |||||||||||||||||||
| Issuance of common stock for cash | — | — | ||||||||||||||||||||||
| Shares issued for acquisition of a company | — | — | ||||||||||||||||||||||
| Shares issued for services | — | — | ||||||||||||||||||||||
| Net loss | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||
| Balance at June 30, 2026 | — | ( | ) | |||||||||||||||||||||
| Stock-based compensation | — | — | — | — | ||||||||||||||||||||
| Issuance of common stock for cash | — | — | ||||||||||||||||||||||
| Shares issued for services | — | — | ||||||||||||||||||||||
| Net income | — | — | — | — | ||||||||||||||||||||
| Balance at September 30, 2026 | $ | $ | $ | $ | — | $ | ( | ) | $ | |||||||||||||||
Common stock $0.01 Par Value | Additional Paid-in | Accumulated Other Comprehensive | Accumulated | |||||||||||||||||||||
| Shares | Amount | Capital | Income | Deficit | Total | |||||||||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | $ | — | $ | ( | ) | $ | |||||||||||||||
| Stock-based compensation | — | — | — | — | ||||||||||||||||||||
| Net income | — | — | — | — | ||||||||||||||||||||
| Balance at March 31, 2025 | — | ( | ) | |||||||||||||||||||||
| Stock-based compensation | — | — | — | — | ||||||||||||||||||||
| Net loss | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||
| Balance at June 30, 2025 | — | ( | ) | |||||||||||||||||||||
| Stock-based compensation | — | — | — | — | ||||||||||||||||||||
| Shares issued for services | — | — | ||||||||||||||||||||||
| Net loss | — | — | — | ( | ) | ( | ) | |||||||||||||||||
| Balance at September 30, 2025 | $ | $ | $ | $ | — | $ | ( | ) | $ | |||||||||||||||
The accompanying unaudited condensed notes are an integral part of these unaudited condensed consolidated financial statements.
| 4 |
NOCOPI TECHNOLOGIES, INC. AND SUBSIDIARY
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2026
(Unaudited)
Note 1. Organization and Nature of Operations
Nocopi Technologies, Inc. (the “Company”) is incorporated under the laws of the State of Maryland. The Company’s main business activities are the development, manufacturing, and marketing of high-performance specialty inks and coatings for multiple applications across various industries. Its customers use these products for purposes that range from bringing entertainment products to life with color activations and providing document and brand authentication against fraud, counterfeiting, and diversion, to delivering durable, custom-formulated ink and coating solutions for digital, screen, textile, and other industrial printing applications. The Company’s primary markets are the educational and toy products industry, the document and product authentication industry, and the industrial and commercial printing industry.
On May 18, 2026,
the Company entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Polymeric U.S., Inc. (“Polymeric”
or the “Seller”), a Missouri corporation, and Savara Capital, a Mauritius limited company, and the sole shareholder of the
Seller (the “Owner”) whereby the Seller and Owner agreed to sell Polymeric’s business to a wholly owned subsidiary
of the Company, Polymeric Nocopi, LLC (“Polymeric Nocopi”) (see Note 8). Pursuant to the Asset Purchase Agreement, the Company
acquired (the “Polymeric Acquisition”) substantially all the assets of Polymeric for an aggregate purchase consideration
of $
Note 2. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). These statements include all adjustments (consisting of normal recurring adjustments and reclassifications and non-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 Note 2. Significant Accounting Policies included in the Notes to Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the Securities and Exchange Commission on March 31, 2026 (the “2025 Annual Report”). Certain financial information and footnote disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted from the Company’s interim unaudited condensed consolidated financial statements. Accordingly, these interim unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the fiscal year ended December 31, 2025. The December 31, 2025 consolidated balance sheet is derived from those statements. The interim operating results for the three and nine months ended September 30, 2026 are not necessarily indicative of the operating results expected for the full year ending December 31, 2026.
The Company follows Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 220 in reporting comprehensive (loss) income. Comprehensive (loss) income is a more inclusive financial reporting methodology that includes disclosure of certain financial information that historically has not been recognized in the calculation of net (loss) income. Since the Company has no items of other comprehensive (loss) income, comprehensive (loss) income is equal to net (loss) income.
Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements include the accounts of Nocopi Technologies, Inc. and its wholly-owned subsidiary, Polymeric Nocopi. All significant intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates and Assumptions
In preparing the unaudited condensed consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated balance sheet, and revenues and expenses for the period then ended. Actual results may differ significantly from those estimates. Significant estimates made by management include, but are not limited to, the allowance for credit losses and inventory reserves, the estimates of useful lives for depreciation, valuation of the lease liabilities and related right of use assets, valuation of goodwill, fair value of common stock, valuation of stock-based compensation, fair value measurement of available-for-sale investments and the assessment of expected credit losses on investment securities, as applicable, and valuation allowance associated with deferred tax assets.
| 5 |
NOCOPI TECHNOLOGIES, INC. AND SUBSIDIARY CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS September 30, 2026 (Unaudited) |
Reclassifications
Certain prior period amounts have been reclassified to conform to the current period presentation. The reclassified amounts have no impact on the Company’s previously reported financial position or results of operations and relate to the presentation of professional and consulting expenses and compensation and related expenses – general and administrative, separately on the condensed consolidated statements of comprehensive loss previously included in the general and administrative expenses.
Marketable Securities and Investments
The Company classifies its investments in equity securities as marketable securities and debt securities as held-to-maturity at the time of acquisition and reassesses the appropriateness of such classification as required under U.S. GAAP.
Marketable Securities – Equity Securities
The Company accounts for its investments in marketable equity securities in accordance with ASC 321, Investments – Equity Securities. Marketable equity securities are recorded at fair value, with unrealized gains and losses resulting from changes in fair value recognized in the accompanying statements of comprehensive income (loss). Realized gains and losses on sales of equity securities are determined using the specific identification method and recognized in earnings. Dividend income is recognized when the right to receive payment is established.
Held-to-Maturity Investments
Debt securities for which the Company has the positive intent and ability to hold to maturity are classified as held-to-maturity investments and recorded at amortized cost, net of any allowance for credit losses. Premiums and discounts are amortized or accreted over the remaining contractual lives of the securities using the effective interest method and recognized as a component of interest income. The Company evaluates held-to-maturity investments for expected credit losses in accordance with ASC 326 and recognizes an allowance for credit losses, as applicable.
Accounts Receivable and Allowances for Credit Losses
Accounts receivable are uncollateralized customer obligations due under normal trade terms generally requiring payment within 30 days from the invoice date. Customer account balances with invoices dated over 90 days old are considered delinquent. The carrying amount of accounts receivable is reduced by an allowance that reflects management’s best estimate of the amounts that will not be collected.
Accounts receivable are presented net of an allowance for credit losses, which is an estimate of amounts that may not be collectible. The Company uses historical loss information based on the aging of receivables, adjusted for management’s expectations about current and future economic conditions, as the basis to determine expected credit losses. Management exercises significant judgment in determining expected credit losses. Key inputs include macroeconomic factors, industry trends, and the creditworthiness of counterparties. Management believes that the composition of receivables at quarter-end is consistent with historical conditions as credit terms and practices and the client base has not changed significantly.
The Company has elected to apply the practical expedient provided by ASU No. 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. Under this practical expedient, the Company assumes that current conditions existing as of the balance sheet date do not change over the remaining life of current accounts receivable and current contract assets when developing the reasonable and supportable forecasts used to estimate expected credit losses. The practical expedient was adopted prospectively, and its adoption did not have a material impact on the Company's condensed consolidated financial statements.
As of September 30, 2026 and December 31, 2025,
the allowance for credit losses was $
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist primarily of costs paid for future services which will occur within a year. Prepaid expenses principally include prepayments in cash for insurance, rent, and services which are being amortized over the terms of their respective agreements.
| 6 |
NOCOPI TECHNOLOGIES, INC. AND SUBSIDIARY CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS September 30, 2026 (Unaudited) |
Intangible Assets and Goodwill
Intangible assets consist of patents, trademarks, and customer lists. These intangible assets were acquired and initially recognized at cost in connection with the Polymeric Acquisition (see Note 8). The Company's finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives of 10 years, which reflect the period over which the assets are expected to contribute directly or indirectly to future cash flows. The estimated useful lives, residual values, and amortization methods are reviewed at least annually and adjusted prospectively if estimates or expectations change.
Costs incurred to renew or extend the life of existing intangible assets are capitalized when the applicable recognition criteria are met, while maintenance and other costs that do not extend the useful life are expensed as incurred.
The Company records goodwill as the excess of the purchase price over the fair value of the identifiable net assets acquired in a business combination (see Note 8). Goodwill is not amortized but is evaluated for impairment at least annually and more frequently if events or changes in circumstances indicate that it is more likely than not that the fair value of the reporting unit is less than its carrying amount. The Company may first perform a qualitative assessment to determine whether it is necessary to perform a quantitative impairment test. If a quantitative impairment test is performed, any impairment loss is recognized for the amount by which the carrying amount of the reporting unit exceeds its fair value, limited to the carrying amount of goodwill. Impairment losses recognized for goodwill are not subsequently reversed.
Long-Lived Assets
Long-lived assets are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Impairment is determined by comparing
the carrying value of the long-lived assets to the estimated undiscounted future cash flows expected to result from use of the assets
and their ultimate disposition. In instances where impairment is determined to exist, the Company writes down the asset to its fair value
based on the present value of estimated future cash flows. There was
Revenue Recognition
The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers. Revenue is recognized when control of promised goods or services is transferred to customers in an amount that reflects the consideration to which the Company expects to be entitled. 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 (i) products incorporating the Company’s technologies, such as inks, security paper and pressure-sensitive labels, and (ii) equipment used to support the application of the Company’s technologies. Royalties consist of guaranteed minimum royalties payable by certain licensees and additional royalties which vary based on the licensee’s sales or production of products incorporating the licensed technology. Service fees and product sales revenues vary directly with the number of units provided. The following are the Company’s revenue streams as reflected in the accompanying condensed consolidated statements of comprehensive income (loss):
Licenses, royalties and fees:
Fixed-Fee License Agreements
Under certain license agreements, customers are required to pay guaranteed minimum royalties over the term of the contract. Management has determined that these licenses represent the right to use functional intellectual property, as the licensed technology has standalone functionality and does not require ongoing substantive activities affecting its utility. Accordingly, revenue related to guaranteed minimum royalties is recognized at a point in time when the license is made available to the customer, provided the contract is enforceable and collection is probable. Because guaranteed minimum payments are received over multiple years, future payments are discounted to present value when a significant financing component exists. The related interest income is recognized over the collection period using the effective interest method.
License Agreements – Future Technology
Certain license arrangements provide access to future or evolving ink technologies. Revenue under these agreements is recognized over time as the Company satisfies its performance obligations over the contractual term.
Sales-Based Royalties
In addition to guaranteed minimum royalties, certain license agreements provide for royalties based on the licensee’s sales or production volumes. Royalties in excess of guaranteed minimum amounts are recognized in the period in which the underlying customer sales occur.
| 7 |
NOCOPI TECHNOLOGIES, INC. AND SUBSIDIARY CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS September 30, 2026 (Unaudited) |
Product and other sales:
Product Sales
Revenue from product sales is recognized at a point in time when control transfers to the customer, generally upon shipment under FOB shipping point terms.
Significant judgment is required in determining the timing of revenue recognition for license arrangements and in assessing whether a significant financing component exists.
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under ASC 740, Income Taxes. Income tax expense is the total of the current-year income tax due or refundable and the change in the deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized.
A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of the tax benefit that is greater than fifty percent (50%) likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Management is not aware of any issues that could result in significant payments, accruals, or material deviation from its positions.
The Company files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. In general, the statute of limitations of the Company’s U.S. federal tax returns remains open three years after a tax return is filed. The statutes of limitations on the Company’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.
Management has concluded that there are no uncertain tax positions that would require recognition in the financial statements. If the Company were to incur an income tax liability in the future, interest on any income tax liability would be reported as interest expense and penalties on any income tax liability would be reported as income taxes. Management’s conclusions regarding uncertain tax positions may be subject to review and adjustment at a later date based upon ongoing analysis or tax laws, regulations and interpretations thereof as well as other factors.
The Company currently has no federal or state tax examinations in progress. As of September 30, 2026, the Company’s tax returns for the tax years 2025, 2024 and 2023 remain subject to audit, primarily by the Internal Revenue Service. The Company did not have material unrecognized tax benefits as of September 30, 2026 and does not expect this to change significantly over the next 12 months. The Company will recognize interest and penalties accrued on any unrecognized tax benefits as a component of the provision for income taxes.
Stock-Based Compensation
Stock-based compensation is accounted for based on the requirements of ASC 718 – “Compensation –Stock Compensation”, which requires recognition in the financial statements of the cost of employee and director services along with non-employee services received in exchange for an award of equity instruments over the period the employee, director or non-employee is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee, director or non-employee services received in exchange for an award based on the grant-date fair value of the award.
Earnings (Loss) per Share
In accordance with FASB ASC 260, Earnings per Share, basic earnings (loss) per common share is computed using net earnings (loss) divided by the weighted average number of common shares outstanding for the periods presented. Diluted earnings (loss) per share are computed using weighted average number of common shares plus dilutive common share equivalents outstanding during the period. The potential common shares related to unvested RSUs were included from diluted EPS because their effect would be dilutive.
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NOCOPI TECHNOLOGIES, INC. AND SUBSIDIARY CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS September 30, 2026 (Unaudited) |
Lease Accounting
The Company follows ASC Topic 842, Leases (Topic
842) and applies the package of practical expedients, which permits it not to reassess under the new standard its prior conclusions about
lease identification, lease classification and initial direct costs. In addition, the Company elected not to apply ASC Topic 842 to arrangements
with lease terms of
Fair Value of Financial Instruments and Fair Value Measurements
The Company measures its financial assets and liabilities in accordance with US GAAP. For certain financial instruments, including cash and cash equivalents, receivables, accounts payable and accrued liabilities, the carrying amounts approximate fair value due to their short maturities.
The Company follows accounting guidance for financial assets and liabilities. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements but rather applies to all other accounting pronouncements that require or permit fair value measurements. This guidance does not apply to measurements related to share-based payments. This guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost).
The guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs, other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use.
Also see Note 10 – Marketable Securities and Investments and Fair Value Measurements.
Recently Issued Accounting Pronouncements Not Yet Adopted
In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (ASU 2024-03). The new guidance requires disaggregated information about certain income statement expense line items on an annual and interim basis. This guidance will be effective for annual periods beginning the year ended December 31, 2027 and for interim periods thereafter. The new standard permits early adoption and can be applied prospectively or retrospectively. The Company is evaluating the effect that this guidance will have on the Company’s consolidated financial statements and related disclosures.
On December 8, 2025, the FASB issued ASU 2025-11 – Interim Reporting (“ASU 2025-11”) which is intended to improve the navigability of the guidance in ASC 270, Interim Reporting, and clarify when it applies. Under the amendments, an entity is subject to ASC 270 if it provides interim financial statements and notes in accordance with GAAP. ASU 2025-11 also addresses the form and content of such financial statements, interim disclosures requirements, and establishes a principle under which an entity must disclose events since the end of the last annual reporting period that have a material impact on the entity. ASU 2025-11 is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027 and early adoption is permitted. The Company is currently evaluating the impact the adoption of ASU 2025-11 may have on the Company’s consolidated financial statements and related disclosures.
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NOCOPI TECHNOLOGIES, INC. AND SUBSIDIARY CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS September 30, 2026 (Unaudited) |
On December 17, 2025, the FASB issued ASU 2025-12, Codification Improvements. The amendments in this update are to make other incremental improvements to GAAP and facilitate codification updates for a broad range of topics arising from technical corrections, unintended application of the codification, clarifications, and other minor improvements. The resulting amendments are collectively referred to as “Codification Improvements.” ASU 2025-12 is effective for all entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. The Company is currently evaluating the impact the adoption of ASU 2025-12 may have on the Company’s consolidated financial statements and related disclosures.
Note 3. Cash and Cash Equivalents
| Schedule of cash and cash equivalents | ||||||||
| September
30, 2026 | December
31, 2025 | |||||||
| Cash and cash equivalents | ||||||||
| Cash and money market funds | $ | $ | ||||||
| Cash and cash equivalents | $ | $ | ||||||
The Company considers all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents include cash on hand, deposits held at financial institutions, and short-term highly liquid investments that are readily convertible into known amounts of cash and subject to an insignificant risk of changes in value.
The Company currently maintains, and may in the
future maintain, assets at certain financial institutions in the United States in amounts that are, and in the future may be, in excess
of the Federal Deposit Insurance Corporation (“FDIC”) insurance limit of $250,000. At September 30, 2026 and December 31,
2025, the Company had approximately $
Note 4. Inventories
Inventories consist primarily of ink components and are stated at the lower of cost (determined by the first-in, first-out method) or net realizable value. Cost includes material costs, labor, and overhead. Provisions are made for the estimated effect of obsolete and slow-moving inventories on the basis of historical experience, current usage patterns, future demand and marketability of products, inventory levels and turns, and known replacement costs.
| Schedule of inventories | ||||||||
| September
30, 2026 | December
31, 2025 | |||||||
| Inventories consist of the following | ||||||||
| Raw materials | $ | $ | ||||||
| Finished goods | ||||||||
| Inventory gross | ||||||||
| Less: Allowance | ( | ) | ( | ) | ||||
| Inventory | $ | $ | ||||||
The increase in inventory primarily reflects inventory acquired in the Polymeric Acquisition – see Note 8.
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NOCOPI TECHNOLOGIES, INC. AND SUBSIDIARY CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS September 30, 2026 (Unaudited) |
Note 5. Long-term Receivables
As of September 30, 2026 and December 31, 2025,
the Company had long-term receivables of $
The Company renewed one of its license agreements
on January 1, 2026. While the agreement contractually states an effective date of January 1, 2026, the Company’s management determined
that the substantive economics of the arrangement do not change until July 1, 2026, which was the accounting effective date of this agreement.
The Company’s management believes that the accounting effective date is a more accurate reflection of the business and the economic
nature of the agreement. Accordingly, the Company recognized the present value of fixed guaranteed royalty payments from such renewal of license agreement of approximately
$
These agreements grant licenses for the use of certain patented ink technology as it exists at the time that it is granted which is considered functional intellectual property. Under Topic 606, a performance obligation to transfer a license for functional intellectual property is satisfied at a point in time and the fixed consideration could be recognized upfront when the Company transfers control of the license to the licensee if certain criteria are met. Specifically, the minimum royalty guarantee could be recognized upfront if the following conditions are met:
| • | The royalty payment is fixed or determinable |
| • | Collection of the royalty payment is considered probable |
| • | The licensee has the ability to benefit from the licensed technology |
The
Company determined that the above conditions were met upon execution of the four license agreements. The present value of the fixed guaranteed
costs of obtaining the license agreements (sales commissions) was recorded upon renewal of three existing license agreements and a new
license agreement entered into in June 2025 with a new licensee. The sales commissions are amortized on a systematic basis consistent
with the pattern of revenue recognition for the underlying license agreements. The unamortized balance as of September 30, 2026 and December
31, 2025, for accrued commission payable was approximately $
The current portion of the license agreements
in the amount of approximately $
The following table summarizes the remaining future minimum payments due under the four license agreements as of September 30, 2026
| Schedule of future minimum payments | |||||
| Year Ending December 31: | |||||
| 2026 | $ | ||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| 2030 | |||||
| Total | $ | ||||
The Company has evaluated the collectability of the long-term receivables and concluded that expected credit losses related to the receivables remain immaterial as of September 30, 2026. However, there can be no assurance that the receivables will not be impaired in the future due to changes in the licensees’ financial condition or other factors.
The long-term receivables are recorded at their
present value as of September 30, 2026, and the receivable and imputed interest will be amortized over the term of the license agreements
using the effective interest method. The book value approximates the fair value for long-term receivables. The unamortized balance of
the long-term receivables as of September 30, 2026 and December 31, 2025 was $
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NOCOPI TECHNOLOGIES, INC. AND SUBSIDIARY CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS September 30, 2026 (Unaudited) |
Note 6. Property and Equipment
Property and equipment acquisitions are stated at cost less accumulated depreciation and amortization. Expenditures for maintenance and repairs are expensed currently, while renewals and betterments that materially extend the life of an asset are capitalized. The cost of assets sold, retired, or otherwise disposed of, and the related allowance for depreciation, are eliminated from the accounts, and any resulting gain or loss is recognized. Depreciation and amortization is charged to expense on the straight-line basis over the estimated useful life of each asset. Leasehold improvements are amortized over the shorter of the lease term or their respective estimated useful lives.
As of the dates presented, property and equipment consisted of the following:
| Schedule of property and equipment | ||||||||
| September 30, 2026 | December 31, 2025 | |||||||
| Leasehold improvements (approximately | $ | $ | ||||||
| Furniture, fixtures and equipment ( | ||||||||
| Laboratory and production equipment ( | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Total | $ | $ | ||||||
For the three months ended September 30, 2026
and 2025, depreciation expense amounted to approximately $
The increase in property and equipment primarily reflects property and equipment acquired in the Polymeric Acquisition – see Note 8.
Note 7. Intangible Assets
The carrying basis and accumulated amortization of recognized intangible assets at September 30, 2026 are:
| Schedule of accumulated amortization | ||||
| September 30, 2026 | ||||
| Patents | $ | |||
| Customer list | ||||
| Trademark | ||||
| Total | ||||
| Less: accumulated amortization | ( | ) | ||
| Total intangible assets, net | $ | |||
The increase in intangible assets primarily reflects intangible assets acquired in the Polymeric Acquisition – see Note 8.
Note 8. Business Acquisition
On May 18, 2026, the Company entered into the
Asset Purchase Agreement with the Seller and the Owner whereby the Seller and Owner agreed to sell Polymeric’s business to Polymeric
Nocopi, a wholly owned subsidiary of the Company. Pursuant to the Asset Purchase Agreement, the aggregate purchase consideration was $
The holdback amount is being retained by the Company
with respect to the post-closing working capital adjustment and the indemnification obligations of the Seller and Owner under the Asset
Purchase Agreement, and will be released to the Seller, in each case net of any working capital setoff, encumbered amounts and finally
resolved indemnification claims, as follows:
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NOCOPI TECHNOLOGIES, INC. AND SUBSIDIARY CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS September 30, 2026 (Unaudited) |
Management concluded that the assets and business operations acquired in the transaction meet the definition of a business under ASC 805 because (1) inputs were acquired, (2) substantive processes were acquired, (3) outputs existed before the acquisition and (4) the acquired operations are capable of continuing as an ongoing business immediately after the acquisition.
Accordingly, the Polymeric Acquisition is accounted for as a business combination under ASC 805 using the acquisition method with the Company as the acquiring entity.
The Polymeric Acquisition was accounted for under the acquisition method of accounting in accordance with FASB ASC Topic No. 805 Business Combinations, with the Company as the acquiring entity. The acquisition method of accounting requires, among other things, that the assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. In addition, the acquisition method of accounting requires that the consideration transferred be measured at current market prices at the date of the acquisition. Accordingly, the assets acquired and liabilities assumed are recorded as of the acquisition date at their respective fair values and added to those of the Company. The financial statements and reported results of operations of the Company issued after completion of the Polymeric Acquisition will reflect these values. Accordingly, the Company recorded the acquired assets and assumed liabilities at their estimated acquisition-date fair values in accordance with ASC 805 directly on the financial statements of its wholly owned subsidiary, Polymeric Nocopi.
In accordance with ASC 805-30-30-7, the Company
measured the consideration transferred at its acquisition-date fair value. The equity consideration consisted of
The estimated fair values of assets acquired and liabilities assumed are provisional and are based on the information that was available as of the acquisition date to estimate the fair value of assets acquired and liabilities assumed. The Company believes that information provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed. The Company expects to complete the purchase accounting during the measurement period as additional information becomes available.
The consideration paid by the Company as follows:
| Schedule of consideration paid | ||||
| Cash | $ | |||
| Purchase consideration – holdback amount (remaining balance) | ||||
| Fair value of the | ||||
| Fair value of total consideration transferred | $ |
The net purchase price paid by the Company was allocated to assets acquired and liabilities assumed on the records of the Company as follows:
| Schedule of assets acquired and liabilities | ||||
| Current assets acquired (including inventories of $ | $ | |||
| Property and equipment, net | ||||
| Liabilities assumed (including accounts payable of $ | ( | ) | ||
| Total identifiable net assets | ||||
| Intangible assets (see Note 7) | ||||
| Operating lease ROU assets (see Note 13) | ||||
| Goodwill | ||||
| Total | $ | |||
| Acquisition related cost (legal fees included in professional and consulting expenses during the nine months ended September 30, 2026) | $ |
In connection with the Polymeric Acquisition,
on May 18, 2026, Polymeric Nocopi entered into a Transition Support Agreement with a member of the former Seller’s board of
directors who has significant knowledge of Polymeric’s business operations. Under the agreement, the consultant agreed to provide
transition and support services to assist the Company in becoming familiar with the acquired operations and to facilitate an orderly transition
of the acquired business. In consideration for these services, the Company paid the consultant $
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NOCOPI TECHNOLOGIES, INC. AND SUBSIDIARY CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS September 30, 2026 (Unaudited) |
The goodwill recognized in the acquisition is expected to be deductible for income tax purposes.
The results of operations of Polymeric Nocopi
have been included in the Company's condensed consolidated financial statements since the acquisition date. For the period from May 18,
2026 through September 30, 2026, Polymeric Nocopi contributed approximately $
Note 9. Stockholders’ Equity
Private Placements
On December 31, 2025, the Company entered into
Stock Purchase Agreements (the “Purchase Agreements”), by and between the Company and various institutional investors (the
“Purchasers”). The Purchase Agreements provided for the private issuance (the “Private Placement”) to the Purchasers
of an aggregate of
Kevin Westenburg, the Company’s President
and a Director, purchased
Third parties purchased an aggregate of
In connection with the Purchase Agreements, on December 31, 2025, the Company entered into registration rights agreements with certain of the Purchasers, which provide that on or prior to January 9, 2027, the Company must file a registration statement to register the Purchasers’ respective Placement Shares.
In May 2026, the Company sold
Stock-Based Compensation Expense
2024 Incentive Compensation Plan
On June 17, 2024, the Company’s shareholders
approved the Nocopi Technologies, Inc. 2024 Incentive Compensation Plan (the “2024 Plan”), which allows the Company to issue
equity awards to directors, officers, other employees and consultants of the Company. As of September 30, 2026 and 2025,
On December 29, 2025, executives were granted
On May 18, 2026, the Company entered into a two-year
consulting agreement whereby the consultant shall be compensated with an equity grant for any given year during the service period, which
shall be determined based on the fair market value per share of common stock as of the grant date for the applicable year during the service
period. Accordingly, the Company agreed to grant a total of
| 14 |
NOCOPI TECHNOLOGIES, INC. AND SUBSIDIARY CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS September 30, 2026 (Unaudited) |
On September 11, 2023, the Company agreed to issue
an aggregate total of
During the three months ended September 30, 2026
and 2025, the Company recognized total stock-based compensation related to all of the above stock awards of approximately $
As of September 30, 2026, total unrecognized compensation
expense related to all nonvested awards was approximately $
Shares issued for Business Acquisition
On May 18, 2026, the Company issued
Note 10. Marketable Securities and Investments
Marketable Securities
During the nine months ended September 30, 2026,
the Company purchased marketable equity securities for an aggregate cost of $
Held-to-Maturity Investments
The Company invests in corporate and municipal bonds that are classified as held-to-maturity debt securities in accordance with ASC 320, Investments – Debt Securities. The Company has the positive intent and ability to hold these investments to maturity. Accordingly, held-to-maturity debt securities are recorded at amortized cost, net of any allowance for expected credit losses. Premiums and discounts are amortized or accreted over the remaining contractual lives of the securities using the effective interest method, with the resulting amounts recognized as interest income in the accompanying consolidated statements of comprehensive income (loss).
During the nine months ended September 30, 2026,
the Company purchased held-to-maturity debt securities with an aggregate face value of $
As of September 30, 2026, the Company's held-to-maturity debt securities consisted of the following by major security type:
| Schedule of held to maturity debt securities | ||||||||||||
| Amortized Cost | Gross Unrecognized Gains (Losses) | Fair Value | ||||||||||
| Corporate bonds | $ | $ | ( | ) | $ | |||||||
| Municipal bonds | ( | ) | ||||||||||
| Total | $ | $ | ( | ) | $ | |||||||
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NOCOPI TECHNOLOGIES, INC. AND SUBSIDIARY CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS September 30, 2026 (Unaudited) |
The contractual maturities of held-to-maturity debt securities as of September 30, 2026, were as follows:
| Schedule of contractual maturities of held to maturity debt securities | ||||||||
| Amortized Cost | Fair Value | |||||||
| Due in one year or less | $ | $ | ||||||
| Due after one year through three years | ||||||||
| Total | $ | $ | ||||||
The Company evaluates its held-to-maturity debt securities for expected credit losses in accordance with ASC 326, Financial Instruments – Credit Losses. In estimating expected credit losses, the Company considers the credit quality of the issuers, historical loss experience, current economic conditions, and reasonable and supportable forecasts. As of September 30, 2026, the Company determined that no allowance for expected credit losses was required based on its evaluation of the investment portfolio.
Fair Value Measurements
Financial Assets Measured at Fair Value on a Recurring Basis
The following table presents the Company's financial assets measured at fair value on a recurring basis as of September 30, 2026:
| Schedule of financial assets measured at fair value on a recurring basis | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Marketable equity securities | $ | $ | $ | $ | ||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
The fair value of the Company's marketable equity securities is determined based on quoted market prices in active markets for identical securities and is classified within Level 1 of the fair value hierarchy.
Financial Assets Not Measured at Fair Value on a Recurring Basis
The Company's held-to-maturity debt securities, consisting of corporate and municipal bonds, are carried at amortized cost, net of any allowance for expected credit losses. The estimated fair values of these investments are determined using observable market inputs, including quoted prices for similar securities and pricing information obtained from third-party pricing services.
The following table presents the estimated fair values of the Company's held-to-maturity debt securities, which are not measured at fair value on a recurring basis, by level within the fair value hierarchy as of September 30, 2026:
| Schedule of financial assets not measured at fair value on a recurring basis | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Corporate bonds | $ | $ | $ | $ | ||||||||||||
| Municipal bonds | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
The Company classifies the estimated fair values of its held-to-maturity debt securities within Level 2 of the fair value hierarchy because the valuations are based on observable market inputs, including quoted prices for similar securities and other market-corroborated pricing information and these held-to-maturity debt securities are carried at amortized cost and changes in their estimated fair value are not recognized in the statement of comprehensive income (loss).
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NOCOPI TECHNOLOGIES, INC. AND SUBSIDIARY CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS September 30, 2026 (Unaudited) |
Note 11. Income Taxes
There was $
As of September 30, 2026 and December 31, 2025,
the Company had federal net operating loss (“NOL”) carryforwards of $
The tax effects of temporary differences which give rise to deferred tax assets (liabilities) are summarized as follows (in approximate amounts):
| Schedule of deferred tax assets liabilities | ||||||||
| September 30, 2026 | December 31, 2025 | |||||||
| Deferred tax assets/(liabilities) | ||||||||
| Net operating loss carryforward | $ | $ | ||||||
| R&D Credits | ||||||||
| Stock-based compensation | ||||||||
| Operating lease assets | ||||||||
| Capitalize research & development costs | ||||||||
| Depreciation | ( | ) | ||||||
| Amortization | ( | ) | ||||||
| Unrealized gain on marketable securities | ( | ) | ||||||
| Total deferred tax assets | ||||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Net | $ | $ | ||||||
For the nine months ended September 30, 2026,
the net decrease in valuation allowance was $(
In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Deferred tax assets consist primarily of the tax effect of NOL carry-forwards. The Company has provided a full valuation allowance on the deferred tax assets because of the uncertainty regarding its realizability.
Reconciliation of the statutory federal income tax to the Company's effective tax (in approximate amounts):
| Schedule of reconciliation of the statutory federal rate | ||||||||||||||||
| September 30, 2026 | December 31, 2025 | |||||||||||||||
| Amount | % | Amount | % | |||||||||||||
| U.S. Federal statutory tax rate | $ | % | $ | ( | ) | % | ||||||||||
| State and local income tax, net of federal income tax effect | ||||||||||||||||
| Pennsylvania state modifications | ( | ) | ||||||||||||||
| Pennsylvania income tax | ( | ) | ||||||||||||||
| State valuation adjustment | ( | ) | ( | ) | ||||||||||||
| Pennsylvania net operating loss expiration | ||||||||||||||||
| Other | ( | ) | ||||||||||||||
| Tax credits | ( | ) | ( | ) | ( | ) | ||||||||||
| Changes in valuation allowance | ( | ) | ( | ) | ( | ) | ||||||||||
| Nontaxable or nondeductible items | ||||||||||||||||
| Return to provision adjustments | ( | ) | ||||||||||||||
| Expiration of net operating losses | ( | ) | ||||||||||||||
| Other | ||||||||||||||||
| Provision for income taxes | $ | % | $ | % | ||||||||||||
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NOCOPI TECHNOLOGIES, INC. AND SUBSIDIARY CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS September 30, 2026 (Unaudited) |
Internal Revenue Code Section 382 may limit the Company’s ability to utilize net operating loss carryforwards if an ownership change, as defined by the Code, occurs. The Company has not completed an analysis to determine whether an ownership change has occurred or whether any resulting limitation would materially affect the utilization of its net operating loss carryforwards. If an ownership change has occurred, the amount of net operating loss carryforwards available for future use could be limited.
The Company’s policy is to record interest
and penalties associated with unrecognized tax benefits as additional income taxes in the condensed consolidated statements of comprehensive
income (loss). The Company did
Tax years 2023 through 2025 remain open to examination for federal income tax purposes and by other major taxing jurisdictions to which the Company is subject.
Although the Company generated net income during the three months ended September 30, 2026, current-year profitability was primarily attributable to significant non-recurring items, including license revenue recognized in connection with a license renewal. In assessing the realizability of its deferred tax assets, management considered both positive and negative evidence and concluded that the Company's cumulative historical losses continue to outweigh the positive evidence provided by recent profitability. Accordingly, the Company continues to maintain a valuation allowance against its deferred tax assets, as management has determined that it is more likely than not that such assets will not be realized.
Note 12. Major Customer and Geographic Information
The Company’s revenues, expressed as a percentage of total revenues, from non-affiliated customers that equaled 10% or more of the Company’s total revenues were:
| Schedule of revenues as percentage | ||||||||||||||||
Three Months ended September 30, | Nine Months ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Customer A | % | % | % | % | ||||||||||||
| Customer B | % | % | % | % | ||||||||||||
The Company’s non-affiliate customers whose individual balances amounted to more than 10% of the Company’s net accounts receivable, expressed as a percentage of net accounts receivable, were:
| Schedule of non-affiliated customers with accounts receivable | ||||||||
| September
30, 2026 | December
31, 2025 | |||||||
| Customer A | % | % | ||||||
| Customer B | % | % | ||||||
The Company performs ongoing credit evaluations of its customers and generally does not require collateral. The Company also maintains allowances for potential credit losses. The loss of a major customer could have a material adverse effect on the Company’s business operations and financial condition.
The Company’s revenues by geographic region are as follows (in approximate amounts):
| Schedule of revenues by geographic region | ||||||||||||||||
Three Months ended September 30, | Nine Months ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| North America | $ | $ | $ | $ | ||||||||||||
| South America | ||||||||||||||||
| Europe | ||||||||||||||||
| Asia | ||||||||||||||||
| Australia | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
Note 13. Commitments and Contingencies
Legal Matters
From time to time the Company may be involved in claims and legal actions that arise in the ordinary course of business. To the Company’s knowledge, there are no material pending legal proceedings to which the Company is a party or of which any of the Company’s property is the subject.
| 18 |
NOCOPI TECHNOLOGIES, INC. AND SUBSIDIARY CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS September 30, 2026 (Unaudited) |
Leases
The Company conducts its operations in leased
facilities located in King of Prussia, PA under a non-cancelable operating lease expiring on December 31, 2027. The Company entered into
a second amendment to the operating lease agreement, effective June 1, 2025, relating to the leased facilities. The second amendment provides
for an extension term to
On May 18, 2026, the Company, through its wholly owned subsidiary,
Polymeric Nocopi, assumed a lease agreement that was scheduled to expire in December 2026 to conduct its operations in leased facilities
located in North Kansas City, MO. The Company assumed balances of the ROU assets and lease liabilities of $
Simultaneously, on May 18, 2026, the Company,
through its wholly owned subsidiary, Polymeric Nocopi, entered into an amendment agreement due to the Polymeric Acquisition (see Note
8) and extended the lease term of the above lease agreement for an additional two-year period which will expire on
Accordingly, the Company recalculated the lease
liability for the amended term (from May 2026 to December 2028) using the incremental borrowing rate as of May 18, 2026 of
As of September 30, 2026 and December 31, 2025,
the operating lease ROU asset amounted to approximately $
Total operating lease costs were $
Undiscounted future minimum lease payments as of September 30, 2026, by year and in aggregate are approximately as follows:
| Schedule of maturities of lease payments | ||||||
| Year ending December 31 | Operating Leases | |||||
| 2026 | $ | |||||
| 2027 | ||||||
| 2028 | ||||||
| Total lease payments | ||||||
| Less imputed interest | ( | ) | ||||
| Total | $ | |||||
Note 14. Segment Reporting
The Company uses “the management approach” in determining reportable operating segments. Operating segments are defined as components of an entity where discrete financial information is evaluated regularly by the chief operating decision maker (“CODM”). The management approach considers the internal organization and reporting used by the Company’s CODM for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. The Company’s CODM is the chief executive officer of the Company, who reviews operating results to make operating decisions, allocate resources and assess performance for the entire Company. The CODM reviews and utilizes consolidated financial information, including revenue, gross profit, operating income (loss) and net income (loss) as reported on the condensed consolidated statements of comprehensive income (loss), to assess performance and allocate resources to support strategic priorities. Consolidated net income (loss) is the Company's primary measure of segment profit or loss. The measure of segment assets is reported on the consolidated balance sheets as total consolidated assets. The single segment constitutes all the consolidated entities, and the accompanying consolidated financial statements and the notes to the accompanying consolidated financial statements are representative of such amounts. For the three and nine months ended September 30, 2026 and 2025, the Company operated in one operating segment.
| 19 |
NOCOPI TECHNOLOGIES, INC. AND SUBSIDIARY CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS September 30, 2026 (Unaudited) |
The table below provides information about the Company’s revenue, significant segment expenses and other segment expenses for the following periods.
| Schedule of segment expenses | ||||||||
Three Months ended September 30, | ||||||||
| 2026 | 2025 | |||||||
| Revenues | ||||||||
| Licenses, royalties and fees | $ | $ | ||||||
| Product and other sales | ||||||||
| Total revenues | ||||||||
| Cost of revenues | ||||||||
| Licenses, royalties and fees | ||||||||
| Product and other sales | ||||||||
| Total cost of revenues | ||||||||
| Gross profit | ||||||||
| Less Segment expenses | ||||||||
| Research and development | ||||||||
| Sales and marketing | ||||||||
| Professional and consulting expenses | ||||||||
| Compensation and related taxes - general and administrative | ||||||||
| Other general and administrative | ||||||||
| Total operating expenses | ||||||||
| Net income (loss) from operations | ( | ) | ||||||
| Other income (expenses) | ||||||||
| Interest income | ||||||||
| Unrealized gain on marketable securities | ||||||||
| Interest expense and bank charges | ( | ) | ( | ) | ||||
| Total other income | ||||||||
| Provision for income taxes | ( | ) | ||||||
| Segment net income (loss) | $ | $ | ( | ) | ||||
Nine Months ended September 30, | ||||||||
| 2026 | 2025 | |||||||
| Revenues | ||||||||
| Licenses, royalties and fees | $ | $ | ||||||
| Product and other sales | ||||||||
| Total revenues | ||||||||
| Cost of revenues | ||||||||
| Licenses, royalties and fees | ||||||||
| Product and other sales | ||||||||
| Total cost of revenues | ||||||||
| Gross profit | ||||||||
| Less Segment expenses | ||||||||
| Research and development | ||||||||
| Sales and marketing | ||||||||
| Professional and consulting expenses | ||||||||
| Compensation and related taxes - general and administrative | ||||||||
| Other general and administrative | ||||||||
| Total operating expenses | ||||||||
| Net income (loss) from operations | ( | ) | ||||||
| Other income (expenses) | ||||||||
| Interest income | ||||||||
| Unrealized gain on marketable securities | ||||||||
| Interest expense and bank charges | ( | ) | ( | ) | ||||
| Total other income | ||||||||
| Provision for income taxes | ( | ) | ||||||
| Segment net income (loss) | $ | $ | ( | ) | ||||
| 20 |
NOCOPI TECHNOLOGIES, INC. AND SUBSIDIARY CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS September 30, 2026 (Unaudited) |
| September 30, 2026 | December 31, 2025 | |||||||
| Segment Assets | $ | $ | ||||||
Significant Segment Expenses
The Company considers the following as significant expenses in evaluating its segment performance:
| • | Research and Development: includes costs related to personnel, laboratory materials and supplies and product development and testing for ink technologies. |
| • | General and Administrative: includes personnel costs, professional fees, and other overhead expenses. |
| • | Sales and Marketing: includes personnel costs and other sales related expenses. |
| • | Cost of Revenues: represents labor costs, material costs and manufacturing overhead costs associated with the production of materials transferred to the customer from the Company’s facility. |
Since the Company has only one reportable segment, no additional segment disclosures are required beyond entity-wide disclosures presented below.
Entity-Wide Disclosures
| • | Geographic Revenue Information: For the three months ended September 30, 2026, approximately |
| • | Major Customers: The Company had one customer and two customers that accounted
for |
| 21 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Information
This Quarterly Report on Form 10-Q contains, and our officers and representatives may from time to time make, “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: “anticipate,” “intend,” “plan,” “goal,” “seek,” “believe,” “project,” “estimate,” “expect,” “strategy,” “future,” “likely,” “may,” “should,” “will” and similar references to future periods. Examples of forward-looking statements include, among others, statements we make regarding:
| • |
Expected operating results, such as revenue, expenses and capital expenditures
| |
| • |
Current or future volatility in market conditions
| |
| • |
Our belief that we have sufficient liquidity to fund our business operations during the next twelve months
| |
| • | Strategy for customer retention, growth, product development, market position, and risk management |
Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following:
| • |
The extent to which we are successful in gaining new long-term relationships with customers or retaining significant existing customers and the level of service failures that could lead customers to use competitors' services.
| |
| • |
Strategic actions, including business acquisitions and our success in integrating acquired businesses.
| |
| • |
Our ability to improve our current credit rating with our vendors and the impact on our raw materials and other costs and competitive position of doing so.
| |
| • |
The impact of losing our intellectual property protections or the loss in value of our intellectual property.
| |
| • |
Changes in customer demand.
| |
| • |
The occurrence of hostilities, political instability or catastrophic events.
| |
| • |
Developments and changes in laws and regulations, including increased regulation of our industry through legislative action and revised rules and standards.
| |
| • |
Security breaches, cybersecurity attacks and other significant disruptions in our information technology systems.
| |
| • | Such other factors as discussed throughout Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations in this Quarterly Report on Form 10-Q, and throughout Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations and in Part I, Item 1A. Risk Factors of the 2025 Annual Report. |
Any forward-looking statement made by us in this Quarterly Report on Form 10-Q is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.
The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and the notes thereto included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management. This information should also be read in conjunction with our audited historical financial statements which are included in the 2025 Annual Report.
| 22 |
Background Overview
Nocopi Technologies, Inc. develops and markets specialty reactive inks for multiple applications across various industries. Our specialty inks are used by our customers for a range of purposes from bringing entertainment products to life with a variety of color activations to providing document and brand authentication for security purposes aimed at reducing losses caused by fraudulent document reproduction or by product counterfeiting and/or diversion. Our primary markets are the large educational and toy products industry and the document and product authentication industry. We derive our revenues primarily from licensing our technologies on an exclusive or non-exclusive basis to licensees who incorporate our technologies into their product offering and from selling products incorporating our technologies to our licensees or to their licensed printers.
Unless the context otherwise requires, all references to the “Company,” “we,” “our” or “us” and other similar terms mean Nocopi Technologies, Inc., a Maryland corporation, and its consolidated subsidiary, Polymeric Nocopi.
Recent Developments
On May 18, 2026, the Company entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Polymeric U.S., Inc. (“Polymeric” or the “Seller”), a Missouri corporation, and Savara Capital, a Mauritius limited company, and the sole shareholder of the Seller (the “Owner”) whereby the Seller and Owner agreed to sell Polymeric’s business to a wholly owned subsidiary of the Company, Polymeric Nocopi, LLC (“Polymeric Nocopi”). Pursuant to the Asset Purchase Agreement, the Company acquired (the “Polymeric Acquisition”) substantially all the assets of Polymeric for an aggregate purchase consideration of $2,650,000, which consisted of (a) $1,900,000 in cash, subject to customary working capital adjustments and other reductions described below, (b) the assumption by the Company of certain specified liabilities of the Seller and (c) the issuance by the Company of 500,000 shares of Common Stock to the Seller. On the closing date, the Company delivered to the Seller $1,750,000, which represented the cash consideration portion of the purchase price, less the holdback amount of $150,000. Polymeric's business operations consist primarily of the manufacture and sale of screens and digital inks. Management believes the acquisition expands the Company's product offerings, manufacturing capabilities, customer relationships, and is expected to enhance future revenue opportunities and expand geographic footprint of the Company.
Results of Operations
The Company’s revenues are derived from (a) royalties paid by licensees of our technologies, (b) fees for the provision of technical services to licensees and (c) from the direct sale of (i) products incorporating our technologies, such as inks, security paper and pressure sensitive labels, and (ii) equipment used to support the application of our technologies, such as ink-jet printing systems. Royalties consist of guaranteed minimum royalties payable by our licensees in certain cases and additional royalties which typically vary with the licensee’s sales or production of products incorporating the licensed technology. Service fees and sales revenues vary directly with the number of units of service or product provided.
The Company recognizes revenue on its lines of business as follows:
| a. | License fees for the use of our technology and guaranteed minimum royalties under licenses of functional intellectual property are recognized at a point in time when the license term begins, provided the contract is enforceable and collection is probable; royalties in excess of guaranteed minimums are recognized when the underlying licensee sales occur; and license arrangements that provide access to future technology are recognized over time as the Company satisfies its performance obligations over the contractual term; | |
| b. | Product sales are recognized at the time of the transfer of goods to customers at an amount that the Company expects to be entitled to in exchange for these goods, which is at the time of shipment; and | |
| c. | Fees for technical services are recognized at the time of the transfer of services to customers at an amount that the Company expects to be entitled to in exchange for the services, which is when the service has been rendered. |
We believe that, as fixed cost reductions beyond those we have achieved in recent years may not be achievable, our 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 amount of the Company’s revenues and the mix among the various sources of revenue are subject to substantial fluctuation. We have 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, revenue mix and overall financial performance. Such changes may result from a substantial customer’s product development delays, engineering changes, changes in product marketing strategies, production requirements 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 such terms, revenues from the customer may be adversely affected.
| 23 |
For the Three and Nine months ended September 30, 2026, as compared to the Three and Nine months ended September 30, 2025.
Total revenues for the three months ended September 30, 2026 were approximately $3,329,000 as compared to $386,000 for the three months ended September 30, 2025, an increase of $2,943,000 or approximately 763%. Total revenues for the nine months ended September 30, 2026 were approximately $4,680,000 as compared to $1,225,000 for the nine months ended September 30, 2025, an increase of $3,455,000, or 282%. The increase in total revenues is primarily comprised of the following:
| · | Licenses, royalties and fees increased by approximately $1,620,000, or 1,470%, to approximately $1,731,000 for the three months ended September 30, 2026 from approximately $110,000 for the three months ended September 30, 2025. Licenses, royalties and fees increased by approximately $1,457,000, or 331%, to approximately $1,897,000 for the nine months ended September 30, 2026 from approximately $440,000 for the nine months ended September 30, 2025. The increase in licenses, royalties and fees during the three and nine months ended September 30, 2026 compared to the three and nine months ended September 30, 2025 is due primarily to the renewal of one existing license effective in July 2026 . We cannot assure you that the marketing and product development activities of the Company’s licensees or other businesses in the entertainment and toy products market will produce a significant increase in revenues for the Company, nor can the timing of any potential revenue increases be predicted, particularly given the uncertain economic conditions presently being experienced. |
| · | Product and other sales increased by approximately $1,323,000, or 480%, to approximately $1,598,000 for the three months ended September 30, 2026 from approximately $275,000 for the three months ended September 30, 2025. Product and other sales increased by approximately $1,998,000, or 255%, to approximately $2,782,000 for the nine months ended September 30, 2026 from $784,000 for the nine months ended September 30, 2025. Sales of ink increased for the three and nine months ended September 30, 2026 compared to the three and nine months ended September 30, 2025 due primarily to higher ink shipments to the third party authorized printer used by two of the Company’s major licensees in the entertainment and toy products market. Additionally, product and other sales increased due to the Polymeric Acquisition, as our subsidiary, Polymeric Nocopi, generated approximately $1,931,000 of revenue from the acquisition date on May 18, 2026 to September 30, 2026. In the third quarter of 2026, the Company derived revenues of approximately $369,600 from the Company’s licensees and their authorized printers in the entertainment and toy products market as compared to revenues of approximately $346,400 in the third quarter of 2025. |
The Company’s gross profit increased to approximately $2,203,000 or 66% of gross revenues, for the three months ended September 30, 2026 from approximately $178,000 or 46% of gross revenues for the three months ended September 30, 2025, an approximately 20% increase in gross profit percentage. The Company’s gross profit increased to approximately $2,751,000 or 59% of gross revenues for the nine months ended September 30, 2026 from approximately $643,000 or 52% of gross revenues for the nine months ended September 30, 2025, an approximately 6% increase in gross profit percentage. The increase in gross profit percentage is due to the increase in revenues from licenses, royalties and fees which have historically carried a higher gross profit than product and other sales, which generally consist of either supplies or other manufactured products which incorporate the Company’s technologies or equipment used to support the application of its technologies. These product supplies and items (except for inks which are manufactured by the Company) are generally purchased from third-party vendors and resold to the end-user or licensee and carry a lower gross profit than licenses, royalties and fees.
As the variable component of cost of revenues related to licenses, royalties and fees is a low percentage of these revenues and the fixed component is not substantial, period to period changes in revenues from licenses, royalties and fees can significantly affect both the gross profit from these sources as well as the Company’s overall gross profit. The gross profit from licenses, royalties and fees increased to approximately 97% for the three months ended September 30, 2026 from approximately 60% for the three months ended September 30, 2025. The gross profit from licenses, royalties and fees increased to approximately 92% for the nine months ended September 30, 2026 from approximately 71% for the nine months ended September 30, 2025.
The gross profit of product and other sales, expressed as a percentage of revenues, is dependent on both the overall sales volumes of product and other sales and on the mix of the specific goods produced and/or sold. The gross profit from product and other sales decreased to approximately 33% for the three months ended September 30, 2026 from approximately 40% for the three months ended September 30, 2025. The gross profit from product and other sales decreased to approximately 36% for the nine months ended September 30, 2026 from approximately 42% for the nine months ended September 30, 2025.
Total operating expenses for the three months ended September 30, 2026, as compared to the three months ended September 30, 2025, were approximately $982,000 and $320,000, respectively, an increase of approximately $661,000 or 207%. Total operating expenses for the nine months ended September 30, 2026, as compared to the nine months ended September 30, 2025, were approximately $2,259,000 and $1,044,000, respectively, an increase of approximately $1,215,000 or 116%. The increase in total operating expenses was primarily comprised of the following:
| • | Research and development expenses increased for the three months ended September 30, 2026 to approximately $58,000 as compared to $44,000 for the three months ended September 30, 2025. Research and development expenses increased for the nine months ended September 30, 2026 to approximately $162,000 compared to $132,000 for the nine months ended September 30, 2025. The increase is due primarily to higher lab expenses for both periods in 2026 as compared to the prior 2025 period. |
| • | Sales and marketing expenses increased for the three months ended September 30, 2026 to approximately $203,000 as compared to $71,000 for the three months ended September 30, 2025. Sales and marketing expenses increased for the nine months ended September 30, 2026 to approximately $366,000 as compared to $220,000 for the nine months ended September 30, 2025. The increase is due primarily to higher commission expense for both periods in 2026 as compared to the prior 2025 period as a result of the increase in revenues from product and other sales |
| 24 |
| • | Professional and consulting expenses increased for the three months ended September 30, 2026 to approximately $190,000 as compared to $87,000 for the three months ended September 30, 2025. Professional and consulting expenses increased for the nine months ended September 30, 2026 to approximately $676,000 as compared to $309,000 for the nine months ended September 30, 2025. The increase is due primarily to increases in legal fees, accounting fees and consulting fees, which are primarily related to acquisition-related costs for the Polymeric Acquisition. | |
| • | Compensation and related taxes – general and administrative increased for the three months ended September 30, 2026 to approximately $345,000 as compared to $69,000 for the three months ended September 30, 2025. Compensation and related taxes – general and administrative increased for the nine months ended September 30, 2026 to approximately $676,000 as compared to $205,000 for the nine months ended September 30, 2025. The increase is due primarily to increases in salaries and stock-based compensation to our officers as well as compensation expenses of our newly owned subsidiary, Polymeric Nocopi. |
| • | Other general and administrative expenses increased for the three months ended September 30, 2026 to approximately $186,000 as compared to $50,000 for the three months ended September 30, 2025. Other general and administrative expenses increased for the nine months ended September 30, 2026 to approximately $379,000 as compared to $178,000 for the nine months ended September 30, 2025. The increase is due primarily to increases in rent expenses, depreciation, and office expenses for both periods in 2026 as compared to the prior 2025 period and such increase is primarily attributable to the Polymeric Acquisition. |
| • | Additionally, the overall increase in total operating expenses is due to the Polymeric Acquisition and as such, the operating expenses included the operations of our newly owned subsidiary, Polymeric Nocopi, from May 18, 2026 to September 30, 2026. |
We reported other income, net of approximately $201,000 and $116,000 for the three months ended September 30, 2026 and 2025, respectively, and approximately $396,000 and $341,000 for the nine months ended September 30, 2026 and 2025, respectively. The increase in other income is primarily attributable to the recognition of an unrealized gain on marketable securities related to acquired equity securities investments during the third quarter of 2026 offset by decrease in interest income as a direct result of having a lower cash balance for both periods in 2026 as compared to the prior period of 2025.
For the three and nine months ended September 30, 2026, we recorded a provision for income taxes of approximately $25,000. We did not record a provision for income taxes for the three and nine months ended September 30, 2025.
Net income increased to approximately $1,397,000 for the three months ended September 30, 2026 as compared to a net loss of $(27,000) for the three months ended September 30, 2025. Net income increased to approximately $863,000 for the nine months ended September 30, 2026 as compared to a net loss of $(60,000) for the nine months ended September 30, 2025. The change relates to the factors discussed above.
Plan of Operation, Liquidity and Capital Resources
The Company’s cash decreased to approximately $7,292,000 at September 30, 2026 from $11,553,600 at December 31, 2025. The change is discussed below under cash flow from activities.
The following table summarizes total current assets, liabilities and working capital at September 30, 2026, compared to December 31, 2025, and the changes between those periods:
| September 30, 2026 | December 31, 2025 | |||||||
| Total Current Assets | $ | 12,246,479 | $ | 13,091,300 | ||||
| Total Current Liabilities | $ | 980,300 | $ | 290,800 | ||||
| Working Capital | $ | 11,266,179 | $ | 12,800,500 | ||||
Sources and Uses of Cash
| For the nine months ended September 30, | ||||||||
| 2026 | 2025 | |||||||
| Net cash (used in) provided by operating activities | $ | (365,708 | ) | $ | 657,900 | |||
| Net cash used in investing activities | $ | (4,695,579 | ) | $ | — | |||
| Net cash provided by financing activities | $ | 800,001 | $ | — | ||||
Net Cash Flow from Operating Activities
For the nine months ended September 30, 2026, net cash used in operating activities was approximately $366,000 due to our net income of approximately $863,000 offset primarily by non-cash charges of stock-based compensation of approximately $106,000, depreciation of $31,000, amortization of $11,000 and amortization of right of use assets of $127,000, partially offset by an unrealized gain on marketable securities of approximately $109,000. Net changes in operating assets and liabilities totaled approximately $(1,409,000), which is primarily attributable to an increase in long-term receivables of approximately $1,013,000, increase in accounts receivable of $445,000, increase in inventories of $132,000, increase in accounts payable and accrued expenses of $372,000 and decrease in operating lease liability of $123,000.
For the nine months ended September 30, 2025, net cash provided by operating activities was approximately $658,000 due to our net loss of approximately $60,000 offset primarily by non-cash charges of stock- based compensation of approximately $72,000, depreciation of $5,000, and amortization of right of use assets of $57,000. Net changes in operating assets and liabilities totaled approximately $569,000, which is primarily attributable to a decrease in long-term receivables of approximately $369,000, decrease in accounts receivable of $247,000, decrease in prepaid and other current assets of $57,000, increase in accounts payable of $44,000 and decrease in operating lease liability of $52,000.
Net Cash Flow used in Investing Activities
Net cash used in investing activities was approximately $4,696,000 for the nine months ended September 30, 2026, related to purchase of equipment of approximately $19,000, purchase of equity investments of approximately $276,000, purchase of held-to-maturity debt securities investments of approximately $2,600,000 and the acquisition of Polymeric business for $1,800,000 as compared to $0 in the same period of 2025.
| 25 |
Net Cash Flow from Financing Activities
Net cash provided by financing activities was approximately $800,000 for the nine months ended September 30, 2026, related to proceeds received from the sale of our common stock for $800,000 as compared to $0 in the same period of 2025.
Our plan of operations for the next twelve months following the date of this Quarterly Report on Form 10-Q consists of concentrating available human and financial resources to continue to capitalize on the specific business relationships the Company has developed in the entertainment and toy products market. Based on our current operating plan, we believe that our existing cash resources will be able to fund our planned operations for the next twelve months. This includes two licensees that have been marketing products incorporating the Company’s technologies since 2012. These two licensees maintain a significant presence in the entertainment and toy products market and are well known and highly regarded participants in this market. We anticipate that these two licensees will expand their current offerings that incorporate our technologies and will introduce and market new products that will incorporate our technologies available to them under their license agreements with the Company. We will continue to develop various applications for these licensees. We also plan to expand our licensee base in the entertainment and toy market. We currently have additional licensees marketing or developing products incorporating our technologies in certain geographic and niche markets of the overall entertainment and toy products market.
The Company maintains its presence in the retail loss prevention market and believes that revenue growth in this market can be achieved through increased security ink sales to its licensees in this market. We will continue to adjust our production and technical staff as necessary and, subject to available financial resources, invest in capital equipment needed to support potential growth in ink production requirements beyond our current capacity. Additionally, we will pursue opportunities to market our current technologies in specific security and non-security markets. There can be no assurances that these efforts will enable the Company to generate additional revenues and positive cash flow.
The Company intends to continue pursuing strategic acquisitions of businesses with complementary or competing products, services, technologies, or capabilities that enhance its operations, expand its product and service offerings, and support long-term growth and the generation of free cash flow. Although the Company completed a recent acquisition in May 2026, management continues to actively evaluate additional acquisition opportunities and engage in discussions with prospective acquisition targets. Future acquisitions may be funded through the issuance of debt or equity securities, cash payments, the exchange of services, or any combination thereof. As of the date of this Quarterly Report on Form 10-Q, the Company has not entered into any definitive agreements with respect to any additional acquisitions.
The Company has received, and may in the future seek, additional capital in the form of debt, equity or both, to support our working capital requirements and to provide funding for other business opportunities. We cannot assure you that if we require additional capital, that we will be successful in obtaining such additional capital, or that such additional capital, if obtained, will enable the Company to generate additional revenues and positive cash flow.
As previously stated, we generate a significant portion of our total revenues from licensees in the entertainment and toy products market. These licensees generally sell their products through retail outlets. In the future, such sales may be adversely affected by changes in consumer spending that may occur as a result of an uncertain economic environment in 2026 and beyond and its effect on the global economy, geopolitical instability including the Russia-Ukraine war and conflicts in the Middle East and the related supply chain disruptions as well as the record inflation and significantly higher interest rates currently being experienced in the United States along with the probability of an economic recession both in the United States and globally. As a result, our revenues, results of operations and liquidity may be negatively impacted in future periods.
Contractual Obligations
As of September 30, 2026, there were no material changes in our contractual obligations from those disclosed in the 2025 Annual Report, other than those appearing in the notes to the financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.
Recently Adopted Accounting Pronouncements
As of September 30, 2026 and for the period then ended, there are no recently adopted accounting standards that have a material effect on the Company's financial statements.
Recently Issued Accounting Pronouncements Not Yet Adopted
See Note 2 to the condensed consolidated financial statements for a discussion of recently issued accounting pronouncements not yet adopted, which the Company is currently evaluating.
| 26 |
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not Applicable
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures. The Company's management, with the participation of its Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of September 30, 2026. Based on such evaluation, the Company's Principal Executive Officer and Principal Financial Officer concluded that, as of September 30, 2026, the Company's disclosure controls and procedures were effective and provided reasonable assurance that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified by the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to the Company's management, including its Principal Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Management’s evaluation considered the Company’s size and staffing levels, including management review controls implemented during 2025 and continuing through the quarter ended September 30, 2026. The Company completed its acquisition of Polymeric in May 2026. Due to the limited period of time since the acquisition, the Company is continuing to evaluate Polymeric’s internal controls and financial reporting processes and integrate Polymeric’s financial reporting function into the Company’s existing internal control framework.
Changes in Internal Control Over Financial Reporting. In connection with the acquisition of Polymeric in May 2026, during the quarter ended June 30, 2026, the Company began integrating Polymeric’s financial reporting processes and internal controls into the Company’s internal control over financial reporting. Given the limited period of time between the acquisition date and September 30, 2026, the evaluation and integration of Polymeric’s internal controls and financial reporting processes remained ongoing as of September 30, 2026.
Except for the ongoing evaluation and integration activities related to Polymeric described above, there were no changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended September 30, 2026 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 1A. Risk Factors.
Information about risk factors for the quarter ended September 30, 2026 does not differ materially from that set forth in Part I, Item 1A of the 2025 Annual Report.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
In September 2026, the Company sold 133,334 shares of Common Stock for $200,000 or $1.50 per share to an accredited investor in a private placement.
In September 2026, we issued an aggregate of 29,966 shares of Common Stock to consultants in consideration for services rendered.
The securities in the transactions described above were sold in reliance on the exemption from registration provided in Section 4(a)(2) of the Securities Act, as there was no general solicitation to the investors and the transactions did not involve any public offering. The Company relied on this exemption from registration based in part on representations made by the purchasers, including that each purchaser is an “accredited investor”, as defined in Rule 501(a) promulgated under the Securities Act.
Item 3. Defaults Upon Senior Securities.
None
Item 4. Mine Safety Disclosures.
Not applicable
Item 5. Other Information.
From time to time, certain of our executive officers and directors have, and we expect they will in the future, enter into, amend or terminate written trading arrangements pursuant to Rule 10b5-1 under the Exchange Act or otherwise.
During the quarter
ended September 30, 2026,
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Item 6. Exhibits.
(a) Exhibits
The following exhibits are included herein:
| Exhibit Number | Description | Location | ||
| 10.1* | Letter Agreement, dated as of September 30, 2026, by and between Terry Stovold and Nocopi Technologies, Inc. | Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on October 2, 2026 | ||
| 31.1 | Certification of Chief Executive Officer required by Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | Filed herewith | ||
| 31.2 | Certification of Chief Financial Officer required by Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | Filed herewith | ||
| 32.1 | Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | Furnished herewith | ||
| 101.INS | Inline XBRL Instance Document–the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document | Filed herewith | ||
| 101.SCH | Inline XBRL Taxonomy Extension Schema | Filed herewith | ||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase | Filed herewith | ||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase | Filed herewith | ||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase | Filed herewith | ||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase | Filed herewith | ||
| 104 | Cover page formatted as Inline XBRL and contained in Exhibit 101 | Filed herewith |
* Management contract or compensation plan or arrangement.
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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, 2026 | /s/ Matthew C. Winger | |
| Matthew C. Winger | ||
| Chairman of the Board & Chief Executive Officer (Principal Executive Officer) | ||
| DATE: November 12, 2026 | /s/ Debra E. Glickman | |
| Debra E. Glickman | ||
| Chief Financial Officer (Principal Financial and Accounting Officer) | ||
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