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

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

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 every Interactive Data File required to be submitted 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 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.

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 Securities 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: ~~60,324,698~~61,044,698 shares of common stock, par value $0.01, as of ~~November 8, 2019.~~


	Three Months ended September 30,						Nine Months ended September 30,
	2019			2018			2019			2018			Three Months ended March 31
													2020			2019
Revenues
Licenses, royalties and fees	$	189,400		$	175,200		$	571,900		$	2,005,700		$	164,600		$	190,500
Product and other sales		448,100			386,200			991,100			854,800			355,700			218,900
		637,500			561,400			1,563,000			2,860,500			520,300			409,400

Cost of revenues
Licenses, royalties and fees		41,400			35,100			98,200			84,300			49,700			25,200
Product and other sales		166,600			137,900			380,300			323,500			201,600			90,300
		208,000			173,000			478,500			407,800			251,300			115,500
Gross profit		429,500			388,400			1,084,500			2,452,700			269,000			293,900

Operating expenses
Research and development		45,200			38,100			122,600			111,300			41,100			38,000
Sales and marketing		81,000			74,600			224,200			313,200			84,000			68,900
General and administrative		84,200			73,400			265,200			277,600			139,700			94,100
		210,400			186,100			612,000			702,100			264,800			201,000
Net income from operations		219,100			202,300			472,500			1,750,600			4,200			92,900

Other income (expenses)
Interest income		4,600			700			7,200			1,400			3,800			1,100
Interest expense and bank charges		(2,600	)		(2,600	)		(8,000	)		(8,300	)		(2,500	)		(2,700	)
		2,000			(1,900	)		(800	)		(6,900	)		1,300			(1,600	)
Net income before income taxes		221,100			200,400			471,700			1,743,700			5,500			91,300
Income taxes		14,300			199,300			30,600			199,300			(47,100	)		5,900
Net income	$	206,800		$	1,100		$	441,100		$	1,544,400		$	52,600		$	85,400

Basic and diluted net income per common share	$	.00		$	.00		$	.01		$	.03		$	.00		$	.00

Weighted average common shares outstanding
Basic		59,614,698			58,616,716			58,949,377			58,616,716		��	61,044,698			58,616,716
Diluted		59,990,371			59,012,626			59,322,141			58,977,284			61,530,910			59,001,489


		September 30,			December 31,				March 31			December 31
		2019			2018				2020			2019
		(unaudited)			(audited)				(unaudited)			(audited)
*Assets*	*Assets*							*Assets*
Current assets
Cash		$	798,000		$	400,800			$	1,205,400		$	688,000
Accounts receivable less $5,000 allowance for doubtful accounts			834,500			579,000				894,700			1,352,300
Inventory			161,000			133,500				187,300			127,900
Prepaid and other			81,100			43,600				92,100			135,000
Total current assets			1,874,600			1,156,900				2,379,500			2,303,200

Fixed assets
Leasehold improvements			19,700			19,700				27,800			24,200
Furniture, fixtures and equipment			185,800			185,400				256,400			252,500
			205,500			205,100				284,200			276,700
Less: accumulated depreciation and amortization			198,700			197,600				211,000			206,600
			6,800			7,500				73,200			70,100
Other assets
Long-term receivables			1,070,700			1,352,200				861,300			957,000
Operating lease right of use - building			212,000			–
Operating lease right of use – building									191,800			202,000
			1,282,700			1,352,200				1,053,100			1,159,000
Total assets		$	3,164,100		$	2,516,600			$	3,505,800		$	3,532,300

*Liabilities and Stockholders' Equity*	*Liabilities and Stockholders' Equity*							*Liabilities and Stockholders' Equity*

Current liabilities
Convertible debentures		$	97,900		$	128,300			$	97,900		$	97,900
Accounts payable			41,400			16,500				19,100			44,300
Accrued expenses			202,200			163,000				241,700			231,600
Income taxes			37,500			38,600				52,700			52,400
Operating lease liability, current			41,000			–
Operating lease liability – current									42,400			41,700
Total current liabilities			420,000			346,400				453,800			467,900

Other liabilities
Accrued expenses, non-current			75,000			94,700				60,300			67,000
Deferred income taxes			47,600			108,800				–			47,400
Operating lease liability, non-current			171,000			–
Operating lease liability – non-current									149,400			160,300
			293,600			203,500				209,700			274,700

Stockholders' equity
Common stock, $0.01 par value
Authorized – 75,000,000 shares
Issued and outstanding
2019 – 60,324, 698 shares; 2018 – 58,616,716 shares			603,300			586,200
Issued and outstanding – 61,044,698 shares									610,400			610,400
Paid-in capital			12,465,600			12,440,000				12,483,900			12,483,900
Accumulated deficit			(10,618,400	)		(11,059,500	)			(10,252,000	)		(10,304,600	)
Total stockholders' equity			2,450,500			1,966,700				2,842,300			2,789,700
Total liabilities and stockholders' equity		$	3,164,100		$	2,516,600			$	3,505,800		$	3,532,300


	Nine Months ended September 30,								Three Months ended March 31
	2019			2018					2020					2019
Operating Activities							Operating Activities
Net income	$	441,100		$	1,544,400		Net income		$		52,600			$		85,400
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Adjustments to reconcile net income to net cash provided by operating activities						Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		2,900			5,300					4,400					1,400
Deferred income taxes		(61,200	)		106,000					(47,400		)			(54,400		)
Other assets		69,500			(1,423,800	)				105,900					(134,300		)
Other liabilities		192,300			99,600					(16,900		)			224,600
Cumulative effect of accounting change		–			96,100
		644,600			427,600					98,600					122,700

Increase in assets
(Increase) decrease in assets
Accounts receivable		(255,500	)		(308,000	)				457,600					(63,800		)
Inventory		(27,500	)		(20,100	)				(59,400		)			(12,600		)
Prepaid and other		(37,500	)		(8,000	)				42,900					6,900
Increase (decrease) in liabilities
Accounts payable and accrued expenses		76,400			(159,000	)				(15,100		)			29,700
Income taxes		(1,100	)		93,300					300					60,300
Deferred revenue		–			(99,400	)
		(245,200	)		(501,200	)				426,300					20,500
Net cash provided by (used in) operating activities		399,400			(73,600	)
Net cash provided by operating activities									524,900					143,200

Investment Activities
Additions to fixed assets		(2,200	)		(500	)				(7,500		)			–
Net cash used in investing activities		(2,200	)		(500	)				(7,500		)			–

Increase (decrease) in cash		397,200			(74,100	)
Increase in cash									517,400					143,200
Cash at beginning of year		400,800			360,400					688,000					400,800
Cash at end of period	$	798,000		$	286,300			$		1,205,400			$		544,000

Supplemental Disclosure of Non-Cash Investing and Financing Activities
Operating lease right of use – building	$	241,100		$	–			$		–			$		241,100
Operating lease liability	$	(241,100	)	$	–			$		–			$		(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	)	$	–

For the Periods December 31, ~~2018~~2019 through ~~September 30, 2019~~March 31, 2020 and December 31, ~~2017~~2018 through ~~September 30, 2018~~March 31, 2019

The accompanying unaudited condensed financial statements have been prepared by Nocopi Technologies, Inc. ~~(the~~(our “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 our Company's ~~2018~~2019 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 our Company believes that the accompanying disclosures are adequate to make the information presented not misleading. The Notes to Financial Statements included in the ~~2018~~2019 Annual Report on ~~Form 10-K~~Form10-K should be read in conjunction with the accompanying interim financial statements. The interim operating results for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 may not be necessarily indicative of the operating results expected for the full year.

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic which continues to spread throughout the United States. On March 19, 2020 the Governor of Pennsylvania declared a health emergency and issued an order to close all nonessential businesses until further notice. The mandated closure of these nonessential businesses in Pennsylvania remains in effect as of the current date is expected to continue for the foreseeable future in the portion of the state in which we conduct our business operations. Our operations are deemed to be essential and thus we remain open. However, disruptions to our business operations with a resultant impact on our results of operations could continue to occur as a result of quarantines of employees and suppliers in areas affected by the outbreak, availability of raw materials required to manufacture our products, disruption of supply chains that provide our raw materials, price increases of raw materials and supplies used in our production processes, facility closures of domestic and international customers who purchase and use our products, and travel and logistics restrictions affecting our inbound and outbound shipments in connection with the outbreak. While we expect this global pandemic to continue to negatively impact our results of operations, cash flow and financial position, the related financial impact cannot be reasonably estimated at this time.

Our 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 our Company has no items of other comprehensive income, comprehensive income is equal to net income.

~~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 recorded a decrease to the opening balance of the accumulated deficit of $96,100 and a corresponding charge to deferred revenue as of January 1, 2018 due to the cumulative impact of the adoption of Topic 606. The disclosure of disaggregated revenue is disclosed in Note 10.

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

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

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

Our 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, 2019,~~March 31, 2020, 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, 2019.~~March 31, 2020.

In 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 assets of our Company and bears 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 review and quiet period. There have been no borrowings under the line of credit since its inception.

At ~~September 30, 2019,~~March 31, 2020, our Company had convertible debentures totaling $97,900 outstanding, which are due during the third quarter of 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 our Company at $0.025 per share. During the third quarter of 2019, our Company’s Board of Directors approved and the holders of ~~approximately $30,400~~$97,900 of ~~previously outstanding~~$128,300 of convertible debentures ~~elected~~then outstanding agreed to ~~convert~~extend the maturity dates of those convertible debentures ~~plus approximately $12,300~~for one year to the third quarter of ~~accrued interest into 1,707,982 shares~~2020 with no change in the terms or conditions of ~~restricted stock of our Company.~~the debentures.

Our Company also granted warrants in ~~earlier periods~~the third quarter of 2013 and 2014 to purchase a total of 691,365 shares of our 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 our Company determined that the warrants were an equity instrument in accordance with FASB ASC 815. The debt discount related to the warrant issuances has been accreted through interest expense over the term of the notes payable.

The following table summarizes our Company’s warrant position at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018:~~2019:


					Weighted Average							Weighted Average
	Number		Exercise		Exercise		Number			Exercise		Exercise
	of Shares		Price		Price		of Shares			Price		Price
Outstanding warrants -
December 31, 2018		691,365	$	0.02	$	0.02
December 31, 2019							691,365		$	0.02	$	0.02

Outstanding warrants -
September 30, 2019		691,365	$	0.02	$	0.02
March 31, 2020							691,365		$	0.02	$	0.02

Weighted average remaining
contractual life (years)		1.08						.58

Exercisable warrants -
September 30, 2019		691,365	$	0.02	$	0.02

March 31, 2020							691,365		$	0.02	$	0.02

The aggregate intrinsic value of warrants outstanding and exercisable as of ~~September 30, 2019~~March 31, 2020 was approximately ~~$12,100.~~$36,300. The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying warrants and the closing stock price of ~~$0.0375~~$0.0725 for our Company’s common stock on ~~September 30, 2019.~~

Other income (expenses) for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and March 31, 2019 ~~and 2018~~ includes interest on ~~convertible~~ debentures held by ~~nine investors and interest earned on invested funds.~~seven investors.

There is no provision for federal income taxes for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and March 31, 2019 ~~and September 30, 2018~~ due to the availability of net operating loss carryforwards. Our Company has established a valuation allowance for the entire amount of 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					Three months ended
	September 30,					September 30,					March 31,
	2019			2018		2019			2018		2020			2019
Current state taxes	$	21,100		$	93,300	$	91,800		$	93,300	$	300		$	60,300
Deferred state taxes		(6,800	)		106,000		(61,200	)		106,000		(47,400	)		(54,400	)
	$	14,300		$	199,300	$	30,600		$	199,300	$	(47,100	)	$	5,900

During the first quarter of 2020, our Company reversed $47,400 of accrued Pennsylvania income taxes that are not payable.

There was no change in unrecognized tax benefits during the period ended ~~September 30, 2019~~March 31, 2020 and there was no accrual for uncertain tax positions as of ~~September 30, 2019.~~March 31, 2020.

Tax years from 2016 through ~~2018~~2019 remain subject to examination by U.S. federal and state jurisdictions.

During the nine months ended September 30, 2018, our Company paid $235,400 to Michael A. Feinstein, M.D., our Company’s Chairman of the Board and Chief Executive Officer, representing the balance of previously deferred salary owed to him under an employment agreement with our Company. During the five month period ended May 31, 2018, Dr. Feinstein deferred $35,400 of salary. The deferred salary was fully repaid to Dr. Feinstein during 2018 and, at September 30, 2018, there was no remaining deferred salary owed to him. There was no interest payable on the deferred salary.NOCOPI TECHNOLOGIES, INC.

In accordance with FASB ASC 260,Earnings per Share, basic earnings per common share is computed using net earnings divided by the weighted average number of common shares outstanding for the periods presented. The computation of diluted earnings per common share involves the assumption that outstanding common shares are increased by shares issuable upon exercise of those warrants for which the market price exceeds the exercise price. The number of shares issuable upon the exercise of such warrants is decreased by shares that could have been purchased by our Company with related proceeds. For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and March 31, 2019, the number of incremental common shares resulting from the assumed conversion of warrants was ~~375,673~~486,212 and ~~372,764,~~384,773, respectively. ~~For the three and nine months ended September 30, 2018, the number of incremental common shares resulting from the assumed conversion of warrants was 395,910 and 360,568, respectively.~~

Our Company’s revenues, expressed as a percentage of total revenues, from non-affiliated customers that equaled 10% or more of our Company’s total revenues were:


	Three Months ended September 30,						Nine Months ended September 30,						Three Months ended March 31
	2019			2018			2019			2018			2020			2019
Customer A		65	%		49	%		47	%		20	%		43	%		34	%
Customer B		14	%		22	%		21	%		64	%		21	%		12	%
Customer C		–			11	%		6	%		6	%		19	%		30	%

Our Company’s non-affiliate customers, whose individual balances amounted to more than 10% of our Company’s net accounts receivable, expressed as a percentage of net accounts receivable, were:

Our Company performs ongoing credit evaluations of its customers and generally does not require collateral. Our Company also maintains allowances for potential credit losses. The loss of a major customer could have a material adverse effect on our Company’s business operations and financial condition.


	Three Months ended September 30,				Nine Months ended September 30,				Three Months ended March 31
	2019		2018		2019		2018		2020		2019
North America	$	190,600	$	208,400	$	633,000	$	2,067,700	$	183,400	$	216,600
South America		–		–		–		1,500		1,400		–
Europe		–		100		100		200
Asia		418,300		352,900		901,300		791,100		335,500		192,800
Australia		28,600		–		28,600		–
	$	637,500	$	561,400	$	1,563,000	$	2,860,500	$	520,300	$	409,400

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.

Total lease expense under operating leases for each of the three month periods ended March 31, 2020 and ~~nine months ended September 30,~~March 31, 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.~~$13,300.


	Operating Leases			Operating Leases
Year ending December 31
2019	$	12,600
2020		51,600		$	38,900
2021		53,100			53,100
2022		54,600			54,600
2023		56,200			56,200
2024		18,900			18,900
Total lease payments		247,000			221,700
Less imputed interest		(35,000	)		(29,900	)
Total	$	212,000		$	191,800

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

This report on Form 10-Q contains, and our officers and representatives may from time to time make, "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: "anticipate," "intend," "plan," "goal," "seek," "believe," "project," "estimate," "expect," "strategy," "future," "likely," "may," "should," "will" and similar references to future periods. Examples of forward-looking statements include, among others, statements we make~~regarding~~: regarding:

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:

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, ~~2018,~~2019, filed with the Securities and Exchange Commission on March 30, 2020, as amended on April 29, ~~2019.~~2020.

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.

To serve our customers while also providing for the safety of our employees and service providers, we have adapted various steps to protect our employees. Any employee who is uncomfortable coming into our facilities may choose not to come in. We have a large enough facility to enable all of our employees to social distance and we follow Centers for Disease Control and Prevention (CDC) guidelines. Our production employees work with chemicals and they have always used masks, respirators, etc., even before COVID-19. As a result, we continue to maintain the same level of productivity and effectiveness as prior to the COVID-19 pandemic.

The impact of COVID-19 on the Company had little impact on the financial results during the first quarter of 2020 as the majority of the operational adjustments were made late in the period. We expect the subsequent quarter to see further impact from COVID-19 and the various operational adjustments we made. The full extent of the impact to the Company due to the impact of the COVID-19 pandemic for our second quarter and beyond cannot be currently determined. The extent to which the COVID-19 pandemic may impact our future financial and operational performance will be dependent on many factors that we may not be able to predict because they continue to change and evolve depending on both national and local circumstances among them government restrictions affecting our employees, customers and suppliers, changes in our revenues due to lower customer demand as a result of the pandemic and a potential inability to obtain raw materials due to lower availability. We continue to monitor the impact of COVID-19 on our business but we cannot accurately predict the extent to which it will adversely affect our future results of operations, financial condition or cash flows.

To date, we have not suffered a drop off in customer orders and total earned royalties in the entertainment and toy products market as a result of COVID-19, but we have recently experienced a negative impact on revenues in our smaller anti-counterfeiting and anti-diversion products market due to closures of certain printing facilities that utilize these technologies and anticipate that these closures may continue for a period of time. We continue to retain revenues at historical levels in the entertainment and toy products market through the current date despite the downturns in the overall economy. While the products of our licensees in the larger entertainment and toy products market are sold by both large and smaller retailers, some of whom remain open, and are also available for purchase online, we believe that revenues may not continue to be achieved at levels experienced to the current date due to the negative economic conditions that are expected to continue over the balance of the year as a result of COVID-19. A slowdown in overall consumer spending may affect the sales of products marketed by our licensees. Our major licensees in the entertainment and toy products market are large, well-known businesses in this market with whom we believe our long-term relationship will not be adversely affected by the current COVID-19 pandemic.

Our Company’s revenues are derived from (a) royalties paid by licensees of our technologies, (b) fees for the provision of technical services to licensees and (c) from the direct sale of (i) products incorporating our technologies, such as inks, security paper and pressure sensitive labels, and (ii) equipment used to support the application of our technologies, such as ink-jet printing systems. Royalties consist of guaranteed minimum royalties payable by our licensees in certain cases and additional royalties which typically vary with the licensee’s sales or production of products incorporating the licensed technology. Service fees and sales revenues vary directly with the number of units of service or product provided.

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

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

Revenues for the ~~third~~first quarter of 2020 were $520,300 compared to $409,400 in the first quarter of 2019, ~~were $637,500 compared to $561,400 in the third quarter of 2018,~~ an increase of ~~$76,100,~~$110,900, or approximately ~~14%~~27%. Licenses, royalties and fees ~~increased~~decreased by ~~$14,200,~~$25,900, or approximately 8%14%, ~~to $189,400~~ in the ~~third~~first quarter of ~~2019~~2020 to $164,600 from ~~$175,200~~$190,500 in the ~~third~~first quarter of ~~2018.~~2019. The ~~increase~~decrease 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 of approximately $100,000 in the ~~third~~first quarter of ~~2019~~2020 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~~There can be no assurances that ~~we will continue to obtain higher royalties on an ongoing basis from~~the marketing and product development activities of our Company’s licensees or other businesses in the entertainment and toy products market ~~especially upon~~will produce a significant increase in revenues for our Company, nor can the ~~occurrence~~timing of anany potential revenue increases be predicted, particularly given the uncertain economic ~~downturn or other unfavorable conditions.~~conditions being experienced worldwide as a result of the COVID-19 pandemic that is continuing to negatively impact all worldwide economies.

Product and other sales increased by ~~$61,900,~~$136,800, or approximately ~~16%~~62%, to ~~$448,100~~$218,900 in the ~~third~~first quarter of ~~2019~~2020 from ~~$386,200~~$218,900 in the ~~third~~first quarter of ~~2018.~~2019. Sales of ink increased in the ~~third~~first quarter of 2020 compared to the first quarter of 2019 ~~compared~~due primarily to lower ink shipments to the third ~~quarter of 2018 due primarily to higher ink shipments to a third~~ party authorized ~~printer~~printers used by ~~one~~two of our Company’s major licensees in the entertainment and toy products market offset in part by lower ink shipments to our Company’s licensees in the retail receipt and document fraud market. In the ~~third~~first quarter of ~~2019,~~2020, our Company derived revenues of approximately ~~$555,900~~$453,500 from our Company’s licensees and their authorized printers in the entertainment and toy products market compared to revenues of approximately ~~$485,700 in the third quarter of 2018.~~

~~For the first nine months of 2019, revenues were $1,563,000, representing a decrease of $1,297,500, or approximately 45%, from revenues of $2,860,500~~$335,900 in the first ~~nine months of 2018. Revenues in the first nine months of 2018 included, in accordance with ASU 214-09,~~~~Revenue from Contracts with Customers~~ ~~(“Topic 606”), revenue of $1,521,700 representing the present value of guaranteed royalty payments that 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 decreased by $1,433,800, or approximately 71%, to $571,900 in the first nine months of 2019 from $2,005,700 in the first nine months of 2018. The decrease in licenses, royalties and fees in the first nine months of 2019 compared to the first nine months of 2018 is due primarily to the 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. Our Company derived revenues of approximately $1,327,900 from licensees and their authorized printers in the entertainment and toy products market in the first nine months of 2019 compared to revenues of approximately $2,661,700 in the first nine months of 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.

Our Company’s gross profit ~~increased~~decreased to ~~$429,500~~$269,000, or approximately 52% of gross revenues, in the ~~third~~first quarter of ~~2019,~~2020 from $293,900, or approximately ~~67%~~72% of gross revenues, ~~from $388,400~~ in the ~~third~~first quarter of ~~2018 or approximately 69% of revenues.~~2019. Licenses, royalties and fees have historically carried a higher gross profit than product and other ~~sales. Such other~~ sales, which generally consist of either supplies or other manufactured products which incorporate our Company’s technologies or equipment used to support the application of its technologies. These items (except for inks which are manufactured by our Company) are generally purchased from third-party vendors and resold to the end-user or licensee and carry a lower gross profit than licenses, royalties and fees. The higher gross profit in the third quarter of 2019 compared to the third quarter of 2018 results primarily from higher gross revenues from licenses, royalties and fees and 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 revenues from product and other sales in the first nine months of 2019 compared to the first nine months of 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~~these sources as well as our Company’s overall gross profit. The gross profit from licenses, royalties and fees decreased to approximately ~~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~~70% in the first ~~nine months~~quarter of ~~2019~~2020 from approximately ~~96%~~87% in the first ~~nine months~~quarter of ~~2018.~~2019.

The gross profit of product and other sales, 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~~Primarily due to higher raw material expenses along with expenses related to a staffing addition and additional depreciation expense in the first quarter of 2020 compared to the first quarter of 2019, there was a lower gross profit from product and other sales ~~decreased to~~of approximately ~~63%~~43% of revenues in the ~~third~~first quarter of ~~2019~~2020 compared to ~~approximately 64% of revenues in the third quarter of 2018. For the first nine months of 2019 and 2018, the~~a gross profit ~~expressed as a percentage~~ of ~~revenues, was~~ approximately ~~62%~~59% of revenues from product and other ~~sales.~~sales in the first quarter of 2019.

Research and development expenses of ~~$45,200 and $122,600~~$41,100 in the ~~third~~first quarter ~~and first nine months~~ of ~~2019, respectively,~~2020 were comparable to ~~$38,100 and $111,300~~$38,000 in the ~~third~~first quarter ~~and first nine months~~ of ~~2018, respectively.~~2019.

Sales and marketing expenses increased to $84,000 in the ~~third~~first quarter of 2020 from $68,900 in the first quarter of 2019 to $81,000 from $74,600 in the third quarter of 2018. Sales and marketing expenses decreased in the first nine months of 2019 to $224,200 from $313,200 in the first nine months of 2018. The increase in the third quarter of 2019 compared to the third quarter of 2018 is due primarily to higher commission expense on the higher level of revenues in the ~~third~~first quarter of ~~2019 compared to the third quarter of 2018. The decrease in the first nine months of 2019~~2020 compared to the first nine months of 2018 is due primarily to lower commission expense on the lower level of sales in the first nine months of 2019 compared to the first nine months of 2018 related to the additional revenue generated in 2018 as a result of the adoption of Topic 606 in the second quarter of ~~2018.~~2019.

General and administrative expenses increased in the ~~third~~first quarter of ~~2019~~2020 to ~~$84,200 from $73,400 in the third quarter of 2018. General and administrative expenses decreased~~$139,700 compared to $94,100 in the first ~~nine months of 2019 to $265,200 from $277,600 in the first nine months of 2018. The increase in third~~ quarter of 2019 ~~compared to the third quarter of 2018 is~~ due primarily to higher ~~employment~~public relations and ~~public company expenses in the third quarter of 2019 compared to the third quarter of 2018. The decrease~~salary expense in the first ~~nine months~~quarter of ~~2019~~2020 compared to the first ~~nine months~~quarter of ~~2018 is due primarily to lower patent related expenses and lower legal expenses in the first nine months of 2019 compared to the first nine months of 2018.~~2019.

Other income (expenses) in the ~~third~~first quarter of 2020 and ~~first nine months of~~ 2019 ~~and 2018~~ included interest on convertible debentures held by ~~nine investors and interest earned on invested funds.~~seven investors.

Income taxes in the ~~third~~first quarter of 2020 and ~~first nine months of~~ 2019 ~~and 2018 resulted~~result from limitations placed on income tax net operating loss deductions by the Commonwealth of Pennsylvania. In the first quarter of 2020, our Company reversed $47,400 of accrued Pennsylvania income taxes that are not payable

The lower 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$52,600 in the first ~~nine months~~quarter of ~~2019~~2020 compared to ~~net income of $1,544,400~~$85,400 in the first ~~nine months~~quarter of ~~2018~~2019 resulted primarily from a lower gross profit on a lower level of licenses, royalties and fees, higher cost of revenues and higher operating expenses in the first ~~nine months~~quarter of ~~2019~~2020 compared to the first ~~nine months of 2018 related to the adoption of Topic 606 in the second~~ quarter of ~~2018~~2019 offset in part by ~~lower overhead expenses and lower Pennsylvania~~the reversal of income ~~taxes in the first nine months of 2019 compared to the first nine months of 2018.~~taxes.

During the first ~~nine months~~quarter of ~~2019,~~2020, our Company’s cash increased to ~~$798,000~~$1,205,400 at ~~September 30, 2019~~March 31, 2020 from ~~$400,800~~$688,000 at December 31, ~~2018.~~2019. During the first ~~nine months~~quarter of ~~2018,~~2020, our Company generated ~~$399,400~~$524,900 from its operating activities and used ~~$2,200~~$7,500 for capital ~~equipment purchases.~~expenditures.

InDuring the first ~~nine months~~quarter of ~~2019,~~2020, our Company’s revenues ~~decreased~~increased approximately 45% to $1,563,000 from $2,860,500 in the first nine months of 2018 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 2018 offset by a decrease of $1,521,700, or 62%, that is attributable the reduction of our Company’s revenues in the first nine months of 2019 compared to the first nine months of 201827% primarily as a result of higher sales of ink to the ~~adoption~~authorized printers of ~~Topic 606~~our Company’s licensees in the ~~second quarter of 2018.~~entertainment and toy products market offset in part by lower royalty revenues from a licensee in the entertainment and toy products market.

Our ~~Company’s~~ total overhead expenses ~~interest expense~~increased in the first quarter of 2020 to $264,800 compared to $201,000 in the first quarter of 2019 and our Company’s income tax expense decreased in the first ~~nine months~~quarter of ~~2019~~2020 compared to the first ~~nine months~~quarter of ~~2018.~~2019. As a result of these factors, our Company generated net income of ~~$441,100~~$52,600 in the first ~~nine months~~quarter of ~~2019~~2020 compared to ~~$1,544,400~~$85,400 in ~~the~~ first ~~nine months~~quarter of ~~2018.~~2019. Our Company had positive operating cash flow of ~~$399,400~~$524,900 during the first ~~nine months~~quarter of ~~2019 and at September 30, 2019,~~2020. At March 31, 2020, our Company had positive working capital of ~~$1,454,600~~$1,925,700 and stockholders’ equity of ~~$2,450,500.~~$2,842,300. For the full year of ~~2018,~~2019, our Company had net income of ~~$1,655,400~~$754,900 and had positive operating cash flow of ~~$40,900.~~$360,600. At December 31, ~~2018,~~2019, our Company had positive working capital of ~~$810,500~~$1,853,300 and stockholders’ equity of ~~$1,966,700.~~$2,789,700.

Our Company has $97,900 of convertible debentures outstanding 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~~These borrowings allowed our Company to ~~extend the maturity dates of the convertible debentures for one year to the third quarter of 2020 with no change~~remain in ~~the terms or conditions of the debentures.~~operation through late 2016 when our Company’s cash flow increased significantly.

Our Company ~~negotiated~~has a $150,000 revolving line of credit ~~(“Lineof Credit”)~~ with a bank ~~to provide~~that provides a source of working capital, if required. The Line of Credit is secured by all the assets of our Company and bears 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 review and quiet period. There have beenAt March 31, 2020, there were no outstanding borrowings under the ~~Line~~line of ~~Credit since its inception.~~ credit.

We may need to obtain additional capital in the future to ~~further~~ support the working capital requirements associated with our existing revenue base and to ~~develop new revenue sources.~~fund the potential negative impact on our profitability that could occur if our licensees experience significant declines in sales of products utilizing our Company’s technologies. We cannot assure you that we will be successful in obtaining ~~such~~sufficient additional capital, or if ~~needed.~~ we do so, that the additional capital will enable our Company to continue to operate profitably in the future and develop new revenue sources to have a material positive effect on our Company’s operations and cash flow.

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

Our plan of operation for the twelve months beginning with the date of this quarterly report consists of concentrating available human and financial resources to continue to capitalize on the specific business relationships our Company has developed in the entertainment and toy products market. This includes two licensees that have been marketing products incorporating our Company’s technologies since 2012. These two licensees maintain a significant presence in the entertainment and toy products market and are well known and highly regarded participants in this market. We anticipate that these two licensees will expand their current offerings that incorporate our technologies and will introduce and market new products that will incorporate our technologies available to them under their license agreements with our Company. We will continue to develop various applications for these licensees. We also plan to expand our licensee base in the entertainment and toy market. We currently have additional licensees marketing or developing products incorporating our technologies in certain geographic and niche markets of the overall entertainment and toy products market.

Our Company maintains its presence in the retail loss prevention market and believes that revenue growth in this market can be achieved through increased security ink sales to its licensees in this market. We will continue to adjust our production and technical staff as necessary and, subject to available financial resources, invest in capital equipment needed to support potential growth in ink production requirements beyond our current capacity. Additionally, we will pursue opportunities to market our current technologies in specific security and non-security markets. There can be no assurances that these efforts will enable our Company to generate additional revenues and positive cash flow.

Our Company has received and ~~may~~continues to seek additional capital, in the form of debt, equity or both, to support our working capital requirements and to provide funding for other business opportunities. We cannot assure you that we will be successful in raising additional capital, or that such additional capital, if obtained, will enable our Company to generate additional revenues and positive cash flow.

As previously stated, we generate a significant portion of our total revenues from licensees in the entertainment and toy products market. These licensees generally sell their products through retail outlets. In the future, such sales may be adversely affected by changes in consumer spending that may ~~occur. If such changes~~ occur as a result of an uncertain economic environment throughout the balance of 2020 and beyond due to the COVID-19 virus and its effect on the global economy. As a result, our revenues, results of operations and liquidity may be ~~similarly~~negatively impacted.

As of March 31, 2020, there were no material changes in our contractual obligations from those disclosed in our Annual Report on Form 10-K filed with the SEC on March 30, 2020, as amended on April 29, 2020, other than those appearing in the notes to the financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.

~~In February 2016, the FASB issued ASU No. 2016-02,~~~~Leases (Topic 842)~~ ~~and subsequent related updates. The core principle~~As of ~~Topic 842 is~~March 31, 2020, there were no recently adopted accounting standards that a lessee should recognize the assets and liabilities 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 of adoption. The standard had a material ~~impact~~effect on ~~the balance sheet (see Note 11).~~our Company’s financial statements.

As of ~~September 30, 2019,~~March 31, 2020, there are no recently issued accounting standards not yet adopted which would have a material effect on our Company’s financial statements.

Evaluation of Disclosure Controls and Procedures.Our Company’s management, with the participation of our Company’s Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of our Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of ~~September 30, 2019.~~March 31, 2020. Based on this evaluation, our Company’s Principal Executive Officer and Principal Financial Officer concluded that, as of ~~September 30, 2019,~~March 31, 2020, our Company’s disclosure controls and procedures were effective, in that they provide reasonable assurance that information required to be disclosed by our Company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and is accumulated and communicated to our Company’s management, including our Company’s Principal Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting. There were no changes in our internal control over financial reporting during the quarter ended ~~September 30, 2019~~March 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item ~~2. Unregistered Sales of Equity Securities and Use of Proceeds~~1A. Risk Factors

~~No underwriters were utilized,~~The extent to which the COVID-19 pandemic will adversely impact our business, financial condition and ~~no commissions or fees were paid with respect~~results of operations is highly uncertain and cannot be predicted.

The COVID-19 pandemic has created significant worldwide uncertainty, volatility and economic disruption. The extent to ~~any~~which COVID-19 will adversely impact our business, financial condition and results of operations is dependent upon numerous factors, many of which are highly uncertain, rapidly changing and uncontrollable. These factors include, but are not limited to: (i) the duration and scope of the ~~above transactions.~~ ~~We relied~~pandemic; (ii) governmental, business and individual actions that have been and continue to be taken in response to the pandemic, including travel restrictions, quarantines, social distancing, work-from-home and shelter-in-place orders and shut-downs; (iii) the impact on ~~Section 4(a)(2) and/~~U.S. and global economies and the timing and rate of economic recovery; (iv) potential adverse effects on the financial markets and access to capital; (v) potential goodwill or ~~Regulation D~~other impairment charges; and (vi) the ability of ~~the Securities Act of 1933, as amended, since the transactions did not involve any public offering.~~our licensees and other customers to sell products that utilize or incorporate our technology.

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


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


Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer þ	Smaller reporting company þ
	Emerging growth company ¨


	PAGE
Part I. FINANCIAL INFORMATION

Item 1. Financial Statements	1

Statements of Operations for Three Months ended March 31, 2020 and ~~Nine Months Ended September 30, 2019 and September 30, 2018~~March 31, 2019	1
Balance Sheets at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019	2
Statements of Cash Flows for ~~Nine~~Three Months ~~Ended September 30,~~ended March 31, 2020 and March 31, 2019 ~~and September 30, 2018~~	3
Statements of Stockholders’ Equity for Three Months ended March 31, 2020 and ~~Nine Months ended September 30,~~March 31, 2019 ~~and September 30, 2018~~	4
Notes to Financial Statements	5

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	109

Item 4. Controls and Procedures	1514

Part II. OTHER INFORMATION

Item 2.1A. ~~Unregistered Sales of Equity Securities and Use of Proceeds~~Risk Factors	15
	16
Item 6. Exhibits	1615

SIGNATURES	1716

EXHIBIT INDEX	1817


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	)


	·	The ongoing impact of the COVID-19 coronavirus pandemic on our business operations, revenues, employees, suppliers and customers
	·	Expected operating results, such as revenue growth and earnings
	·	Anticipated levels of capital expenditures for fiscal year ~~2019~~2020 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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered


	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


	·	The extent to which the COVID-19 pandemic may impact our future financial and operational performance will be dependent on many factors that we may not be able to predict because they continue to change and evolve depending on both national and local circumstances among them government restrictions affecting our employees, customers and suppliers, changes in our revenues due to lower customer demand as a result of the pandemic and a potential inability to obtain raw materials due to lower availability. We continue to monitor the impact of COVID-19 on our business but we cannot accurately predict the extent to which it will adversely affect our future results of operations, financial condition or cash flows.
	·	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.~~2019 and this Quarterly Report on Form 10-Q.


	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.


Exhibit No.	Description of Exhibit	Location
~~4.1~~	~~Form of Convertible Debenture Purchase Agreement and Exhibits~~	~~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	Certification pursuant to Rule 13a-14(a) of ~~Chief~~the Securities Exchange Act of 1934, as amended, executed by the Principal Executive Officer ~~required by Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302~~ of the ~~Sarbanes-Oxley Act of 2002.~~Company.	Filed herewith
31.2	Certification pursuant to Rule 13a-14(a) of ~~Chief~~the Securities Exchange Act of 1934, as amended, executed by the Principal Financial Officer ~~required by Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302~~ of the ~~Sarbanes-Oxley Act of 2002.~~Company.	Filed herewith
32.1	~~Certifications of Chief Executive Officer and Chief Financial Officer~~Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002.~~2002, executed by the Principal Executive Officer and the Principal Financial Officer of the Company.	Filed herewith
~~101.INS~~101	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~~


		NOCOPI TECHNOLOGIES, INC.

DATE: ~~November 13, 2019~~May 14, 2020		/s/ Michael A. Feinstein, M.D.
		Michael A. Feinstein, M.D.
		Chairman of the Board, President & Chief Executive Officer

DATE: ~~November 13, 2019~~May 14, 2020		/s/ Rudolph A. Lutterschmidt
		Rudolph A. Lutterschmidt
		Vice President & Chief Financial Officer