UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the transition period from ______________________ to __________________________

Commission file number 000-20333

Nocopi Technologies, Inc.

(Exact name of registrant as specified in its charter)

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

(Address of principal executive offices)  (Zip Code)

Registrant’s telephone number, including area code code):(610) 834-9600

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to section 12(g) of the Act:

Common Stock, Par Value $0.01 par value

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ¨ Yes þ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. ¨ Yes þ No

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. þ Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site,Website, 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). þ Yes ¨ No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark 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 Act)Exchange Act of 1934) ¨ Yes þ No

State theThe aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference toof the price at which the common equityregistrant was last sold, or the average bid and asked price of such common equity,approximately $2,637,000 as of the last business day of the registrant’s most recently completed second fiscal quarter. $709,000 at June 30, 2016 closing price of $0.013.2017.

(APPLICABLE ONLY TO CORPORATE REGISTRANTS)

Indicate the numberAs of March 27, 2018, there were 58,616,716 shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. 58,599,016 shares of common stock, $0.01 par value at March 15, 2017.

DOCUMENTS INCORPORATED BY REFERENCE

Nonevalue.

NOCOPI TECHNOLOGIES, INC.

TABLE OF CONTENTSTable of Contents

i

Forward-Looking Statements

This report on Form 10-K contains forward-looking statements. Forward-looking statements involve risks and uncertainties, such as statements about our plans, objectives, expectations, assumptions or future events. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “we believe,” “we intend,” “may,” “should,” “will,” “could” and similar expressions denoting uncertainty or an action that may, will or is expected to occur in the future. These statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from any future results, performances or achievements expressed or implied by the forward-looking statements.

Examples of forward-looking statements include, but are not limited to:

·

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.

·

Developments and changes in laws and regulations, including increased regulation of our industry through legislative action and revised rules and standards

·

Security breaches, cybersecurity attacks and other significant disruptions in our information technology systems; and

·

Such other factors as discussed throughout Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in this report.

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.

ii

PART I

Item 1.

ITEM 1. BUSINESSBusiness

BACKGROUNDBackground

Nocopi Technologies, Inc. (hereinafter "Nocopi", "Registrant" or the "Company") is a Maryland corporation organized in 1983 that currently develops and markets specialty reactive inks that it believes havefor applications in the large educational and toy products market. RegistrantWe also developsdevelop and marketsmarket technologies for document and product authentication, which it believeswe believe can reduce losses caused by fraudulent document reproduction or by product counterfeiting and/or diversion. Registrant derives itsWe derive our revenues primarily from licensing itsour technologies on an exclusive or non-exclusive basis to licensees who incorporate theour technologies into their product offering and from selling products incorporating itsour technologies to the licensees or to their licensed printers.

InUnless the three years preceding 2014, Registrant experienced a period of decline in revenues resulting in significant operating losses and a decline in financial condition and a period of adverse liquidity that affected its business operations through mid-2014 when revenue increases generated from (1) higher license fees and royalties from two licensees in the entertainment and toy products market and (2) higher ink salescontext otherwise requires, all references to the licensed printers of certain of the Company’s licensees in the entertainment“Company,” “we,” “our” or “us” and toy products market began to positively impact Registrant’s cash flow. This causes of the revenue decline and Registrant’s remedial actions are more fully described in Registrant’s Comprehensive Form 10-K for the three years ended December 31, 2012, 2013 and 2014 filed with the Securities and Exchange Commission on September 11, 2015. In 2015, Registrant experienced an increase in revenues of approximately 3% to $950,800 in 2015 from $922,800 in 2014 as Registrant, during 2015, concludedother similar terms means Nocopi Technologies, Inc., a new multi-year license with one of its two major licensees in the entertainment and toy products market and signed a multi-year license with an Australia-based company in the entertainment and toy products market.  Registrant experienced further revenue growth in 2016 as revenues increased approximately 46% to $1,383,500. Revenues derived from Registrant’s two major licensees and their authorized printers in the entertainment and toy products market increased approximately 60% in 2016 compared to 2015. Registrant’s net income of $258,500 in 2016 compared to a net loss of $18,000 in 2015 is attributable in part to (1) a higher gross profit in 2016 on a higher level of revenue in 2016 compared to 2015 and (2) lower accretion of interest in 2016 compared to 2015. Registrant’s net loss in 2015 of $18,000 compared to net income of $7,900 in 2014 is attributable in part to (1) expenses incurred in filing the three year comprehensive Form 10-K in September 2015 and (2) accretion of interest related to the extension of the maturity dates of $95,000 of subordinated debentures. During 2015 Registrant concluded a new multi-year license with one of its two major licensees in the entertainment and toy products market and signed a multi-year license with an Australia-based company in the entertainment and toy products market.

Registrant continues its efforts to raise additional capital, in the form of debt, equity or both to support its working capital requirements and to provide funding for other business opportunities. There are no assurances that Registrant will be able to attract such additional capital.

There can be no assurances that the marketing and product development activities of the Company’s licensees will produce a significant increase inoperatingrevenues for the Company, nor can the timing of any potential revenue increases be predicted.Maryland corporation.

Entertainment and Toy Technologies and Products

Registrant’sSince 2004, we have marketed our Rub-it & Color technology forto the entertainment and toy products marketmarket. This technology consists of removable dyesspecialty inks that can beare produced in a variety of colors and can be revealed by rubbing with a fingernail or other firm object such as a plastic pen cap. This technology, introduced in 2004, has been named Rub-it & Color. Registrant believes that thisColor ink technology does not compromise the confidentiality of its security and authentication technologies whose chemistry is similar but the specific formulations are differentcan be used for each application. Applications include children’s activity products such as coloring books, without crayons or restaurantactivity kits, play sheets, single use place mats, educational instruction booksgreeting cards, board games, promotional products, or any other paper-based application that’s needs some “fun” factor added. Safe and testing review manuals. Registrant has obtained certifications of non-toxicity from the Consumer Products Services, Inc.non-toxic, Rub-it and the American Society for TestingColor conforms to ASTM D4236 and Materials Laboratories.F-963 and other toxicology tests.

Every child loves to color, and every parent has a horror story about the cleanup. Our patented, revolutionary, and award-winning Rub-it & Color takes out all the messy stuff related to children’s coloring except the fun. No more crayons ground into the carpet and car upholstery. No more spilled paint on the rug. No more messy markers ruining clothes and furniture. Rub-it & Color ink technology can be used for coloring books, activity kits, play sheets, single use place mats, greeting cards, board games, promotional products, or any other paper-based application that’s needs some “fun” factor added. Safe and non-toxic, Rub-it and Color conforms to ASTM D4236 and F-963 and other toxicology tests.

Since January 2012, Registrant has had aWe license our Rub-it & Color technology through various license agreements, including:

A.

License agreement expiring in 2017, with a licensee who has a significant presence in the entertainment and toy products market which permitsmarket. A license agreement, in effect from January 2012 through December 2017, permitted this licensee to exclusively marketmarket: (1) a specific line of products incorporating Registrant’sour technologies through a specific distribution channel but permitting Registrantus to license the covered technologies to others (including Bendon, Inc., as noted below) for applications and sale through channels of distribution not available to this licensee under the terms of the license, and (2) sincefrom January 2013 through December 2017, an additional technology on an exclusive basis in certain geographic areas of the world and on a non-exclusive basis in other geographic areas of the world. TheIn early 2018, we entered into a new five-year license agreement with this licensee displayedwhich permits the licensee to market products incorporating this additional technology tocertain of our technologies, including the marketplace at the American International Toy Fair in February 2015 and initial sales of products incorporating this technology were realizedtechnologies permitted in the second quarter of 2015.earlier license, on a non-exclusive basis throughout the world.

Registrant has a licenseB.

License agreement expiring in 2019, containing guaranteed minimum royalties over the term of the license, which have been met, with Bendon, Inc. (Bendon), an international, well-known children’s coloring and activity book publishing company that permits Bendon to exclusively market products with other characteristics that incorporate Registrant’sour technologies through a distinctly different channel of distribution. The newThis four-year license agreement with Bendon was completed.incompleted in June 2015, replacing a previous three-year license agreement. In early 2018, the license was amended to allow Bendon to: (1) market specific new technologies not covered in the license agreement, (2) expand certain rights relative to product content and design that were specifically excluded in the license agreement and (3) market merchandise permitted by the license through all channels of distribution, some of which were previously prohibited in the license agreement. This license expires in 2019.

These two licensees are well known and highly regarded participants in the entertainment and toy products market with significant market recognition and retail distribution. These two licensees have been distributing products incorporating Registrant’s technologies for more than four years. Since the inception of these licenses, sales of ink to the licensed printers of the licensees have been increasing. The agreements with both licensees contain renewal options but there can be no assurances that the licenses will continue in force at the same or more favorable terms beyond their current termination dates nor can there be any assurances that the relationships with these two licensees will generate significant additional operating revenues for Registrant in the future.C.

Since March 2011, Registrant has had a licenseLicense agreement with a privately-held designer of creative educational products for children granting the licensee the exclusive right to utilize Registrant’sour Rub-it & Color ink technology in a newly-created vertical market in the United States. In addition to an annual license fee, Registrant receiveswe receive a royalty based on units of product produced. The license originated in 2011 and was renewed in July 2014June 2017 for a period of up to three years. There can be no assurances that the marketing efforts of Registrant’s licensee will generate significant additional operating revenues for the Registrant in the future.

Since November 2012, Registrant has had a licenseD.

License agreement with a privately-held children’s meal entertainment program provider that allows the licensee to use Registrant’sour Rub-it & Color ink technology in children’s menus, placemats, butcher paper and certain other products for restaurant use and for sale in certain children’s retail outlets. InThe license originated in November 2012 and was renewed in December 2014 the license was renewed for a period of six years, expiring in December 2020. There can be no assurances that the marketing efforts of Registrant’s licensee will generate significant additional operating revenues for the Registrant in the future.  

 Since April 2013, Registrant has had a license with a nationally known distributor of seasonal boxed greeting cards and other products which permits the licensee to market certain products distributed by the licensee that incorporate specific technologies of the Registrant. While the license terminated in December 2016, Registrant believes that the license can be extended on similar terms as in the original license. The licensee introduced products incorporating Registrant’s technologies in late 2014. Revenues were realized by Registrant in 2014, 2015 and 2016. There can be no assurances the license will be extended at the same or more favorable terms nor can there be any assurances that the marketing efforts of Registrant’s licensee will generate significant additional operating revenues for the Registrant in the future.E.

In October 2015, Registrant negotiated a multi-year license containing guaranteed minimum royaltiesLicense agreement with a privately-held international publisher of family products and publications based in Australia. UnlessThe license originated in October 2015 and unless renewed, the license terminates in December 2018. The license agreement contains guaranteed minimum royalties and allows the licensee to market certain products that incorporate specific technologies of the Registrantour Company on an exclusive basis in certain specific countries and on a non-exclusive basis in other countries with the exclusion of the United States, Canada and Mexico. The licensee introduced products incorporating Registrant’sour technologies in 2016. The

Certain of our license agreement contains aagreements with licensees contain renewal option but there canoptions and/or guaranteed minimum royalties, while other do not. We cannot assure you that any of our existing licenses will be no assurances that the license will continue in force at the samerenewed or more favorable terms beyond its current termination date nor can there be any assurances that the relationship with this new licensee will generate significant additional operating revenues for the Registrantour Company in the future.

Registrant continues In each of the years 2017 and 2016, we derived approximately 86% of our total revenues from our licensees and their licensed printers in the entertainment and toy products market. We continue to pursue additional licensing opportunities for its technologiesour Rub-it & Color ink technology in the large worldwide entertainment and toy products market through direct marketing efforts and attendance at trade shows. During 2016, Registrant derived approximately 86% of its 2016 total revenues from its licensees and their licensed printers in the entertainment and toy products market comparedWe also seek to approximately 80% derived from this market in 2015. There can be no assurances that the Registrant’s available resources, evenrenew existing license agreements with additional investment, if obtained, for marketing and further technical development of this product line will be sufficient to increase Registrant’s revenues.licensees.

ANTI-COUNTERFEITING AND ANTI-DIVERSION TECHNOLOGIES AND PRODUCTSAnti-Counterfeiting and Anti-Diversion Technologies and Products

Continuing developments in copying and printing technologies have mademakes it easier than ever easierbefore to counterfeit a wide variety of documents. Product labels and packaging, retail receipts, event and transportation tickets and the like are all susceptible to counterfeiting, and Registrant believes that losses from such counterfeiting have increased substantially with improvements in the copying and printing technologies. Productproduct counterfeiting has long caused losses to manufacturers of brand name products,products. With improvements in the copying and Registrant believes these losses have increased as the counterfeiting ofprinting technologies making it easier to counterfeit labeling and packaging, has become easier.losses to businesses from such counterfeiting appear to have increased substantially.

Registrant'sOur COPIMARK and RUB & REVEAL technologies provide proprietary document authentication technologiessystems that are useful to businesses desiring to authenticate a wide variety of printed materials and products. One product incorporating these technologies has the abilityOur COPIMARK system enables businesses to print invisibly on certain areas of a document. When authentication of certain documents is required, the invisible printing can be activated or revealed by use of a special highlighter pen. This technology is marketed under the trademark COPIMARK. Other variations of the COPIMARK technology involve multiple color responses from a common pen, visible marks of one color that turn another color with the pen or visible and invisible marks that turn into a multicolored image. A related technology is Nocopi'sOur RUB & REVEAL system, which permits the invisible printing of an authenticating symbol or code that can be revealed by rubbing a fingernail over the printed area. These

Both technologies provide users with the ability to authenticate documents and detect counterfeit documents. Applications include the authentication of documents having intrinsic value, such as merchandise receipts, checks, travelers' checks, gift certificates and event tickets, and the authentication of product labeling and packaging. When applied to product labels and packaging, such technologiesour systems allow detection of counterfeit products, the labels and packaging of which would not contain the authenticating marks invisibly printed on the packaging or labels of the legitimate product. Registrant has focused recent

Our marketing efforts for these technologies are focused on specific industries it believeswe believe may be affected by product counterfeiting. These technologies also combat product diversion (i.e. sale of legitimate products through unauthorized distribution channels or in unauthorized markets). AAnother of our related technology of Registrant, thetechnologies, our invisible inkjet technology, permits manufacturers and distributors to track the movement of products from production to ultimate consumption when coupled with proprietary software. Management believesWe anticipate that the “track and trace” capability provided by this technology canwill be attractive to brand owners and marketers. There are no assurancesmarketers and we hope that itsour ongoing marketing initiatives will result in additional revenues in the future.future; although we cannot assure you that this will occur.

RegistrantWe currently participatesparticipate in the retail receipt and document fraud market through licensing arrangements with eightseven printers and distributors in the United States and Canada who provide loss prevention products to retailers and other outlets. Registrant believes thatWe market these technologies are most efficiently marketed through the use of licensed printers and distributors. Registrant continuesdistributors and continue to use itsour available internal sales and technical resources to expand the number of licensees marketing itsour technologies in this market. During 2016, Registrant derived approximately 5%

Contrast Technologies, formerly known as Euro-Nocopi, S.A., is a former affiliate of its 2016 total revenues from its licenseesour Company that, since June 2003, has held a perpetual royalty-free license to exploit certain of our anti-counterfeiting and anti-diversion technologies in the retail loss prevention market compared to approximately 10% derived from this market in 2015. There can be no assurances that Registrant’s strategy for the retail loss prevention market will result in significant additional revenues and cash flow for Registrant.Europe.

Product Revenue

The following table illustrates the approximate percentage of Registrant'sour Company’s total revenues accounted for by each type of its products for each of the two last fiscal years:

MARKETINGMarketing

Registrant’sWe have identified two major markets for our technologies and products, the entertainment and toy product market and the anti-counterfeiting/anti-diversion market. Our marketing approach focuses on the sufficient flexibility in itsour products and technologies and itsour ability to provide innovative, cost effective technologies for the entertainment and toy products market as well as solutions to a wide variety of counterfeiting, diversion and copier fraud problems. As a technology company, Registrant generateswe generate revenues primarily by collecting license fees and royalties from market-specific businesses that incorporate Registrant'sour technologies into their products and, in certain cases, sales of Registrant’sour inks to these licensees and their designated manufacturers. RegistrantWe also licenses itslicense our technologies directly to end-users.

Registrant has identified two major markets for its technologies and products, the entertainment and toy product market and the anti-counterfeiting/anti-diversion market. Registrant’s adverse financial condition in recent years has limited its sales efforts to direct selling by Registrant’s personnel. Sales travel, attendance at trade shows and marketing expenditures have been constrained. Current Our current marketing efforts are focused on Registrant’sour developed technologies that can be utilized in geographic or market areas not contractually committed to an existing licensee on an exclusive basis. There can be no assurances that the limited resources Registrant can dedicate to its marketing activities will result in significant additional revenues in the future.We presently market our technologies through our own employees, sales travel and attendance at trade shows.

Registrant presently markets its technologies through its own employees. In Europe, certain of its security technologies are marketed by Contrast Technologies, formerly known as Euro-Nocopi, S.A., and a former affiliate of the Registrant, which holds certain European marketing rights with respect to those technologies.

MAJOR CUSTOMERSMajor Customers

During 2016, Registrant2017, we made sales or obtained revenues equal to 10% or more of Registrant'sour Company’s 2017 total revenues from two non-affiliated customers who individually accounted for approximately 43% and 26%, respectively, of 2017 revenues of our Company. During 2016, we made sales or obtained revenues equal to 10% or more of our Company’s 2016 total revenues from three non-affiliated customers who individually accounted for approximately 38%, 25% and 14%, respectively, of 2016 revenues of theour Company. During 2015, Registrant made sales or obtained revenues equal

Additional information concerning our major customers is contained in Note 12 to 10% or more of Registrant's 2015 total revenues from two non-affiliated customers who individually accounted for approximately 53% and 17%, respectively, of 2015 revenues of the Company.our Financial Statements, attached asAppendix A to this Annual Report on Form 10-K.

Manufacturing

Registrant hasOur Company operates a small manufacturing facility for the manufacture of its security inks. Except for this facility, Registrant does not maintain manufacturing facilities. Registrant presently subcontractsinks that is located at our corporate headquarters at 480 Shoemaker Road, Suite 104, King of Prussia, Pennsylvania 19406, and we subcontract the manufacture of itscertain of our applications (mainly certain printing inks and coating)coatings) to third party manufacturersmanufacturers. Our current mix of manufacturing processes are suitable for our Company, for both economic and expectstechnical reasons, and we have no plans to continue such subcontracting. Because some ofalter this mix in the processes that Nocopi uses in its applications are based on relatively common manufacturing technologies, there appears to be no technical or economic reason for Registrant to invest capital in its own manufacturing facilities.

Registrant hasnear future. We have established a quality control program that currently entails laboratory analysis of developed technologies. Whentechnologies; and when warranted, Registrant’sour specially trained technicians travel to third party production facilities to install equipment, train client staff and monitor the manufacturing process.

PATENTS

Patents

Since its inception, RegistrantOur Company has receivedbeen granted various patents in the United States, Canada, South Africa, Saudi Arabia, Australia, New Zealand, Japan, France, the United Kingdom, Belgium, the Netherlands, Germany, Austria, Italy, Sweden, Switzerland, Luxembourg, and Liechtenstein. RegistrantWe currently has obtainedhave patent protection on substantially all of itsour security inks including the RUB & REVEAL system, and theon our Rub-it & Color technology. Registrant’sOur latest patent is on a certainprotects our newly developed technology that Registrant believes hasmay have applications in the entertainment and toy products market.

When a new product or process is developed, the developer may seek to preserve for itself the economic benefit of the product or process by applying for a patent in each jurisdiction in which the product or process is likely to be exploited. Generally speaking, in order for a patent to be granted, the product or process must be new and be inventively different from what has been previously patented or otherwise known anywhere in the world. Patents generally have a duration of twenty years from the date of application depending on the jurisdiction concerned, after which time any person is free to exploit the product or process covered by a patent. A person who is the owner of a patent has, within the jurisdiction in which the patent is granted, the exclusive right, either directly or through licensees, to prevent any person from infringing on the patent.

The granting of a patent does not prevent a third party from seeking a judicial determination that the patent is invalid. Such challenges to the validity of a patent are not uncommon and are occasionally successful. There can be no assurance that a challenge will not be filed to one or more of Registrant's patents and that, if filed, such challenge(s) will not be successful.

In the United States and some other countries, patent applications are automatically published at a specified time after filing. Nocopi is required toSince we are obligated pay annuities from time to time on our patents to keep them in force; with this in mind, Nocopi makes an annual evaluation of its patents in orderforce, we annually evaluate our patent portfolio to determine which patents itwe will continue to maintain. In Europe, the territory of Contrast Technologies, formerly known as Euro-Nocopi, S.A. (“Contrast”), annuities for European patents are paid by Contrast.Contrast Technologies, formerly known as Euro-Nocopi, S.A., since Europe is where they hold a perpetual royalty-free license to exploit certain of our anti-counterfeiting and anti-diversion technologies.

RESEARCH AND DEVELOPMENTResearch and Development

Registrant hasWe have been involved in the research and development of our technologies since itsour inception. Although Registrant’sseveral years ago our adverse financial condition has forced itus to limit funding for research and development, in recent years, it intends to continue itswe are presently actively conducting research and development activities in the following three areas, to the extent feasible. First, Registrant will seek to continue to refine itsfeasible: (1) refining our present family of products. Second, Registrant will seek to developproducts, (2) developing specific customer applications. Finally, Registrant will seek to expand itsapplications, and (3) expanding our technology into new areas of implementation. There can be no assurancesDuring the years ended December 31, 2017 and December 31, 2016, we expended approximately $146,300 and $138,800, respectively, on research and development. We cannot assure you that Registrantwe will continue to have funds available to maintain itsour research and development activities at current or increased levels.

During the years ended December 31, 2016, and December 31, 2015, Registrant expended approximately $138,800 and $128,100, respectively, on research and development.Competition

COMPETITION

Our Company has competitors in all segments of our business. The entertainment and toy products markets are highly competitive and includes numerous competitors. The loss prevention market also includes numerous competitors, including large publicly traded and privately-held companies as well as regional paper converters. In the area of document and product authentication and serialization, Registrant is aware of othercompetitors offer competitive covert and overt surface marking technologies requiring decoding implements or analytical methods to reveal certain information. These technologiesinformation that are offered by other companiesmarketed for the same anti-counterfeiting and anti-diversion purposes for which the Registrantour Company markets its covert technologies. These include, among others, biological DNA codes, microtaggants, thermochromic, UV and infrared inks as well as encryption, 2D symbology and laser engraving. Nonetheless, Registrant believes itswe believe our patented and proprietary technologies provide a unique and cost-effective solution to the problem of counterfeiting and gray marketing in the document and product authentication markets it has traditionally sought to exploit.

The entertainmentWe are a small operating company and toy products markets include numerousmany of our existing and potential competitors who have significantlysubstantially greater research and product development capabilities and financial, marketing and human resources and presence in these markets than Registrant.we do.

The loss prevention market includes numerous potential competitors, including large publicly traded and privately-held companies as well as regional paper converters, many of whom have greater financial resources and presence in these markets than Registrant.Employees

RegistrantWe currently has limited resources and competes with businesses that have greater financial resources than Registrant. There can be no assurance that businesses with greater resources than Registrant will not enter Registrant’s markets and compete successfully with Registrant.

Contrast Technologies (formerly Euro-Nocopi, S.A.)

Contrast Technologies, formerly known as Euro-Nocopi, S.A., is a former affiliate of Registrant which, since June 2003, has held a perpetual royalty-free license to exploit certain of Registrant’s technologies in Europe.

EMPLOYEES

At March 15, 2017 and December 31, 2016, Registrant had three full-time and two part-time employees. We believe that we have good relations with our employees.

FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONSFinancial Information about Foreign and Domestic Operations

Registrant conducts itsWe conduct our business operations solely inwithin the United States; however, it doeswe have licensees and customers in Europe, South America, Asia and Australia. These licensees and customers accounted for approximately 56%54% of Registrant’sour gross revenues in 20162017 and approximately 54%56% of our gross revenues in 2015. Certain2016. Additional information concerning Registrant'sour foreign and domestic operations is contained in Note 1312 to Registrant'sour Financial Statements, included elsewhere inattached asAppendix A to this Annual Report on Form 10-K.

Item 1A.

ITEM 1A. RISK FACTORSRisk Factors

NotOur Company’s operating results, financial condition and stock price are subject to certain risks, some of which are beyond its control. These risks could cause the Company’s actual operating and financial results to differ materially from those expressed in its forward-looking statements, including the risks described below and the risks identified in other documents which are filed and furnished with the United States Securities and Exchange Commission.

Access to Capital. Our Company anticipates that it may need to raise additional capital in the future to fund its historical and new business operations. Additional financing may not be available to us, due to, among other things, our Company not having a sufficient income stream, profit level, asset base eligible to be collateralized, or market for its securities. If we raise additional funds by issuing equity or convertible debt securities, the percentage ownership of our existing shareholders may be reduced, and these securities may have rights superior to those of our common stock. If adequate funds are not available to satisfy our long-term capital requirements, or if planned revenues are not generated, we may be required to substantially limit our operations or cease operations altogether. We cannot assure you that, if required, we will be successful in obtaining additional financing in sufficient amounts to fund our ongoing business operations.

Dependence on Major Customers. We are dependent on our licensees to develop new products and markets that will generate increases in its licensing and product revenues. The inability of our licensees to maintain at least current levels of sales of products utilizing our technologies could adversely affect our operating results and cash flow. To the extent that our licensees are adversely affected by negative economic conditions, our revenues may also be negatively impacted. We derive a significant percentage of our revenues through licensing relationships with two major customers. Revenues obtained directly from these customers and indirectly, through the customers’ third party licensed printers, equaled approximately 81% of the Company’s revenues in 2017. Receivables from these two licensees and their third party authorized printers were approximately 82% of the Company’s net accounts receivable at December 31, 2017. One of the license agreements expires in 2019 and the other expires in 2022. Both license agreements contain guaranteed minimum royalties, which historically are met. Both license agreements contain renewal options; but there can be no assurances that one or both of the licenses will continue in force at the same or more favorable terms beyond their current termination dates, nor can there be any assurances that the relationships with these two licensees will generate increased revenues for the Company in the future.

Possible Inability to Develop New Business. Our management believes that any significant improvement in the Company’s cash flow must result from increases in revenues from traditional sources and from new revenue sources. The Company’s ability to develop new revenues may depend on the extent of both its marketing activities and its research and development activities, both of which are limited. We cannot assure you that the resources that the Company can devote to marketing and to research and development will be sufficient to increase its revenues to levels that will enable it to maintain positive operating cash flow in the future.

Inability to Obtain Raw Materials and Products for Resale. The Company’s adverse financial condition in years prior to 2016 has required it from time to time to significantly defer payments due to (i) vendors who supply raw materials and other components of its security inks, (ii) providers of professional and other services and (iii) certain employees to whom salary and sales commissions are owed. As a result, the Company is required to pay cash in advance of shipment to certain of its suppliers. The inability to obtain materials on a timely basis and the possibility that certain vendors may permanently discontinue supplying the Company with needed products and services may result in delayed shipments to customers and further impact the Company’s ability to service its customers, thereby adversely affecting the Company’s relationships with its customers and licensees. We cannot assure you that our Company will be able to maintain its vendor relationships in an acceptable manner.

Uneven Pattern of Quarterly and Annual Operating Results. Our Company’s revenues, which are derived primarily from licensing and sales of products incorporating its technologies as well as royalties from these products, are difficult to forecast; such forecasting difficulty is due to, among other reasons, the long sales cycle of our Company’s technologies, the potential for customer delay or deferral of implementation of our Company’s technologies, the size and timing of inception of individual license agreements, the success of our Company’s licensees and strategic partners in exploiting the market for the licensed products, modifications of customer budgets, and uneven patterns of royalty revenue and product orders. As our revenue base is not substantial, delays in the finalization of license contracts, the implementation of the technology to initiate the revenue stream and the ordering decisions of customers can have a material adverse effect on our Company’s quarterly and annual revenue expectations. As our operating expenses are substantially fixed, income expectations will be subject to a similar adverse outcome. As licensees for the entertainment and toy products markets are added, the predictability of our Company’s revenue stream may be further impacted.

Volatility of Stock Price. The market price for our common stock has historically experienced significant fluctuations and may continue to do so. With the exception of 2007, 2013, 2014, 2016 and 2017 from its inception, our Company has operated at a loss and has not produced revenue levels traditionally associated with publicly-traded companies. Our common stock is not listed on a national or regional securities exchange and, consequently, our Company receives limited publicity regarding its business achievements and prospects. Additionally, securities analysts and traders do not extensively follow our stock and it is thinly traded. The market price for our common stock may be affected by announcements of new relationships or modifications to existing relationships. The stock prices of many developing public companies, particularly those with small capitalizations, have experienced wide fluctuations not necessarily related to operating performance. Such fluctuations may adversely affect the market price of the Company’s common stock.

Intellectual Property. Our Company relies on a combination of protections as may be available under applicable domestic, foreign or international patent, trademark and trade secret laws. We also rely on confidentiality, non-analysis and licensing agreements to establish and protect our rights in its proprietary technologies. While we attempt to protect these rights, our technologies may be compromised through reverse engineering, independent invention or other means. In addition, our ability to enforce our intellectual property rights through appropriate legal action has been and will continue to be limited by its tight liquidity. We cannot assure you that our Company will be able to protect the basis of its technologies from discovery by third parties or to preclude third parties from conducting activities that infringe on our Company’s rights. Our Company’s tight liquidity adversely impacts our ability to obtain patent protection on our intellectual property and to maintain protection on previously issued patents. We cannot assure you that we will be able to continue to prosecute new patents and maintain issued patents. As a result, our customer and licensee relationships could be adversely affected, and the value of our technologies and intellectual property (including their value upon liquidation) could be substantially diminished.

Economic Conditions. Our Company’s revenue is susceptible to changes in general economic conditions. Our sales, liquidity and overall results of operations may be negatively affected by decreasing consumer confidence, slowdowns in consumer spending or other downturns in the U.S. economy as a whole or in any geographic markets from which we derive revenue. In addition, these factors may result in decreased customer and licensee demand for our products and may negatively impact our ability to develop new customers and licensees. Due to uncertainties surrounding the worldwide economy, that we are unable to predict the effect of such conditions on our customers and licensees. Consequently, we cannot predict the scope or magnitude of the negative effect resulting from ongoing global financial uncertainties or economic slowdowns.

Potential undetected material weakness in internal controls.Ourannual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s attestation in this annual report. As a result,a material weakness in our internal controls may remain undetected for a smaller reporting company.longer period.

Item 1B.

ITEM 1B. UNRESOLVED STAFF COMMENTSUnresolved Staff Comments

None.

Item 2.

ITEM 2. PROPERTIESProperties

Registrant'sOur corporate headquarters, research and ink production facilities are located at 480 Shoemaker Road, Suite 104, King of Prussia, Pennsylvania 19406. Its telephone number is (610) 834-9600. These premises consist of approximately 6,100 square feet of space in a multi-tenant building leased by the Registrant from an unaffiliated third party pursuant to aspace. Our lease that commenced in January 2014 and expires in April 2019. Current monthly rent under this lease is $3,880;$3,982; this amount escalates an amount of approximately three percent each year. In addition to rent, Registrant iswe are also responsible for itsour pro-rata share of the operating costs of the building. Registrant

We incurred leasehold improvement expenditures of approximately $19,700 through March 15, 2017. Registrant believes27, 2018, and we believe that additional leasehold improvement expenditures will not be significant. Registrant believes thatWe consider this space will be adequate for itsour current needs and that additional space will beis available as needed.

Item 3.

ITEM 3. LEGAL PROCEEDINGSLegal Proceedings

Registrant is not aware of any pending litigation (other than ordinary routine litigation incidental to its business where, in management's view, the amount involved is not material) to which Registrant is or may be a party, or to which any of its properties is or may be subject, nor is it aware of any pending or contemplated proceedings against it by any governmental authority. Registrant knows of no material legal proceedings pending or threatened, or judgments entered against, any director or officer of Registrant in his capacity as such.None.

Item 4.

ITEM 4. MINE SAFETY DISCLOSURESMine Safety Disclosures

Not applicable.

PART II

Item 5.

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIESMarket For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases Of Equity Securities

Registrant's Common StockMarket Information

Our common stock is currently traded on the OTC Pink tier of the over-the-counter (“OTC”) market under the symbol "NNUP". Investors can find Real-Time quotes and market information on the Company on www.otcmarkets.com. The following table set forth below presentslists the range of high and low salesbids for our common stock for our two most recent fiscal years. The prices of Registrant's Common Stock by calendar quarter forin the last two full fiscal yearstable reflect inter-dealer prices, without retail markup, markdown or commission and for a recent date, as reported by OTC Markets Group Inc.may not represent actual transactions. 

As of March 15, 2017, 58,599,01627, 2018, we had approximately 58,616,716 shares of Registrant's Common Stock were outstanding. The number ofcommon stock outstanding, held by approximately 600 holders of record of Registrant's Common Stock was approximately 600. However, Registrant estimates that it hasour common stock. This shareholder figure does not include a significantlysubstantially greater number of common stockholders because a number ofholders whose shares of Registrant's Common Stock are held of record by broker-dealers for their customers in street name. In addition to the 58,599,016banks, brokers and other financial institutions. We do not have any shares of Common Stock which are outstanding, Registrant, at March 15, 2017, has reserved for the issuance of 7,288,942 shares of its Common Stock which underlie warrants to purchase Common Stock of the Registrant and the conversion of convertible debentures and interest into Common Stock of the Registrant.preferred stock outstanding.

The Company did notDividends

No cash dividends have been declared or paid on our common stock during our two most recent fiscal years. No restrictions limit our ability to pay dividends on our common stock. The payment of cash dividends in 2016 or 2015the future, if any, will be contingent upon our Company's revenues and earnings, capital requirements and general financial condition. The payment of any dividends is within the discretion of our board of directors. Our board of director's present intention is to retain all earnings, if any, for use in our business operations and, accordingly, the board of directors does not anticipate paying any suchcash dividends in the foreseeable future. Any determination to pay dividends in the future will be at the discretion of the Company’s Board of Directors and will be dependent upon the Company’s results of operations, financial condition, contractual restrictions and other factors deemed relevant by the Board of Directors.

Information required with respect toSecurities Authorized for Issuance under Equity Compensation Plans in this Item 5 is included in Item 12 on page 20 of this report on Form 10-K.

None.

Recent Sales of Unregistered Securities

In March 2017,During the common stock private placement was extendedperiod covered by this report, our Company sold the following securities without registering the securities under the Securities Act of 1933, as amended (“Securities Act”):

No underwriters were utilized, and no commissions or fees were paid with respect to December 31, 2017 byany of the Company’s Boardabove transactions. These persons were the only offerees in connection with these transactions. We relied on Section 4(a)(2), 4(a)(5) and Rule 506 of Directors.Regulation D of the Securities Act since the transaction does not involve any public offering.

ISSUER REPURCHASES OF EQUITY SECURITIESIssuer Repurchases of Equity Securities

None.

ITEMItem 6.

SELECTED FINANCIAL DATASelected Financial Data

Not required for a smaller reporting company.Applicable.

Item 7.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSManagement's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Information

This Form 10-KThe information in this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, regarding, among other things, anticipated improvements in operations, the Company’s plans, earnings, cash flow and expense estimates, strategies and prospects, both business and financial.statements. All statements other than statements of current or historical fact containedmade in this report are forward looking. In particular, the statements herein regarding industry prospects and future results of operations or financial position are forward-looking statements. TheThese forward-looking statements can be identified by the use of words “believe,’’ “expect,’’ “anticipate,’’ “should,’’ “plan,’’such as “believes,” “estimates,” “could,” “possibly,” “probably,” anticipates,” “projects,” “expects,” “may,” “will,’’ “may,’’ “intend,’’ “estimate,’’ “potential,’’ “continue’’” or “should” or other variations or similar words. No assurances can be given that the future results anticipated by the forward-looking statements will be achieved. Forward-looking statements reflect management’s current expectations and similar expressions, as they relate to the Company, are intended, where possible, to identify forward-looking statements.inherently uncertain. Our actual results may differ significantly from management’s expectations.

The Company has based these forward-looking statements largely on its current expectations and projections about future events, financial trends, market opportunities, competition, and the adequacy of the Company’s available cash resources, which the Company believes may affect its financial condition, results of operations, business strategy and financial needs. This Form 10-K also contains forward-looking statements attributed to third parties. All such statements can be affected by inaccurate assumptions, including, without limitation, with respect to risks, uncertainties, anticipated operating efficiencies, new business prospects and the rate of expense increases. In light of these risks, uncertainties and assumptions, the forward-looking statements in this report may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements. For these reasons, and because of the uncertainty relating to the current financial conditions in today’s economic environment and the potential reduction in demand for the Company’s products, you should not consider this information to be a guarantee by the Company or any other person that its objectives and plans will be achieved. When you consider these forward-looking statements, you should keep in mind the “Risk Factors” and other cautionary statements set forth in this Item 7 and elsewhere in this Form 10-K. The Company’s forward-looking statements speak only as of the date made. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with theour financial statements, and related notes, and keepingincluded 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 mind this cautionary statement regarding forward-looking information.the future. Such discussion represents only the best present assessment of our management.

RESULTS OF OPERATIONSBackground Overview

TheNocopi 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 the Company’sour technologies, (b) fees for the provision of technical services to licensees and (c) from the direct sale of (i) products incorporating the Company’sour technologies, such as inks, security paper and pressure sensitive labels, and (ii) equipment used to support the application of the Company’sour technologies, such as ink-jet printing systems. Royalties consist of guaranteed minimum royalties payable by the Company’sour 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.

TheOur Company recognizes revenue on its lines of business as follows:

a) 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.

b) Product sales are recognized upon shipment of products, when the price is fixed or determinable and collectability is reasonably assured; and

c.

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 believesWe believe that, as fixed cost reductions beyond those it haswe have achieved in recent years may not be achievable, itsour 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 theour Company’s revenues and the mix among the various sources of revenue are subject to substantial fluctuation. The Company hasWe 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 theour 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 theour Company agrees to revise such terms, revenues from the customer may be affected.

Comparison of the Years ended December 31, 20162017 and 20152016

Revenues for 20162017 were $1,383,500,$1,566,900, an increase of approximately 46%13%, or $432,700,$183,400, from $950,800$1,383,500 in 2015. 2016.

Licenses, royalties and fees increased in 20162017 by approximately 67%19%, or $226,300,$105,600, to $670,600 from $565,000 from $338,700 in 2015.2016. The increase in licenses, royalties and fees is due primarily to higher licensing revenues from an existing licensee in the entertainment and toy products market who signed a new four-year license in the second quarter of 2015 along with higher license fees and royalties from certain licensees, including a new international licensee in the entertainment and toy products market whose license commenced in late 2015. anti-counterfeiting market.

Product and other sales increased by $206,400,$77,800, or approximately 34%10%, to $896,300 in 2017 from $818,500 in 2016 from $612,100 in 2015.2016. The higher level of ink sales in 20162017 compared to 20152016 is due primarily to higher ink requirements of the licensed third partythird-party printers used by the Company’s licensees in the entertainment and toy products market. Sales of ink to the licensed printers of its licensees in the entertainment and toy products market were approximately $224,400$77,600 higher in 20162017 compared to 2015.2016. Sales of security ink to the Company’s licensees in the retail receipt and document fraud market decreased by approximately $25,000$22,700 in 20162017 compared to 2015. The2016.

Our Company derived $1,193,000,$1,340,500, or approximately 86% of total revenues, from licensees and their licensed printers in the entertainment and toy products market in 2016 compared to $757,300,$1,193,000, or approximately 80%86% of total revenues, in 2015.2016. The Company’s licensees in the entertainment and toy products market continue to develop new products for this market and improve their current offerings; however, their sales will be affected by marketplace reaction to the new and improved products, economic conditions that influence this market segment and the economy as a whole. Revenues that the Company derives from these licensees will be similarly affected. There can be no assurancesWe cannot assure you that the marketing and product development activities of licensees in the entertainment and toy products market will produce increased revenues for the Company in future periods, nor can the timing of any potential revenue increases be predicted, particularly given the uncertain economic conditions currently being experienced worldwide.

Gross profit increased to $1,123,800, or approximately 72% of revenues, in 2017 from $941,400, or approximately 68% of revenues, in 2016 from $617,800, or approximately 65% of revenues, in 2015.2016. Licenses, royalties and fees have historically carried a higher gross profit than product sales, which generally consist of supplies or other manufactured products that 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 higher gross profit in 20162017 compared to 20152016 reflects higher gross revenues from licenses, royalties and fees and from product and other sales in 20162017 compared to 2015.2016.

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 gross profit from licenses, royalties and fees as well as overall gross profit. Due primarily to the higher revenues in 20162017 compared to 2015,2016, the gross profit from licenses, royalties and fees increased to approximately 83%86% of revenues from licenses, royalties and fees in 20162017 from approximately 77%83% in 2015.2016.

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. TheDue to a favorable mix of products sold, the gross profit from product and other sales wasincreased to approximately 61% of revenues in 2017 from approximately 58% of revenues in both 2016 and 2015.2016.

Research and development expenses were $146,300 in 2017 compared to $138,800 in 2016 compared to $128,100 in 2015.2016. The increase in 20162017 compared to 20152016 resulted primarily from higher employee salary benefit and product developmentbenefit expenses in 20162017 compared to 2015.2016.

Sales and marketing expenses were $253,600 in 2017 compared to $236,000 in 2016 compared to $202,800 in 2015.2016. The increase in 20162017 compared to 20152016 resulted primarily from higher commission expense in 20162017 compared to 20152016 resulting from a higher level of revenues in 20162017 compared to 2015.

2016.

General and administrative expenses decreasedincreased to $317,600 in 2017 from $294,800 in 2016. The increase in 2017 compared to 2016 resulted primarily from $325,600higher employment costs, insurance expense and fees offset in 2015. The decrease in 2016 compared 2015 is due primarilypart by lower legal and audit expenses incurred in 20162017 compared 2015. In 2015, the Company incurred significant expenses related to the filing of the comprehensive annual report on Form 10-K and the first and second quarter 2015 Form 10-Q’s that were filed during the third quarter of 2015. These expenses included legal and audit fees in 2015 as well as expenses related to the electronic filing of the documents.2016.

Other income (expenses) in 2017 and 2016 and 2015 includesincluded interest on unsecured loans from threetwo individuals and on convertible debentures held by tennine investors. Additionally, other income (expenses) includes, in 2015, the reversal of approximately $56,300 of accounts payable related to invoices received from 2001 through 2009 from a professional services business that provided legal services to the Company and an individual that provided consulting services to the Company in 2009 that the Company, with legal counsel, has determined to be no longer statutorily payable as the statute of limitations to bring claims has expired. Also included in other income (expenses) is accretion of debt discounts in 2017 related to the issuance of convertible debentures totaling $138,300 and, in 2015, the extension of the maturity dates of $95,000$33,300 of convertible debentures. Other income (expenses) increased to $25,100 in 2017 from $13,300 in 2016. This increase is due primarily to accretion of debt discounts in 2017 related to the extension of the maturity dates of $33,300 of convertible debentures in the first quarter of 2017.

The higher net income of $381,200 in 2017 compared to $258,500 in 2016 compared to a net loss of $18,000 in 2015 resulted primarily from a higher gross profit on a higher level of revenues in 20162017 compared to 2015 along with lower accretion of interest in 2016 compared to 2015 offset in part by higher overhead expenses and higher accretion of debt discounts in 20162017 compared to 2015 and no reversal of accounts payable in 2016.

Management of the CompanyOur management does not believe that inflation and changing prices have had a significant effect on itsour revenues and results of operations during the years ended December 31, 20162017 and December 31, 2015.2016.

Plan of Operation, Liquidity and Capital Resources

The Company’sOur cash increased to $360,400 at December 31, 2017 from $199,100 at December 31, 2016 from $11,400 at December 31, 2015.2016. During 2016,2017, the Company generated $202,600$177,500 from its operating activities,received $400 upon the exercise of warrants, used $1,400$6,600 for capital equipment and repaid $13,500$10,000 to an individual lender.

During 2016, the Company’s2017, our revenues increased primarily as a result of significanthigher sales of ink to a newan authorized printer of one of the Company’s licensees in the entertainment and toy products market and higher license fees from a licensee in the entertainment and toy products market offset in part by lower sales of ink to an existing authorized printer of certain licensees in the entertainment and toy products market. The Company’s

Our total overhead expenses increased in 20162017 compared 2015.2016. As a result of these factors, the Company generated net income of $381,200 in 2017 compared to $258,500 in 2016. The Company had positive operating cash flow of $202,600$177,500 in 2016.2017. At December 31, 2017, the Company had positive working capital of $201,100 and stockholders’ equity of $215,200. 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 stockholders’ deficiency of $179,600. For the full year of 2015, the Company had a net loss of $18,000 and had positive operating cash flow of $41,800. At December 31, 2015, the Company had negative working capital of $364,000 and a $438,100$179,600 stockholders’ deficiency.

In 20162017 and 2015,2016, the Company repaid $33,500 of $43,500the entire $23,500 of short-term loans that had been outstanding at January 1, 20152016 and in, 2015, repaid $10,000presently has no short-term loans outstanding. The Company has $128,300 of convertible debentures and extendedoutstanding that are due during the maturity datesthird quarter of $95,000 of convertible debentures from 2015 to 2017.2018. These borrowings allowed the Company to remain in operation through late 2016 when the Company’s cash flow increased significantly. There can be no assurances that the Company will be able to secure sufficient additional funding, if needed, through investments or borrowings. The Company believes that without additional investment, it may be forced to cease operations at an undetermined date in the future if it is unable to sustain revenues at levels equal to or greater than it achieved in 2016.

In MarchSeptember 2017, theour common stock private placement was extended to December 31, 20172018 by the Company’s Board of Directors.

Management of the Company believes that itWe may need to obtain additional capital in the future to support the working capital requirements associated with itsour existing revenue base and to fund potential operating losses that it believes maycould occur asif our licensees are unable to at least maintain current levels of sales of products utilizing the state of the worldwide economy remains uncertain. There can be no assurancesCompany’s technologies. We cannot assure you that the Companywe will be successful in obtaining sufficient additional capital, or if it does,we do so, that the additional capital will enable theour Company to continue to operate profitably in the future and develop new revenue sources to have a material positive effect on the Company’s operations and cash flow. The Company believes that withoutWithout additional investment, itwe may be forced to cease operations at an undetermined time in the future if it iswe are unable to sustain revenues at levels equal to or greater than itapproximating revenues achieved in 2016.recent years.

There can be no assurances that the Company will be successful in obtaining additional investment. There can be no assurances that revenues in future periods will be sustained at levels that will allow it to maintain positive cash flow.

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

The Company’s

Our plan of operation for the twelve months beginning with the date of this annual report consists of concentrating available human and financial resources to continue to capitalize on the specific business relationships theour Company has developed in the entertainment and toy products market includingmarket. This includes 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. 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. The Company believesWe anticipate that these two licensees will expand their current offerings incorporating the Company’sthat incorporate our technologies currently being marketed and will introduce and market new products incorporatingthat will incorporate our technologies available technologies covered by theto them under their license agreements that are not currently being marketed by them. The Company planswith our Company. We will continue to continue developingdevelop various applications for these licensees while expanding itslicensees. We also plan to expand our licensee base in the entertainment and toy market. The Company hasWe currently have additional licensees marketing or developing products incorporating the Company’sour technologies in certain geographic and niche markets of the overall entertainment and toy products market.

In late 2015, the Company added a licensee who began marketing products incorporating the Company’sour available technologies in certain international markets in 2016. TheOur Company maintains its presence in the retail loss prevention market and believesexpects that revenue growth in this market can be achieved through increased security ink sales to its licensees in this market. The CompanyWe will continue to adjust itsour production and technical staff as necessary. The Company will also,necessary and, subject to available financial resources, invest in capital equipment needed to support potential growth in ink production requirements beyond itsour current capacity. Additionally, the Companywe will pursue opportunities to market itsour 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.

TheOur Company has received and continues to seek additional capital, in the form of debt, equity or both, to support itsour working capital requirements. There can be no assurancesrequirementsand to provide funding for other business opportunities. We cannot assure you that the Companywe will be successful in raising additional capital, or that such additional capital, if obtained, will enable theour Company to generate additional revenues and positive cash flow.

The Company generatesAs previously stated, we generate a significant portion of itsour total revenues from licensees in the entertainment and toy products market. These licensees generally sell their products through retail outlets. DuringIn the year,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, the Company’sour revenues, results of operations and liquidity may be negatively impacted as they were in previous years.

Risk FactorsContractual Obligations

The Company’sWe conduct our operations in leased facilities under a non-cancelable operating results, financial conditionlease expiring in 2019. Future minimum lease payments under this operating lease at December 31, 2017 are: $48,600 – 2018 and stock price are subject to certain risks, some$16,300 – 2019. Total rental expense under operating leases was $45,100 in each of which are beyond its control. These risks could cause the Company’s actual operating and financial results to differ materially from those expressed in its forward looking statements, including the risks described below and the risks identified in other documents which are filed and furnished with the SEC:

Limited Interim Historical Information. The Company filed a comprehensive annual report on Form 10-K for the fiscal years ended December 31, 2012, 20132017 and 2014 on September 11, 2015. The Form 10-K contained summarized quarterly financial information for each of the quarters ended June 30 and September 30, 2012 and for each of the quarters ended March 31, June 30 and September 30, 2013 and 2014. As the complete periodic filings for those periods have not been filed, certain financial information, disclosures and discussions normally contained in a Form 10-Q were not included in the Form 10-K. The omission of the information that would have been contained in these periodic filings leaves current and prospective investors, customers, employees and others without this source of information about the Company’s business achievements and prospects and may negatively impact the Company’s business opportunities and its ability to raise capital. There can be no assurances that the Company will be able to remain current with its required SEC filing obligations in the future.

Access to Capital.  The Company anticipates that it may need to raise capital in the future to fund its historical and new business operations. Negative or uncertain global economic conditions could make it more difficult for the Company to raise capital. If the Company is unable to secure capital, if needed, in the future, in the form of debt, equity or both, it may be forced to cease operations. There can be no assurances that, if required, the Company will be successful in obtaining additional investment in sufficient amounts to fund its ongoing business operations.

Dependency on Major Customers. The Company is dependent on its licensees to develop new products and markets that will generate increases in its licensing and product revenues. The inability of the Company’s licensees to maintain at least current levels of sales of products utilizing the Company’s technologies could adversely affect the Company’s operating results and cash flow. To the extent that the Company’s licensees are adversely affected by negative economic conditions, the Company’s revenues may also be negatively impacted. The Company has derived a significant percentage of its revenues through licensing relationships with two major customers. Revenues obtained directly from these customers and indirectly, through the customers’ third party licensed printers, equaled approximately 80% of the Company’s revenues in 2016. Receivables from these two licensees and their third party authorized printers were approximately 83% of the Company’s net accounts receivable at December 31, 2016. The Company has a license agreement containing guaranteed minimum royalties expiring in 2019 with one of these two licensees and a license agreement with the second that expires in 2017. Products incorporating the Company’s technologies that are sold by these two licensees have certain dissimilar characteristics and are marketed generally through distinctly different channels of distribution. These two licensees are well known and highly regarded participants in the entertainment and toy products market. The agreements with both licensees contain renewal options but there can be no assurances that the licenses will continue in force at the same or more favorable terms beyond their current termination dates, nor can there be any assurances that the relationships with these two licensees will generate increased revenues for the Company in the future.

Possible Inability to Develop New Business. While the Company raised cash through additional capital investment, sales of convertible debentures and loans from individuals in 2012, 2013 and 2014, it limited increases in its operating expenses, reduced its operating expenses when possible and deferred payment of certain obligations to employees and service providers. Management of the Company believes that any significant improvement in the Company’s cash flow must result from increases in revenues from traditional sources and from new revenue sources. The Company’s ability to develop new revenues may depend on the extent of both its marketing activities and its research and development activities, both of which are limited. There are no assurances that the resources that the Company can devote to marketing and to research and development will be sufficient to increase its revenues to levels that will enable it to maintain positive operating cash flow in the future.

Inability to Obtain Raw Materials and Products for Resale. The Company’s adverse financial condition in years prior to 2016 has required it from time to time to significantly defer payments due to (i) vendors who supply raw materials and other components of its security inks, (ii) providers of professional and other services and (iii) certain employees to whom salary and sales commissions are owed. As a result, the Company is required to pay cash in advance of shipment to certain of its suppliers. The inability to obtain materials on a timely basis and the possibility that certain vendors may permanently discontinue supplying the Company with needed products and services may result in delayed shipments to customers and further impact the Company’s ability to service its customers, thereby adversely affecting the Company’s relationships with its customers and licensees. There can be no assurances that the Company will be able to maintain its vendor relationships in an acceptable manner.

Uneven Pattern of Quarterly and Annual Operating Results. The Company’s revenues, which are derived primarily from licensing and sales of products incorporating its technologies as well as royalties from these products, are difficult to forecast; such forecasting difficulty is due to, among other reasons, the long sales cycle of the Company’s technologies, the potential for customer delay or deferral of implementation of the Company’s technologies, the size and timing of inception of individual license agreements, the success of the Company’s licensees and strategic partners in exploiting the market for the licensed products, modifications of customer budgets, and uneven patterns of royalty revenue and product orders. As the Company’s revenue base is not substantial, delays in the finalization of license contracts, the implementation of the technology to initiate the revenue stream and the ordering decisions of customers can have a material adverse effect on the Company’s quarterly and annual revenue expectations. As the Company’s operating expenses are substantially fixed, income expectations will be subject to a similar adverse outcome. As licensees for the entertainment and toy products markets are added, the predictability of the Company’s revenue stream may be further impacted.

Volatility of Stock Price. The market price for the Company’s common stock has historically experienced significant fluctuations and may continue to do so. With the exception of 2007, 2013, 2014 and 2016 from its inception, the Company has operated at a loss and has not produced revenue levels traditionally associated with publicly-traded companies. The Company’s common stock is not listed on a national or regional securities exchange and, consequently, the Company receives limited publicity regarding its business achievements and prospects. Additionally, securities analysts and traders do not extensively follow the Company’s stock and its stock is thinly traded. The Company’s market price may be affected by announcements of new relationships or modifications to existing relationships. The stock prices of many developing public companies, particularly those with small capitalizations, have experienced wide fluctuations not necessarily related to operating performance. Such fluctuations may adversely affect the market price of the Company’s common stock.

Intellectual Property. The Company relies on a combination of protections as may be available under applicable domestic, foreign or international patent, trademark and trade secret laws. The Company also relies on confidentiality, non-analysis and licensing agreements to establish and protect its rights in its proprietary technologies. While the Company attempts to protect these rights, its technologies may be compromised through reverse engineering, independent invention or other means. In addition, the Company’s ability to enforce its intellectual property rights through appropriate legal action has been and will continue to be limited by its adverse liquidity. There can be no assurances that the Company will be able to protect the basis of its technologies from discovery by third parties or to preclude third parties from conducting activities that infringe on the Company’s rights. The Company’s adverse liquidity situation also impacts its ability to obtain patent protection on its intellectual property and to maintain protection on previously issued patents. There can be no assurances that the Company will be able to continue to prosecute new patents and maintain issued patents. As a result, the Company’s customer and licensee relationships could be adversely affected, and the value of the Company’s technologies and intellectual property (including their value upon liquidation) could be substantially diminished.

Economic Conditions. The Company’s revenue is susceptible to changes in general economic conditions. The Company’s sales, liquidity and overall results of operations may be negatively affected by decreasing consumer confidence, slowdowns in consumer spending or other downturns in the U.S. economy as a whole or in any geographic markets from which the Company derives revenue. In addition, these factors may result in decreased customer and licensee demand for the Company’s products and may negatively impact the Company’s ability to develop new customers and licensees. Due to uncertainties surrounding the worldwide economy, the Company is unable to predict the effect of such conditions on its customers and licensees. Consequently, the Company cannot predict the scope or magnitude of the negative effect resulting from ongoing global financial uncertainties or economic slowdowns.

RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

In August 2014, the FASB issued ASU 2014-15,Presentation of Financial Statements – Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. The amendments in this Update provide guidance about management’s responsibility to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued and to provide related footnote disclosures. Substantial doubt about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued. The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. The amendments were adopted as of December 31, 2016, see Note 2 for management’s evaluation and disclosure.  

Recently IssuedAdopted 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. In August 2015, FASB issued ASU 2015-14 which deferred the effective date of Update 2014-09 to annual reporting periods beginning after December 15, 2017. The Company anticipates that the impact of this guidance on the financial statements will not be material.

In July 2015, the FASB issued ASU No. 2015-11,Inventory (Topic 330),Simplifying the Measurement of Inventory. The amendments in this Update require an entity to measure inventory at the lower of cost or net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. The amendments in this Update are effective for fiscal years beginning after December 15, 2016. The Company anticipates thatadopted the amendments in this Update on January 1, 2017 and there is no material impact of this guidance on the financial statements will not be material.

In February 2016, the FASB issued ASU No. 2016-02,Leases (Topic 842). The amendments in this Update specify the accounting for leases. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently assessing the impact of adoption of this guidance will have on the financial statements.

In March 2016, the FASB issued ASU No. 2016-09,Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which simplifies several aspects of the accounting for share-based payment award transactions, including: (1) income tax consequences; (2) classification of awards as either equity or liabilities, and (3) classification on the statement of cash flows. For public companies, the amendments in this ASU are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company adopted the amendments on January 1, 2017 and they had no impact on the financial statements since any excess tax benefits were fully offset by a valuation allowance and not recognized for financial statement purposes.

Recently Issued Accounting Pronouncements Not Yet Adopted

In May 2014 and April 2016, the FASB issued ASU No. 2014-09 and ASU No. 2016-10,Revenue from Contracts with Customers (Topic 606). The core principle of the guidance is currently assessingthat an entity should recognize revenue to depict the impacttransfer of adoption of thispromised 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. The Company, which presently has no significant new licenses or license renewals pending, has not determined the method to be used in applying the amendments in this standard.

In May 2017, the FASB issued ASU No. 2017-09,Compensation – Stock Compensation (Topic 718), Scope of Modification Accounting. The amendments in this Update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The amendments in this Update are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. The amendments in this Update should be applied prospectively to an award modified on or after the adoption date. The Company does not expect the adoption on January 1, 2018 of the amendments in this Update to have a material impact on theits financial statements.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements.None.

Item 7a.

ITEM 7A. QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKQuantitative and Qualitative Disclosures About Market Risk

Not required for a smaller reporting company.Applicable.

Item 8.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAFinancial Statements and Supplementary Data

For information required with respect to this Item 8, see index toOur Financial Statements are attached asAppendix A (following Exhibits) and Schedules on page F-1included as part of this report on Form 10-K.10-K Report. A list of our Financial Statements is provided in response to Item 15 of this Form 10-K Report.

Item 9.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSUREChanges In And Disagreements With Accountants On Accounting and Financial Disclosure

Not applicable.None.

Item 9a.

ITEM 9A. CONTROLS AND PROCEDURESControls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company’s disclosure controls and procedures are designed to provide reasonable assurance that material information required to be included in its periodic SEC reports is recorded, processed, summarized and reported within the time periods specified in the relevant SEC rules and forms. The Company has carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded, asAs of the end of the period covered by this report, thatour Company evaluated the effectiveness and design and operation of its disclosure controls and procedures. Our Company’s disclosure controls and procedures are the controls and other procedures that we designed to ensure that our Company records, processes, summarizes, and reports in a timely manner the information that it must disclose in reports that our Company files with or submits to the Securities and Exchange Commission. Our principal executive officer and principal financial officer reviewed and participated in this evaluation. Based on this evaluation, our Company made the determination that its disclosure controls and procedures were effective.

Management's Annual Report on Internal Control overOver Financial Reporting

ManagementOur management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f) under. Under the Securities Exchange Actsupervision and with the participation of 1934.management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal controls over financial reporting based on the framework in Internal Control -Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Based on this evaluation, management has concluded that our internal control over financial reporting is a process to provide reasonable assurance regarding the reliabilitywas effective as of financial reporting and preparation of financial statements for external purposes in accordance with U.S. GAAP. InternalDecember 31, 2017.

The Company's internal control over financial reporting includes policies and procedures that (1) pertain to maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company,Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP,generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management authorization and directors of the Company; and (3) provide reasonable assurance thatregarding prevention or timely detection of unauthorized acquisition, use, or disposition of Companythe Company's assets that could have a material effect on the Company’s financial statements would be preventedstatements.

Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls or detected on a timely basis. Because of its inherent limitations,our internal control over financial reporting may notwill prevent or detect misstatements inall errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the Company’s financial statements on a timely basis.

Management assessed the effectiveness of the Company’s internalcontrol system's objectives will be met. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. In addition, the design of any system of controls is based in part on certain assumptions about the Committeelikelihood of Sponsoring Organizations of the Treadway Commissionfuture events, and controls may become inadequate if conditions change. There can be no assurance that any design will succeed in “Internal Control-Integrated Framework (1992).” Based on this assessment, management believes that, as of December 31, 2016, the Company’s internal control over financial reporting was effective.achieving its stated goals under all potential future conditions.

This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. TheManagement’s report was not subject to attestation report requirement for non-accelerated filers was permanently removed fromby the Sarbanes-Oxley Act by Section 989CCompany’s registered public accounting firm pursuant to rules of the Dodd-Frank Act as adopted bySecurities and Exchange Commission that permit the SEC.Company to provide only management’s attestation in this annual report.

Changes in Company Internal Control over Financial ReportingControls

There have been no changesNo change in theour Company’s internal controlscontrol over financial reporting occurred during theour fourth fiscal quarter of 2016 that havehas materially affected, or areis reasonably likely to materially affect, our internal controlscontrol over financial reporting.

Item 9b.

ITEM 9B. OTHER INFORMATIONOther Information

None.

PART III

Item 10.

ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEDirectors, Executive Officers and Corporate Governance

TheIdentity of directors, executive officers and named executivesignificant employees

———————

*

The term of office of each of the Company, their ages, present positions with the Company,Directors is one (1) year, which continues until his successor has been elected and a summaryqualified.

Business experience of their business experience are set forth below.directors, executive officers, and significant employees

Michael A. Feinstein, M.D., 70,71, has served as our Chairman of the Board of Directors since December 1999 and Nocopi’sour Chief Executive Officer since February 2000, has been a practicing physician in Philadelphia for more than thirty years, serving for more than twenty-five years as the President of a group medical practice which includes threetwo physicians. He is a Fellow of the American College of Obstetrics and Gynecology and of the American Board of Obstetrics and Gynecology. He received his B.A. from LaSalle University and his M.D. from Jefferson Medical College. He has represented Nocopiour Company in numerous licensing negotiations, governmental meetings and capital raises. The Board of Directors believes that Dr. Feinstein’s considerable personal experience as a business owner and investor in publicly traded businesses makes him well suited to serve as a member of Nocopi Technologies’our Board of Directors.

Terry W. Stovold, 55, has served as our Chief Operating Officer since July 2014, and has been employed by our Company for more than thirty years. Mr. Stovold previously served as our Company’s Director of Operations and Sales. Mr. Stovold received a Forestry Technician College degree from Algonquin College in Pembroke, Ontario, Canada and studied business at McGill University in Montreal, Canada. He holds numerous U.S. and foreign patents in the fields of printing technology and printing inks.

Rudolph A. Lutterschmidt, 71, has served as our Vice President and Chief Financial Officer since 1992, serving in this capacity on a part-time basis since January 2000. Mr. Lutterschmidt has been a consultant to several southeast Pennsylvania businesses. He is a graduate of Syracuse University.

Herman M. Gerwitz, CPA, 63, a64, has served as our director since May 2005,2005. He is presently the Treasurer of Keystone Property Group. Mr. Gerwitz has been with Keystone full time since 1998 and has been responsible for all the financial matters of a Real Estate Development Company that has grown to over 10 million square feet of commercial real estate and a $2 billion Real Estate Fund. Prior to joining Keystone, Mr. Gerwitz has spent 20 years as a partner in a public accounting firm. He has received a BBA from Temple University with master’s coursework at Widener University. He has been a member of both the Pennsylvania and American Institutes of Certified Public Accountants since 1983. The Board of Directors believes that Mr. Gerwitz’ many years as a Certified Public Accountant and his subsequent business management experience make him well suited to serve as a member of Nocopi Technologies’our Board of Directors and to serve on itsthe Audit Committee.Committee of the Board of Directors.

Richard Levitt, 60, a61, has served as our director since December 1999, and has been engaged in the computer and services segment of the computer industry since 1981. Mr. Levitt is currently a Senior Account Executive for Dell Computer in Pittsburgh, PA. He is in the Large Enterprise Group and is responsible for developing major accounts in Western Pennsylvania. Mr. Levitt has been with Dell since November 2005. In 2009, Mr. Levitt was awarded the “Circle of Excellence” award by Dell which is Dell’s highest corporate award given to less than 1% of its sales and support employees. In addition, he was awarded over the past three years the “Top Team Performer” and “Regional Top Performer” awards. In 1995, he participated in the founding of XiTech Corporation, a Pittsburgh, Pennsylvania-based provider of computing and computer networking hardware and network design and implementation services which in five years grew to over 100 employees and $50 million in annual sales. Since founding XiTech, Mr. Levitt served as one of its corporate principals, as a Network Consultant and as the Manager of its Network Sales Force. Mr. Levitt left XiTech in 2004. Before joining XiTech, Mr. Levitt served as a network sales executive for Digital Equipment Corporation from 1988 to 1994 and as a network consultant for TriLogic Corporation during 1994 and 1995. Mr. Levitt holds a B.S. in Marketing from Kent State University. The Board of Directors believes that Mr. Levitt’s sales and marketing experience in technology-based businesses, including start-ups and smaller businesses, makes him well suited to serve as a member of Nocopi Technologies’our Board of Directors.

Marc Rash, 69, has served as our director since September 2017, and is the Executive Vice President of Keystone Property Group, a Real Estate Development Company with over 10 million square feet of commercial real estate and a $2 billion Real Estate Fund. Mr. Rash, who joined Keystone in 1994, has extensive dealings with numerous lenders and investors as well as significant real estate experience, including the redevelopment of apartments, shopping centers and industrial/office space. Previously, Mr. Rash was an agent with the IRS specializing in auditing large corporations and high-net-worth individuals. Mr. Rash graduated from the University of North Carolina with a Bachelor of Science in Accounting and received his Juris Doctor degree from Delaware Law School. He is a member of the Pennsylvania Bar Association and the American Institute of Certified Public Accountants. The Board of Directors believes that Mr. Rash’s financial and legal background along with his banking and investor experience make him well suited to serve as a member of our Board of Directors.

Philip B. White, 78,79, has been aserved as our director since August 2006. Mr. White is currently an international consultant in the private sector providing regulatory and industry standards advice to international companies regulated by the Food and Drug Administration, the Consumer Product Safety Commission, and the Environmental Protection Agency. He also served as a Technical Advisor and Regulatory Liaison to Nocopi from 2002 to 2005. Before establishing his own global consulting practice in 2000, Mr. White was, from 1994 to 2000, Director of Medical Device Consulting at the international firm of AAC Consulting Group (now Kendle), Rockville, MD. In 1994, Mr. White retired from a 33-year career with the U.S. Food and Drug Administration. His last FDA position was Director of the Office of Standards and Regulations in the Center for Devices and Radiological Health. Previous FDA positions included Regional Director of FDA’s enforcement activities in the Southwestern Region, Deputy FDA Assistant Commissioner for Program Coordination, and Supervisory Food and Drug Inspector. He has served on the Board of Directors of the American National Standards Institute, the Association for Advancement of Medical Instrumentation, and the Regulatory Affairs Professionals Society. He is a 1961 graduate of Wilkes University, Wilkes-Barre, PA with a B.A. Degree in Biology. He also did graduate studies in 1967 and 1968 specializing in the Federal Food Drug and Cosmetic Act at the New York University Graduate Law School in New York City. The Board of Directors believes that Mr. White’s considerable experience with consumer product safety and regulatory matters gained from his many years at the Food and Drug Administration makes him well suited to serve as a member of Nocopi Technologies’our Board of Directors.

Terry W. Stovold, 54, Chief Operating Officer, has been employed by Nocopi for more than twenty-five years. Mr. Stovold previously served as the Company’s Director of Operations and Sales. Mr. Stovold received a Forestry Technician College degree from Algonquin College and studied business at McGill University. He holds numerous U.S. and foreign patents in the fields of printing technology and printing inks.

Rudolph A. Lutterschmidt, 70, has been Vice President and Chief Financial Officer of the Company for more than five years, serving in this capacity on a part-time basis since January 2000. Mr. Lutterschmidt has been a consultant to several southeast Pennsylvania businesses. He is a graduate of Syracuse University.

The terms of theall current directors will expire at the 20172018 annual meeting of stockholders of the Company.

Corporate GovernanceAudit Committee Financial Expert

The Board of Directors has determined that all of the directors, with the exception of Michael A. Feinstein, M.D., who serves as Chief Executive Officer, are independent as that term is defined by the SEC. The Company did not make any material changes to the procedures by which stockholders may recommend nominees to the Company’s Board of Directors during 2017.

AUDIT COMMITTEE FINANCIAL EXPERT

TheOur Company has established a standing audit committee in accordance with Section 3(a) (58) (A) of the Securities Exchange Act of 1934 that makes recommendations to the Company’s Board of Directors regarding the selection of an independent registered public accounting firm, reviews the results and scope of the Company’s audits and other accounting-related services and reviews and evaluates the Company’s internal control functions. The audit committee does not presently have a written charter. The audit committee is comprised of Michael A. Feinstein, M.D., its Chairman of the Board, and Herman M. Gerwitz, CPA. The Board of Directors has determined that Mr. Gerwitz is an “audit committee financial expert” as currently defined under the SEC rules implementing Section 407 of the Sarbanes Oxley Act of 2002 and that Mr. Gerwitz meets the criteria for independence as defined by the SEC.

CODE OF ETHICSCode of Ethics

TheOur Company has adopted a Code of Ethics that applies to its Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer and persons performing similar functions. A copy of the Company’s Code of Ethics is incorporated by reference to Exhibit 14.1 of this report on Form 10-K.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires the Company’sthat our executive officers and directors, and any persons who beneficially own more than 10%ten percent of its Common Stock (collectively, “Reporting Persons”) toa registered class of our equity securities, file reports of ownership and changes in ownership with the SEC. Reporting PersonsExecutive officers, directors and greater-than-ten percent stockholders are required by SEC regulations to furnish the Companyus with copies of all Section 16(a) forms they file.

BasedTo the best of our knowledge, based solely on the Company’supon a review of the copies of any Section 16(a) forms received by it, theForms 3 and 4 and amendments thereto furnished to our Company believes thatduring its most recent fiscal year and Forms 5 and amendments thereto furnished to our Company with respect to theits most recent fiscal year, ended December 31, 2016, and any written representation referred to in paragraph (b)(1) of Item 405 of Regulation S-K,all Reporting Personsof our executive officers, directors and greater-than-ten percent stockholders complied with all applicableSection 16(a) filing requirements.requirements with the following exceptions:Mr. Marc Rash failed to timely file an Initial Form 3; Mr. Michael A. Feinstein failed to timely file a Form 4 nineteen times with respect to forty four transactions, and Mr. Herman M. Gerwitz failed to timely file one Form 4 with respect to two transactions.

Item 11.

ITEM 11. EXECUTIVE COMPENSATIONExecutive Compensation

The following table sets forth information concerningbelow summarizes all compensation for 2016 and 2015awarded to, earned by, Michael A. Feinstein, M.D.,or paid to our Named Executives for the Company’s Chairman who has served since February 2000 as the Company’s Chief Executive Officerfiscal years ended December 31, 2017 and Terry W. Stovold, the Company’s Chief Operating Officer, the only employee to receive compensation in 2016 greater than $100,000 (the “Named Executive”).2016.

SUMMARY COMPENSATION TABLESummary Compensation Table

———————

(1) Sales commissions

1.

Dr. Feinstein entered into a written employment agreement effective June 1, 2008 under which he serves as President and Chief Executive Officer of the Company for an initial term of three years with successive one year renewal terms. In accordance with the terms of the employment agreement, the employment agreement renewed on December 1, 20152017 for a period of one year effective June 1, 2016.2018. The employment agreement provides for an annual base salary of $85,000 which may be increased annually at the discretion of the Board of Directors and an annual performance bonus determined by the Board of Directors. In certain situations, including a change in control, Dr. Feinstein may be eligible to receive his base salary for a period of up to twelve months following the termination of employment. The employment agreement prohibits him from competing with the Company during the term of this agreement and for two years after the termination of his employment with the Company. In each of the years ended December 31, 20162017 and 2015,2016, Dr. Feinstein deferred $85,000 of salary owed to him for each of those years. At December 31, 2017 and December 31, 2016, Dr. Feinstein was owed a total$200,000 and $301,200, respectively, of approximately $301,200 of salary that was deferred by him.

2.

Mr. Stovold entered into a written employment agreement effective April 1, 2011 under which he served as the Company’s Director of Operations and Sales for an initial term of three years with successive one yearone-year renewal terms. The employment agreement provides for a base salary set by the Company’s Board of Directors, which is currently set at $75,000 per year beginning on January 1, 2012, along with a commission of seven percent on sales generated by his efforts. The amount in column (g) reflects Mr. Stovold’s commissions on sales. In certain situations, including but not limited to a change in control, Mr. Stovold may be eligible to receive his base salary for a period of up to six months following the termination of employment. The employment agreement prohibits him from competing with the Company during the term of the agreement and for one year after the termination of his employment with the Company. At December 31, 2016,2017, Mr. Stovold was owed approximately $43,900$44,000 of currently payable commissions related to sales realized in 20162017 through his efforts. In July 2014, the Company’s Board of Directors appointed Mr. Stovold Chief Operating Officer of the Company. There were no changes to the employment agreement with Mr. Stovold resulting from this appointment.

There are no outstanding stock or option awards at fiscal year end.

If Dr. Feinstein’s employment is terminated as a result of a change in control, Dr. Feinstein is entitled to receive severance payments equal to twelve months of his then base salary. If Mr. Stovold’s employment is terminated as a result of a change in control, Mr. Stovold is entitled to receive severance payments not to exceed six months of his then base salary.

DIRECTOR COMPENSATIONOutstanding Equity Awards at Fiscal Year-End

None.

Director Compensation

The following table summarizes compensation earned by theour Company’s non-executive directors for the year ended December 31, 2016.2017. All directors have been and will be reimbursed for reasonable expenses incurred in connection with attendance at meetings of the Board of Directors or other activities undertaken by them on behalf of the Company.

DIRECTOR COMPENSATION

———————

(1) 1.

Serves as an executive officer and a director, but receives no additional compensation for serving as a director.

2.

At December 31, 2016,2017, Mr. Gerwitz held 26,665 warrants that became exercisable in July 2016.

Compensation Policies and Practices as They Relate to Our Risk Management

No risks arise from our Company’s compensation policies and practices for our employees that are reasonably likely to have a material adverse effect on our Company.

Item 12.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurity Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The following table sets forth, as of March 15, 2017,27, 2018, the stock ownership of (1) each person or group known by the Registrantto our Company to beneficially own 5% or more of Registrant’s Common Stockour common stock and (2) each director and Named Executive (as set forth under the heading “Executive Compensation”)in Item 11. Executive Compensation) individually, and (3) all directors and executive officers of the Company as a group. To the Company’sour knowledge, except as set forth in the footnotes to this table and subject to applicable community property laws, each person named in the table below has sole voting and investment power with respect to the shares set forth opposite such person’s name. Except as otherwise indicated, the address of each of the persons in the table below is c/o Nocopi Technologies, Inc., 480 Shoemaker Road, Suite 104, King of Prussia, Pennsylvania 19406.

Common Stock

———————

* Less than 1.0%.

(1)

Where the Number of Shares Beneficially Owned (reported in the preceding column) includes shares which may be purchased upon the exercise of outstanding stock options and warrants which are or within sixty days will become exercisable (“presently exercisable options”) the percentage of class reported in this column has been calculated assuming the exercise of such presently exercisable options.

(2)

(2)Based on 58,616,716 shares of common stock outstanding on March 27, 2018.

(3)

As reflected in a Schedule 13D dated August 11, 2008 filed on behalf of Philip N. Hudson and subsequent open market purchases as reported to the Company by Mr. Hudson.

(3)(4)

As reflected in a Schedule 13D dated March 14, 2001 filed on behalf of Westvaco Brand Security, Inc.

(4)(5)

As reflected in a Schedule 13D dated April 4, 2005 filed on behalf of Ross L. Campbell.

(5)(6)

Includes 734,000940,474 shares held by a pension plan of which Dr. Feinstein is the trustee and 100,0001,443,868 shares held in an IRA.

(6)(7)

Includes 50,000 shares held by a trust on behalf of a child of Mr. Gerwitz, 72,500 shares held by a child of Mr. Gerwitz, 6,000 shares held in an IRA and 26,665 presently exercisable warrants.

(8)

(7)Held in an IRA.

(9)

Includes 5,00017,000 shares held by Mr. White’s wife.

EQUITY COMPENSATION PLAN INFORMATION AS OF DECEMBER 31, 2016We are not aware of any arrangements that could result in a change of control.

———————Securities Authorized for Issuance under Equity Compensation Plans

(1)

Warrants issuedInformation regarding our compensation plans under which our equity securities are authorized for issuance can be found in connection with the salePart II –Item 5 of convertible debentures totaling $138,273 in 2014 and 2013 and the receipt of short term-notes totaling $30,000 in 2012 and 2013. The warrants expire from five to seven years from the date of issuance.this report.

Item 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCECertain Relationships and Related Transactions, and Director Independence

TheTransactions with related persons

None.

Review, approval or ratification of transactions with related persons

Our Company does not have any formal written policies or procedures for related party transactions, however in practice, our Board of Directors reviews and approves all related party transactions and other matters pertaining to the integrity of management, including potential conflicts of interest, trading in our securities, or adherence to standards of business conduct.

Director Independence

Although we are currently traded on the Over-the-Counter Markets, our Board of Directors has reviewed each of the Directors’ relationships with the Company in conjunction with NASDAQ Listing Rule 5605(a)(2) that provides that an “independent director” is‘a person other than an Executive Officer or employee of the Company or any other individual having a relationship which, in the opinion of the Company's board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.’ Our Board of Directors has affirmatively determined that four of our directors, Herman M. Gerwitz, Richard Levitt, Marc Rash and Philip B. White are independent directors in that they are independent of management and free of any relationship that would interfere with their independent judgment as members of our Board of Directors. In making such determination, our Board of Directors considered the relationships that each such non-employee director has with our Company and all other facts and circumstances that our Board of Directors deemed relevant in determining their independence, including the directors, withbeneficial ownership of our capital stock by each non-employee director. One member of our Board of Directors, Michael A. Feinstein, M.D., is not an independent director pursuant to the exceptionstandards described above.

Our audit committee is comprised of Michael A. Feinstein, M.D., who and Herman M. Gerwitz, CPA.Our Company does not have a separately designated nominating or compensation committee or committee performing similar functions; therefore, our full Board of Directors currently serves as President and Chief Executive Officer, are independent as that term is defined by the SEC.in these capacities

Item 14.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICESPrincipal Accounting Fees and Services

Registrant has retained the public accounting firm of Morison Cogen LLP, whose principal business address is 484 Norristown Road, Suite 100, Blue Bell, PA 19422, to perform its annual audit for inclusion of its report in Form 10-K and perform SAS 100 reviews of quarterly information in connection with Form 10-Q filings.

Audit Fees

During 2016 and 2015, theThe aggregate fees billed for the years ended December 31, 2017 and December 31, 2016 for professional services rendered by Registrant’s principal accountantMorison Cogen, LLP for the audit of Registrant’sthe Company’s annual financial statements and review of its quarterly financial statements included in the Company’s Form 10-Q or services that are normally provided by Morison Cogen, LLP in connection with statutory and regulatory filings or engagements were $42,000 for the year ended December 31, 2017 and $41,000 and $47,000, respectively.for the year ended December 31, 2016.

AUDIT-RELATED FEESAudit-Related Fees

During 2016 and 2015, there were no feesFees billed for audit-related services.

TAX FEES

Duringthe years ended December 31, 2017 and December 31, 2016 for assurance and 2015, the aggregate fees billed for professionalrelated services rendered by Registrant’s principal accountantMorison Cogen, LLP that are reasonably related to the performance of the audit or review of the Company’s financial statements and are not reported under the category Audit Fees described above were $0 for the year ended December 31, 2017 and $0 for the year ended December 31, 2016.

Tax Fees

Fees billed for the years ended December 31, 2017 and December 31, 2016 for tax compliance, tax advice and tax planning services rendered by Morison Cogen, LLP were $3,000 for the year ended December 31, 2017 and $9,000, respectively.$3,000 for the year ended December 31, 2016.

ALL OTHER FEESAll Other Fees

DuringFees billed for the years ended December 31, 2017 and December 31, 2016 and 2015, there were no fees billed for products and services provided by Registrant’s principal accountantMorison Cogen, LLP, other than those set forth above.  the services reported in the Audit Fees, Audit-Related Fees, and Tax Fees categories above were $0 for the year ended December 31, 2017 and $0 for the year ended December 31, 2016.

AUDIT COMMITTEE APPROVALAudit Committee Approval

The Audit Committee, consisting of Michael A. Feinstein, M.D., Chairman, President and Chief Executive Officer, and Herman M. Gerwitz, CPA, evaluate and approve, in advance,Company’s audit committee currently does not have any pre-approval policies or procedures concerning services performed by Morison Cogen, LLP. All the scope and cost of the engagement of an auditor before the auditor renders audit and non-audit services. All non-audit services performed by Morison Cogen, LLP that are described above were approvedpre-approved by the Company’s audit committee. Registrant does not rely on pre-approval policies and procedures.

PART IV

Item 15.

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULESExhibits, Financial Statement Schedules

Item 16.

Form 10-K Summary

See Exhibit Index.None.

SIGNATURES

Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

INDEX TO FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors

and
Stockholders of Nocopi Technologies, Inc.

King of Prussia, Pennsylvania

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Nocopi Technologies, Inc. (the Company) as of December 31, 20162017 and 2015,2016, and the related statements of operations, stockholders'stockholders’ deficiency, and cash flows for each of the two years in the two-year period ended December 31, 2016. Nocopi Technologies, Inc.’s management is responsible2017, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for theseeach of the years in the two-year period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements.statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on thesethe Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included considerationAs part of our audits, we are required to obtain an understanding of internal control over financial reporting, as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the financial statements, assessingstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement presentation.statements. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Nocopi Technologies, Inc. at December 31, 2016 and 2015, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2016 in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company continues to have a working capital deficit which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to this matter are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ MORISON COGENMorison Cogen LLP

We have served as the Company’s auditor since 2001.

Blue Bell, Pennsylvania

March 30, 2017

29, 2018

Nocopi Technologies, Inc.

Balance Sheets*