Description
This will be a short one on a new stock to VIC. Short - because there is not a lot to say:
- Very simple and under the radar business
- OTC-Traded
- Microcap (<$7M)
- $1.2m Cash
- Zero debt
- Loss carryforward
- Growing business
- 2 important long term active contracts
- <9 p/e
- RUB & REVEAL - Children’s Painting Books
The company developed an ink technology that “revealed” itself after being rubbed. Unlike regular painting books in which kids actively paint and create a mess around the house, books painted with Nocopi’s ink reveal their color (“painted”) after the child rubs a clear, dry pen against them, not creating any mess at home.
This product constitutes an average of 90% of the business revenues.
Nocopi’s largest customer here is Bendon (https://www.bendonpub.com/products), which sells their RUB&REVEAL based products on Amazon as “Magic Ink” (https://www.amazon.com/Disney-Princess-Coloring-Featuring-Invisible/dp/B07NP97SJH/ref=sr_1_2?dchild=1&keywords=Bendon&qid=1591478906&sr=8-2). It is important to mention that Bendon is allowed by Disney to pay their characters.
(For pictures of more magic ink products: https://drive.google.com/drive/folders/1h0iqbiseL_U7rZy-RgtUtxAMTIMWBA2I?usp=sharing)
- COPIMARK - Anti-Counterfeiting Ink
The company developed an invisible ink that can be seen only under specific light. In times for digital printing, where fraudulent tags and documents are easy to make, the COPIMARK allows whoever needs to verify paper authenticity to easily do so.
This product constitutes an average of 10% of the business revenues with a positive trend. The management believes that this business could become an important growth factor for the company in the following years.
Results
Nacopi mainly makes money from royalties and product sales. Bendon’s contract, for example, has a minimum royalty section.
While in the last 10-k (https://www.sec.gov/Archives/edgar/data/888981/000155335020000259/nnup_10k.htm) it seems like the company royalties are down $1.5m. But that’s is only a matter of new reporting method, note 606, concerning the 4 years contract with Bendon (basically they booked-ahead the total contract royalties as a revenue).
The business revenues were up 27% in the last 10Q, exclusively on the product sales segment. Due to note 606, royalties revenues were down and so the gross margin (which is much higher in the royalties segment). This is why the net income is also down.
I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise hold a material investment in the issuer's securities.
Catalyst
Summary
The company has $1.2m cash on the balance sheet, zero debt, and $400,000 of loss carryforward. With a <$7m market cap, you get $5.8m worth of business that had a net income of $800,000 last year (<9 p/e) and that grew since, and has two long-term important contracts (both due to 2023).