Nocopi Technologies (NNUP) Q1 2026 revenue drops 19% as profit turns to loss
Nocopi Technologies, Inc. reports Q1 2026 revenue of $389,700 and a net loss of $62,300, compared with net income of $25,500 a year earlier. Revenue fell about 19%, mainly because licenses, royalties and fees dropped to $100,700 from $190,300, while product sales were flat.
Gross margin slipped to roughly 49% as the mix shifted away from higher-margin licensing. Operating expenses were broadly stable at $352,100, and interest income of $105,200 partially offset the operating loss. Cash and cash equivalents increased to $11.9M, helped by a $400,000 private placement at $1.50 per share, leaving working capital of $13.3M and stockholders’ equity of $13.9M.
Positive
- None.
Negative
- None.
Insights
Revenue slipped on weaker licensing, but liquidity remains strong.
Nocopi Technologies saw Q1 2026 revenue fall to $389,700, with licenses, royalties and fees down 47% year over year. That shift reduced gross profit to $190,600 and drove an operating loss despite fairly stable operating expenses around $352,100.
The business still generates meaningful interest income of $105,200 from its cash and long-term receivables, softening the loss to $62,300. A $400,000 equity raise lifted cash to $11.9M against modest total liabilities of $390,000, indicating a solid balance sheet.
Future performance will hinge on restoring higher-margin licensing revenue, especially from key entertainment and toy licensees that provided about $375,700 of Q1 2026 revenue. Subsequent quarterly filings for periods ending after March 31, 2026 will show whether licensing volumes and margins recover.
Key Figures
Key Terms
long-term receivables financial
valuation allowance financial
restricted stock units financial
Private Placement financial
Rule 10b5-1 regulatory
Earnings Snapshot
United States
Securities and Exchange Commission
Washington, D.C. 20549
Form
(Mark One)
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NOCOPI TECHNOLOGIES, INC.
INDEX
| PAGE | |
| Part I. FINANCIAL INFORMATION | |
| Item 1. Financial Statements | 1 |
| Condensed Statements of Comprehensive (Loss) Income for the Three Months Ended March 31, 2026 and March 31, 2025 | 1 |
| Condensed Balance Sheets at March 31, 2026 and December 31, 2025 | 2 |
| Condensed Statements of Cash Flows for the Three Months Ended March 31, 2026 and March 31, 2025 | 3 |
| Condensed Statements of Stockholders’ Equity for the Three Months Ended March 31, 2026 and March 31, 2025 | 4 |
| Notes to the Condensed Financial Statements | 5 |
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 12 |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk | 16 |
| Item 4. Controls and Procedures | 16 |
| Part II. OTHER INFORMATION | |
| Item 1. Legal Proceedings | 17 |
| Item 1A. Risk Factors | 17 |
| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. | 17 |
| Item 3. Defaults Upon Senior Securities | 17 |
| Item 4. Mine Safety Disclosures | 17 |
| Item 5. Other Information | 17 |
| Item 6. Exhibits | 17 |
| SIGNATURES | 18 |
i
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
Nocopi Technologies, Inc.
Condensed Statements of Comprehensive (Loss) Income*
(unaudited)
Three Months ended March 31 | ||||||||
| 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 | ||||||||
| General and administrative | ||||||||
| Total operating expenses | ||||||||
| Net loss from operations | ( | ) | ( | ) | ||||
| Other income (expenses) | ||||||||
| Interest income | ||||||||
| Interest expense and bank charges | ( | ) | ( | ) | ||||
| Total other income | ||||||||
| Net (loss) income before income taxes | ( | ) | ||||||
| Income taxes | ||||||||
| Net (loss) income | $ | ( | ) | $ | ||||
| Net (loss) income per common share | ||||||||
| Basic and Diluted | $ | ( | ) | $ | ||||
| Weighted average common shares outstanding | ||||||||
| Basic and Diluted | ||||||||
*See accompanying notes to these condensed financial statements.
| 1 |
Nocopi Technologies, Inc.
Condensed Balance Sheets*
(unaudited)
| March 31 | December 31 | |||||||
| 2026 | 2025 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable less $ | ||||||||
| Inventory, net of allowance of $ | ||||||||
| Prepaid and other | ||||||||
| Total current assets | ||||||||
| Fixed assets | ||||||||
| Leasehold improvements | ||||||||
| Furniture, fixtures and equipment | ||||||||
| Fixed assets, gross | ||||||||
| Less: accumulated depreciation and amortization | ||||||||
| Total fixed assets | ||||||||
| Other assets | ||||||||
| Long-term receivables | ||||||||
| Operating lease right of use – building | ||||||||
| Total other assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders' Equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Stock compensation payable | ||||||||
| Operating lease liability – current | ||||||||
| Total current liabilities | ||||||||
| Long-term liabilities | ||||||||
| Operating lease liability – non-current | ||||||||
| Accrued expenses, non-current | ||||||||
| Total long-term liabilities | ||||||||
| Total liabilities | ||||||||
| Stockholders' equity | ||||||||
| Preferred stock,
$ | ||||||||
| Common stock, $ Issued and outstanding – March 31, 2026- December 31, 2025- | ||||||||
| Paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders' equity | ||||||||
| Total liabilities and stockholders' equity | $ | $ | ||||||
*See accompanying notes to these condensed financial statements.
| 2 |
Nocopi Technologies, Inc.
Condensed Statements of Cash Flows*
(unaudited)
Three Months ended March 31 | ||||||||
| 2026 | 2025 | |||||||
| Operating Activities | ||||||||
| Net (loss) income | $ | ( | ) | $ | ||||
| Adjustments to reconcile net (loss) income to net cash provided by operating activities | ||||||||
| Depreciation and amortization | ||||||||
| Stock-based compensation | ||||||||
| Amortization of operating lease right of use-building | ||||||||
| Inventory reserve | ( | ) | ( | ) | ||||
| (Increase) decrease in assets | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventory | ||||||||
| Prepaid and other current assets | ||||||||
| Long-term receivables | ||||||||
| Increase (decrease) in liabilities | ||||||||
| Accounts payable | ||||||||
| Accrued expenses | ( | ) | ||||||
| Operating lease liability-current | ( | ) | ( | ) | ||||
| Net cash (used in) provided by operating activities | ( | ) | ||||||
| Investing Activities | ||||||||
| Purchase of fixed assets | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| Financing Activities | ||||||||
| Issuance of common stock | ||||||||
| Net cash provided by financing activities | ||||||||
| Increase in cash and cash equivalents | ||||||||
| Cash and Cash Equivalents | ||||||||
| Beginning of period | ||||||||
| End of period | $ | $ | ||||||
*See accompanying notes to these condensed financial statements.
| 3 |
Nocopi Technologies, Inc.
Condensed Statements of Stockholders’ Equity*
For the Three Months ended March 31, 2026 and March 31, 2025
(unaudited)
| Common stock | Paid-in | Accumulated | ||||||||||||||||||
| Shares | Amount | Capital | Deficit | Total | ||||||||||||||||
| Balance at December 31, 2025 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock-based compensation | — | — | — | |||||||||||||||||
| Issuance of common stock | — | |||||||||||||||||||
| Net loss | — | — | — | ( | ) | ( | ) | |||||||||||||
| Balance at March 31, 2026 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Common stock | Paid-in | Accumulated | ||||||||||||||||||
| Shares | Amount | Capital | Deficit | Total | ||||||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock-based compensation | — | — | — | |||||||||||||||||
| Net income | — | — | — | |||||||||||||||||
| Balance at March 31, 2025 | $ | $ | $ | ( | ) | $ | ||||||||||||||
* See accompanying notes to these condensed financial statements.
| 4 |
NOCOPI TECHNOLOGIES, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. Financial Statements
The accompanying unaudited condensed financial statements have been prepared by Nocopi Technologies, Inc. (the “Company”). These statements include all adjustments (consisting only of normal recurring adjustments) which management believes necessary for a fair presentation of the statements and have been prepared on a consistent basis using the accounting policies described in 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 generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the accompanying disclosures are adequate to make the information presented not misleading. The notes to financial statements included in the 2025 Annual Report should be read in conjunction with the accompanying interim financial statements. The interim operating results for the three months ended March 31, 2026 may not be necessarily indicative of the operating results expected for the full year.
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.
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. We are evaluating the effect that this guidance will have on our consolidated financial statements and related disclosures.
Note 2. Cash and Cash Equivalents
| Schedule of cash and cash equivalents | ||||||||
March 31 2026 | December 31 2025 | |||||||
| Cash and cash equivalents | ||||||||
| Cash and money market funds | $ | $ | ||||||
| Cash and cash equivalents | $ | $ | ||||||
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 March 31, 2026 and December 31, 2025, the Company
had $
Note 3. Inventories
| Schedule of inventories | ||||||||
| March 31 2026 | December 31 2025 | |||||||
| Inventories consist of the following | ||||||||
| Raw materials | $ | $ | ||||||
| Work in process | ||||||||
| Finished goods | ||||||||
| Inventory gross | ||||||||
| Less: Allowance | ( | ) | ( | ) | ||||
| Inventory | $ | $ | ||||||
| 5 |
NOCOPI TECHNOLOGIES, INC. NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED) |
Note 4. Long-term Receivables
As of March 31, 2026 and December 31, 2025, the Company
had long-term receivables of $
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 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 with a new licensee. The sales commissions are amortized on a systematic basis consistent with the pattern of revenue
recognition for the underlying these license agreements. The unamortized balance as of March 31, 2026 and December 31, 2025, for accrued
commission payable was $
The current portion of the license agreements in the
amount of $
The following table summarizes the future minimum payments due under the remaining three license agreements as of March 31, 2026:
| Schedule of future minimum payments | |||||
| Year Ending December 31: | |||||
| 2026 | $ | ||||
| 2027 | |||||
| 2028 | |||||
| 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 March 31, 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 its present
value as of March 31, 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-tern receivables. The unamortized balance of the long-term
receivables as of March 31, 2026 and December 31, 2025 was $
| 6 |
NOCOPI TECHNOLOGIES, INC. NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED) |
Note 5. Stockholders’ Equity
The Company follows FASB ASC 718, Compensation
– Stock Compensation, and uses the Black-Scholes option pricing model to calculate the grant-date fair value of an award. 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 March 31, 2026 and 2025,
Advisory Shares – Private Placement
On September 11, 2023, the Company entered into a
stock purchase agreement in connection with a private placement for total gross proceeds of $
In addition, as consideration for advisory services
through September 11, 2026, the Company agreed to issue
The Company recognizes compensation expense for advisory share grants based on grant-date fair value and recognizes expense on a straight-line basis over the service period.
For the three months ended March 31, 2026 and 2025,
the Company recognized consulting expense of $
On September 11, 2024 and September 11, 2025, the
Company issued
Director and Executive Grants
On December 29, 2025, executives were granted
Private Placement
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 provides that on or prior to January 9, 2027, the Company must file a registration statement to register the Purchaser’s respective Placement Shares.
| 7 |
NOCOPI TECHNOLOGIES, INC. NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED) |
Stock-Based Compensation Expense
For the three months ended March 31, 2026 and
2025, the Company recognized stock-based compensation expense of $
As of March 31, 2026, total unrecognized compensation
expense related to nonvested awards was approximately $
Note 6. Income Taxes
There was
As of March 31, 2026 and December 31, 2025, the Company
had federal net operating loss carry forwards of $
The tax effects of temporary differences which give rise to deferred tax assets (liabilities) are summarized as follows:
| Schedule of deferred tax assets liabilities | ||||||||
| March 31, 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 | ||||||||
| Total deferred tax assets | ||||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Net | $ | $ | ||||||
For the quarter ended March 31, 2026, the net increase
in valuation allowance was $
Reconciliation of the statutory federal income tax to the Company's effective tax:
| Schedule of reconciliation of the statutory federal rate | ||||||||||||||||
| March 31, 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 | ||||||||||||||||
| 8 |
NOCOPI TECHNOLOGIES, INC. NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED) |
Internal Revenue Code Section 382 limits the ability to utilize net operating losses if a 50% change in ownership occurs over a three-year period. Such limitation of the net operating losses may have occurred, but we have not analyzed it at this time as the deferred tax asset is fully reserved.
The Company’s policy is to record interest and
penalties associated with unrecognized tax benefits as additional income taxes in the statement of operations. The Company did
Tax years ending December 31, 2022 and thereafter remain open to examination for federal income tax purposes and by other major taxing jurisdictions to which the Company is subject.
Note 7. 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 excluded from diluted EPS because their effect would be antidilutive.
Note 8. 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 of revenue | ||||||||
Three Months ended March 31 | ||||||||
| 2026 | 2025 | |||||||
| Customer A | % | % | ||||||
| Customer B | % | % | ||||||
| Customer C | % | % | ||||||
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 | ||||||||
| March 31 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:
| Schedule of revenues by geographic region | ||||||||
Three Months ended March 31 | ||||||||
| 2026 | 2025 | |||||||
| North America | $ | $ | ||||||
| South America | ||||||||
| Asia | ||||||||
| Australia | ||||||||
| $ | $ | |||||||
| 9 |
NOCOPI TECHNOLOGIES, INC. NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED) |
Note 9. Leases
The Company conducts its operations in leased facilities 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
The Company has capitalized the present value of the
minimum lease payments commencing June 1, 2025, using an estimated incremental borrowing rate of
As of March 31, 2026 and December 31, 2025,
the operating lease asset amounted to $
There are no other material operating leases. The Company has elected not to recognize right-of-use assets and lease liabilities arising from short-term leases. The Company’s leases do not contain variable lease payments or residual value guarantees.
Total operating lease costs were $
Undiscounted future minimum lease payments as of March 31, 2026, by year and in aggregate are as follows:
| Schedule of maturities of lease payments | ||||||
| Operating Leases | ||||||
| Year ending December 31 | ||||||
| 2026 | $ | |||||
| 2027 | ||||||
| Total lease payments | ||||||
| Less imputed interest | ( | ) | ||||
| Total | $ | |||||
Note 10. Segment Reporting
The Company operates as a single reportable segment, as the Chief Operating Decision Maker (“CODM”), the Chief Executive Officer (“CEO”), evaluates the business on a consolidated basis and does not receive discrete financial information for multiple business units.
Measure of Segment Profit or Loss
The CODM assesses the Company’s financial performance based on operating loss, which aligns with the amount reported in the statement of comprehensive loss. The following table presents a reconciliation of segment operating loss to net (loss) income:
| Schedule of segment operating loss to net loss | ||||||||
Three Months ended March 31 | ||||||||
| 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 | ||||||||
| General and administrative | ||||||||
| Total operating expenses | ||||||||
| Net loss from operations | ( | ) | ( | ) | ||||
| Other income (expenses) | ||||||||
| Interest income | ||||||||
| Interest expense and bank charges | ( | ) | ( | ) | ||||
| Total other income | ||||||||
| Net (loss) income before income taxes | ( | ) | ||||||
| Income taxes | ||||||||
| Net (loss) income | $ | ( | ) | $ | ) | |||
| 10 |
NOCOPI TECHNOLOGIES, INC. NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED) |
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 March 31, 2026, |
| · | Major Customers: The Company had two customers that accounted for |
| 11 |
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.
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| · | Developments and changes in laws and regulations, including increased regulation of our industry through legislative action and revised rules and standards.
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| · | Security breaches, cybersecurity attacks and other significant disruptions in our information technology systems.
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| · | 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.
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The following discussion and analysis should be read in conjunction with our condensed financial statements, 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 Annual Report.
Background Overview
Nocopi Technologies, Inc. develops and markets specialty reactive inks for applications in the large educational and toy products market. We also develop and market technologies for document and product authentication, which we believe can reduce losses caused by fraudulent document reproduction or by product counterfeiting and/or diversion. 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 the licensees or to their licensed printers.
Unless the context otherwise requires, all references to the “Company,” “we,” “our” or “us” and other similar terms means Nocopi Technologies, Inc., a Maryland corporation.
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 royalties with guaranteed minimum amounts are recognized at a point in time when the term begins; | |
| 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.
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Revenues for the first quarter of 2026 were $389,700 compared to $479,000 in the first quarter of 2025, a decrease of $89,300, or approximately 19%. Licenses, royalties and fees decreased by $89,600, or approximately 47%, in the first quarter of 2026 to $100,700 from $190,300 in the first quarter of 2025. The decrease in licenses, royalties and fees in the first quarter of 2026 compared to the first quarter of 2025 is due primarily to the renewal of one of our existing licenses in January 2025. 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 $300, or approximately 0.1%, to $289,000 in the first quarter of 2026 from $288,700 in the first quarter of 2025. Sales of ink increased in the first quarter of 2026 compared to the first quarter of 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. In the first quarter of 2026, the Company derived revenues of approximately $375,700 from the Company’s licensees and their authorized printers in the entertainment and toy products market compared to revenues of approximately $354,900 in the first quarter of 2025.
The Company’s gross profit decreased to $190,600, or approximately 49% of gross revenues, in the first quarter of 2026 from $273,700, or approximately 57% of gross revenues, in the first quarter of 2025 due to decrease in licenses and royalties. Licenses, royalties and fees 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 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 decreased to approximately 54% in the first quarter of 2026 from approximately 77% in the first quarter of 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. Primarily due to higher sales of ink and other products and the overall mix in the first quarter of 2026 compared to the first quarter of 2025, there was a higher gross profit from product and other sales of approximately 47% of revenues in the first quarter of 2026 compared to a gross profit of approximately 44% of revenues in the first quarter of 2025.
Research and development expenses increased in the first quarter of 2026 to $55,800 compared to $45,000 in the first quarter of 2025 due primarily to higher lab expenses in the first quarter of 2026 compared to the first quarter of 2025.
Sales and marketing expenses decreased to $74,500 in the first quarter of 2026 from $91,000 in the first quarter of 2025 due primarily to lower commission expense on the lower level of revenues in the first quarter of 2026 compared to the first quarter of 2025.
General and administrative expenses decreased in the first quarter of 2026 to $221,800 compared to $223,500 in the first quarter of 2025 due primarily to higher stock-based compensation, lower professional fees, and higher employee related expenses in the first quarter of 2026 compared to the first quarter of 2025.
For the first quarter of 2026 and 2025, there was no income tax benefit for the net (loss) income for the first quarter of 2026 and 2025 due to the recording of a full valuation allowance since it is more likely than not that that the realization of the net deferred tax assets would not be realized. Income taxes in the first quarter of 2025 include federal and state income taxes. The state income taxes result from limitations placed on income tax net operating loss deductions by the Commonwealth of Pennsylvania.
The net loss of $62,300 in the first quarter of 2026 compared to the net income of $25,500 in the first quarter of 2025 resulted primarily from a lower level of licenses, royalties and fees in combination with lower quarterly operating expenses, as well as the positive other income generated in the first quarter of 2026, when compared to the first quarter of 2025.
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Plan of Operation, Liquidity and Capital Resources
During the first quarter of 2026, the Company’s cash increased to $11,913,000 at March 31, 2026 from $11,553,600 at December 31, 2025. During the first quarter of 2026, the Company used $27,000 and $13,600 from its operating activities and investing activities, respectively, and generated $400,000 from financing activities. During the first quarter of 2025, the Company’s cash increased to $11,209,400 at March 31, 2025 from $10,839,700 at December 31, 2024. During the first quarter of 2025, the Company generated $369,700 from its operating activities.
During the first quarter of 2026, the Company’s revenues decreased approximately 19% primarily as a result of lower licenses, royalties and fees revenue in the entertainment and toy products market. Our total overhead expenses decreased in the first quarter of 2026 to $352,100 compared to $359,500 in the first quarter of 2025, and the Company’s interest income decreased in the first quarter of 2026 compared to the first quarter of 2025. As a result of these factors, the Company had a net loss of $62,300 in the first quarter of 2026 compared to net income of $25,500 in the first quarter of 2025. The Company had negative operating cash flow of $27,000 during the first quarter of 2026. At March 31, 2026, the Company had working capital of $13,257,700 and stockholders’ equity of $13,949,000. For the three months ended March 31,2026, the Company had a net loss of $62,300 and had negative operating cash flow of $27,000. At March 31, 2025, the Company had working capital of $12,526,100 and stockholders’ equity of $13,667,300.
Our plan of operation for the twelve months beginning with 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. 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.
Our future growth strategy includes expanding our business through acquisitions of other companies with competing or complementary services, technologies or businesses in order to expand our product and service offerings to grow our free cash flow. We are currently actively engaged in the process to identify acquisition candidates and negotiate transactions. As of the date of this Quarterly Report on Form 10-Q, we have not entered into any definitive agreements to make any acquisition. We expect to fund our business expansion through the issuance of debt or equity securities, the payment of cash, the exchange of services, or any combination thereof.
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.
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Contractual Obligations
As of March 31, 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 March 31, 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
As of March 31, 2026, there were no recently issued accounting standards not yet adopted that would have a material effect on the Company’s financial statements.
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 the Company’s 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) as of March 31, 2026. Based on this evaluation, the Company’s Principal Executive Officer and Principal Financial Officer concluded that, as of March 31, 2026, the Company’s disclosure controls and procedures were effective, in that they provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and is accumulated and communicated to the Company’s management, including the Company’s 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 March 31, 2026
Changes in Internal Control Over Financial Reporting. There were no changes in our 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 March 31, 2026 that have materially affected, or are reasonably likely to materially affect, our 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 March 31, 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.
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 266,666 shares of the Company’s common stock (such shares of common stock issued pursuant to the Private Placement, the “Placement Shares”) at a purchase price of $1.50 per share. On January 9, 2026, the Private Placement closed and the Company received aggregate gross proceeds of $400,000, which will be used for future acquisitions.
Kevin Westenburg, the Company’s President and a Director, purchased 33,333 Placement Shares in connection with the Private Placement.
Third Parties purchased an aggregate of 233,333 Placement Shares in connection with the Private Placement.
In connection with the Purchase Agreements, on December 31, 2025, the Company entered into registration rights agreements with certain of the Purchasers, which provides that on or prior to January 9, 2027, the Company must file a registration statement to register the Purchaser’s respective Placement Shares.
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 of the Securities and Exchange Act or otherwise.
For the quarter ended March 31,
2026,
Item 6. Exhibits.
(a) Exhibits
The following exhibits are included herein:
| Exhibit Number | Description | Location | ||
| 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 |
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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: May 15, 2026 | /s/ Matthew C. Winger | |
| Matthew C. Winger | ||
| Chairman of the Board & Chief Executive Officer (Principal Executive Officer) | ||
| DATE: May 15, 2026 | /s/ Debra E. Glickman | |
| Debra E. Glickman | ||
| Chief Financial Officer (Principal Financial and Accounting Officer) | ||
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