United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
(Mark One)
þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 20172019
or
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from _________________ to ______________
Commission File Number: 000-20333
NOCOPI TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Maryland | 87-0406496 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
480 Shoemaker Road, Suite 104, King of Prussia, PA 19406
(Address of principal executive offices) (Zip Code)
(610) 834-9600
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None.
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨ | Accelerated filer ¨ |
Non-accelerated filer | Smaller reporting company þ |
| Emerging growth company ¨ |
If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the ExchangeSecurities Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 58,616,716date: 60,324,698 shares of common stock, par value $0.01, as of November 1, 20178, 2019.
NOCOPI TECHNOLOGIES, INC.
INDEX
| PAGE |
Part I. FINANCIAL INFORMATION |
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Financial Statements | 1 |
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1 | |
Balance Sheets at September 30, | 2 |
Statements of Cash Flows for Nine Months Ended September 30, | 3 |
4 | |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Controls and Procedures |
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Part II. OTHER INFORMATION |
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Unregistered Sales of Equity Securities and Use of Proceeds | |
16 | |
Exhibits |
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| |
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PART I – FINANCIAL INFORMATION
Statements of Operations*
(unaudited)
|
| Three Months ended September 30 |
| Nine Months ended September 30 |
|
| Three Months ended |
| Nine Months ended |
| ||||||||||||||||||||||
|
| 2017 |
| 2016 |
| 2017 |
| 2016 |
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||||||||||||
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|
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| ||||||||||||||
Revenues |
|
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| ||||||||||||||
Licenses, royalties and fees |
| $ | 178,200 |
| $ | 170,300 |
| $ | 468,900 |
| $ | 381,800 |
|
| $ | 189,400 |
| $ | 175,200 |
| $ | 571,900 |
| $ | 2,005,700 |
| ||||||
Product and other sales |
|
| 224,200 |
|
|
| 373,400 |
|
|
| 634,500 |
|
|
| 648,100 |
|
|
| 448,100 |
|
|
| 386,200 |
|
|
| 991,100 |
|
|
| 854,800 |
|
|
|
| 402,400 |
|
|
| 543,700 |
|
|
| 1,103,400 |
|
|
| 1,029,900 |
|
|
| 637,500 |
|
|
| 561,400 |
|
|
| 1,563,000 |
|
|
| 2,860,500 |
|
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|
|
|
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| ||||||||||||||
Cost of revenues |
|
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|
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| ||||||||||||||
Licenses, royalties and fees |
| 23,300 |
| 36,500 |
| 71,100 |
| 73,000 |
|
| 41,400 |
| 35,100 |
| 98,200 |
| 84,300 |
| ||||||||||||||
Product and other sales |
|
| 82,300 |
|
|
| 156,900 |
|
|
| 248,600 |
|
|
| 275,200 |
|
|
| 166,600 |
|
|
| 137,900 |
|
|
| 380,300 |
|
|
| 323,500 |
|
|
|
| 105,600 |
|
|
| 193,400 |
|
|
| 319,700 |
|
|
| 348,200 |
|
|
| 208,000 |
|
|
| 173,000 |
|
|
| 478,500 |
|
|
| 407,800 |
|
Gross profit |
|
| 296,800 |
|
|
| 350,300 |
|
|
| 783,700 |
|
|
| 681,700 |
|
|
| 429,500 |
|
|
| 388,400 |
|
|
| 1,084,500 |
|
|
| 2,452,700 |
|
|
|
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|
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| ||||||||||||||
Operating expenses |
|
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|
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|
|
|
|
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|
|
| ||||||||||||||
Research and development |
| 36,300 |
| 33,700 |
| 109,200 |
| 103,700 |
|
| 45,200 |
| 38,100 |
| 122,600 |
| 111,300 |
| ||||||||||||||
Sales and marketing |
| 67,200 |
| 72,800 |
| 187,900 |
| 176,700 |
|
| 81,000 |
| 74,600 |
| 224,200 |
| 313,200 |
| ||||||||||||||
General and administrative |
|
| 80,400 |
|
|
| 69,900 |
|
|
| 240,000 |
|
|
| 224,200 |
|
|
| 84,200 |
|
|
| 73,400 |
|
|
| 265,200 |
|
|
| 277,600 |
|
|
|
| 183,900 |
|
|
| 176,400 |
|
|
| 537,100 |
|
|
| 504,600 |
|
|
| 210,400 |
|
|
| 186,100 |
|
|
| 612,000 |
|
|
| 702,100 |
|
Net income from operations |
|
| 112,900 |
|
|
| 173,900 |
|
|
| 246,600 |
|
|
| 177,100 |
|
|
| 219,100 |
|
|
| 202,300 |
|
|
| 472,500 |
|
|
| 1,750,600 |
|
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|
|
|
|
|
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|
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|
|
|
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| ||||||||||||||
Other income (expenses) |
|
|
|
|
|
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|
|
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|
|
|
| ||||||||||||||
Interest income |
| 200 |
| – |
| 200 |
| – |
|
| 4,600 |
| 700 |
| 7,200 |
| 1,400 |
| ||||||||||||||
Interest expense, bank charges and accretion of interest |
|
| (3,300 | ) |
|
| (3,300 | ) |
|
| (22,600 | ) |
|
| (10,100 | ) | ||||||||||||||||
Interest expense and bank charges |
|
| (2,600 | ) |
|
| (2,600 | ) |
|
| (8,000 | ) |
|
| (8,300 | ) | ||||||||||||||||
|
|
| (3,100 | ) |
|
| (3,300 | ) |
|
| (22,400 | ) |
|
| (10,100 | ) |
|
| 2,000 |
|
|
| (1,900 | ) |
|
| (800 | ) |
|
| (6,900 | ) |
Net income before income taxes |
| 221,100 |
| 200,400 |
| 471,700 |
| 1,743,700 |
| |||||||||||||||||||||||
Income taxes |
|
| 14,300 |
|
|
| 199,300 |
|
|
| 30,600 |
|
|
| 199,300 |
| ||||||||||||||||
Net income |
| $ | 109,800 |
|
| $ | 170,600 |
|
| $ | 224,200 |
|
| $ | 167,000 |
|
| $ | 206,800 |
|
| $ | 1,100 |
|
| $ | 441,100 |
|
| $ | 1,544,400 |
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| ||||||||||||||
Basic and diluted net income per common share |
| $ | .00 |
| $ | .00 |
| $ | .00 |
| $ | .00 |
|
| $ | .00 |
| $ | .00 |
| $ | .01 |
| $ | .03 |
| ||||||
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Weighted average common shares outstanding |
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| ||||||||||||||
Basic |
| 58,599,016 |
| 58,599,016 |
| 58,599,016 |
| 58,599,016 |
|
| 59,614,698 |
| 58,616,716 |
| 58,949,377 |
| 58,616,716 |
| ||||||||||||||
Diluted |
| 58,896,464 |
| 58,599,655 |
| 58,891,635 |
| 58,600,384 |
|
| 59,990,371 |
| 59,012,626 |
| 59,322,141 |
| 58,977,284 |
|
*See accompanying notes to these financial statements.
Balance Sheets*
|
| September 30 |
| December 31 |
|
| September 30, |
| December 31, |
| ||||||
|
| 2017 |
| 2016 |
|
| 2019 |
| 2018 |
| ||||||
|
| (unaudited) |
| (audited) |
|
| (unaudited) |
| (audited) |
| ||||||
Assets | Assets |
| Assets |
| ||||||||||||
Current assets |
|
|
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|
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| ||||||
Cash |
| $ | 362,800 |
| $ | 199,100 |
|
| $ | 798,000 |
| $ | 400,800 |
| ||
Accounts receivable less $5,000 allowance for doubtful accounts |
| 197,900 |
| 243,400 |
|
| 834,500 |
| 579,000 |
| ||||||
Inventory |
| 111,800 |
| 70,900 |
|
| 161,000 |
| 133,500 |
| ||||||
Prepaid and other |
|
| 21,500 |
|
|
| 29,600 |
|
|
| 81,100 |
|
|
| 43,600 |
|
Total current assets |
|
| 694,000 |
|
|
| 543,000 |
|
|
| 1,874,600 |
|
|
| 1,156,900 |
|
|
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|
|
|
|
|
|
|
|
| ||||||
Fixed assets |
|
|
|
|
|
|
|
|
|
| ||||||
Leasehold improvements |
| 19,700 |
| 19,700 |
|
| 19,700 |
| 19,700 |
| ||||||
Furniture, fixtures and equipment |
|
| 183,200 |
|
|
| 178,300 |
|
|
| 185,800 |
|
|
| 185,400 |
|
|
| 202,900 |
| 198,000 |
|
| 205,500 |
| 205,100 |
| ||||||
Less: accumulated depreciation and amortization |
|
| 188,400 |
|
|
| 183,000 |
|
|
| 198,700 |
|
|
| 197,600 |
|
|
|
| 14,500 |
|
|
| 15,000 |
|
|
| 6,800 |
|
|
| 7,500 |
|
Other assets |
|
|
|
|
| |||||||||||
Long-term receivables |
| 1,070,700 |
| 1,352,200 |
| |||||||||||
Operating lease right of use - building |
|
| 212,000 |
|
|
| – |
| ||||||||
|
|
| 1,282,700 |
|
|
| 1,352,200 |
| ||||||||
Total assets |
| $ | 708,500 |
|
| $ | 558,000 |
|
| $ | 3,164,100 |
|
| $ | 2,516,600 |
|
|
|
|
|
| ||||||||||||
Liabilities and Stockholders' Equity (Deficiency) |
| |||||||||||||||
Liabilities and Stockholders' Equity | Liabilities and Stockholders' Equity |
| ||||||||||||||
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|
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| ||||||
Current liabilities |
|
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|
|
|
|
|
|
|
| ||||||
Demand loans |
| $ | – |
| $ | 10,000 |
| |||||||||
Convertible debentures |
| 128,300 |
| 128,300 |
|
| $ | 97,900 |
| $ | 128,300 |
| ||||
Accounts payable |
| 43,800 |
| 33,100 |
|
| 41,400 |
| 16,500 |
| ||||||
Accrued expenses |
| 396,500 |
| 459,900 |
|
| 202,200 |
| 163,000 |
| ||||||
Deferred revenue |
|
| 82,100 |
|
|
| 106,300 |
| ||||||||
Income taxes |
| 37,500 |
| 38,600 |
| |||||||||||
Operating lease liability, current |
|
| 41,000 |
|
|
| – |
| ||||||||
Total current liabilities |
|
| 650,700 |
|
|
| 737,600 |
|
|
| 420,000 |
|
|
| 346,400 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Stockholders' equity (deficiency) |
|
|
|
|
| |||||||||||
Other liabilities |
|
|
|
|
| |||||||||||
Accrued expenses, non-current |
| 75,000 |
| 94,700 |
| |||||||||||
Deferred income taxes |
| 47,600 |
| 108,800 |
| |||||||||||
Operating lease liability, non-current |
|
| 171,000 |
|
|
| – |
| ||||||||
|
|
| 293,600 |
|
|
| 203,500 |
| ||||||||
|
|
|
|
|
| |||||||||||
Stockholders' equity |
|
|
|
|
| |||||||||||
Common stock, $0.01 par value |
|
|
|
|
|
|
|
|
|
| ||||||
Authorized – 75,000,000 shares |
|
|
|
|
|
|
|
|
|
| ||||||
Issued and outstanding – 58,599,016 shares |
| 586,000 |
| 586,000 |
| |||||||||||
Issued and outstanding |
|
|
|
|
| |||||||||||
2019 – 60,324, 698 shares; 2018 – 58,616,716 shares |
| 603,300 |
| 586,200 |
| |||||||||||
Paid-in capital |
| 12,439,800 |
| 12,426,600 |
|
| 12,465,600 |
| 12,440,000 |
| ||||||
Accumulated deficit |
|
| (12,968,000 | ) |
|
| (13,192,200 | ) |
|
| (10,618,400 | ) |
|
| (11,059,500 | ) |
Total stockholders' equity (deficiency) |
|
| 57,800 |
|
|
| (179,600 | ) | ||||||||
Total liabilities and stockholders' equity (deficiency) |
| $ | 708,500 |
|
| $ | 558,000 |
| ||||||||
Total stockholders' equity |
|
| 2,450,500 |
|
|
| 1,966,700 |
| ||||||||
Total liabilities and stockholders' equity |
| $ | 3,164,100 |
|
| $ | 2,516,600 |
|
*See accompanying notes to these financial statements.
Statements of Cash Flows*
(unaudited)
|
| Nine Months ended September 30 |
|
| Nine Months ended |
| ||||||||||
|
| 2017 |
| 2016 |
|
| 2019 |
|
| 2018 |
| |||||
Operating Activities |
|
|
|
|
|
|
|
|
|
|
| |||||
Net income |
| $ | 224,200 |
| $ | 167,000 |
|
| $ | 441,100 |
|
| $ | 1,544,400 |
| |
Adjustments to reconcile net income to net cash provided by operating activities |
|
|
|
|
| |||||||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities |
|
|
|
|
|
|
|
| ||||||||
Depreciation and amortization |
| 5,400 |
| 5,500 |
|
|
| 2,900 |
|
|
| 5,300 |
| |||
Accretion of interest – convertible debentures |
|
| 13,200 |
|
|
| 500 |
| ||||||||
Deferred income taxes |
|
| (61,200 | ) |
|
| 106,000 |
| ||||||||
Other assets |
|
| 69,500 |
|
|
| (1,423,800 | ) | ||||||||
Other liabilities |
|
| 192,300 |
|
|
| 99,600 |
| ||||||||
Cumulative effect of accounting change |
|
| – |
|
|
| 96,100 |
| ||||||||
|
|
| 242,800 |
|
|
| 173,000 |
|
|
| 644,600 |
|
|
| 427,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
(Increase) decrease in assets |
|
|
|
|
| |||||||||||
Increase in assets |
|
|
|
|
|
|
|
| ||||||||
Accounts receivable |
| 45,500 |
| (159,800 | ) |
|
| (255,500 | ) |
|
| (308,000 | ) | |||
Inventory |
| (40,900 | ) |
| (36,700 | ) |
|
| (27,500 | ) |
|
| (20,100 | ) | ||
Prepaid and other |
| 8,100 |
| 10,700 |
|
|
| (37,500 | ) |
|
| (8,000 | ) | |||
Increase (decrease) in liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Accounts payable and accrued expenses |
| (52,700 | ) |
| 75,600 |
|
|
| 76,400 |
|
|
| (159,000 | ) | ||
Income taxes |
|
| (1,100 | ) |
|
| 93,300 |
| ||||||||
Deferred revenue |
|
| (24,200 | ) |
|
| (22,200 | ) |
|
| – |
|
|
| (99,400 | ) |
|
|
| (64,200 | ) |
|
| (132,400 | ) |
|
| (245,200 | ) |
|
| (501,200 | ) |
Net cash provided by operating activities |
|
| 178,600 |
|
|
| 40,600 |
| ||||||||
Net cash provided by (used in) operating activities |
|
| 399,400 |
|
|
| (73,600 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Investment Activities |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Additions to fixed assets |
|
| (4,900 | ) |
|
| (1,400 | ) |
|
| (2,200 | ) |
|
| (500 | ) |
Net cash used in investing activities |
|
| (4,900 | ) |
|
| (1,400 | ) |
|
| (2,200 | ) |
|
| (500 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Financing Activities |
|
|
|
|
| |||||||||||
Repayment of demand loans |
|
| (10,000 | ) |
|
| (13,500 | ) | ||||||||
Net cash used in financing activities |
|
| (10,000 | ) |
|
| (13,500 | ) | ||||||||
|
|
|
|
|
| |||||||||||
Increase in cash |
| 163,700 |
| 25,700 |
| |||||||||||
Increase (decrease) in cash |
|
| 397,200 |
|
|
| (74,100 | ) | ||||||||
Cash at beginning of year |
|
| 199,100 |
|
|
| 11,400 |
|
|
| 400,800 |
|
|
| 360,400 |
|
Cash at end of period |
| $ | 362,800 |
|
| $ | 37,100 |
|
| $ | 798,000 |
|
| $ | 286,300 |
|
|
|
|
|
|
|
|
|
| ||||||||
Supplemental Disclosure of Non-Cash Investing and Financing Activities |
|
|
|
|
|
|
|
| ||||||||
Operating lease right of use – building |
| $ | 241,100 |
|
| $ | – |
| ||||||||
Operating lease liability |
| $ | (241,100 | ) |
| $ | – |
| ||||||||
Accumulated depreciation and amortization |
| $ | 1,800 |
|
| $ | – |
| ||||||||
Furniture, fixtures and equipment |
| $ | (1,800 | ) |
| $ | – |
| ||||||||
Convertible debentures |
| $ | 30,400 |
|
| $ | – |
| ||||||||
Accrued expenses |
| $ | 12,300 |
|
| $ | – |
| ||||||||
Common stock |
| $ | (17,100 | ) |
| $ | – |
| ||||||||
Paid-in capital |
| $ | (25,600 | ) |
| $ | – |
|
*See accompanying notes to these financial statements.
Statements of Stockholders’ Equity*
For the Periods December 31, 2018 through September 30, 2019 and December 31, 2017 through September 30, 2018
(unaudited)
|
| Common stock |
|
| Paid-in |
|
| Accumulated |
|
|
|
| ||||||||
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Total |
| |||||
Balance – December 31, 2018 |
|
| 58,616,716 |
|
| $ | 586,200 |
|
| $ | 12,440,000 |
|
| $ | (11,059,500 | ) |
| $ | 1,966,700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 85,400 |
|
|
| 85,400 |
|
Balance – March 31, 2019 |
|
| 58,616,716 |
|
|
| 586,200 |
|
|
| 12,440,000 |
|
|
| (10,974,100 | ) |
|
| 2,052,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 148,900 |
|
|
| 148,900 |
|
Balance – June 30, 2019 |
|
| 58,616,716 |
|
|
| 586,200 |
|
|
| 12,440,000 |
|
|
| (10,825,200 | ) |
|
| 2,201,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock |
|
| 1,707,982 |
|
|
| 17,100 |
|
|
| 25,600 |
|
|
|
|
|
|
| 42,700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 206,800 |
|
|
| 206,800 |
|
Balance – September 30, 2019 |
|
| 60,324,698 |
|
| $ | 603,300 |
|
| $ | 12,465,600 |
|
| $ | (10,618,400 | ) |
| $ | 2,450,500 |
|
|
| Common stock |
|
| Paid-in |
|
| Accumulated |
|
|
|
| ||||||||
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Total |
| |||||
Balance – December 31, 2017 |
|
| 58,616,716 |
|
| $ | 586,200 |
|
| $ | 12,440,000 |
|
| $ | (12,811,000 | ) |
| $ | 215,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative effect of accounting change at January 1, 2018, Note 2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 96,100 |
|
|
| 96,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 95,800 |
|
|
| 95,800 |
|
Balance – March 31, 2018 |
|
| 58,616,716 |
|
|
| 586,200 |
|
|
| 12,440,000 |
|
|
| (12,619,100 | ) |
|
| 407,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,447,500 |
|
|
| 1,447,500 |
|
Balance – June 30, 2018 |
|
| 58,616,716 |
|
|
| 586,200 |
|
|
| 12,440,000 |
|
|
| (11,171,600 | ) |
|
| 1,854,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,100 |
|
|
| 1,100 |
|
Balance – September 30, 2018 |
|
| 58,616,716 |
|
| $ | 586,200 |
|
| $ | 12,440,000 |
|
| $ | (11,170,500 | ) |
| $ | 1,855,700 |
|
* See accompanying notes to these financial statements.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. Financial Statements
The accompanying unaudited condensed financial statements have been prepared by Nocopi Technologies, Inc. (the “Company”). These statements include all adjustments (consisting only of normal recurring adjustments) which management believes necessary for a fair presentation of the statements and have been prepared on a consistent basis using the accounting policies described in the summary of Accounting Policies included in theour Company's 20162018 Annual Report on Form 10-K. Certain financial information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although theour Company believes that the accompanying disclosures are adequate to make the information presented not misleading. The Notes to Financial Statements included in the 20162018 Annual Report on Form 10-K should be read in conjunction with the accompanying interim financial statements. The interim operating results for the three months and nine months ended September 30, 20172019 may not be necessarily indicative of the operating results expected for the full year.
TheOur Company follows Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 220 in reporting comprehensive income. Comprehensive income is a more inclusive financial reporting methodology that includes disclosure of certain financial information that historically has not been recognized in the calculation of net income. Since theour Company has no items of other comprehensive income, comprehensive income is equal to net income.
Note 2. Going ConcernRevenues
Since its inception,On January 1, 2018, our Company adopted ASU 214-09,Revenue from Contracts with Customers (“Topic 606”), using the modified retrospective method. Results for periods beginning on or after January 1, 2018 are presented under Topic 606; however, prior period amounts are not adjusted and continue to be reported in accordance with Topic 605,Revenue Recognition, which was in effect for those periods.
Our Company has incurred significant lossesrecorded a decrease to the opening balance of the accumulated deficit of $96,100 and a corresponding charge to deferred revenue as of September 30, 2017, had accumulated lossesJanuary 1, 2018 due to the cumulative impact of $12,968,000. For the nine months ended September 30, 2017,adoption of Topic 606. The disclosure of disaggregated revenue is disclosed in Note 10.
The adoption of the Company had net incomenew guidance affected our recognition of revenue from operationslicenses and royalties. Under our previous accounting practice, we recognized revenue from licenses and royalties on a straight-line basis over the term of $246,600. At September 30, 2017, the Company had positive working capitalrelated license agreement. As a result of $43,300our adoption of the new guidance, we will recognize revenue from licensees and stockholders’ equityroyalties at a point in time when the term begins.
During the second quarter of $57,800. For2018, we negotiated an amendment to a license agreement with a licensee that, in addition to expanding the technologies that the licensee is permitted to market, provides for a four year ended December 31, 2016,extension to the Company’s net income from operations was $271,800. The Company, whichlicense agreement that contains guaranteed royalties payable in installments over the term of the amendment to the license agreement.Since the performance obligation is substantially dependent on its licensees to generate licensing revenues, may incur operating losses and experience negative cash flow ingrant the future. Sustaining profitability and positive cash flow depends onlicense for the Company’s ability to maintainuse of certain patented ink technology as it exists at the increases in revenues and gross profitstime that it realizedis granted, the promise to grant the license is a performance obligation satisfied at a point in 2016time in accordance with Topic 606.In accordance with Topic 606, we recorded $1,521,700 net of imputed interest of licenses, royalties and throughfees and $106,500 of selling expenses in the first nine months of 2017 from its traditional business. There can be no assurances that2018 related to the Company will be ableamendment to generate sufficient revenuesthe license agreement. The related receivable and gross profits to sustain profitabilitypayable are recorded as other assets and positive cash flow inother liabilities on the future.balance sheet.
Receipt of fundsThe change in earlier periods from investors and from demand loan holders have allowedaccumulated deficit on our Balance Sheet at September 30, 2018, including the Company to remain in operation through the current date. Managementaggregate impact of the Company believes that it may need additional capital if the Company is unable to at least maintain the revenue level and profits achieved during 2016 and the first nine months of 2017. There can be no assurances that the Company will be successfulchange in obtaining sufficient additional capital, if needed, or if it does, that the additional capital will enable the Company to impact its revenues soaccounting principles which was effective on January 1, 2018, was as to have a material positive effect on the Company’s operations and cash flow. The Company believes that without additional capital, whether in the form of debt, equity or both, it may be forced to cease operations at an undetermined future date.follows:
Accumulated deficit – January 1, 2018 |
| $ | (12,811,000 | ) |
Net earnings |
|
| 1,544,400 |
|
Cumulative effect of accounting change at January 1, 2018 |
|
| 96,100 |
|
Accumulated deficit – September 30, 2018 |
| $ | (11,170,500 | ) |
5
NOCOPI TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
Note 3. Stock Based Compensation
TheOur Company follows FASB ASC 718,Compensation – Stock Compensation, and uses the Black-Scholes option pricing model to calculate the grant-date fair value of an award. At September 30, 2017, the2019, our Company did not have an active stock option plan. There was no unrecognized portion of expense related to stock option grants at September 30, 2017.2019.
Note 4. Demand LoansLine of Credit
DuringIn November 2018, our Company negotiated a $150,000 revolving line of credit with a bank to provide a source of working capital, if required. The line of credit is secured by all the third quarterassets of 2017, theour Company repaid the remaining $10,000 principal balance of an unsecured loan from an individual and at September 30, 2017 had no demand loans outstanding. During the nine months ended September 30, 2016, the Company repaid the remaining $13,500 principal balance of an unsecured loan from a second individual. The loans borebears interest at the bank’s prime rate for a period of one year and its prime rate plus 1.5% thereafter. The line of credit is subject to an annual ratereview and quiet period. There have been no borrowings under the line of 8%.credit since its inception.
4
NOCOPI TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
Note 5. Convertible Debentures
At September 30, 2017, the2019, our Company had convertible debentures totaling $128,300$97,900 outstanding, of which $95,000 were due during the third quarter of 2017 and $33,300 are due during the third quarter of 2018.2020. The convertible debentures bear interest at 7%. During the third quarter of 2019, our Company’s Board of Directors approved and the holders of $97,900 of the $128,300 of convertible debentures previously outstanding agreed to extend the maturity dates of those convertible debentures for one year to the third quarter of 2020 with no change in the terms or conditions of the debentures. At the option of the lender, the debentures and accrued interest are convertible in whole or part into common stock of theour Company at $0.025 per share. During the firstthird quarter of 2017, the Company’s Board of Directors approved and2019, the holders of $33,300approximately $30,400 of previously outstanding convertible debentures that had matured during the third quarterelected to convert those debentures plus approximately $12,300 of 2016, one of which is held by a Director of the Company, accepted an offer of extension whereby the maturity dates of the convertible debentures are extended for two years and the conversion rate of the debentures and accrued interest into Common Stock1,707,982 shares of the Company is reduced from $0.05 to $0.025. In accordance with FASB ASC 470, this modificationrestricted stock of the convertible debentures was recorded as a debt discount to the notes payable of approximately $13,200 with an offsetting credit to additional-paid in capital. In the three months ended March 31, 2017, the entire $13,200 was accreted through interest expense.our Company.
Early in the fourth quarter of 2017, the holders of $95,000 of convertible debentures agreed to extend the maturity dates of those convertible debentures for one year with no change in the terms or conditions of the debentures.
TheOur Company also granted warrants in earlier periods to purchase 691,365 shares of theour Company’s common stock at $0.02 per share to the holders of the debentures. The warrants are exercisable two years after issuance and expire seven years after issuance. The fair value of the warrants was determined using the Black-Scholes pricing model. The relative fair value of the warrants was recorded as a discount to the notes payable with an offsetting credit to additional paid-in capital since theour Company determined that the warrants were an equity instrument in accordance with FASB ASC 815. The debt discount related to the warrant issuances has been accreted through interest expense over the term of the notes payable. For the three months ended September 30, 2017 and September 30, 2016, $0 was accreted through interest expense. For the nine months ended September 30, 2017 and September 30, 2016, $0 and approximately $500, respectively, was accreted through interest expense.
The following table summarizes allour Company’s warrant activityposition at September 30, 2019 and December 31, 2018:
|
|
|
|
|
|
|
| Weighted Average |
| |||
|
| Number |
|
| Exercise |
|
| Exercise |
| |||
|
| of Shares |
|
| Price |
|
| Price |
| |||
Outstanding warrants - |
|
|
|
|
|
|
|
|
| |||
December 31, 2018 |
|
| 691,365 |
|
| $ | 0.02 |
|
| $ | 0.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding warrants - |
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019 |
|
| 691,365 |
|
| $ | 0.02 |
|
| $ | 0.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average remaining |
|
|
|
|
|
|
|
|
|
|
|
|
contractual life (years) |
|
| 1.08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable warrants - |
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019 |
|
| 691,365 |
|
| $ | 0.02 |
|
| $ | 0.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The aggregate intrinsic value of warrants outstanding and exercisable as of September 30, 2019 was approximately $12,100. The aggregate intrinsic value is calculated as the difference between the exercise price of the Company since December 31, 2016:
|
|
|
|
|
|
|
| Weighted Average |
| |||
|
| Number |
|
| Exercise |
|
| Exercise |
| |||
|
| of Shares |
|
| Price |
|
| Price |
| |||
Outstanding warrants - |
|
|
|
|
|
|
|
|
| |||
December 31, 2016 |
|
| 721,365 |
|
| $0.01 to $0.07 |
|
| $ | 0.021 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants expired |
|
| 12,300 |
|
| $0.06 and $0.07 |
|
| $ | 0.063 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding warrants - |
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017 |
|
| 709,065 |
|
| $0.01 to $0.03 |
|
| $ | 0.020 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average remaining |
|
|
|
|
|
|
|
|
|
|
|
|
contractual life (years) |
|
| 3.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable warrants - |
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017 |
|
| 709,065 |
|
| $0.01 to $0.03 |
|
| $ | 0.020 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average remaining |
|
|
|
|
|
|
|
|
|
|
|
|
contractual life (years) |
|
| 3.01 |
|
|
|
|
|
|
|
|
|
Note 6. Other Income (Expenses)
Other income (expenses) inunderlying warrants and the three months and nine months endedclosing stock price of $0.0375 for our Company’s common stock on September 30, 2017 and September 30, 2016 includes interest on unsecured loans from two individuals and on convertible debentures held by nine investors. Also included in other income (expenses) is accretion of debt discounts in the nine months ended September 30, 2017 related to the extension of the maturity dates of $33,300 of convertible debentures.2019.
56
NOCOPI TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
Note 6. Other Income (Expenses)
Other income (expenses) for the three and nine months ended September 30, 2019 and 2018 includes interest on convertible debentures held by nine investors and interest earned on invested funds.
Note 7. Income Taxes
There is no provision for federal income taxes for the three months and nine months ended September 30, 20172019 and September 30, 20162018 due to the availability of net operating loss carryforwards. TheOur Company has createdestablished a valuation allowance for the entire amount of such benefits.benefits resulting from our Company’s net operating loss carryforwards because our Company has determined that the realization of the net deferred tax asset is not assured.
The components for state income tax expense resulting from the limitation on the use of net operating losses are:
|
| Three months ended |
|
| Nine months ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||
Current state taxes |
| $ | 21,100 |
|
| $ | 93,300 |
|
| $ | 91,800 |
|
| $ | 93,300 |
|
Deferred state taxes |
|
| (6,800 | ) |
|
| 106,000 |
|
|
| (61,200 | ) |
|
| 106,000 |
|
|
| $ | 14,300 |
|
| $ | 199,300 |
|
| $ | 30,600 |
|
| $ | 199,300 |
|
There was no change in unrecognized tax benefits during the period ended September 30, 20172019 and there was no accrual for uncertain tax positions as of September 30, 2017.2019.
Tax years from 20132016 through 20162018 remain subject to examination by U.S. federal and state jurisdictions.
Note 8. Related Party Transactions
During the nine months ended September 30, 2017 and September 30, 2016 the2018, our Company paid $151,700 and $15,000, respectively,$235,400 to Michael A. Feinstein, M.D., theour Company’s Chairman of the Board and Chief Executive Officer, representing a portionthe balance of previously deferred salary owed to him under an employment agreement with theour Company. During each of the ninefive month periodsperiod ended September 30, 2017 and September 30, 2016,May 31, 2018, Dr. Feinstein deferred $63,800$35,400 of salary. AtThe deferred salary was fully repaid to Dr. Feinstein during 2018 and, at September 30, 2017, Dr. Feinstein2018, there was no remaining deferred salary owed approximately $213,300 of salary deferred byto him. There iswas no interest payable on the deferred salary.
Note 9. Earnings (Loss) per Share
In accordance withFASB ASC 260,Earnings per Share, basic earnings (loss) per common share is computed using net earnings (loss) divided by the weighted average number of common shares outstanding for the periods presented. The computation of diluted earnings per common share involves the assumption that outstanding common shares are increased by shares issuable upon exercise of those stock options and warrants for which the market price exceeds the exercise price. The number of shares issuable upon the exercise of such stock options and warrants is decreased by shares that could have been purchased by theour Company with related proceeds. For the three months and nine months ended September 30, 2017,2019, the number of incremental common shares resulting from the assumed conversion of warrants was 297,448375,673 and 292,619,372,764, respectively. For the three months and nine months ended September 30, 2016,2018, the number of incremental common shares resulting from the assumed conversion of warrants was 639395,910 and 1,368,360,568, respectively.
7
NOCOPI TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
Note 10. Major Customer and Geographic Information
TheOur Company’s revenues, expressed as a percentage of total revenues, from non-affiliated customers that equaled 10% or more of theour Company’s total revenues were:
|
| Three Months ended September 30 |
|
| Nine Months ended September 30 |
|
| Three Months ended September 30, |
|
| Nine Months ended September 30, |
| ||||||||||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||||||
Customer A |
|
| 48 | % |
|
| 60 | % |
|
| 43 | % |
| 37 | % |
|
| 65 | % |
|
| 49 | % |
|
| 47 | % |
| 20 | % | ||
Customer B |
| 27 | % |
| 21 | % |
| 25 | % |
| 22 | % |
| 14 | % |
| 22 | % |
| 21 | % |
| 64 | % | ||||||||
Customer C |
| 4 | % |
| 3 | % |
| 9 | % |
| 19 | % |
| – |
|
| 11 | % |
| 6 | % |
| 6 | % |
TheOur Company’s non-affiliate customers whose individual balances amounted to more than 10% of theour Company’s net accounts receivable, expressed as a percentage of net accounts receivable, were:
|
| September 30 |
|
| December 31 |
|
| September 30, |
|
| December 31, |
| ||||
|
| 2017 |
|
| 2016 |
|
| 2019 |
|
| 2018 |
| ||||
Customer A |
| 20 | % |
| 26 | % |
| 13 | % |
|
| 6 | % | |||
Customer B |
| 45 | % |
| 47 | % |
| 79 | % |
|
| 86 | % | |||
Customer C |
| 8 | % |
| 5 | % |
TheOur Company performs ongoing credit evaluations of its customers and generally does not require collateral. TheOur Company also maintains allowances for potential credit losses. The loss of a major customer could have a material adverse effect on theour Company’s business operations and financial condition.
Our Company’s revenues by geographic region are as follows:
|
| Three Months ended September 30, |
|
| Nine Months ended September 30, |
| ||||||||||
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||
North America |
| $ | 190,600 |
|
| $ | 208,400 |
|
| $ | 633,000 |
|
| $ | 2,067,700 |
|
South America |
|
| – |
|
|
| – |
|
|
| – |
|
|
| 1,500 |
|
Europe |
|
| – |
|
|
| 100 |
|
|
| 100 |
|
|
| 200 |
|
Asia |
|
| 418,300 |
|
|
| 352,900 |
|
|
| 901,300 |
|
|
| 791,100 |
|
Australia |
|
| 28,600 |
|
|
| – |
|
|
| 28,600 |
|
|
| – |
|
|
| $ | 637,500 |
|
| $ | 561,400 |
|
| $ | 1,563,000 |
|
| $ | 2,860,500 |
|
Note 11. Leases
Our Company conducts its operations in leased facilities under a non-cancelable operating lease expiring in 2024.
Due to the adoption of the new lease standard under the optional transition method which allows the entity to apply the new lease standard at the adoption date, our Company has capitalized the present value of the minimum lease payments commencing January 1, 2019, using an estimated incremental borrowing rate of 6%. The minimum lease payments do not include common area annual expenses which are considered to be non-lease components.
As of January 1, 2019 the operating lease right-of-use asset and operating lease liability amounted to $241,100 with no cumulative-effect adjustment to the opening balance of accumulated deficit.
There are no other material operating leases. Our Company has elected not to recognize right-of-use assets and lease liabilities arising from short-term leases.
Future minimum lease payments under non-cancelable operating leases with initial or remaining terms of one year or more at September 30, 2019 are: $12,600 – 2019; $51,600 – 2020; $53,100 – 2021; $54,600 – 2022; $56,200 – 2023 and $18,900 – 2024.
68
NOCOPI TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
The Company’s revenues by geographic regionTotal lease expense under operating leases for the three and nine months ended September 30, 2019 was $13,300 and $40,000, respectively. Total lease expense under operating leases for the three and nine months ended September 30, 2018 was $11,300 and $33,800, respectively.
Maturities of lease liabilities are as follows:
|
| Three Months ended September 30 |
|
| Nine Months ended September 30 |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
North America |
| $ | 181,800 |
|
| $ | 184,900 |
|
| $ | 493,600 |
|
| $ | 411,300 |
|
South America |
|
| 1,500 |
|
|
| – |
|
|
| 1,500 |
|
|
| – |
|
Europe |
|
| 100 |
|
|
| – |
|
|
| 300 |
|
|
| – |
|
Asia |
|
| 211,600 |
|
|
| 351,400 |
|
|
| 585,800 |
|
|
| 596,400 |
|
Australia |
|
| 7,400 |
|
|
| 7,400 |
|
|
| 22,200 |
|
|
| 22,200 |
|
|
| $ | 402,400 |
|
| $ | 543,700 |
|
| $ | 1,103,400 |
|
| $ | 1,029,900 |
|
Note 11. Subsequent Event
In October 2017, a warrant holder exercised warrants to purchase 17,700 shares of common stock of the Company at exercise prices ranging from $0.01 to $0.03.
|
|
|
|
| Operating Leases |
| |
Year ending December 31 |
|
|
|
|
|
|
|
2019 |
|
|
|
| $ | 12,600 |
|
2020 |
|
|
|
|
| 51,600 |
|
2021 |
|
|
|
|
| 53,100 |
|
2022 |
|
|
|
|
| 54,600 |
|
2023 |
|
|
|
|
| 56,200 |
|
2024 |
|
|
|
|
| 18,900 |
|
Total lease payments |
|
|
|
|
| 247,000 |
|
Less imputed interest |
|
|
|
|
| (35,000 | ) |
Total |
|
|
|
| $ | 212,000 |
|
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Information
This report on Form 10-Q contains, and our officers and representatives may from time to time make, "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: "anticipate," "intend," "plan," "goal," "seek," "believe," "project," "estimate," "expect," "strategy," "future," "likely," "may," "should," "will" and similar references to future periods. Examples of forward-looking statements include, among others, statements we makeregarding:
·
Expected operating results, such as revenue growth and earnings
·
Anticipated levels of capital expenditures for fiscal year 2017 and beyond
·
Current or future volatility in market conditions
·
Our belief that we have sufficient liquidity to fund our business operations during the next twelve months
·
Strategy for customer retention, growth, product development, market position, financial results and reserves
· | Expected operating results, such as revenue growth and earnings |
· | Anticipated levels of capital expenditures for fiscal year 2019 and beyond |
· | Current or future volatility in market conditions |
· | Our belief that we have sufficient liquidity to fund our business operations during the next twelve months |
· | Strategy for customer retention, growth, product development, market position, financial results and reserves |
· | Strategy for risk management |
Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following:
·
| The extent to which we are successful in gaining new long-term relationships with customers or retaining significant existing customers and the level of service failures that could lead customers to use competitors' services. |
· | Our ability to improve our current credit rating with our vendors and the impact on our raw materials and other costs and competitive position of doing so. |
· | The impact of losing our intellectual property protections or the loss in value of our intellectual property. |
· | Changes in customer demand. |
· | The adequacy of our cash flow and earnings and other conditions which may affect our ability to timely service our debt obligations. |
· | The occurrence of hostilities, political instability or catastrophic events. |
· | Such other factors as discussed throughout Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations in this report, and throughout Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations and in Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2018. |
Any forward-looking statement made by us in this report is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.
The following discussion and analysis should be read in conjunction with our Condensed financial statements, included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management. This information should also be read in conjunction with our audited historical financial statements which are included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016,2018, filed with the Securities and Exchange Commission on March 30, 2017.29, 2019.
Background Overview
Nocopi Technologies, Inc. develops and markets specialty reactive inks for applications in the large educational and toy products market. We also develop and market technologies for document and product authentication, which we believe can reduce losses caused by fraudulent document reproduction or by product counterfeiting and/or diversion. We derive our revenues primarily from licensing our technologies on an exclusive or non-exclusive basis to licensees who incorporate our technologies into their product offering and from selling products incorporating our technologies to the licensees or to their licensed printers.
Unless the context otherwise requires, all references to the “Company,” “we,” “our” or “us” and other similar terms means Nocopi Technologies, Inc., a Maryland corporation.
Results of Operations
TheOur Company’s revenues are derived from (i)(a) royalties paid by licensees of the Company’s technologies; (ii)our technologies, (b) fees for the provision of technical services to licensees;licensees and (iii)(c) from the direct sale of (a)(i) products incorporating the Company’sour technologies, such as inks, security paper and pressure sensitive labels, and (b)(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 and/orin certain cases and additional royalties which typically vary with the licensee’s sales or production of products incorporating the licensed technology. Technical services, in the form of on-site or telephone consultations by members of the Company’s technical staff, may be offered to licensees of the Company’s technologies. The consulting fees are billed at agreed upon per diem or hourly rates at the time the services are rendered. Service fees and sales revenues vary directly with the number of units of service or product provided.
TheOur Company recognizes revenue on its lines of business as follows:
a)
License fees and royalties are recognized when the license term begins. Upon inception of the license term, revenue is recognized in a manner consistent with the nature of the transaction and the earnings process, which generally is ratably over the license term;
b)
Product sales are recognized (i) upon shipment of products; (ii) when the price is fixed or determinable; and (iii) when collectability is reasonably assured; and
c)
Fees for technical services are recognized when (i) the service has been rendered; (ii) an arrangement exists; (iii) the price is fixed or determinable based upon a per diem or hourly rate; and (iv) collectability is reasonably assured.
a. | License fees for the use of our technology and royalties with guaranteed minimum amounts are recognized at a point in time when the term begins; | |
b. | Product sales are recognized at the time of the transfer of goods to customers at an amount that our Company expects to be entitled to in exchange for these goods, which is at the time of shipment; and | |
c. | Fees for technical services are recognized at the time of the transfer of services to customers at an amount that our Company expects to be entitled to in exchange for the services, which is when the service has been rendered. |
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 amountsamount 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, and on its 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. The addition of a substantial new customer or the loss of a substantial existing customer may also have a substantial effect on the Company’s total revenue, revenue mix and operating results.
Revenues for the third quarter of 20172019 were $402,400$637,500 compared to $543,700$561,400 in the third quarter of 2016, a decrease2018, an increase of $141,300,$76,100, or approximately 26%14%. Licenses, royalties and fees increased by $7,900,$14,200, or approximately 5%8%, to $178,200$189,400 in the third quarter of 20172019 from $170,300$175,200 in the third quarter of 2016.2018. The increase in licenses, royalties and fees in the third quarter of 2019 compared to the third quarter of 2018 is due primarily to higher royalties from five licensees offset in part by lower guaranteed licensing revenue received from four licensees including one licensee addedof approximately $100,000 in the second halfthird quarter of 2016. There can be no assurances that the marketing and product development activities of the Company’s licensees or other businesses2019 from one licensee in the entertainment and toy products market as a result of the adoption of ASU 214-09,Revenue from Contracts with Customers (see below) in the second quarter of 2018. We cannot assure you that we will produce sustained increasescontinue to obtain higher royalties on an ongoing basis from licensees in revenues for the Company, nor canentertainment and toy products market, especially upon the timingoccurrence of any potential revenue increases be predicted, particularly given the uncertainan economic conditions being experienced worldwide.downturn or other unfavorable conditions.
Product and other sales decreasedincreased by $149,200,$61,900, or approximately 40%16%, to $224,200$448,100 in the third quarter of 20172019 from $373,400$386,200 in the third quarter of 2016.2018. Sales of ink decreasedincreased in the third quarter of 20172019 compared to the third quarter of 20162018 due primarily to a decrease in the volume ofhigher ink shipped in the third quarter of 2017shipments to a third party authorized printer used by one of theour Company’s major licensees in the entertainment and toy products market compared to the third quarter of 2016, along withoffset in part by lower ink shipments to theour Company’s licensees in the retail receipt and document fraud market. This new printer was appointed late in the second quarter of 2016 and, at that time, placed a significant amount of ink orders that were shipped in the third quarter of 2016. In 2017, this printer’s orders and shipments were more equally balanced between the second and third quarters. In the third quarter of 2017, the2019, our Company derived revenues of approximately$344,900 $555,900 from itsour licensees and their authorized printers in the entertainment and toy products market compared to revenues of approximately $490,100$485,700 in the third quarter of 2016.2018.
For the first nine months of 2017,2019, revenues were $1,103,400,$1,563,000, representing an increasea decrease of $73,500,$1,297,500, or approximately 7% higher than45%, from revenues of $1,029,900$2,860,500 in the first nine months of 2016. Licenses, royalties and fees of $468,9002018. Revenues in the first nine months of 2017 were $87,100, or approximately 23%2018 included, in accordance with ASU 214-09,Revenue from Contracts with Customers (“Topic 606”), higher thanrevenue of $1,521,700 representing the present value of guaranteed royalty payments that are payable over a four-year period beginning in the third quarter of 2019 as a result of an amendment to a license agreement with a licensee that, in addition to expanding the technologies that our licensee is permitted to market, provides for a four year extension to the license agreement beginning in July 2019.Since the performance obligation is to grant the license for the use of certain patented ink technology as it exists at the time that it is granted, the promise to grant the license is a performance obligation satisfied at a point in time in accordance with Topic 606.Previously, we recognized revenue from licenses and royalties on a straight-line basis over the term of the related license agreement. Licenses, royalties and fees of $381,800decreased by $1,433,800, or approximately 71%, to $571,900 in the first nine months of 2016. The increase in licenses, royalties and fees is due primarily to higher licensing revenue received2019 from four licensees including one licensee added in the second half of 2016.
Product and other sales decreased by $13,600, or approximately 2%, to $634,500$2,005,700 in the first nine months of 2017 from $648,1002018. The decrease in licenses, royalties and fees in the first nine months of 2016. Sales of ink decreased in the first nine months of 20172019 compared to the first nine months of 20162018 is due primarily to lowerthe adoption of Topic 606 described above. See “Plan of Operation, Liquidity and Capital Resources” and “Note 2 to our Condensed Financial Statements” for comparative information on the impact of the adoption of Topic 606 to our Company’s condensed financial statements.
Product and other sales increased by $136,300, or approximately 16%, to $991,100 in the first nine months of 2019 from $854,800 in the first nine months of 2018. Sales of ink increased in the nine months of 2019 compared to the first nine of 2018 due primarily to higher ink shipments to the third party authorized printer used by one of our Company’s major licensees in the entertainment and toy products market and higher ink shipments to our Company’s licensees in the retail receipt and document fraud market. TheOur Company derived revenues of approximately $932,600$1,327,900 from licensees and their authorized printers in the entertainment and toy products market in the first nine months of 20172019 compared to revenues of approximately $883,800$2,661,700 in the first nine months of 2016.2018. The decrease in revenues from our licensees and their authorized printers in the entertainment and toy products market in the first nine months of 2019 compared to the first nine months of 2018 is due primarily to the adoption of Topic 606.
TheOur Company’s gross profit decreasedincreased to $296,800$429,500 in the third quarter of 2017,2019, or approximately 74%67% of revenues, from $350,300$388,400 in the third quarter of 2016,2018 or approximately 64%69% of revenues. Licenses, royalties and fees have historically carried a higher gross profit than product and other sales. Such other sales generally consist of supplies or other manufactured products which incorporate theour Company’s technologies or equipment used to support the application of its technologies. These items (except for inks which are manufactured by theour 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 lowerhigher gross profit in the third quarter of 20172019 compared to the third quarter of 20162018 results primarily from lower gross revenues from product and other sales offset in part by higher gross revenues from licenses, royalties and fees in the third quarter of 2017 compared to the third quarter of 2016.
For the first nine months of 2017, gross profit was $783,700, or approximately 71% of revenues, compared to $681,700, or approximately 66% of revenues, in the first nine months of 2016. The higher gross profit in the first nine months of 2017 compared to the first nine months of 2016 results from higher gross revenues from licenses, royalties and fees along with aand product and other sales in the third quarter of 2019 compared to the third quarter of 2018.
For the first nine months of 2019, gross profit was $1,084,500, or approximately 69% of revenues, compared to $2,452,700, or approximately 86% of revenues in 2018. The lower gross profit in the first nine months of 2019 compared to the first nine months of 2018 results primarily from lower licenses, royalties and fees due to the adoption of Topic 606 in 2018 offset in part by higher gross profitrevenues from product and other sales in the first nine months of 20172019 compared to the first nine months of 2016 resulting from a favorable mix of products sold in the first nine months of 2017 compared to the first nine months of 2016.2018.
As the variable component of cost of revenues related to licenses, royalties and fees is a low percentage of these revenues and the fixed component is not substantial, period to period changes in revenues from licenses, royalties and fees can significantly affect both the gross profit from licenses, royalties and fees as well as overall gross profit. Primarily dueThe gross profit from licenses, royalties and fees decreased to higherapproximately 78% in the third quarter of 2019 compared to approximately 80% in the third quarter of 2018 and to approximately 83% of revenues from licenses, royalties and fees in the third quarterfirst nine months of 2017 compared to the third quarter of 2016, the gross profit from licenses, royalties and fees increased to approximately 87% of revenues in the third quarter of 20172019 from approximately 79% of revenues in the third quarter of 2016. The gross profit from licenses, royalties and fees was approximately 85%96% in the first nine months of 2017 compared to approximately 81% in first nine months of 2017 resulting from the same factors as the third quarter of 2017 compared to the third quarter of 2016.2018.
The gross profit, expressed as a percentage of revenues, of product and other sales is dependent on both the overall sales volumes of product and other sales and on the mix of the specific goods produced and/or sold. The gross profit from product and other sales increaseddecreased to approximately 63% of revenues in the third quarter of 20172019 compared to approximately 58%64% of revenues in the third quarter of 2016. This increase in2018. For the first nine months of 2019 and 2018, the gross profit, expressed as a percentage of revenues, was due primarily to a change in mix of products sold during the third quarter of 2017 compared to the third quarter of 2016. For the first nine months of 2017, the gross profit, expressed as a percentage of revenues, increased to approximately 61%62% of revenues from product and other sales compared to approximately 58% of revenues from product and other sales in the first nine months of 2016 resulting from the same factors as the third quarter of 2017 compared to the third quarter of 2016.sales.
Research and development expenses of $36,300$45,200 and $122,600 in the third quarter and first nine months of 2019, respectively, were comparable to $38,100 and $111,300 in the third quarter and first nine months of 2018, respectively.
Sales and marketing expenses increased in the third quarter of 20172019 to $81,000 from $74,600 in the third quarter of 2018. Sales and $109,200marketing expenses decreased in the first nine months of 2017 were comparable2019 to $33,700 in the third quarter of 2016 and $103,700$224,200 from $313,200 in the first nine months of 2016.
Sales and marketing expenses decreased to $67,2002018. The increase in the third quarter of 2017 from $72,8002019 compared to the third quarter of 2018 is due primarily to higher commission expense on the higher level of revenues in the third quarter of 20162019 compared to the third quarter of 2018. The decrease in the first nine months of 2019 compared to the first nine months of 2018 is due primarily to lower commission expense on the lower level of sales in the third quarter of 2017 compared to the third quarter of 2016. Sales and marketing expenses increased to $187,900 in the first nine months of 2017 compared to $176,700 the first nine months of 2016 due primarily to higher commission expense on the higher level of sales in the first nine months of 20172019 compared to the first nine months of 2016.2018 related to the additional revenue generated in 2018 as a result of the adoption of Topic 606 in the second quarter of 2018.
General and administrative expenses increased in the third quarter of 2019 to $84,200 from $73,400 in the third quarter of 2018. General and administrative expenses decreased in the first nine months of 20172019 to $80,400 and $240,000, respectively,$265,200 from $69,900 and $224,200$277,600 in the third quarter and first nine months of 2016, respectively,2018. The increase in third quarter of 2019 compared to the third quarter of 2018 is due primarily to higher employment costs, insuranceand public company expenses and fees offset in part bythe third quarter of 2019 compared to the third quarter of 2018. The decrease in the first nine months of 2019 compared to the first nine months of 2018 is due primarily to lower patent related expenses and lower legal expenses in the third quarter and first nine months of 20172019 compared to the third quarter and first nine months of 2016.2018.
Other income (expenses) in the third quarter and first nine months of 20172019 and 20162018 included interest on unsecured loans from two individuals and on convertible debentures held by nine investors. Also includedinvestors and interest earned on invested funds.
Income taxes in otherthe third quarter and first nine months of 2019 and 2018 resulted from limitations placed on income (expenses) is accretiontax net operating loss deductions by the Commonwealth of debt discountsPennsylvania.
The net income of $206,800 in the third quarter of 2018 compared to net income of $1,100 in the third quarter of 2018 resulted primarily from higher gross profit on a higher level of revenues and lower Pennsylvania income taxes in the third quarter of 2019 compared to the third quarter of 2018 offset in part by higher overhead expenses in the third quarter of 2019 compared to the third quarter of 2018. The net income of $441,100 in the first nine months of 2017 related2019 compared to the extensionnet income of the maturity dates of $33,300 of convertible debentures. Other income (expenses) decreased to $3,100 in the third quarter of 2017 from $3,300 in the third quarter of 2016. Other income (expenses) increased to $22,400$1,544,400 in the first nine months of 2017 from $10,100 in the first nine months 2016. This increase is due primarily to accretion of debt discounts in the first nine months of 2017 related to the extension of the maturity dates of $33,300 of convertible debentures in the first quarter of 2017.
The net income of $109,800 in the third quarter of 2017 compared to the net income of $170,600 in the third quarter of 20162018 resulted primarily from a lower gross profit on a lower level of revenues in the third quarter of 2017 compared to the third quarter of 2016 along with higher operating expenses in the third quarter of 2017 compared to the third quarter of 2016. The net income of $224,200 in the first nine months of 2017 compared to the net income of $167,000 in the first nine months of 2016 resulted primarily from a higher gross profit on a higher level of revenues in the first nine months of 20172019 compared to the first nine months of 20162018 related to the adoption of Topic 606 in the second quarter of 2018 offset in part by higher operatinglower overhead expenses and accretion of debt discountslower Pennsylvania income taxes in the first nine months of 20172019 compared to the first nine months of 2016.2018.
Plan of Operation, Liquidity and Capital Resources
During the first nine months of 2017, the2019, our Company’s cash increased to $362,800$798,000 at September 30, 20172019 from $199,100$400,800 at December 31, 2016.2018. During the first nine months of 2017, the2018, our Company generated $178,600$399,400 from its operating activities and used $4,900$2,200 for capital equipment and repaid $10,000 to an individual lender.purchases.
DuringIn the first nine months of 2017, the2019, our Company’s revenues increaseddecreased approximately 7% primarily as a result of higher licensing and royalty revenues45% to $1,563,000 from new and existing licensees. The Company’s first nine months of 2017 total overhead expenses increased compared to the 2016 first nine months total overhead expenses and the Company’s interest expense increased related to accretion of interest$2,860,500 in the first nine months of 20172018 of which an increase of 17%, or $224,200, is attributable to an increase in revenues from historical operations in the first nine months of 2019 compared to the first nine months of 2016. As2018 offset by a resultdecrease of these factors,$1,521,700, or 62%, that is attributable the Company recorded a higher net profitreduction of our Company’s revenues in the first nine months of 20172019 compared to the first nine months of 2016. The2018 as a result of the adoption of Topic 606 in the second quarter of 2018.
Our Company’s total overhead expenses, interest expense and income tax expense decreased in the first nine months of 2019 compared to the first nine months of 2018. As a result of these factors, our Company generated net income of $441,100 in the first nine months of 2019 compared to $1,544,400 in the first nine months of 2018. Our Company had positive operating cash flow of $178,600$399,400 during the first nine months of 2017. At2019 and at September 30, 2017, the Company2019, had positive working capital of $43,300$1,454,600 and stockholders’ equity of $57,800.$2,450,500. For the full year of 2016, the2018, our Company had net income of $258,500$1,655,400 and had positive operating cash flow of $202,600.$40,900. At December 31, 2016, the2018, our Company had negativepositive working capital of $194,600$810,500 and a $179,600 stockholders’ deficiency.equity of $1,966,700.
Through September 30, 2017, theOur Company repaid all $63,000 of short-term loans that had been outstanding at January 1, 2015. In 2015, the Company repaid $10,000has $97,900 of convertible debentures and, in 2017, extendedoutstanding that are due during the third quarter of 2020. During the third quarter of 2019, holders of $97,900 of $128,300 of the convertible debentures previously outstanding agreed to extend the maturity dates of $33,300 ofthe convertible debentures from 2016 to 2018 and extended the maturity dates of $95,000 of convertible debentures from the third quarter of 2017for one year to the third quarter of 2018. Borrowings2020 with no change in the terms or conditions of the debentures.
In November 2018, our Company negotiated a $150,000 revolving line of credit (“Lineof Credit”) with a bank to provide a source of working capital, if required. The Line of Credit is secured by all the assets of our Company and salesbears interest at the bank’s prime rate for a period of common stock in years priorone year and its prime rate plus 1.5% thereafter. The Line of Credit is subject to January 1, 2015an annual review and quiet period. There have allowedbeen no borrowings under the CompanyLine of Credit since its inception. We may need to remain in operation through 2016. There can be no assurances that the Company will be able to secure sufficientobtain additional funding through investments or borrowings that will allow the Company to fund losses that it presently believes may be experiencedcapital in the future to further support the working capital requirements associated with our existing revenue base and to develop new revenue sources. We cannot assure you that we will be successful in obtaining such additional capital, if the Company is unableneeded. We continue to maintain revenue levelsa cost containment program including curtailment, where possible, of discretionary research and profits consistent with 2016development and the first nine months of 2017. The Company believes that without additional investment, it may then be forced to cease operations at an undetermined date in the future.sales and marketing expenses.
The Company’sOur plan of operation for the twelve months beginning with the date of this quarterly report consists of concentrating available human and financial resources to continue to capitalize on the specific business relationships theour Company has developed in the entertainment and toy products market includingmarket. This includes two licensees withthat have been marketing products incorporating our Company’s technologies since 2012. These two licensees maintain a significant presence in the entertainment and toy products market that have been marketing products incorporating the Company’s technologies since 2012 along with a licensee added in 2015 who has been marketing products incorporating the Company’s available technologies in certain international markets since 2016. These licensees in the entertainment and toy products market are well known and highly regarded participants in this market. The Company believesWe anticipate that thethese two licensees that the Company has developed in the entertainment and toy products market 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. The
Our Company maintains its presence in the retail loss prevention anti-counterfeiting and anti-diversion marketsmarket and believes that revenue growth in these marketsthis 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 theour Company to generate additional revenues and positive cash flow.
TheOur Company has received and continues tomay 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. If such changes 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.similarly impacted.
Recently Adopted Accounting Pronouncements
AsIn February 2016, the FASB issued ASU No. 2016-02,Leases (Topic 842) and subsequent related updates. The core principle of September 30, 2017Topic 842 is that a lessee should recognize the assets and forliabilities that arise from operating leases. Our Company adopted the standard effective January 1, 2019 under the optional transition method which allows the entity to apply the new lease standard at the adoption date and recognize a cumulative-effect adjustment, if any, to the opening balance of retained earnings in the period then ended, there were no recently adopted accounting pronouncements thatof adoption. The standard had a material effectimpact on the Company’s financial statements.balance sheet (see Note 11).
Recently Issued Accounting Pronouncements Not Yet Adopted
In May 2014, the FASBAs of September 30, 2019, there are no recently 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 toaccounting standards not yet adopted 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 Companywould have a material effect 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.Company’s financial statements.
Off-Balance Sheet Arrangements
TheOur Company does not have any off-balance sheet arrangements.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures.TheOur Company’s management, with the participation of theour Company’s Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of theour Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of September 30, 2017.2019. Based on this evaluation, theour Company’s Principal Executive Officer and Principal Financial Officer concluded that, as of September 30, 2017 the2019, our Company’s disclosure controls and procedures were effective, in that they provide reasonable assurance that information required to be disclosed by theour Company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and is accumulated and communicated to theour Company’s management, including theour Company’s Principal Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting. There were no changes in our internal control over financial reporting during the quarter ended September 30, 20172019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Date | Security/Value | |
July 2019 | Common Stock – 1,707,982 shares of common stock issued pursuant to exercise of convertible debentures with an exercise price of $0.025 per share. |
No underwriters were utilized, and no commissions or fees were paid with respect to any of the above transactions. We relied on Section 4(a)(2) and/or Regulation D of the Securities Act of 1933, as amended, since the transactions did not involve any public offering.
(a) ExhibitsThe following exhibits are included herein:
Exhibit No. | Description of Exhibit | Location | |||
4.1 |
|
| Incorporated by reference to the Company’s Annual Report on Form 10-K filed on September 11, 2015 | ||
4.2 | Form of Letter Agreement re: Convertible Debenture Purchase Agreement Election | Filed herewith | |||
31.1 | Filed herewith | ||||
31.2 |
| Certification of Chief Financial Officer required by Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | Filed herewith | ||
32.1 |
| Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |||
| Filed herewith | ||||
101.INS | XBRL Instance Document | ||||
| Filed herewith | ||||
101.SCH | XBRL Taxonomy Extension Schema | ||||
| Filed herewith | ||||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase | ||||
| Filed herewith | ||||
101.DEF | XBRL Taxonomy Extension Definition Linkbase | ||||
| Filed herewith | ||||
101.LAB | XBRL Taxonomy Extension Label Linkbase | ||||
| Filed herewith | ||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase | Filed herewith |
Pursuant to the requirement of the Securities Exchange Act of 1934, theour Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
| NOCOPI TECHNOLOGIES, INC. |
|
|
|
DATE: November 13, |
| /s/ Michael A. Feinstein, M.D. |
|
| Michael A. Feinstein, M.D. |
|
| Chairman of the Board, President & Chief Executive Officer |
|
|
|
DATE: November 13, |
| /s/ Rudolph A. Lutterschmidt |
|
| Rudolph A. Lutterschmidt |
|
| Vice President & Chief Financial Officer |
Exhibit No. | Description of Exhibit | Location | ||
4.1 |
| Incorporated by reference to the Company’s Annual Report on Form 10-K filed on September 11, 2015 | ||
4.2 | Form of Letter Agreement re: Convertible Debenture Purchase Agreement Election | Filed herewith | ||
31.1 | Filed herewith | |||
Filed herewith | ||||
Filed herewith | ||||
101.INS | XBRL Instance Document | Filed herewith | ||
101.SCH | XBRL Taxonomy Extension Schema | Filed herewith | ||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase | Filed herewith | ||
101.DEF | XBRL Taxonomy Extension Definition Linkbase | Filed herewith | ||
101.LAB | XBRL Taxonomy Extension Label Linkbase | Filed herewith | ||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase | Filed herewith |
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