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 June 30, 2018

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 August 10, 2018.

NOCOPI TECHNOLOGIES, INC.

INDEX

	PAGE
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements	1
Statements of Operations for Three Months and Six Months Ended June 30, 2018 and June 30, 2017	1
Balance Sheets at June 30, 2018 and December 31, 2017	2
Statements of Cash Flows for Six Months Ended June 30, 2018 and June 30, 2017	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	13
Part II. OTHER INFORMATION
Item 6. Exhibits	14
SIGNATURES	15
EXHIBIT INDEX	16

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Nocopi Technologies, Inc.

Statements of Operations*

(unaudited)

	Three Months ended June 30						Six Months ended June 30
	2018			2017			2018			2017
Revenues
Licenses, royalties and fees	$	1,655,600		$	131,900		$	1,830,500		$	290,700
Product and other sales		218,100			227,700			468,600			410,300
		1,873,700			359,600			2,299,100			701,000
Cost of revenues
Licenses, royalties and fees		24,200			26,800			49,200			47,800
Product and other sales		93,400			94,100			185,600			166,300
		117,600			120,900			234,800			214,100
Gross profit		1,756,100			238,700			2,064,300			486,900
Operating expenses
Research and development		36,100			36,500			73,200			72,900
Sales and marketing		168,500			59,800			238,600			120,700
General and administrative		101,500			68,900			204,200			159,600
		306,100			165,200			516,000			353,200
Net income from operations		1,450,000			73,500			1,548,300			133,700
Other income (expenses)
Interest income		300			–			700			–
Interest expense, bank charges and accretion of interest		(2,800	)		(3,100	)		(5,700	)		(19,300	)
		(2,500	)		(3,100	)		(5,000	)		(19,300	)
Net income	$	1,447,500		$	70,400		$	1,543,300		$	114,400
Basic and diluted net income per common share	$	.02		$	.00		$	.03		$	.00
Weighted average common shares outstanding
Basic		58,616,716			58,599,016			58,616,716			58,599,016
Diluted		58,989,480			58,969,160			58,955,344			58,889,178

*See accompanying notes to these financial statements.

1

Nocopi Technologies, Inc.

Balance Sheets*

	June 30			December 31
	2018			2017
	(unaudited)			(audited)
Assets
Current assets
Cash	$	298,000		$	360,400
Accounts receivable less $5,000 allowance for doubtful accounts		286,000			292,100
Inventory		122,600			110,600
Prepaid and other		29,600			35,300
Total current assets		736,200			798,400
Fixed assets
Leasehold improvements		19,700			19,700
Furniture, fixtures and equipment		185,400			184,900
		205,100			204,600
Less: accumulated depreciation and amortization		194,000			190,500
		11,100			14,100
Other assets
Long-term receivable		1,521,700			–
Total assets	$	2,269,000		$	812,500
Liabilities and Stockholders' Equity
Current liabilities
Convertible debentures	$	128,300		$	128,300
Accounts payable		20,100			4,900
Accrued expenses		159,500			364,700
Deferred revenue		–			99,400
Total current liabilities		307,900			597,300
Other liabilities
Accrued expenses, non-current		106,500			–
Stockholders' equity
Common stock, $0.01 par value
Authorized – 75,000,000 shares
Issued and outstanding – 58,616,716 shares		586,200			586,200
Paid-in capital		12,440,000			12,440,000
Accumulated deficit		(11,171,600	)		(12,811,000	)
Total stockholders' equity		1,854,600			215,200
Total liabilities and stockholders' equity	$	2,269,000		$	812,500

*See accompanying notes to these financial statements.

2

Nocopi Technologies, Inc.

Statements of Cash Flows*

(unaudited)

	Six Months ended June 30
	2018			2017
Operating Activities
Net income	$	1,543,300		$	114,400
Adjustments to reconcile net income to net cash used in operating activities
Depreciation and amortization		3,500			3,500
Accretion of interest – convertible debentures		–			13,200
Non-current assets and liabilities, net		(1,415,200	)		–
Cumulative effect of accounting change		96,100			–
		227,700			131,100
(Increase) decrease in assets
Accounts receivable		6,100			(50,600	)
Inventory		(12,000	)		(15,500	)
Prepaid and other		5,700			(400	)
Decrease in liabilities
Accounts payable and accrued expenses		(190,000	)		(69,000	)
Deferred revenue		(99,400	)		(10,300	)
		(289,600	)		(145,800	)
Net cash used in operating activities		(61,900	)		(14,700	)
Investment Activities
Additions to fixed assets		(500	)		(4,900	)
Net cash used in investing activities		(500	)		(4,900	)
Decrease in cash		(62,400	)		(19,600	)
Cash at beginning of year		360,400			199,100
Cash at end of period	$	298,000		$	179,500

*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 2017 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 2017 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 six months ended June 30, 2018 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 (loss) is equal to net income (loss).

Note 2. Revenues

On January 1, 2018, the Company adopted ASU 214-09, Revenue from Contracts with Customers (“Topic 606”), using the modified retrospective method. Results for periods beginning on or after January 1, 2018 are presented under Topic 606; however, prior period amounts are not adjusted and continue to be reported in accordance with Topic 605, Revenue Recognition, which was in effect for those periods.

The Company recorded a decrease to the opening balance of the accumulated deficit of $96,100 and a corresponding charge to deferred revenue as of January 1, 2018 due to the cumulative impact of the adoption of Topic 606. The disclosure of disaggregated revenue is disclosed in Note 9.

The adoption of the new guidance affected our recognition of revenue from licenses and royalties. Under our previous accounting practice, we recognized revenue from licenses and royalties on a straight-line basis over the term of the related license agreement. As a result of our adoption of the new guidance, we will recognize revenue from licensees and royalties at a point in time when the term begins.

During the second quarter of 2018, we negotiated an amendment to a license agreement with a licensee that, in addition to expanding the technologies that the licensee is permitted to market, provides for a four year extension to the license agreement that contains guaranteed royalties payable in installments over the term of the amendment to the license agreement. Since the performance obligation is to grant the license for the use of certain patented ink technology as it exists at the time that it is granted, the promise to grant the license is a performance obligation satisfied at a point in time in accordance with Topic 606. In accordance with Topic 606, we recorded $1,521,700 net of imputed interest of licenses, royalties and fees and $106,500 of selling expenses in the second quarter and first six months of 2018 related to the amendment to the license agreement. The related receivable and payable are recorded as other assets and other liabilities on the balance sheet.

The change in accumulated deficit on our Balance Sheet at June 30, 2018, including the aggregate impact of the change in accounting principles which was effective on January 1, 2018, was as follows:

Accumulated deficit – January 1, 2018	$	(12,811,000	)
Net earnings		1,543,300
Cumulative effect of accounting change at January 1, 2018		96,100
Accumulated deficit – June 30, 2018	$	(11,171,600	)

4

NOCOPI TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

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 June 30, 2018, the Company did not have an active stock option plan. There was no unrecognized portion of expense related to stock option grants at June 30, 2018.

Note 4. Convertible Debentures

At June 30, 2018, the Company had convertible debentures totaling $128,300 outstanding, which 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 third quarter of 2018, the holders of $103,300 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.

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.

The following table summarizes the Company’s warrant position at June 30, 2018 and December 31, 2017:

				Weighted Average
	Number		Exercise	Exercise
	of Shares		Price	Price
Outstanding warrants -
December 31, 2017		691,365	$0.02	$0.02
Outstanding warrants -
June 30, 2018		691,365	$0.02	$0.02
Weighted average remaining
contractual life (years)		2.33
Exercisable warrants -
June 30, 2018		691,365	$0.02	$0.02
Weighted average remaining
contractual life (years)		2.33

5

NOCOPI TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

Note 5. Other Income (Expenses)

Other income (expenses) in the three months and six months ended June 30, 2018 and June 30, 2017 includes interest on convertible debentures held by nine investors. Also included in other income (expenses) in the three months and six months ended June 30, 2017 is interest on an unsecured loan from an individual and, in the six months ended June 30, 2017, accretion of debt discounts related to the extension of the maturity dates of $33,300 of convertible debentures.

Note 6. Income Taxes

There is no provision for income taxes for the three months and six months ended June 30, 2018 and June 30, 2017 due to the availability of net operating loss carryforwards. The Company has established a valuation allowance for the entire amount of benefits resulting from the Company’s net operating loss carryforwards because the Company has determined that the realization of the net deferred tax asset is not assured.

There was no change in unrecognized tax benefits during the period ended June 30, 2018 and there was no accrual for uncertain tax positions as of June 30, 2018.

Tax years from 2014 through 2017 remain subject to examination by U.S. federal and state jurisdictions.

Note 7. Related Party Transactions

During the six months ended June 30, 2018, the Company paid $235,400 to Michael A. Feinstein, M.D., the Company’s Chairman of the Board and Chief Executive Officer, representing the balance of previously deferred salary owed to him under an employment agreement with the Company. During the six months ended June 30, 2017, the Company paid $116,200 to Dr. Feinstein representing a portion of previously deferred salary owed to him under the employment agreement. During the five month period ended May 31, 2018, Dr. Feinstein deferred $35,400 of salary. During the six month period ended June 30, 2017, Dr. Feinstein deferred $42,500 of salary. In June 2018, the periodic salary payments provided for in Dr. Feinstein’s employment agreement resumed. At June 30, 2018, there was no remaining deferred salary owed to Dr. Feinstein. There was no interest payable on the deferred salary.

Note 8. Earnings per Share

In accordance with FASB ASC 260, Earnings per Share, basic earnings per common share is computed using net earnings 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 warrants for which the market price exceeds the exercise price. The number of shares issuable upon the exercise of such warrants is decreased by shares that could have been purchased by the Company with related proceeds. For the three months and six months ended June 30, 2018, the number of incremental common shares resulting from the assumed conversion of warrants was 372,764 and 338,628, respectively. For the three months and six months ended June 30, 2017, the number of incremental common shares resulting from the assumed conversion of warrants was 370,144 and 290,162, respectively.

Note 9. 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 June 30						Six Months ended June 30
	2018			2017			2018			2017
Customer A		8	%		47	%		13	%		40	%
Customer B		85	%		20	%		74	%		24	%
Customer C		2	%		12	%		5	%		12	%

6

NOCOPI TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

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:

	June 30			December 31
	2018			2017
Customer A		6	%		14	%
Customer B		88	%		47	%
Customer C		2	%		15	%

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 June 30				Six Months ended June 30
	2018		2017		2018		2017
North America	$	1,674,400	$	136,700	$	1,859,300	$	311,800
South America		–		–		1,500		–
Europe		100		200		100		200
Asia		199,200		215,300		438,200		374,200
Australia		–		7,400		–		14,800
	$	1,873,700	$	359,600	$	2,299,100	$	701,000

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 2018 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, 2017.

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, 2017, filed with the Securities and Exchange Commission on March 29, 2018.

8

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

Our 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.

Our 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 our 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 our 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 our 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 our 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 our Company agrees to revise such terms, revenues from the customer may be affected.

Revenues for the second quarter of 2018 were $1,873,700 compared to $359,600 in the second quarter of 2017, an increase of $1,514,100, or approximately 421%. Revenues in the second quarter of 2018 included, in accordance with ASU 214-09, Revenue from Contracts with Customers (“Topic 606”), revenue of $1,521,700 representing the present value of guaranteed royalty payments that will be payable over a four-year period beginning in the third quarter of 2019 as a result of an amendment to a license agreement with a licensee that, in addition to expanding the technologies that our licensee is permitted to market, provides for a four year extension to the license agreement beginning in July 2019. Since the performance obligation is to grant the license for the use of certain patented ink technology as it exists at the time that it is granted, the promise to grant the license is a performance obligation satisfied at a point in time in accordance with Topic 606. Previously, we recognized revenue from licenses and royalties on a straight-line basis over the term of the related license agreement. Licenses, royalties and fees increased by $1,523,700, or approximately 1,155%, to $1,655,600 in the second quarter of 2018 from $131,900 in the second quarter of 2017. The increase in licenses, royalties and fees is due primarily to the adoption of Topic 606 described above. There can be no assurances that the marketing and product development activities of our Company’s licensees or other businesses in the entertainment and toy products market will produce a significant increase in revenues for our Company, nor can the timing of any potential revenue increases be predicted, particularly given the uncertain economic conditions being experienced worldwide. See “Plan of Operation, Liquidity and Capital Resources” and “Note 2 to our Condensed Financial Statements” for comparative information on the impact of the adoption of Topic 606 to our Company’s condensed financial statements.

9

Product and other sales decreased by $9,600, or approximately 4%, to $218,100 in the second quarter of 2018 from $227,700 in the second quarter of 2017. Sales of ink decreased nominally in the second quarter of 2018 compared to the second quarter of 2017 due primarily to lower ink shipments to a third party authorized printer used by one of our Company’s major licensees in the entertainment and toy products market. In the second quarter of 2018, our Company derived revenues of approximately $1,806,700 from our licensees and their authorized printers in the entertainment and toy products market compared to revenues of approximately $305,200 in the second quarter of 2017. The increase in revenues from our licensees and their authorized printers in the entertainment and toy products market in the second quarter of 2018 compared to the second quarter of 2017 is due primarily to the adoption of Topic 606 described above.

For the first six months of 2018, revenues were $2,299,100, representing an increase of $1,598,100, or approximately 228%, from revenues of $701,000 in the first six months of 2017. Licenses, royalties and fees increased by $1,539,800, or approximately 530%, to $1,830,500 in the first six months of 2018 from $290,700 in the first six months of 2017. As in the second quarter of 2018, the increase in licenses, royalties and fees in the first six months of 2018 compared to the first six months of 2017 is due primarily to the adoption of Topic 606.

Product and other sales increased by $58,300, or approximately 14%, to $468,600 in the first six months of 2018 from $410,300 in the first six months of 2017. Sales of ink increased in the six months of 2018 compared to the first six of 2017 due primarily to higher ink shipments to the third party authorized printers used by two of our Company’s major licensees in the entertainment and toy products market offset in part by lower ink shipments to our Company’s licensees in the retail receipt and document fraud market. Our Company derived revenues of approximately $2,176,000 from licensees and their authorized printers in the entertainment and toy products market in the first six months of 2018 compared to revenues of approximately $587,700 in the first six months of 2017. The increase in revenues from our licensees and their authorized printers in the entertainment and toy products market in the first six months of 2018 compared to the first six months of 2017 is due primarily to the adoption of Topic 606.

Our Company’s gross profit increased to $1,756,100 in the second quarter of 2018, or approximately 94% of revenues, from $238,700 in the second quarter of 2017 or approximately 66% 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 our Company’s technologies or equipment used to support the application of its technologies. These items (except for inks which are manufactured by our 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 higher gross profit in the second quarter of 2018 compared to the second quarter of 2017 results primarily from higher licenses, royalties and fees due to the adoption of Topic 606 offset in part by lower gross revenues from product and other sales in the second quarter of 2018 compared to the second quarter of 2017.

For the first six months of 2018, gross profit was $2,064,300, or approximately 90% of revenues, compared to $486,900, or approximately 69% of revenues, in the first six months of 2017. The higher gross profit in the first six months of 2018 compared to the first six months of 2017 results primarily from both higher licenses, royalties and fees due to the adoption of Topic 606 and higher gross revenues from product and other sales in the first six months of 2018 compared to the first six months of 2017.

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. The gross profit from licenses, royalties and fees increased to approximately 99% in the second quarter of 2018 compared to approximately 80% in the second quarter of 2017 and to approximately 97% of revenues from licenses, royalties and fees in the first six months of 2018 from approximately 84% in the first six months of 2017.

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 decreased to approximately 57% of revenues in the second quarter of 2018 compared to approximately 59% of revenues in the second quarter of 2017. This decrease was due to lower sales volume of product and other sales and lower margins on certain products due primarily to higher prices of certain raw materials. For the first six months of 2018, the gross profit, expressed as a percentage of revenues, increased to approximately 60% of revenues from product and other sales compared to approximately 59% of revenues from product and other sales in the first six months of 2017.

10

Research and development expenses of $36,100 and $73,200 in the second quarter and first six months of 2018, respectively, were comparable to $36,500 and $72,900 in the second quarter and first six months of 2017, respectively.

Sales and marketing expenses increased to $168,500 in the second quarter of 2018 from $59,800 in the second quarter of 2017 and to $238,800 in the first six months of 2018 from $120,700 in the first six months of 2017. This increase is due primarily to higher commission expense on the higher level of sales in the second quarter and first six months of 2018 compared to the second quarter and first six months of 2017 related to the additional revenue generated as a result of the adoption of Topic 606.

General and administrative expenses increased in the second quarter of 2018 to $101,500 from $68,900 in the second quarter of 2017. In the first six months of 2018, general and administrative expenses increased to $204,200 from $159,600 in the first six months of 2017. The increase in both the second quarter and first six months of 2018 compared to the second quarter and first six months of 2017 is due primarily to higher patent related expenses, higher legal expenses and higher employment expenses in the second quarter and first six months of 2018 compared to the second quarter and first six months of 2017.

Other income (expenses) in the second quarter and first six months of 2018 and 2017 included interest on convertible debentures held by nine investors and, in the second quarter and first six months of 2017, interest on an unsecured loan from an individual. Also included in other income (expenses) is accretion of debt discounts in the first quarter of 2017 related to the extension of the maturity dates of $33,300 of convertible debentures.

The net income of $1,447,500 in the second quarter of 2018 compared to net income of $70,400 in the second quarter of 2017 resulted primarily from a higher gross profit on a higher level of revenues in the second quarter of 2018 compared to the second quarter of 2017 related to the adoption of Topic 606 offset in part by higher overhead expenses in the second quarter of 2018 compared to the second quarter of 2017. The net income of $1,543,300 in the first six months of 2018 compared to net income of $114,400 in the first six months of 2017 resulted primarily from a higher gross profit on a higher level of revenues in the first six months of 2018 compared to the first six months of 2017 related to the adoption of Topic 606 and no accretion of debt discounts in the first six months of 2018 as there was in the first six months of 2017 offset in part by higher overhead expenses in the first six months of 2018 compared to the first six months of 2017.

Plan of Operation, Liquidity and Capital Resources

During the first six months of 2018, our Company’s cash decreased to $298,000 at June 30, 2018 from $360,400 at December 31, 2017. During the first six months of 2018, our Company used $61,900 to fund its operating activities and $500 for capital equipment purchases.

During the first six months of 2018, our Company’s revenues increased approximately 228% to $2,299,100 in the first six months of 2018 from $701,000 in the first six months of 2017 of which 11%, or $76,500 is attributable to historical operations and 217%, or $1,521,600, to the adoption of Topic 606.

Our total overhead expenses increased in the first six months of 2018 compared to the first six months of 2017 and our Company’s interest expense decreased in the first six months of 2018 compared to the first six months of 2017. As a result of these factors, our Company generated net income of $1,543,300 in the first six months of 2018 compared to $114,400 in first six months of 2017. Our Company had negative operating cash flow of $61,900 during the first six months of 2018. At June 30, 2018, our Company had positive working capital of $428,300 and stockholders’ equity of $1,854,600. For the full year of 2017, our Company had net income of $381,200 and had positive operating cash flow of $177,500. At December 31, 2017, our Company had positive working capital of $201,100 and stockholders’ equity of $215,200.

Our Company has $128,300 of convertible debentures outstanding that are due during the third quarter of 2018. As of the current date, holders of $103,300 of the convertible debentures have agreed to extend the maturity dates of the convertible debentures for one year with no change in the terms or conditions of the debentures. These borrowings allowed our Company to remain in operation through late 2016 when our Company’s cash flow increased significantly.

11

We may need to obtain additional capital in the future to support the working capital requirements associated with our existing revenue base and to fund potential operating losses that could occur if our licensees are unable to at least maintain current levels of sales of products utilizing our Company’s technologies. We cannot assure you that we will be successful in obtaining sufficient additional capital, or if we do so, that the additional capital will enable our Company to continue to operate profitably in the future and develop new revenue sources to have a material positive effect on our Company’s operations and cash flow. Without additional investment, we may be forced to cease operations at an undetermined time in the future if we are unable to sustain revenues at levels approximating revenues achieved in recent years.

We continue to maintain a cost containment program including curtailment, where possible, of discretionary research and development and sales and marketing expenses.

Our 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 our Company has developed in the entertainment and toy products market. This includes two licensees that have been marketing products incorporating our 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 our 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.

Our 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 our Company to generate additional revenues and positive cash flow.

Our Company has received and continues to 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 we will be successful in raising additional capital, or that such additional capital, if obtained, will enable our 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. As a result, our revenues, results of operations and liquidity may be negatively impacted as they were in earlier years.

Recently Adopted Accounting Pronouncements

In June 2018, the FASB issued ASU No. 2018-07, Compensation – Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting. The amendments in this Update expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. Prior to this Update, Topic 718 applied only to share-based transactions to employees. Consistent with the accounting requirement for employee share-based payment awards, nonemployee share-based payment awards within the scope of Topic 718 are measured at grant-date fair value of the equity instruments that an entity is obligated to issue when the good has been delivered or the service has been rendered and any other conditions necessary to earn the right to benefit from the instruments have been satisfied. The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606. The adoption of this pronouncement on June 30, 2018 had no material impact on our Company’s financial statements.

12

Recently Issued Accounting Pronouncements Not Yet Adopted

As of June 30, 2018, there are no recently issued accounting standards not yet adopted which would have a material effect on our Company’s financial statements.

Off-Balance Sheet Arrangements

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

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures. Our Company’s management, with the participation of our Company’s Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of our 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 June 30, 2018. Based on this evaluation, our Company’s Principal Executive Officer and Principal Financial Officer concluded that, as of June 30, 2018, our Company’s disclosure controls and procedures were effective, in that they provide reasonable assurance that information required to be disclosed by our 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 our Company’s management, including our 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 June 30, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

13

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

14

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: August 13, 2018	/s/ Michael A. Feinstein, M.D.
	Michael A. Feinstein, M.D.
	Chairman of the Board, President & Chief Executive Officer
DATE: August 13, 2018	/s/ Rudolph A. Lutterschmidt
	Rudolph A. Lutterschmidt
	Vice President & Chief Financial Officer

15

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

16

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: August 13, 2018

/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: August 13, 2018

/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 June 30, 2018 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.

August 13, 2018

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

Michael A. Feinstein, M.D.

/s/ Rudolph A. Lutterschmidt

Rudolph A. Lutterschmidt

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2018	Aug. 10, 2018
Document And Entity Information
Entity Registrant Name	NOCOPI TECHNOLOGIES INC/MD/
Entity Central Index Key	0000888981
Document Type	10-Q
Document Period End Date	Jun. 30, 2018
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	Q2
Document Fiscal Year Focus	2018

XML

Statements of Operations - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Revenues
Licenses, royalties and fees	$ 1,655,600	$ 131,900	$ 1,830,500	$ 290,700
Product and other sales	218,100	227,700	468,600	410,300
Total revenues	1,873,700	359,600	2,299,100	701,000
Cost of revenues
Licenses, royalties and fees	24,200	26,800	49,200	47,800
Product and other sales	93,400	94,100	185,600	166,300
Total cost of revenues	117,600	120,900	234,800	214,100
Gross profit	1,756,100	238,700	2,064,300	486,900
Operating expenses
Research and development	36,100	36,500	73,200	72,900
Sales and marketing	168,500	59,800	238,600	120,700
General and administrative	101,500	68,900	204,200	159,600
Total operating expenses	306,100	165,200	516,000	353,200
Net income from operations	1,450,000	73,500	1,548,300	133,700
Other income (expenses)
Interest income	300		700
Interest expense, bank charges and accretion of interest	(2,800)	(3,100)	(5,700)	(19,300)
Total other income (expenses)	(2,500)	(3,100)	(5,000)	(19,300)
Net income	$ 1,447,500	$ 70,400	$ 1,543,300	$ 114,400
Basic and diluted net income per common share	$ .02	$ 0.00	$ .03	$ 0.00
Weighted average common shares outstanding
Basic	58,616,716	58,599,016	58,616,716	58,599,016
Diluted	58,989,480	58,969,160	58,955,344	58,889,178

XML

Balance Sheets - USD ($)	Jun. 30, 2018	Dec. 31, 2017
Current assets
Cash	$ 298,000	$ 360,400
Accounts receivable less $5,000 allowance for doubtful accounts	286,000	292,100
Inventory	122,600	110,600
Prepaid and other	29,600	35,300
Total current assets	736,200	798,400
Fixed assets
Leasehold improvements	19,700	19,700
Furniture, fixtures and equipment	185,400	184,900
Fixed assets, gross	205,100	204,600
Less: accumulated depreciation and amortization	194,000	190,500
Total fixed assets	11,100	14,100
Other assets
Long-term receivable	1,521,700
Total assets	2,269,000	812,500
Current liabilities
Convertible debentures	128,300	128,300
Accounts payable	20,100	4,900
Accrued expenses	159,500	364,700
Deferred revenue		99,400
Total current liabilities	307,900	597,300
Other liabilities
Accrued expenses, non-current	106,500
Stockholders' equity
Common stock, $0.01 par value Authorized - 75,000,000 shares Issued and outstanding - 58,616,716 shares	586,200	586,200
Paid-in capital	12,440,000	12,440,000
Accumulated deficit	(11,171,600)	(12,811,000)
Total stockholders' equity	1,854,600	215,200
Total liabilities and stockholders' equity	$ 2,269,000	$ 812,500

XML

Balance Sheets (Parenthetical) - USD ($)	Jun. 30, 2018	Dec. 31, 2017
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	58,616,716	58,616,716
Common stock, shares outstanding	58,616,716	58,616,716

XML

Statements of Cash Flows - USD ($)	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Operating Activities
Net income	$ 1,543,300	$ 114,400
Adjustments to reconcile net income to net cash used in operating activities
Depreciation and amortization	3,500	3,500
Accretion of interest - convertible debentures		13,200
Non-current assets and liabilities, net	(1,415,200)
Cumulative effect of accounting change	96,100
Net income adjusted for non-cash operating activities	227,700	131,100
(Increase) decrease in assets
Accounts receivable	6,100	(50,600)
Inventory	(12,000)	(15,500)
Prepaid and other	5,700	(400)
Decrease in liabilities
Accounts payable and accrued expenses	(190,000)	(69,000)
Deferred revenue	(99,400)	(10,300)
Total increase in operating capital	(289,600)	(145,800)
Net cash used in operating activities	(61,900)	(14,700)
Investing Activities
Additions to fixed assets	(500)	(4,900)
Net cash used in investing activities	(500)	(4,900)
Financing Activities
Decrease in cash	(62,400)	(19,600)
Cash at beginning of year	360,400	199,100
Cash at end of period	$ 298,000	$ 179,500

XML

Financial Statements

6 Months Ended

Jun. 30, 2018

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 2017 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 2017 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 six months ended June 30, 2018 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 (loss) is equal to net income (loss).

XML

Revenues

6 Months Ended

Jun. 30, 2018

Revenue from Contract with Customer [Abstract]

Revenues

Note 2. Revenues

On January 1, 2018, the Company adopted ASU 214-09, Revenue from Contracts with Customers (“Topic 606”), using the modified retrospective method. Results for periods beginning on or after January 1, 2018 are presented under Topic 606; however, prior period amounts are not adjusted and continue to be reported in accordance with Topic 605, Revenue Recognition, which was in effect for those periods.

The Company recorded a decrease to the opening balance of the accumulated deficit of $96,100 and a corresponding charge to deferred revenue as of January 1, 2018 due to the cumulative impact of the adoption of Topic 606. The disclosure of disaggregated revenue is disclosed in Note 9.

The adoption of the new guidance affected our recognition of revenue from licenses and royalties. Under our previous accounting practice, we recognized revenue from licenses and royalties on a straight-line basis over the term of the related license agreement. As a result of our adoption of the new guidance, we will recognize revenue from licensees and royalties at a point in time when the term begins.

During the second quarter of 2018, we negotiated an amendment to a license agreement with a licensee that, in addition to expanding the technologies that the licensee is permitted to market, provides for a four year extension to the license agreement that contains guaranteed royalties payable in installments over the term of the amendment to the license agreement. Since the performance obligation is to grant the license for the use of certain patented ink technology as it exists at the time that it is granted, the promise to grant the license is a performance obligation satisfied at a point in time in accordance with Topic 606. In accordance with Topic 606, we recorded $1,521,700 net of imputed interest of licenses, royalties and fees and $106,500 of selling expenses in the second quarter and first six months of 2018 related to the amendment to the license agreement. The related receivable and payable are recorded as other assets and other liabilities on the balance sheet.

The change in accumulated deficit on our Balance Sheet at June 30, 2018, including the aggregate impact of the change in accounting principles which was effective on January 1, 2018, was as follows:

Accumulated deficit – January 1, 2018	$	(12,811,000	)
Net earnings		1,543,300
Cumulative effect of accounting change at January 1, 2018		96,100
Accumulated deficit – June 30, 2018	$	(11,171,600	)

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Stock Based Compensation

6 Months Ended

Jun. 30, 2018

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 June 30, 2018, the Company did not have an active stock option plan. There was no unrecognized portion of expense related to stock option grants at June 30, 2018.

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Convertible Debentures

6 Months Ended

Jun. 30, 2018

Convertible Debt [Abstract]

Convertible Debentures

Note 4. Convertible Debentures

At June 30, 2018, the Company had convertible debentures totaling $128,300 outstanding, which 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 third quarter of 2018, the holders of $103,300 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.

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.

The following table summarizes the Company’s warrant position at June 30, 2018 and December 31, 2017:

				Weighted Average
	Number		Exercise	Exercise
	of Shares		Price	Price
Outstanding warrants -
December 31, 2017		691,365	$0.02	$0.02
Outstanding warrants -
June 30, 2018		691,365	$0.02	$0.02
Weighted average remaining
contractual life (years)		2.33
Exercisable warrants -
June 30, 2018		691,365	$0.02	$0.02
Weighted average remaining
contractual life (years)		2.33

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Other Income (Expenses)

6 Months Ended

Jun. 30, 2018

Other Income and Expenses [Abstract]

Other Income (Expenses)

Note 5. Other Income (Expenses)

Other income (expenses) in the three months and six months ended June 30, 2018 and June 30, 2017 includes interest on convertible debentures held by nine investors. Also included in other income (expenses) in the three months and six months ended June 30, 2017 is interest on an unsecured loan from an individual and, in the six months ended June 30, 2017, accretion of debt discounts related to the extension of the maturity dates of $33,300 of convertible debentures.

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Income Taxes

6 Months Ended

Jun. 30, 2018

Income Tax Disclosure [Abstract]

Income Taxes

Note 6. Income Taxes

There is no provision for income taxes for the three months and six months ended June 30, 2018 and June 30, 2017 due to the availability of net operating loss carryforwards. The Company has established a valuation allowance for the entire amount of benefits resulting from the Company’s net operating loss carryforwards because the Company has determined that the realization of the net deferred tax asset is not assured.

There was no change in unrecognized tax benefits during the period ended June 30, 2018 and there was no accrual for uncertain tax positions as of June 30, 2018.

Tax years from 2014 through 2017 remain subject to examination by U.S. federal and state jurisdictions.

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Related Party Transactions

6 Months Ended

Jun. 30, 2018

Related Party Transactions [Abstract]

Related Party Transactions

Note 7. Related Party Transactions

During the six months ended June 30, 2018, the Company paid $235,400 to Michael A. Feinstein, M.D., the Company’s Chairman of the Board and Chief Executive Officer, representing the balance of previously deferred salary owed to him under an employment agreement with the Company. During the six months ended June 30, 2017, the Company paid $116,200 to Dr. Feinstein representing a portion of previously deferred salary owed to him under the employment agreement. During the five month period ended May 31, 2018, Dr. Feinstein deferred $35,400 of salary. During the six month period ended June 30, 2017, Dr. Feinstein deferred $42,500 of salary. In June 2018, the periodic salary payments provided for in Dr. Feinstein’s employment agreement resumed. At June 30, 2018, there was no remaining deferred salary owed to Dr. Feinstein. There was no interest payable on the deferred salary.

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Earnings per Share

6 Months Ended

Jun. 30, 2018

Weighted average common shares outstanding

Earnings per Share

Note 8. Earnings per Share

In accordance with FASB ASC 260, Earnings per Share, basic earnings per common share is computed using net earnings 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 warrants for which the market price exceeds the exercise price. The number of shares issuable upon the exercise of such warrants is decreased by shares that could have been purchased by the Company with related proceeds. For the three months and six months ended June 30, 2018, the number of incremental common shares resulting from the assumed conversion of warrants was 372,764 and 338,628, respectively. For the three months and six months ended June 30, 2017, the number of incremental common shares resulting from the assumed conversion of warrants was 370,144 and 290,162, respectively.

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Major Customer and Geographic Information

6 Months Ended

Jun. 30, 2018

Major Customer and Geographic Information [Abstract]

Major Customer and Geographic Information

Note 9. 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 June 30						Six Months ended June 30
	2018			2017			2018			2017
Customer A		8	%		47	%		13	%		40	%
Customer B		85	%		20	%		74	%		24	%
Customer C		2	%		12	%		5	%		12	%

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:

	June 30			December 31
	2018			2017
Customer A		6	%		14	%
Customer B		88	%		47	%
Customer C		2	%		15	%

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 June 30				Six Months ended June 30
	2018		2017		2018		2017
North America	$	1,674,400	$	136,700	$	1,859,300	$	311,800
South America		–		–		1,500		–
Europe		100		200		100		200
Asia		199,200		215,300		438,200		374,200
Australia		–		7,400		–		14,800
	$	1,873,700	$	359,600	$	2,299,100	$	701,000

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Revenues (Tables)

6 Months Ended

Jun. 30, 2018

Revenue from Contract with Customer [Abstract]

Change in Accumulated Deficit Balance

The change in accumulated deficit on our Balance Sheet at June 30, 2018, including the aggregate impact of the change in accounting principles which was effective on January 1, 2018, was as follows:

Accumulated deficit – January 1, 2018	$	(12,811,000	)
Net earnings		1,543,300
Cumulative effect of accounting change at January 1, 2018		96,100
Accumulated deficit – June 30, 2018	$	(11,171,600	)

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Convertible Debentures (Tables)

6 Months Ended

Jun. 30, 2018

Convertible Debt [Abstract]

Schedule of Warrants Outstanding

The following table summarizes the Company’s warrant position at June 30, 2018 and December 31, 2017:

				Weighted Average
	Number		Exercise	Exercise
	of Shares		Price	Price
Outstanding warrants -
December 31, 2017		691,365	$0.02	$0.02
Outstanding warrants -
June 30, 2018		691,365	$0.02	$0.02
Weighted average remaining
contractual life (years)		2.33
Exercisable warrants -
June 30, 2018		691,365	$0.02	$0.02
Weighted average remaining
contractual life (years)		2.33

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Major Customer and Geographic Information (Tables)

6 Months Ended

Jun. 30, 2018

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 June 30						Six Months ended June 30
	2018			2017			2018			2017
Customer A		8	%		47	%		13	%		40	%
Customer B		85	%		20	%		74	%		24	%
Customer C		2	%		12	%		5	%		12	%

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:

	June 30			December 31
	2018			2017
Customer A		6	%		14	%
Customer B		88	%		47	%
Customer C		2	%		15	%

Schedule of Revenue by Geographic Region

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

	Three Months ended June 30				Six Months ended June 30
	2018		2017		2018		2017
North America	$	1,674,400	$	136,700	$	1,859,300	$	311,800
South America		–		–		1,500		–
Europe		100		200		100		200
Asia		199,200		215,300		438,200		374,200
Australia		–		7,400		–		14,800
	$	1,873,700	$	359,600	$	2,299,100	$	701,000

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Revenues (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Revenue from Contract with Customer [Abstract]
Long-term receivable	$ 1,521,700		$ 1,521,700
Accrued expenses, non-current	106,500		106,500
Accumulated deficit			(12,811,000)
Net earnings	1,447,500	$ 70,400	1,543,300	$ 114,400
Cumulative effect of accounting change			96,100
Accumulated deficit	$ (11,171,600)		$ (11,171,600)

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Stock Based Compensation (Details)	Jun. 30, 2018 USD ($)
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Unrecognized portion of expense related to stock option grants	$ 0

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Convertible Debentures (Narrative) (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Debt Instrument [Line Items]
Interest expense	$ 2,800	$ 3,100	$ 5,700	$ 19,300
Convertible Debt [Member]
Debt Instrument [Line Items]
Convertible debt amount outstanding	128,300		128,300
Convertible debt due during the third quarter of 2018	$ 128,300		$ 128,300
Debt instrument, interest rate	7.00%		7.00%
Debt having extended maturity date	$ 103,300		$ 103,300
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
Convertible Debt [Member] | Price One [Member]
Debt Instrument [Line Items]
Debt instrument, conversion price per share	0.025		$ 0.025
Convertible Debt [Member] | 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		$ 13,200
Accretion of debt discount recognized as interest expense			$ 13,200

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Convertible Debentures (Warrants Activity) (Details) - Warrant [Member] - $ / shares	6 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Warrants
Warrants outstanding	691,365	691,365
Exercise price	$ 0.02	$ 0.02
Weighted average exercise price	$ 0.02	0.02
Weighted average remaining contractual life	2 years 3 months 29 days
Exercisable	691,365
Exercisable weighted average exercise price	$ 0.02	$ 0.02
Exercisable weighted average remaining contractual life	2 years 3 months 29 days

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Income Taxes (Details) - USD ($)	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
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	2014
Maximum [Member]
Income Tax Contingency [Line Items]
Tax years open for examination	2017

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Related Party Transactions (Details) - Related Party [Member] - USD ($)	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Related Party Transaction [Line Items]
Deferred salary paid to related party	$ 235,400	$ 116,200
Portion of salary to related party deferred during period	35,400	$ 42,500
Deferred salary owed to related party	$ 0

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Earnings per Share (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Weighted average common shares outstanding
Number of incremental common shares resulting from the assumed conversion of warrants	372,764	370,144	338,628	290,162

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Major Customer and Geographic Information (Schedule of Revenues from Non-affiliated Customers) (Details) - Revenue [Member]	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Customer A [Member]
Revenue, Major Customer [Line Items]
Risk percentage	8.00%	47.00%	13.00%	40.00%
Customer B [Member]
Revenue, Major Customer [Line Items]
Risk percentage	85.00%	20.00%	74.00%	24.00%
Customer C [Member]
Revenue, Major Customer [Line Items]
Risk percentage	2.00%	12.00%	5.00%	12.00%

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Major Customer and Geographic Information (Schedule of Non-affiliated Customers with Accounts Receivable) (Details) - Accounts Receivable [Member]	6 Months Ended	12 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Customer A [Member]
Concentration Risk [Line Items]
Risk percentage	6.00%	14.00%
Customer B [Member]
Concentration Risk [Line Items]
Risk percentage	88.00%	47.00%
Customer C [Member]
Concentration Risk [Line Items]
Risk percentage	2.00%	15.00%

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Major Customer and Geographic Information (Schedule of Revenue by Geographic Region) (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	$ 1,873,700	$ 359,600	$ 2,299,100	$ 701,000
North America [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	1,674,400	136,700	1,859,300	311,800
South America [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues			1,500
Europe [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	100	200	100	200
Asia [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	199,200	215,300	438,200	374,200
Australia [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues		$ 7,400		$ 14,800