10-Q

United States

Securities and Exchange Commission

Washington, D.C. 20549

Form 10-Q

(Mark One)

þQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended September 30, 2017

or

¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from _________________ to ______________

Commission File Number: 000-20333

NOCOPI TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

Maryland	87-0406496
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

480 Shoemaker Road, Suite 104, King of Prussia, PA 19406

(Address of principal executive offices) (Zip Code)

(610) 834-9600

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ  No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes þ  No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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   ¨
Non-accelerated filer     ¨	Smaller reporting company  þ
(Do not check if a 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 þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 58,616,716 shares of common stock, par value $0.01, as of November 1, 2017

NOCOPI TECHNOLOGIES, INC.

INDEX

	PAGE
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements	1
Statements of Operations for Three Months and Nine Months Ended September 30, 2017 and September 30, 2016	1
Balance Sheets at September 30, 2017 and December 31, 2016	2
Statements of Cash Flows for Nine Months Ended September 30, 2017 and September 30, 2016	3
Notes to Financial Statements	4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	8
Item 4. Controls and Procedures	12
Part II. OTHER INFORMATION
Item 6. Exhibits	13
SIGNATURES	14
EXHIBIT INDEX	15

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Nocopi Technologies, Inc.

Statements of Operations*

(unaudited)

	Three Months ended September 30						Nine Months ended September 30
	2017			2016			2017			2016
Revenues
Licenses, royalties and fees	$	178,200		$	170,300		$	468,900		$	381,800
Product and other sales		224,200			373,400			634,500			648,100
		402,400			543,700			1,103,400			1,029,900
Cost of revenues
Licenses, royalties and fees		23,300			36,500			71,100			73,000
Product and other sales		82,300			156,900			248,600			275,200
		105,600			193,400			319,700			348,200
Gross profit		296,800			350,300			783,700			681,700
Operating expenses
Research and development		36,300			33,700			109,200			103,700
Sales and marketing		67,200			72,800			187,900			176,700
General and administrative		80,400			69,900			240,000			224,200
		183,900			176,400			537,100			504,600
Net income from operations		112,900			173,900			246,600			177,100
Other income (expenses)
Interest income		200			–			200			–
Interest expense, bank charges and accretion of interest		(3,300	)		(3,300	)		(22,600	)		(10,100	)
		(3,100	)		(3,300	)		(22,400	)		(10,100	)
Net income	$	109,800		$	170,600		$	224,200		$	167,000
Basic and diluted net income per common share	$	.00		$	.00		$	.00		$	.00
Weighted average common shares outstanding
Basic		58,599,016			58,599,016			58,599,016			58,599,016
Diluted		58,896,464			58,599,655			58,891,635			58,600,384

*See accompanying notes to these financial statements.

1

Nocopi Technologies, Inc.

Balance Sheets*

	September 30			December 31
	2017			2016
	(unaudited)			(audited)
Assets
Current assets
Cash	$	362,800		$	199,100
Accounts receivable less $5,000 allowance for doubtful accounts		197,900			243,400
Inventory		111,800			70,900
Prepaid and other		21,500			29,600
Total current assets		694,000			543,000
Fixed assets
Leasehold improvements		19,700			19,700
Furniture, fixtures and equipment		183,200			178,300
		202,900			198,000
Less: accumulated depreciation and amortization		188,400			183,000
		14,500			15,000
Total assets	$	708,500		$	558,000
Liabilities and Stockholders' Equity (Deficiency)
Current liabilities
Demand loans	$	–		$	10,000
Convertible debentures		128,300			128,300
Accounts payable		43,800			33,100
Accrued expenses		396,500			459,900
Deferred revenue		82,100			106,300
Total current liabilities		650,700			737,600
Stockholders' equity (deficiency)
Common stock, $0.01 par value
Authorized – 75,000,000 shares
Issued and outstanding – 58,599,016 shares		586,000			586,000
Paid-in capital		12,439,800			12,426,600
Accumulated deficit		(12,968,000	)		(13,192,200	)
Total stockholders' equity (deficiency)		57,800			(179,600	)
Total liabilities and stockholders' equity (deficiency)	$	708,500		$	558,000

*See accompanying notes to these financial statements.

2

Nocopi Technologies, Inc.

Statements of Cash Flows*

(unaudited)

	Nine Months ended September 30
	2017			2016
Operating Activities
Net income	$	224,200		$	167,000
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		5,400			5,500
Accretion of interest – convertible debentures		13,200			500
		242,800			173,000
(Increase) decrease in assets
Accounts receivable		45,500			(159,800	)
Inventory		(40,900	)		(36,700	)
Prepaid and other		8,100			10,700
Increase (decrease) in liabilities
Accounts payable and accrued expenses		(52,700	)		75,600
Deferred revenue		(24,200	)		(22,200	)
		(64,200	)		(132,400	)
Net cash provided by operating activities		178,600			40,600
Investment Activities
Additions to fixed assets		(4,900	)		(1,400	)
Net cash used in investing activities		(4,900	)		(1,400	)
Financing Activities
Repayment of demand loans		(10,000	)		(13,500	)
Net cash used in financing activities		(10,000	)		(13,500	)
Increase in cash		163,700			25,700
Cash at beginning of year		199,100			11,400
Cash at end of period	$	362,800		$	37,100

*See accompanying notes to these financial statements.

3

NOCOPI TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

Note 1. Financial Statements

The accompanying unaudited condensed financial statements have been prepared by Nocopi Technologies, Inc. (the “Company”). These statements include all adjustments (consisting only of normal recurring adjustments) which management believes necessary for a fair presentation of the statements and have been prepared on a consistent basis using the accounting policies described in the summary of Accounting Policies included in the Company's 2016 Annual Report on Form 10-K. 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 2016 Annual Report on Form 10-K should be read in conjunction with the accompanying interim financial statements. The interim operating results for the three months and nine months ended September 30, 2017 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 income. Comprehensive 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 income. Since the Company has no items of other comprehensive income, comprehensive income is equal to net income.

Note 2. Going Concern

Since its inception, the Company has incurred significant losses and, as of September 30, 2017, had accumulated losses of $12,968,000. For the nine months ended September 30, 2017, the Company had net income from operations of $246,600. At September 30, 2017, the Company had positive working capital of $43,300 and stockholders’ equity of $57,800. For the year ended December 31, 2016, the Company’s net income from operations was $271,800. The Company, which is substantially dependent on its licensees to generate licensing revenues, may incur operating losses and experience negative cash flow in the future. Sustaining profitability and positive cash flow depends on the Company’s ability to maintain the increases in revenues and gross profits that it realized in 2016 and through the first nine months of 2017 from its traditional business. There can be no assurances that the Company will be able to generate sufficient revenues and gross profits to sustain profitability and positive cash flow in the future.

Receipt of funds in earlier periods from investors and from demand loan holders have allowed the Company to remain in operation through the current date. Management of the Company believes that it may need additional capital if the Company is unable to at least maintain the revenue level and profits achieved during 2016 and the first nine months of 2017. There can be no assurances that the Company will be successful in obtaining sufficient additional capital, if needed, or if it does, that the additional capital will enable the Company to impact its revenues so as to have a material positive effect on the Company’s operations and cash flow. The Company believes that without additional capital, whether in the form of debt, equity or both, it may be forced to cease operations at an undetermined future date.

Note 3. Stock Based Compensation

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. At September 30, 2017, the Company did not have an active stock option plan. There was no unrecognized portion of expense related to stock option grants at September 30, 2017.

Note 4. Demand Loans

During the third quarter of 2017, the Company repaid the remaining $10,000 principal balance of an unsecured loan from an individual and at September 30, 2017 had no demand loans outstanding. During the nine months ended September 30, 2016, the Company repaid the remaining $13,500 principal balance of an unsecured loan from a second individual. The loans bore interest at an annual rate of 8%.

4

NOCOPI TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

Note 5. Convertible Debentures

At September 30, 2017, the Company had convertible debentures totaling $128,300 outstanding, of which $95,000 were due during the third quarter of 2017 and $33,300 are due during the third quarter of 2018. The convertible debentures bear interest at 7%. At the option of the lender, the debentures and accrued interest are convertible in whole or part into common stock of the Company at $0.025 per share. During the first quarter of 2017, the Company’s Board of Directors approved and the holders of $33,300 of convertible debentures that had matured during the third quarter of 2016, one of which is held by a Director of the Company, accepted an offer of extension whereby the maturity dates of the convertible debentures are extended for two years and the conversion rate of the debentures and accrued interest into Common Stock of the Company is reduced from $0.05 to $0.025. In accordance with FASB ASC 470, this modification of the convertible debentures was recorded as a debt discount to the notes payable of approximately $13,200 with an offsetting credit to additional-paid in capital. In the three months ended March 31, 2017, the entire $13,200 was accreted through interest expense.

Early in the fourth quarter of 2017, the holders of $95,000 of convertible debentures agreed to extend the maturity dates of those convertible debentures for one year with no change in the terms or conditions of the debentures.

The Company also granted warrants to purchase 691,365 shares of the Company’s common stock at $0.02 per share to the holders of the debentures. The warrants are exercisable two years after issuance and expire seven years after issuance. The fair value of the warrants was determined using the Black-Scholes pricing model. The relative fair value of the warrants was recorded as a discount to the notes payable with an offsetting credit to additional paid-in capital since the Company determined that the warrants were an equity instrument in accordance with FASB ASC 815. The debt discount related to the warrant issuances has been accreted through interest expense over the term of the notes payable. For the three months ended September 30, 2017 and September 30, 2016, $0 was accreted through interest expense. For the nine months ended September 30, 2017 and September 30, 2016, $0 and approximately $500, respectively, was accreted through interest expense.

The following table summarizes all warrant activity of the Company since December 31, 2016:

				Weighted Average
	Number		Exercise	Exercise
	of Shares		Price	Price
Outstanding warrants -
December 31, 2016		721,365	$0.01 to $0.07	$	0.021
Warrants expired		12,300	$0.06 and $0.07	$	0.063
Outstanding warrants -
September 30, 2017		709,065	$0.01 to $0.03	$	0.020
Weighted average remaining
contractual life (years)		3.01
Exercisable warrants -
September 30, 2017		709,065	$0.01 to $0.03	$	0.020
Weighted average remaining
contractual life (years)		3.01

Note 6. Other Income (Expenses)

Other income (expenses) in the three months and nine months ended September 30, 2017 and September 30, 2016 includes interest on unsecured loans from two individuals and on convertible debentures held by nine investors. Also included in other income (expenses) is accretion of debt discounts in the nine months ended September 30, 2017 related to the extension of the maturity dates of $33,300 of convertible debentures.

5

NOCOPI TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

Note 7. Income Taxes

There is no provision for income taxes for the three months and nine months ended September 30, 2017 and September 30, 2016 due to the availability of net operating loss carryforwards. The Company has created a valuation allowance for the entire amount of such benefits.

There was no change in unrecognized tax benefits during the period ended September 30, 2017 and there was no accrual for uncertain tax positions as of September 30, 2017.

Tax years from 2013 through 2016 remain subject to examination by U.S. federal and state jurisdictions.

Note 8. Related Party Transactions

During the nine months ended September 30, 2017 and September 30, 2016 the Company paid $151,700 and $15,000, respectively, to Michael A. Feinstein, M.D., the Company’s Chairman of the Board and Chief Executive Officer, representing a portion of previously deferred salary owed to him under an employment agreement with the Company. During each of the nine month periods ended September 30, 2017 and September 30, 2016, Dr. Feinstein deferred $63,800 of salary. At September 30, 2017, Dr. Feinstein was owed approximately $213,300 of salary deferred by him. There is no interest payable on the deferred salary.

Note 9. 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. The computation of diluted earnings per common share involves the assumption that outstanding common shares are increased by shares issuable upon exercise of those stock options and warrants for which the market price exceeds the exercise price. The number of shares issuable upon the exercise of such stock options and warrants is decreased by shares that could have been purchased by the Company with related proceeds. For the three months and nine months ended September 30, 2017, the number of incremental common shares resulting from the assumed conversion of warrants was 297,448 and 292,619, respectively. For the three months and nine months ended September 30, 2016, the number of incremental common shares resulting from the assumed conversion of warrants was 639 and 1,368, respectively.

Note 10. 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:

	Three Months ended September 30						Nine Months ended September 30
	2017			2016			2017			2016
Customer A		48	%		60	%		43	%		37	%
Customer B		27	%		21	%		25	%		22	%
Customer C		4	%		3	%		9	%		19	%

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:

	September 30			December 31
	2017			2016
Customer A		20	%		26	%
Customer B		45	%		47	%
Customer C		8	%		5	%

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.

6

NOCOPI TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

The Company’s revenues by geographic region are as follows:

	Three Months ended September 30				Nine Months ended September 30
	2017		2016		2017		2016
North America	$	181,800	$	184,900	$	493,600	$	411,300
South America		1,500		–		1,500		–
Europe		100		–		300		–
Asia		211,600		351,400		585,800		596,400
Australia		7,400		7,400		22,200		22,200
	$	402,400	$	543,700	$	1,103,400	$	1,029,900

Note 11. Subsequent Event

In October 2017, a warrant holder exercised warrants to purchase 17,700 shares of common stock of the Company at exercise prices ranging from $0.01 to $0.03.

7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Information

This 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 growth and earnings

·

Anticipated levels of capital expenditures for fiscal year 2017 and beyond

·

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, financial results and reserves

·

Strategy for 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.

·

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 adequacy of our cash flow and earnings and other conditions which may affect our ability to timely service our debt obligations.

·

The occurrence of hostilities, political instability or catastrophic events.

·

Such other factors as discussed throughout Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations in this report, 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 our Annual Report on Form 10-K for the year ended December 31, 2016.

Any forward-looking statement made by us in this report 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 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 our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, filed with the Securities and Exchange Commission on March 30, 2017.

8

Results of Operations

The Company’s revenues are derived from (i) royalties paid by licensees of the Company’s technologies; (ii) fees for the provision of technical services to licensees; and (iii) the direct sale of (a) products incorporating the Company’s technologies, such as inks, security paper and pressure sensitive labels, and (b) equipment used to support the application of the Company’s technologies, such as ink-jet printing systems. Royalties consist of guaranteed minimum royalties payable by the Company’s licensees and/or additional royalties, which typically vary with the licensee’s sales or production of products incorporating the licensed technology. Technical services, in the form of on-site or telephone consultations by members of the Company’s technical staff, may be offered to licensees of the Company’s technologies. The consulting fees are billed at agreed upon per diem or hourly rates at the time the services are rendered. 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 and royalties are recognized when the license term begins. Upon inception of the license term, revenue is recognized in a manner consistent with the nature of the transaction and the earnings process, which generally is ratably over the license term;

b)

Product sales are recognized (i) upon shipment of products; (ii) when the price is fixed or determinable; and (iii) when collectability is reasonably assured; and

c)

Fees for technical services are recognized when (i) the service has been rendered; (ii) an arrangement exists; (iii) the price is fixed or determinable based upon a per diem or hourly rate; and (iv) collectability is reasonably assured.

The Company believes that, as fixed cost reductions beyond those it has achieved in recent years may not be achievable, its operating results are substantially dependent on revenue levels. Because revenues derived from licenses and royalties carry a much higher gross profit margin than other revenues, operating results are also substantially affected by changes in revenue mix.

Both the absolute amounts of the Company’s revenues and the mix among the various sources of revenue are subject to substantial fluctuation. The Company has a relatively small number of substantial customers rather than a large number of small customers. Accordingly, changes in the revenue received from a significant customer can have a substantial effect on the Company’s total revenue and on its revenue mix and overall financial performance. Such changes may result from a customer’s product development delays, engineering changes, changes in product marketing strategies and the like. In addition, certain customers have, from time to time, sought to renegotiate certain provisions of their license agreements and, when the Company agrees to revise terms, revenues from the customer may be affected. The addition of a substantial new customer or the loss of a substantial existing customer may also have a substantial effect on the Company’s total revenue, revenue mix and operating results.

Revenues for the third quarter of 2017 were $402,400 compared to $543,700 in the third quarter of 2016, a decrease of $141,300, or approximately 26%. Licenses, royalties and fees increased by $7,900, or approximately 5%, to $178,200 in the third quarter of 2017 from $170,300 in the third quarter of 2016. The increase in licenses, royalties and fees is due primarily to higher licensing revenue received from four licensees including one licensee added in the second half of 2016. There can be no assurances that the marketing and product development activities of the Company’s licensees or other businesses in the entertainment and toy products market will produce sustained increases in revenues for the Company, nor can the timing of any potential revenue increases be predicted, particularly given the uncertain economic conditions being experienced worldwide.

Product and other sales decreased by $149,200, or approximately 40%, to $224,200 in the third quarter of 2017 from $373,400 in the third quarter of 2016. Sales of ink decreased in the third quarter of 2017 compared to the third quarter of 2016 due primarily to a decrease in the volume of ink shipped in the third quarter of 2017 to a third party authorized printer used by one of the Company’s major licensees in the entertainment and toy products market compared to the third quarter of 2016, along with lower ink shipments to the Company’s licensees in the retail receipt and document fraud market. This new printer was appointed late in the second quarter of 2016 and, at that time, placed a significant amount of ink orders that were shipped in the third quarter of 2016. In 2017, this printer’s orders and shipments were more equally balanced between the second and third quarters. In the third quarter of 2017, the Company derived revenues of approximately $344,900 from its licensees and their authorized printers in the entertainment and toy products market compared to revenues of approximately $490,100 in the third quarter of 2016.

9

For the first nine months of 2017, revenues were $1,103,400, representing an increase of $73,500, or approximately 7% higher than revenues of $1,029,900 in the first nine months of 2016. Licenses, royalties and fees of $468,900 in the first nine months of 2017 were $87,100, or approximately 23%, higher than licenses, royalties and fees of $381,800 in the first nine months of 2016. The increase in licenses, royalties and fees is due primarily to higher licensing revenue received from four licensees including one licensee added in the second half of 2016.

Product and other sales decreased by $13,600, or approximately 2%, to $634,500 in the first nine months of 2017 from $648,100 in the first nine months of 2016. Sales of ink decreased in the first nine months of 2017 compared to the first nine months of 2016 due primarily to lower ink shipments to the Company’s licensees in the retail receipt and document fraud market. The Company derived revenues of approximately $932,600 from licensees and their authorized printers in the entertainment and toy products market in the first nine months of 2017 compared to revenues of approximately $883,800 in the first nine months of 2016.

The Company’s gross profit decreased to $296,800 in the third quarter of 2017, or approximately 74% of revenues, from $350,300 in the third quarter of 2016, or approximately 64% of revenues. Licenses, royalties and fees have historically carried a higher gross profit than product and other sales. Such other sales generally consist of 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. The lower gross profit in the third quarter of 2017 compared to the third quarter of 2016 results primarily from lower gross revenues from product and other sales offset in part by higher gross revenues from licenses, royalties and fees in the third quarter of 2017 compared to the third quarter of 2016.

For the first nine months of 2017, gross profit was $783,700, or approximately 71% of revenues, compared to $681,700, or approximately 66% of revenues, in the first nine months of 2016. The higher gross profit in the first nine months of 2017 compared to the first nine months of 2016 results from higher gross revenues from licenses, royalties and fees along with a higher gross profit from product and other sales in the first nine months of 2017 compared to the first nine months of 2016 resulting from a favorable mix of products sold in the first nine months of 2017 compared to the first nine months of 2016.

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 licenses, royalties and fees as well as overall gross profit. Primarily due to higher revenues from licenses, royalties and fees in the third quarter of 2017 compared to the third quarter of 2016, the gross profit from licenses, royalties and fees increased to approximately 87% of revenues in the third quarter of 2017 from approximately 79% of revenues in the third quarter of 2016. The gross profit from licenses, royalties and fees was approximately 85% in the first nine months of 2017 compared to approximately 81% in first nine months of 2017 resulting from the same factors as the third quarter of 2017 compared to the third quarter of 2016.

The gross profit, expressed as a percentage of revenues, of product and other sales 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 increased to approximately 63% of revenues in the third quarter of 2017 compared to approximately 58% of revenues in the third quarter of 2016. This increase in the gross profit, expressed as a percentage of revenues was due primarily to a change in mix of products sold during the third quarter of 2017 compared to the third quarter of 2016. For the first nine months of 2017, the gross profit, expressed as a percentage of revenues, increased to approximately 61% of revenues from product and other sales compared to approximately 58% of revenues from product and other sales in the first nine months of 2016 resulting from the same factors as the third quarter of 2017 compared to the third quarter of 2016.

Research and development expenses of $36,300 in the third quarter of 2017 and $109,200 in the first nine months of 2017 were comparable to $33,700 in the third quarter of 2016 and $103,700 in the first nine months of 2016.

Sales and marketing expenses decreased to $67,200 in the third quarter of 2017 from $72,800 in the third quarter of 2016 due primarily to lower commission expense on the lower level of sales in the third quarter of 2017 compared to the third quarter of 2016. Sales and marketing expenses increased to $187,900 in the first nine months of 2017 compared to $176,700 the first nine months of 2016 due primarily to higher commission expense on the higher level of sales in the first nine months of 2017 compared to the first nine months of 2016.

General and administrative expenses increased in the third quarter and first nine months of 2017 to $80,400 and $240,000, respectively, from $69,900 and $224,200 in the third quarter and first nine months of 2016, respectively, due primarily to higher employment costs, insurance expenses and fees offset in part by lower legal expenses in the third quarter and first nine months of 2017 compared to the third quarter and first nine months of 2016.

10

Other income (expenses) in the third quarter and first nine months of 2017 and 2016 included interest on unsecured loans from two individuals and on convertible debentures held by nine investors. Also included in other income (expenses) is accretion of debt discounts in the first nine months of 2017 related to the extension of the maturity dates of $33,300 of convertible debentures. Other income (expenses) decreased to $3,100 in the third quarter of 2017 from $3,300 in the third quarter of 2016. Other income (expenses) increased to $22,400 in the first nine months of 2017 from $10,100 in the first nine months 2016. This increase is due primarily to accretion of debt discounts in the first nine months of 2017 related to the extension of the maturity dates of $33,300 of convertible debentures in the first quarter of 2017.

The net income of $109,800 in the third quarter of 2017 compared to the net income of $170,600 in the third quarter of 2016 resulted primarily from a lower gross profit on a lower level of revenues in the third quarter of 2017 compared to the third quarter of 2016 along with higher operating expenses in the third quarter of 2017 compared to the third quarter of 2016. The net income of $224,200 in the first nine months of 2017 compared to the net income of $167,000 in the first nine months of 2016 resulted primarily from a higher gross profit on a higher level of revenues in the first nine months of 2017 compared to the first nine months of 2016 offset in part by higher operating expenses and accretion of debt discounts in the first nine months of 2017 compared to the first nine months of 2016.

Plan of Operation, Liquidity and Capital Resources

During the first nine months of 2017, the Company’s cash increased to $362,800 at September 30, 2017 from $199,100 at December 31, 2016. During the first nine months of 2017, the Company generated $178,600 from its operating activities, used $4,900 for capital equipment and repaid $10,000 to an individual lender.

During the first nine months of 2017, the Company’s revenues increased approximately 7% primarily as a result of higher licensing and royalty revenues from new and existing licensees. The Company’s first nine months of 2017 total overhead expenses increased compared to the 2016 first nine months total overhead expenses and the Company’s interest expense increased related to accretion of interest in the first nine months of 2017 compared to the first nine months of 2016. As a result of these factors, the Company recorded a higher net profit in the first nine months of 2017 compared to the first nine months of 2016. The Company had positive operating cash flow of $178,600 during the first nine months of 2017. At September 30, 2017, the Company had positive working capital of $43,300 and stockholders’ equity of $57,800. For the full year of 2016, the Company had net income of $258,500 and had positive operating cash flow of $202,600. At December 31, 2016, the Company had negative working capital of $194,600 and a $179,600 stockholders’ deficiency.

Through September 30, 2017, the Company repaid all $63,000 of short-term loans that had been outstanding at January 1, 2015. In 2015, the Company repaid $10,000 of convertible debentures and, in 2017, extended the maturity dates of $33,300 of convertible debentures from 2016 to 2018 and extended the maturity dates of $95,000 of convertible debentures from the third quarter of 2017 to the third quarter of 2018. Borrowings and sales of common stock in years prior to January 1, 2015 have allowed the Company to remain in operation through 2016. There can be no assurances that the Company will be able to secure sufficient additional funding through investments or borrowings that will allow the Company to fund losses that it presently believes may be experienced in the future if the Company is unable to maintain revenue levels and profits consistent with 2016 and the first nine months of 2017. The Company believes that without additional investment, it may then be forced to cease operations at an undetermined date in the future.

The Company’s plan of operation for the twelve months beginning with the date of this quarterly report 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 including two licensees with a significant presence in the entertainment and toy products market that have been marketing products incorporating the Company’s technologies since 2012 along with a licensee added in 2015 who has been marketing products incorporating the Company’s available technologies in certain international markets since 2016. These licensees in the entertainment and toy products market are well known and highly regarded participants in this market. The Company believes that the licensees that the Company has developed in the entertainment and toy products market will expand their offerings incorporating the Company’s technologies currently being marketed and will introduce new products incorporating available technologies covered by the license agreements that are not currently being marketed by them. The Company plans to continue developing applications for these licensees while expanding its licensee base in the entertainment and toy market. The Company has additional licensees marketing or developing products incorporating the Company’s 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, anti-counterfeiting and anti-diversion markets and believes that revenue growth in these markets can be achieved through increased security ink sales to its licensees in this market. The Company will continue to adjust its production and technical staff as necessary. The Company will also, subject to available financial resources, invest in capital equipment needed to support potential growth in ink production requirements beyond its current capacity. Additionally, the Company will pursue opportunities to market its 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.

11

The Company has received and continues to seek additional capital, in the form of debt, equity or both, to support its working capital requirements. There can be no assurances that the Company will be successful in raising additional capital, or that such additional capital, if obtained, will enable the Company to generate additional revenues and positive cash flow.

The Company generates a significant portion of its total revenues from licensees in the entertainment and toy products market. These licensees generally sell their products through retail outlets. During the year, such sales may be adversely affected by changes in consumer spending that may occur as a result of an uncertain economic environment. As a result, the Company’s revenues, results of operations and liquidity may be negatively impacted as they were in previous years.

Recently Adopted Accounting Pronouncements

As of September 30, 2017 and for the period then ended, there were no recently adopted accounting pronouncements that had a material effect on the Company’s financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance will supersede current revenue recognition guidance which is effective for the Company on January 1, 2018. Under the new standard, the Company may be required to recognize revenue from license fees at the point in time when the license is granted as opposed to the recognition as earned over the license term which has been our historical practice. The Company has not determined the method to be used in applying the amendments in this standard.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements.

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 September 30, 2017. Based on this evaluation, the Company’s Principal Executive Officer and Principal Financial Officer concluded that, as of September 30, 2017 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.

Changes in Internal Control Over Financial Reporting. There were no changes in our internal control over financial reporting during the quarter ended September 30, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

12

PART II - OTHER INFORMATION

Item 6.Exhibits

(a) Exhibits

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.
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.
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.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Linkbase
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase

13

SIGNATURES

Pursuant to the requirement of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	NOCOPI TECHNOLOGIES, INC.
DATE: November 13, 2017	/s/ Michael A. Feinstein, M.D.
	Michael A. Feinstein, M.D.
	Chairman of the Board, President & Chief Executive Officer
DATE: November 13, 2017	/s/ Rudolph A. Lutterschmidt
	Rudolph A. Lutterschmidt
	Vice President & Chief Financial Officer

14

EXHIBIT INDEX

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.
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.
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.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Linkbase
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase

15

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Michael A. Feinstein, M.D., Chief Executive Officer of Nocopi Technologies, Inc., certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Nocopi Technologies, Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 13, 2017

/s/ Michael A. Feinstein, M.D.

Michael A. Feinstein, M.D.

Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Rudolph A. Lutterschmidt, Vice President and Chief Financial Officer of Nocopi Technologies, Inc., certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Nocopi Technologies, Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (registrant’s fourth fiscal quarter in the case of annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 13, 2017

/s/ Rudolph A. Lutterschmidt

Rudolph A. Lutterschmidt

Vice President and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Nocopi Technologies, Inc. (the "Company") on Form 10-Q for the Quarter ended September 30, 2017 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, Michael A. Feinstein, M.D., Chief Executive Officer, and Rudolph A. Lutterschmidt, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that;

(1)

The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

November 13, 2017

/s/ Michael A. Feinstein, M.D.

Michael A. Feinstein, M.D.

/s/ Rudolph A. Lutterschmidt

Rudolph A. Lutterschmidt

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2017	Nov. 01, 2017
Document And Entity Information
Entity Registrant Name	NOCOPI TECHNOLOGIES INC/MD/
Entity Central Index Key	0000888981
Document Type	10-Q
Document Period End Date	Sep. 30, 2017
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		58,616,716
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2017

XML

Statements of Operations - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Revenues
Licenses, royalties and fees	$ 178,200	$ 170,300	$ 468,900	$ 381,800
Product and other sales	224,200	373,400	634,500	648,100
Total revenues	402,400	543,700	1,103,400	1,029,900
Cost of revenues
Licenses, royalties and fees	23,300	36,500	71,100	73,000
Product and other sales	82,300	156,900	248,600	275,200
Total cost of revenues	105,600	193,400	319,700	348,200
Gross profit	296,800	350,300	783,700	681,700
Operating expenses
Research and development	36,300	33,700	109,200	103,700
Sales and marketing	67,200	72,800	187,900	176,700
General and administrative	80,400	69,900	240,000	224,200
Total operating expenses	183,900	176,400	537,100	504,600
Net income from operations	112,900	173,900	246,600	177,100
Other income (expenses)
Interest income	200		200
Interest expense, bank charges and accretion of interest	(3,300)	(3,300)	(22,600)	(10,100)
Total other income (expenses)	(3,100)	(3,300)	(22,400)	(10,100)
Net income	$ 109,800	$ 170,600	$ 224,200	$ 167,000
Basic and diluted net income per common share	$ 0.00	$ 0.00	$ 0.00	$ 0.00
Weighted average common shares outstanding
Basic	58,599,016	58,599,016	58,599,016	58,599,016
Diluted	58,896,464	58,599,655	58,891,635	58,600,384

XML

Balance Sheets - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Current assets
Cash	$ 362,800	$ 199,100
Accounts receivable less $5,000 allowance for doubtful accounts	197,900	243,400
Inventory	111,800	70,900
Prepaid and other	21,500	29,600
Total current assets	694,000	543,000
Fixed assets
Leasehold improvements	19,700	19,700
Furniture, fixtures and equipment	183,200	178,300
Fixed assets, gross	202,900	198,000
Less: accumulated depreciation and amortization	188,400	183,000
Total fixed assets	14,500	15,000
Total assets	708,500	558,000
Current liabilities
Demand loans		10,000
Convertible debentures	128,300	128,300
Accounts payable	43,800	33,100
Accrued expenses	396,500	459,900
Deferred revenue	82,100	106,300
Total current liabilities	650,700	737,600
Stockholders' equity (deficiency)
Common stock, $0.01 par value, Authorized - 75,000,000 shares, Issued and outstanding - 58,599,016 shares	586,000	586,000
Paid-in capital	12,439,800	12,426,600
Accumulated deficit	(12,968,000)	(13,192,200)
Total stockholders' equity (deficiency)	57,800	(179,600)
Total liabilities and stockholders' equity (deficiency)	$ 708,500	$ 558,000

XML

Balance Sheets (Parenthetical) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Statement of Financial Position [Abstract]
Allowance for doubtful accounts	$ 5,000	$ 5,000
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	75,000,000	75,000,000
Common stock, shares issued	58,599,016	58,599,016
Common stock, shares outstanding	58,599,016	58,599,016

XML

Statements of Cash Flows - USD ($)	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Operating Activities
Net income	$ 224,200	$ 167,000
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization	5,400	5,500
Accretion of interest - convertible debentures	13,200	500
Net income adjusted for non-cash operating activities	242,800	173,000
(Increase) decrease in assets
Accounts receivable	45,500	(159,800)
Inventory	(40,900)	(36,700)
Prepaid and other	8,100	10,700
Increase (decrease) in liabilities
Accounts payable and accrued expenses	(52,700)	75,600
Deferred revenue	(24,200)	(22,200)
Total increase in operating capital	(64,200)	(132,400)
Net cash provided by operating activities	178,600	40,600
Investing Activities
Additions to fixed assets	(4,900)	(1,400)
Net cash used in investing activities	(4,900)	(1,400)
Financing Activities
Repayment of demand loans	(10,000)	(13,500)
Net cash used in financing activities	(10,000)	(13,500)
Increase in cash	163,700	25,700
Cash at beginning of year	199,100	11,400
Cash at end of period	$ 362,800	$ 37,100

XML

Financial Statements

9 Months Ended

Sep. 30, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Financial Statements

Note 1. Financial Statements

The accompanying unaudited condensed financial statements have been prepared by Nocopi Technologies, Inc. (the “Company”). These statements include all adjustments (consisting only of normal recurring adjustments) which management believes necessary for a fair presentation of the statements and have been prepared on a consistent basis using the accounting policies described in the summary of Accounting Policies included in the Company's 2016 Annual Report on Form 10-K. 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 2016 Annual Report on Form 10-K should be read in conjunction with the accompanying interim financial statements. The interim operating results for the three months and nine months ended September 30, 2017 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 income. Comprehensive 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 income. Since the Company has no items of other comprehensive income, comprehensive income is equal to net income.

XML

Going Concern

9 Months Ended

Sep. 30, 2017

Going Concern [Abstract]

Going Concern

Note 2. Going Concern

Since its inception, the Company has incurred significant losses and, as of September 30, 2017, had accumulated losses of $12,968,000. For the nine months ended September 30, 2017, the Company had net income from operations of $246,600. At September 30, 2017, the Company had positive working capital of $43,300 and stockholders’ equity of $57,800. For the year ended December 31, 2016, the Company’s net income from operations was $271,800. The Company, which is substantially dependent on its licensees to generate licensing revenues, may incur operating losses and experience negative cash flow in the future. Sustaining profitability and positive cash flow depends on the Company’s ability to maintain the increases in revenues and gross profits that it realized in 2016 and through the first nine months of 2017 from its traditional business. There can be no assurances that the Company will be able to generate sufficient revenues and gross profits to sustain profitability and positive cash flow in the future.

Receipt of funds in earlier periods from investors and from demand loan holders have allowed the Company to remain in operation through the current date. Management of the Company believes that it may need additional capital if the Company is unable to at least maintain the revenue level and profits achieved during 2016 and the first nine months of 2017. There can be no assurances that the Company will be successful in obtaining sufficient additional capital, if needed, or if it does, that the additional capital will enable the Company to impact its revenues so as to have a material positive effect on the Company’s operations and cash flow. The Company believes that without additional capital, whether in the form of debt, equity or both, it may be forced to cease operations at an undetermined future date.

XML

Stock Based Compensation

9 Months Ended

Sep. 30, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock Based Compensation

Note 3. Stock Based Compensation

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. At September 30, 2017, the Company did not have an active stock option plan. There was no unrecognized portion of expense related to stock option grants at September 30, 2017.

XML

Demand Loans

9 Months Ended

Sep. 30, 2017

Debt Disclosure [Abstract]

Demand Loans

Note 4. Demand Loans

During the third quarter of 2017, the Company repaid the remaining $10,000 principal balance of an unsecured loan from an individual and at September 30, 2017 had no demand loans outstanding. During the nine months ended September 30, 2016, the Company repaid the remaining $13,500 principal balance of an unsecured loan from a second individual. The loans bore interest at an annual rate of 8%.

XML

Convertible Debentures

9 Months Ended

Sep. 30, 2017

Convertible Debt [Abstract]

Convertible Debentures

Note 5. Convertible Debentures

At September 30, 2017, the Company had convertible debentures totaling $128,300 outstanding, of which $95,000 were due during the third quarter of 2017 and $33,300 are due during the third quarter of 2018. The convertible debentures bear interest at 7%. At the option of the lender, the debentures and accrued interest are convertible in whole or part into common stock of the Company at $0.025 per share. During the first quarter of 2017, the Company’s Board of Directors approved and the holders of $33,300 of convertible debentures that had matured during the third quarter of 2016, one of which is held by a Director of the Company, accepted an offer of extension whereby the maturity dates of the convertible debentures are extended for two years and the conversion rate of the debentures and accrued interest into Common Stock of the Company is reduced from $0.05 to $0.025. In accordance with FASB ASC 470, this modification of the convertible debentures was recorded as a debt discount to the notes payable of approximately $13,200 with an offsetting credit to additional-paid in capital. In the three months ended March 31, 2017, the entire $13,200 was accreted through interest expense.

Early in the fourth quarter of 2017, the holders of $95,000 of convertible debentures agreed to extend the maturity dates of those convertible debentures for one year with no change in the terms or conditions of the debentures.

The Company also granted warrants to purchase 691,365 shares of the Company’s common stock at $0.02 per share to the holders of the debentures. The warrants are exercisable two years after issuance and expire seven years after issuance. The fair value of the warrants was determined using the Black-Scholes pricing model. The relative fair value of the warrants was recorded as a discount to the notes payable with an offsetting credit to additional paid-in capital since the Company determined that the warrants were an equity instrument in accordance with FASB ASC 815. The debt discount related to the warrant issuances has been accreted through interest expense over the term of the notes payable. For the three months ended September 30, 2017 and September 30, 2016, $0 was accreted through interest expense. For the nine months ended September 30, 2017 and September 30, 2016, $0 and approximately $500, respectively, was accreted through interest expense.

The following table summarizes all warrant activity of the Company since December 31, 2016:

				Weighted Average
	Number		Exercise	Exercise
	of Shares		Price	Price
Outstanding warrants -
December 31, 2016		721,365	$0.01 to $0.07	$	0.021
Warrants expired		12,300	$0.06 and $0.07	$	0.063
Outstanding warrants -
September 30, 2017		709,065	$0.01 to $0.03	$	0.020
Weighted average remaining
contractual life (years)		3.01
Exercisable warrants -
September 30, 2017		709,065	$0.01 to $0.03	$	0.020
Weighted average remaining
contractual life (years)		3.01

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Other Income (Expenses)

9 Months Ended

Sep. 30, 2017

Other Income and Expenses [Abstract]

Other Income (Expenses)

Note 6. Other Income (Expenses)

Other income (expenses) in the three months and nine months ended September 30, 2017 and September 30, 2016 includes interest on unsecured loans from two individuals and on convertible debentures held by nine investors. Also included in other income (expenses) is accretion of debt discounts in the nine months ended September 30, 2017 related to the extension of the maturity dates of $33,300 of convertible debentures.

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Income Taxes

9 Months Ended

Sep. 30, 2017

Income Tax Disclosure [Abstract]

Income Taxes

Note 7. Income Taxes

There is no provision for income taxes for the three months and nine months ended September 30, 2017 and September 30, 2016 due to the availability of net operating loss carryforwards. The Company has created a valuation allowance for the entire amount of such benefits.

There was no change in unrecognized tax benefits during the period ended September 30, 2017 and there was no accrual for uncertain tax positions as of September 30, 2017.

Tax years from 2013 through 2016 remain subject to examination by U.S. federal and state jurisdictions.

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Related Party Transactions

9 Months Ended

Sep. 30, 2017

Related Party Transactions [Abstract]

Related Party Transactions

Note 8. Related Party Transactions

During the nine months ended September 30, 2017 and September 30, 2016 the Company paid $151,700 and $15,000, respectively, to Michael A. Feinstein, M.D., the Company’s Chairman of the Board and Chief Executive Officer, representing a portion of previously deferred salary owed to him under an employment agreement with the Company. During each of the nine month periods ended September 30, 2017 and September 30, 2016, Dr. Feinstein deferred $63,800 of salary. At September 30, 2017, Dr. Feinstein was owed approximately $213,300 of salary deferred by him. There is no interest payable on the deferred salary.

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Earnings (Loss) per Share

9 Months Ended

Sep. 30, 2017

Weighted average common shares outstanding

Earnings (Loss) per Share

Note 9. 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. The computation of diluted earnings per common share involves the assumption that outstanding common shares are increased by shares issuable upon exercise of those stock options and warrants for which the market price exceeds the exercise price. The number of shares issuable upon the exercise of such stock options and warrants is decreased by shares that could have been purchased by the Company with related proceeds. For the three months and nine months ended September 30, 2017, the number of incremental common shares resulting from the assumed conversion of warrants was 297,448 and 292,619, respectively. For the three months and nine months ended September 30, 2016, the number of incremental common shares resulting from the assumed conversion of warrants was 639 and 1,368, respectively.

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Major Customer and Geographic Information

9 Months Ended

Sep. 30, 2017

Major Customer and Geographic Information [Abstract]

Major Customer and Geographic Information

Note 10. 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:

	Three Months ended September 30						Nine Months ended September 30
	2017			2016			2017			2016
Customer A		48	%		60	%		43	%		37	%
Customer B		27	%		21	%		25	%		22	%
Customer C		4	%		3	%		9	%		19	%

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:

	September 30			December 31
	2017			2016
Customer A		20	%		26	%
Customer B		45	%		47	%
Customer C		8	%		5	%

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:

	Three Months ended September 30				Nine Months ended September 30
	2017		2016		2017		2016
North America	$	181,800	$	184,900	$	493,600	$	411,300
South America		1,500		–		1,500		–
Europe		100		–		300		–
Asia		211,600		351,400		585,800		596,400
Australia		7,400		7,400		22,200		22,200
	$	402,400	$	543,700	$	1,103,400	$	1,029,900

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Subsequent Events

9 Months Ended

Sep. 30, 2017

Subsequent Events [Abstract]

Subsequent Event

Note 11. Subsequent Event

In October 2017, a warrant holder exercised warrants to purchase 17,700 shares of common stock of the Company at exercise prices ranging from $0.01 to $0.03.

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Convertible Debentures (Tables)

9 Months Ended

Sep. 30, 2017

Convertible Debt [Abstract]

Schedule of Warrants Outstanding

The following table summarizes all warrant activity of the Company since December 31, 2016:

				Weighted Average
	Number		Exercise	Exercise
	of Shares		Price	Price
Outstanding warrants -
December 31, 2016		721,365	$0.01 to $0.07	$	0.021
Warrants expired		12,300	$0.06 and $0.07	$	0.063
Outstanding warrants -
September 30, 2017		709,065	$0.01 to $0.03	$	0.020
Weighted average remaining
contractual life (years)		3.01
Exercisable warrants -
September 30, 2017		709,065	$0.01 to $0.03	$	0.020
Weighted average remaining
contractual life (years)		3.01

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Major Customer and Geographic Information (Tables)

9 Months Ended

Sep. 30, 2017

Segment Reporting [Abstract]

Schedule of Revenues from Non-affiliated Customers

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:

	Three Months ended September 30						Nine Months ended September 30
	2017			2016			2017			2016
Customer A		48	%		60	%		43	%		37	%
Customer B		27	%		21	%		25	%		22	%
Customer C		4	%		3	%		9	%		19	%

Schedule of Non-affiliated Customers with Accounts Receivable More Than 10%

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:

	September 30			December 31
	2017			2016
Customer A		20	%		26	%
Customer B		45	%		47	%
Customer C		8	%		5	%

Schedule of Revenue by Geographic Region

The Company’s revenues by geographic region are as follows:

	Three Months ended September 30				Nine Months ended September 30
	2017		2016		2017		2016
North America	$	181,800	$	184,900	$	493,600	$	411,300
South America		1,500		–		1,500		–
Europe		100		–		300		–
Asia		211,600		351,400		585,800		596,400
Australia		7,400		7,400		22,200		22,200
	$	402,400	$	543,700	$	1,103,400	$	1,029,900

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Going Concern (Details) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Going Concern [Abstract]
Accumulated deficit	$ 12,968,000		$ 12,968,000		$ 13,192,200
Working capital	43,300		43,300
Operating income	112,900	$ 173,900	246,600	$ 177,100	271,800
Stockholders' equity (deficiency)	$ 57,800		$ 57,800		$ (179,600)

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Stock Based Compensation (Details)	Sep. 30, 2017 USD ($)
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Unrecognized portion of expense related to stock option grants	$ 0

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Demand Loans (Details) - USD ($)	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Debt Instrument [Line Items]
Demand loans			$ 10,000
Repayment of demand loans	10,000	$ 13,500
Unsecured loan [Member]
Debt Instrument [Line Items]
Demand loans	$ 10,000
Debt instrument, interest rate	8.00%
Repayment of demand loans	$ 10,000	$ 13,500

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Convertible Debentures (Narrative) (Details) - USD ($)	3 Months Ended			9 Months Ended
	Sep. 30, 2017	Mar. 31, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Jun. 30, 2017
Debt Instrument [Line Items]
Interest expense	$ 3,300		$ 3,300	$ 22,600	$ 10,100
Convertible Debt [Member]
Debt Instrument [Line Items]
Convertible debt amount outstanding	128,300			128,300
Convertible debt due during the third quarter of 2017	95,000			95,000
Convertible debt due during the third quarter of 2018	$ 33,300			$ 33,300
Debt instrument, interest rate	7.00%			7.00%
Number of shares of common stock that can be purchased through warrants	691,365			691,365
Price per share of warrants	$ 0.02			$ 0.02
Warrant exercisable term				2 years	2 years
Warrant expiration term				7 years	7 years
Interest expense	$ 0		$ 0	$ 0	$ 500
Convertible Debt [Member] | Conversion Price One [Member]
Debt Instrument [Line Items]
Debt instrument, conversion price per share	$ 0.025			$ 0.025
Convertible Debt [Member] | Conversion Price Two [Member]
Debt Instrument [Line Items]
Amount of principal that can be converted				$ 33,300
Debt instrument, conversion price per share	$ 0.05			$ 0.05
Debt discount recognized on notes payable						$ 13,200
Accretion of debt discount recognized as interest expense		$ 13,200

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Convertible Debentures (Warrants Activity) (Details) - Warrant [Member] - $ / shares	9 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Warrants
Warrants outstanding	709,065	721,365
Warrants expired	12,300
Price
Warrants outstanding	$ 0.020	$ 0.021
Warrants outstanding exercise price range, lower limit	0.01	0.01
Warrants outstanding exercise price range, upper limit	0.03	$ 0.07
Warrants expired exercise price range, lower limit	0.06
Warrants expired exercise price range, upper limit	0.07
Warrants exercisable exercise price range, lower limit	0.01
Warrants exercisable exercise price range, upper limit	$ 0.03
Weighted average remaining contractual life	3 years 4 days
Warrants exercisable, number	709,065
Warrants exercisable, weighted average exercise price	$ 0.020
Warrants exercisable, weighted average remaining contractual life	3 years 4 days

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Income Taxes (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Income Tax Contingency [Line Items]
Income tax provision
Change in unrecognized tax benefits during the period
Accrual for uncertain tax positions
Minimum [Member]
Income Tax Contingency [Line Items]
Tax years open for examination			2013
Maximum [Member]
Income Tax Contingency [Line Items]
Tax years open for examination			2016

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Related Party Transactions (Details) - Related Party [Member] - USD ($)	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Related Party Transaction [Line Items]
Deferred salary paid to related party	$ 151,700	$ 15,000
Portion of salary to related party deferred during period	63,800	$ 63,800
Deferred salary owed to related party	$ 213,300

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Earnings (Loss) per Share (Details) - shares	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Weighted average common shares outstanding
Number of incremental common shares resulting from the assumed conversion of warrants	297,448	639	292,619	1,368

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Major Customer and Geographic Information (Schedule of Revenues from Non-affiliated Customers) (Details) - Revenue [Member]	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Customer A [Member]
Revenue, Major Customer [Line Items]
Risk percentage	48.00%	60.00%	43.00%	37.00%
Customer B [Member]
Revenue, Major Customer [Line Items]
Risk percentage	27.00%	21.00%	25.00%	22.00%
Customer C [Member]
Revenue, Major Customer [Line Items]
Risk percentage	4.00%	3.00%	9.00%	19.00%

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Major Customer and Geographic Information (Schedule of Non-affiliated Customers with Accounts Receivable) (Details) - Accounts Receivable [Member]	9 Months Ended	12 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Customer A [Member]
Concentration Risk [Line Items]
Risk percentage	20.00%	26.00%
Customer B [Member]
Concentration Risk [Line Items]
Risk percentage	45.00%	47.00%
Customer C [Member]
Concentration Risk [Line Items]
Risk percentage	8.00%	5.00%

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Major Customer and Geographic Information (Schedule of Revenue by Geographic Region) (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	$ 402,400	$ 543,700	$ 1,103,400	$ 1,029,900
North America [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	181,800	184,900	493,600	411,300
South America [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	1,500		1,500
Europe [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	100		300
Asia [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	211,600	351,400	585,800	596,400
Australia [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	$ 7,400	$ 7,400	$ 22,200	$ 22,200

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Subsequent Events (Details) - Subsequent Event [Member]	1 Months Ended
	Oct. 31, 2017 $ / shares shares
Subsequent Event [Line Items]
Common shares issued from exercise of warrants | shares	17,700
Warrants exercised exercise price range, lower limit	$ 0.01
Warrants exercised exercise price range, upper limit	$ 0.03