Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Mar. 17, 2020 | Jun. 30, 2019 | |
Document and Entity Information [Abstract] | |||
Entity Registrant Name | NOCOPI TECHNOLOGIES INC/MD/ | ||
Entity Central Index Key | 0000888981 | ||
Current Fiscal Year End Date | --12-31 | ||
Document Type | 10-K | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Small Business | true | ||
Entity Emerging Growth Company | false | ||
Entity Shell Company | false | ||
Document Period End Date | Dec. 31, 2019 | ||
Document Fiscal Year Focus | 2019 | ||
Document Fiscal Period Focus | FY | ||
Amendment Flag | false | ||
Entity Public Float | $ 2,325,000 | ||
Entity Common Stock Shares Outstanding | 61,044,698 | ||
Entity Well Known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Incorporation State Country Name | MD | ||
Entity File Number | 000-20333 |
Balance Sheets
Balance Sheets - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Current assets | ||
Cash | $ 688,000 | $ 400,800 |
Accounts receivable less $5,000 allowance for doubtful accounts | 1,352,300 | 579,000 |
Inventory | 127,900 | 133,500 |
Prepaid and other | 135,000 | 43,600 |
Total current assets | 2,303,200 | 1,156,900 |
Fixed assets | ||
Leasehold improvements | 24,200 | 19,700 |
Furniture, fixtures and equipment | 252,500 | 185,400 |
Fixed assets, gross | 276,700 | 205,100 |
Less: accumulated depreciation and amortization | 206,600 | 197,600 |
Total fixed assets | 70,100 | 7,500 |
Other assets | ||
Long-term receivables | 957,000 | 1,352,200 |
Operating lease right of use - building | 202,000 | |
Other assets | 1,159,000 | 1,352,200 |
Total assets | 3,532,300 | 2,516,600 |
Current liabilities | ||
Convertible debentures | 97,900 | 128,300 |
Accounts payable | 44,300 | 16,500 |
Accrued expenses | 231,600 | 163,000 |
Income taxes | 52,400 | 38,600 |
Operating lease liability - current | 41,700 | |
Total current liabilities | 467,900 | 346,400 |
Other liabilities | ||
Accrued expenses, non-current | 67,000 | 94,700 |
Deferred income taxes | 47,400 | 108,800 |
Operating lease liability - non-current | 160,300 | |
Total other liabilities | 274,700 | 203,500 |
Commitments and contingencies | ||
Stockholders' equity | ||
Series A preferred stock, $1.00 par value, Authorized - 300,000 shares, Issued and outstanding - none | ||
Common stock, $0.01 par value Authorized - 75,000,000 shares, Issued and outstanding - 2019 - 61,044,698 shares; 2018 - 58,616,716 shares | 610,400 | 586,200 |
Paid-in capital | 12,483,900 | 12,440,000 |
Accumulated deficit | (10,304,600) | (11,059,500) |
Total stockholders' equity | 2,789,700 | 1,966,700 |
Total liabilities and stockholders' equity | $ 3,532,300 | $ 2,516,600 |
Balance Sheets (Parenthetical)
Balance Sheets (Parenthetical) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 5,000 | $ 5,000 |
Preferred stock, par value | $ 1 | $ 1 |
Preferred stock, shares authorized | 300,000 | 300,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 75,000,000 | 75,000,000 |
Common stock, shares issued | 61,044,698 | 58,616,716 |
Common stock, shares outstanding | 61,044,698 | 58,616,716 |
Statements of Operations
Statements of Operations - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Revenues | ||
Licenses, royalties and fees | $ 793,800 | $ 2,242,500 |
Product and other sales | 1,743,600 | 1,099,200 |
Total revenues | 2,537,400 | 3,341,700 |
Cost of revenues | ||
Licenses, royalties and fees | 169,100 | 115,400 |
Product and other sales | 672,600 | 445,800 |
Total cost of revenues | 841,700 | 561,200 |
Gross profit | 1,695,700 | 2,780,500 |
Operating expenses | ||
Research and development | 165,600 | 153,200 |
Sales and marketing | 329,900 | 387,300 |
General and administrative | 393,900 | 369,400 |
Total operating expenses | 889,400 | 909,900 |
Net income from operations | 806,300 | 1,870,600 |
Other income (expenses) | ||
Interest income | 11,700 | 2,900 |
Interest expense and bank charges | (10,800) | (12,300) |
Total other income (expenses) | 900 | (9,400) |
Net income before income taxes | 807,200 | 1,861,200 |
Income taxes | 52,300 | 205,800 |
Net income | $ 754,900 | $ 1,655,400 |
Net income per common share | ||
Basic | $ 0.01 | $ 0.03 |
Diluted | $ 0.01 | $ 0.03 |
Weighted average common shares outstanding | ||
Basic | 59,443,207 | 58,616,716 |
Diluted | 59,836,570 | 58,980,420 |
Statement of Stockholders' Equi
Statement of Stockholders' Equity - USD ($) | Common stock [Member] | Paid-in Capital [Member] | Accumulated Deficit [Member] | Total |
Balance at Dec. 31, 2017 | $ 586,200 | $ 12,440,000 | $ (12,811,000) | $ 215,200 |
Balance, shares at Dec. 31, 2017 | 58,616,716 | 58,616,716 | ||
Cumulative effect of accounting at January 1, 2018, Note 2 | 96,100 | $ 96,100 | ||
Net income | 1,655,400 | 1,655,400 | ||
Balance at Dec. 31, 2018 | $ 586,200 | 12,440,000 | (11,059,500) | $ 1,966,700 |
Balance, shares at Dec. 31, 2018 | 58,616,716 | 58,616,716 | ||
Issuance of common stock | $ 7,100 | 18,300 | $ 25,400 | |
Issuance of common stock shares | 720,000 | |||
Conversion of debentures and accrued interest to common stock | $ 17,100 | 25,600 | 42,700 | |
Conversion of debentures and accrued interest to common stock shares | 1,707,982 | |||
Net income | 754,900 | 754,900 | ||
Balance at Dec. 31, 2019 | $ 610,400 | $ 12,483,900 | $ (10,304,600) | $ 2,789,700 |
Balance, shares at Dec. 31, 2019 | 61,044,698 | 61,044,698 |
Statements of Cash Flows
Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Operating Activities | ||
Net income | $ 754,900 | $ 1,655,400 |
Adjustments to reconcile net income to net cash provided by operating activities | ||
Depreciation and amortization | 10,800 | 7,100 |
Deferred income taxes | (61,400) | 108,800 |
Other assets | 193,200 | (1,352,200) |
Other liabilities | 174,300 | 94,700 |
Common stock issued for services | 25,400 | |
Cumulative effect of accounting change | 96,100 | |
Net income adjusted for non-cash operating activities | 1,097,200 | 609,900 |
(Increase) decrease in assets | ||
Accounts receivable | (773,300) | (286,900) |
Inventory | 5,600 | (22,900) |
Prepaid and other | (91,400) | (8,300) |
Increase (decrease) in liabilities | ||
Accounts payable and accrued expenses | 108,700 | (190,100) |
Income taxes | 13,800 | 38,600 |
Deferred revenue | (99,400) | |
Total increase (decrease) in operating capital | (736,600) | (569,000) |
Net cash provided by operating activities | 360,600 | 40,900 |
Investing Activities | ||
Additions to fixed assets | (73,400) | (500) |
Net cash used in investing activities | (73,400) | (500) |
Increase in cash | 287,200 | 40,400 |
Cash | ||
Beginning of year | 400,800 | 360,400 |
End of year | 688,000 | 400,800 |
Cash paid for interest | 1,000 | |
Cash paid for taxes | 100,000 | 44,600 |
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) |
Organization of the Company
Organization of the Company | 12 Months Ended |
Dec. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization of the Company | 1. Organization of the Company Nocopi Technologies, Inc. (the Company) is organized under the laws of the State of Maryland. Its main business activities are the development and distribution of document security products and the licensing of its patented reactive ink technologies for the Entertainment and Toy and the Document and Product Authentication markets in the United States and foreign countries. Our Company operates in one principal industry segment. |
Significant Accounting Policies
Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies | 2. Significant Accounting Policies Financial Statement Presentation Estimates Cash Accounts receivable and credit policies The carrying amount of accounts receivable is reduced by an allowance that reflects managements best estimate of the amounts that will not be collected. Management individually reviews all accounts receivable balances that exceed 90 days from invoice date and based on an assessment of current creditworthiness, estimates the portion, if any, of the balance that will not be collected. Inventory Fixed assets Patent costs Revenues Revenue from Contracts with Customers Revenue Recognition 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 fixed fee licensees at a point in time when the term begins if the contract provides for patented ink technology only as it exists at the time that it is granted. However, for license agreements that provide for rights to future ink technology, revenue will be recognized over the term of the license agreement. Revenue for per-unit license agreement will be recognized in the period that the Company receives the related royalty report. Revenue for product sales will be recognized upon shipment to the customer. There are no contract assets or contract liabilities and therefore no unsatisfied performance obligations. The Company does not offer any warranties, however, damaged products can be returned for credit or refund. For disaggregation of revenue by customers and geographic region, see Note 12. 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. 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 change in accumulated deficit on our Balance Sheet at December 31, 2018, including the aggregate impact of the change in accounting principles which was effective on January 1, 2018, was as follows: Accumulated deficit January 1, 2018 $ (12,811,000 ) Net income 1,655,400 Cumulative effect of accounting change at January 1, 2018 96,100 Accumulated deficit December 31, 2018 $ (11,059,500 ) Income taxes Fair value Convertible debentures Stock-based payments Earnings per share The table below presents the computation of basic and diluted weighted average common shares outstanding: 2019 2018 Basic shares outstanding 59,443,207 58,616,716 Incremental shares from assumed conversion of warrants 393,363 363,704 Diluted shares outstanding 59,836,570 58,980,420 Comprehensive income Recoverability of Long-Lived Assets Our Company follows FASB ASC 360-35, Impairment or Disposal of Long-Lived Assets. The Statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Our Company is not aware of any events or circumstances which indicate the existence of an impairment which would be material to our Companys annual financial statements. Recently Adopted Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) and subsequent related updates. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from operating leases. The 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 on the balance sheet. As of January 1, 2019, the operating lease right of use asset and operating lease liability amounted to $241,000 with no cumulative-effect adjustment. In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842), Targeted Improvements Leases In May 2017, the FASB issued ASU No. 2017-09, Compensation Stock Compensation (Topic 718), Scope of Modification Accounting Recently Issued Accounting Pronouncements Not Yet Adopted As of December 31, 2019, there are no recently issued accounting standards not yet adopted which would have a material effect on the Companys financial statements. |
Concentration of Credit Risk
Concentration of Credit Risk | 12 Months Ended |
Dec. 31, 2019 | |
Risks and Uncertainties [Abstract] | |
Concentration of Credit Risk | 3 Concentration of Credit Risk Certain financial instruments potentially subject our Company to concentrations of credit risk. These financial instruments consist primarily of cash and accounts receivables. At December 31, 2019, our Companys deposits with a financial institution were $438,000 in excess of the FDIC deposit insurance coverage of $250,000. There is a concentration of credit risk with respect to accounts receivable due to the number of major customers. |
Line of Credit
Line of Credit | 12 Months Ended |
Dec. 31, 2019 | |
Line of Credit Facility [Abstract] | |
Line of Credit | 4 Line of Credit 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 banks 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. |
Convertible Debentures
Convertible Debentures | 12 Months Ended |
Dec. 31, 2019 | |
Convertible Debt [Abstract] | |
Convertible Debentures | 5. Convertible Debentures At December 31, 2019, 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 Companys 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, the holders of approximately $30,400 of previously outstanding convertible debentures elected to convert those debentures plus approximately $12,300 of accrued interest into 1,707,982 shares of restricted stock of our Company. Our Company also granted warrants to purchase 691,365 shares of our Companys 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. |
Stockholders' Equity
Stockholders' Equity | 12 Months Ended |
Dec. 31, 2019 | |
Stockholders' Equity Note [Abstract] | |
Stockholders' Equity | 6. Stockholders Equity In October 2019, our Company issued 720,000 shares of restricted common stock to an investor relations firm as a portion of compensation for services. The common stock vests on a pro rata basis over one year. The fair value of the common stock amounting to $25,400 on the inception date of agreement is being amortized to expense over the first year of the engagement. |
Other Income (Expenses)
Other Income (Expenses) | 12 Months Ended |
Dec. 31, 2019 | |
Other Income and Expenses [Abstract] | |
Other Income (Expenses) | 7. Other Income (Expenses) Other income (expenses) in the years ended December 31, 2019 and December 31, 2018 includes interest on convertible debentures held by seven investors. |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 8. Income Taxes There is no provision for federal income taxes for the years ended December 31, 2019 and December 31, 2018 due to the availability of net operating loss carryforwards. At December 31, 2019 and December 31, 2018, our Company had NOLs approximating $1,622,000 and $2,478,000, respectively. The operating losses at December 31, 2019 are available to offset future taxable income; however, if not utilized, they expire in varying amounts through the year 2032. The utilization of these NOLs to reduce future income taxes will depend on the generation of sufficient taxable income prior to their expiration. There were no material temporary differences for the years ended December 31, 2019 and December 31, 2018. Our Company has established a 100% valuation allowance of $454,200 and $693,800 at December 31, 2019 and December 31, 2018, respectively, for the deferred tax assets due to the uncertainty of their realization. The components for state income tax expense resulting from the limitation on the use of net operating losses are: Year ended December 31 2019 2018 Current state taxes $ 52,400 $ 93,400 Deferred state taxes 108,800 $ 52,400 $ 202,200 The reconciliation of the statutory federal rate to our Companys effective tax rate follows: 2019 2018 Amount % Amount % Income tax at U.S. federal income tax rate $ 158,600 21 $ 398,200 21 State tax net of federal tax effect 52,300 7 202,200 7 Utilization of operating losses (158,600 ) (21) (398,200 ) (21 ) $ 52,300 7 $ 202,200 7 The components of deferred tax assets and liabilities as of December 31, 2019 and 2018 are as follows: 2019 2018 Deferred tax asset for NOL carryforwards $ 454,200 $ 693,800 Deferred tax liability - other (47,400 ) (108,800 ) Valuation allowance (454,200 ) (693,800 ) $ (47,400 ) $ (108,800 ) The income tax provision consists of the following: 2019 2018 Current $ 119,700 $ 97,000 Deferred (67,400 ) 108,800 $ 52,300 $ 205,800 Our Company has adopted the provisions of FASB ASC 740-10-50-15, Unrecognized Tax Benefit Related Disclosures. There were no unrecognized tax benefits as of the date of adoption and no unrecognized tax benefits at December 31, 2019. There was no change in unrecognized tax benefits during the year ended December 31, 2019 and there was no accrual for uncertain tax positions as of December 31, 2019. Interest and penalties totaling $3,600 in 2018 were recognized as income tax expense in the statement of operations and in the balance sheet. Tax years from 2016 through 2019 remain subject to examination by U.S. federal and state tax jurisdictions. |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Dec. 31, 2019 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | 9. Related Party Transactions During the year ended December 31, 2018, our Company paid $235,400 to Michael A. Feinstein, M.D., our Companys 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. In June 2018, the periodic salary payments provided for in Dr. Feinsteins employment agreement resumed. At December 31, 2019, there was no remaining deferred salary owed to Dr. Feinstein. There was no interest payable on the deferred salary. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 10. Commitments and Contingencies 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 December 31, 2019 are: $51,600 2020; $53,100 2021; $54,600 2022; $56,200 2023 and $18,900 2024. Total lease expense under operating leases was $53,300 and $45,100 in each of the years ended December 31, 2019 and December 31, 2018, respectively. Maturities of lease liabilities are as follows: Operating Leases Year ending December 31 2020 $ 51,600 2021 53,100 2022 54,600 2023 56,200 2024 18,900 Total lease payments 234,400 Less imputed interest (32,400 ) Total $ 202,000 Our Company has an employment agreement, expiring in May 2021, with Michael A. Feinstein, M.D., its Chairman of the Board and Chief Executive Officer. The employment agreement contains one-year renewal provisions that became effective after the original term. Dr. Feinstein receives base compensation of $120,000 per year effective January 1, 2020 plus a performance bonus determined by our Companys Board of Directors. Our Company has an employment agreement, expiring in March 2021, with Terry W. Stovold, its Chief Operating Officer, whereby Mr. Stovold receives a salary set by our Companys Board of Directors, currently set at $75,000, along with a commission of seven percent on sales generated by his efforts. The employment agreement contains one-year renewal provisions that became effective after the original term. Future minimum compensation payments under these employment agreements are: $195,000 to be paid in 2020 and $68,800 to be paid in 2021. From time to time, our Company may be subject to legal proceedings and claims that arise in the ordinary course of its business. |
Stock Options, Warrants and 401
Stock Options, Warrants and 401(k) Savings Plan | 12 Months Ended |
Dec. 31, 2019 | |
Share-based Payment Arrangement [Abstract] | |
Stock Options, Warrants and 401(k) Savings Plan | 11. Stock Options, Warrants and 401(k) Savings Plan Our Company follows FASB ASC 718, Share Based Payment, At December 31, 2019, our Company did not have an active stock option plan. Our Company uses the Black-Scholes option pricing model to calculate the grant-date fair value of an award. There was no compensation expense recognized during the years ended December 31, 2019 and December 31, 2018 and there was no unrecognized portion of expense at December 31, 2019. At December 31, 2019, our Company had 691,365 warrants to purchase common stock of our Company outstanding at an exercise price of $0.02 and expiring at various dates through July 2021. The warrants are held by ten investors who acquired convertible debentures from our Company in 2013 and 2014. A summary of outstanding warrants follows: Weighted Exercise Average Number of Price Range Exercise Shares Per Share Price Outstanding at December 31, 2018 and December 31, 2019 691,365 $0.02 $0.02 Weighted average remaining contractual life (years) .83 Weighted Exercise Average Number of Price Range Exercise Shares Per Share Price Exercisable warrants at year end: 2019 691,365 $0.02 $0.02 Weighted average remaining contractual life (years) .83 The aggregate intrinsic value of warrants outstanding and exercisable as of December 31, 2019 was approximately $38,000. The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying warrants and the closing stock price of $0.075 for our Companys common stock on December 31, 2019. At December 31, 2019, our Company has reserved 6,297,543 shares of common stock for possible future issuance upon exercise of 691,365 warrants and for the conversion of approximately $97,900 of convertible debentures and accrued interest into 5,606,178 shares of common stock. Our Company sponsors a 401(k) savings plan, covering substantially all employees, providing for employee and employer contributions. Employer contributions are made at the discretion of our Company. There were no contributions charged to expense during 2019 or 2018. |
Major Customer and Geographic I
Major Customer and Geographic Information | 12 Months Ended |
Dec. 31, 2019 | |
Major Customer and Geographic Information [Abstract] | |
Major Customer and Geographic Information | 12. Major Customer and Geographic Information Our Companys revenues, expressed as a percentage of total revenues, from non-affiliated customers that equaled 10% or more of our Companys total revenues were: Year ended December 31 2019 2018 Customer A 55% 21% Customer B 18% 59% Our Companys non-affiliate customers whose individual balances amounted to more than 10% of our Companys net accounts receivable, expressed as a percentage of net accounts receivable, were: December 31 2019 2018 Customer A 26% 6% Customer B 67% 86% 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 Companys business operations and financial condition. Our Companys revenues by geographic region are as follows: Year ended December 31 2019 2018 North America $ 856,300 $ 2,280,000 South America 1,500 Europe 600 200 Asia 1,630,500 1,020,000 Australia 50,000 40,000 $ 2,537,400 $ 3,341,700 |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Event | 13. Subsequent Event In December 2019, a novel strain of coronavirus (“COVID-19”) was reported in Wuhan, China. The World Health Organization has declared COVID-19 to constitute a global pandemic. On March 19, 2020 the Governor of Pennsylvania declared a health emergency and issued an order to close all nonessential businesses until further notice. Our operations are deemed to be essential and thus we remain open. However, disruptions to our business operations could occur as a result of quarantines of employees and suppliers in areas affected by the outbreak, facility closures, and travel and logistics restrictions in connection with the outbreak. While we expect this matter to negatively impact its results of operations, cash flow and financial position, the related financial impact cannot be reasonably estimated at this time. |
Significant Accounting Polici_2
Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
Financial Statement Presentation | Financial Statement Presentation |
Estimates | Estimates |
Cash | Cash |
Accounts receivable and credit policies | Accounts receivable and credit policies The carrying amount of accounts receivable is reduced by an allowance that reflects managements best estimate of the amounts that will not be collected. Management individually reviews all accounts receivable balances that exceed 90 days from invoice date and based on an assessment of current creditworthiness, estimates the portion, if any, of the balance that will not be collected. |
Inventory | Inventory |
Fixed assets | Fixed assets |
Patent costs | Patent costs |
Revenues | Revenues Revenue from Contracts with Customers Revenue Recognition 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 fixed fee licensees at a point in time when the term begins if the contract provides for patented ink technology only as it exists at the time that it is granted. However, for license agreements that provide for rights to future ink technology, revenue will be recognized over the term of the license agreement. Revenue for per-unit license agreement will be recognized in the period that the Company receives the related royalty report. Revenue for product sales will be recognized upon shipment to the customer. There are no contract assets or contract liabilities and therefore no unsatisfied performance obligations. The Company does not offer any warranties, however, damaged products can be returned for credit or refund. For disaggregation of revenue by customers and geographic region, see Note 12. 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. 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 change in accumulated deficit on our Balance Sheet at December 31, 2018, including the aggregate impact of the change in accounting principles which was effective on January 1, 2018, was as follows: Accumulated deficit January 1, 2018 $ (12,811,000 ) Net income 1,655,400 Cumulative effect of accounting change at January 1, 2018 96,100 Accumulated deficit December 31, 2018 $ (11,059,500 ) |
Income taxes | Income taxes |
Fair value | Fair value |
Convertible debentures | Convertible debentures |
Stock-based payments | Stock-based payments |
Earnings per share | Earnings per share The table below presents the computation of basic and diluted weighted average common shares outstanding: 2019 2018 Basic shares outstanding 59,443,207 58,616,716 Incremental shares from assumed conversion of warrants 393,363 363,704 Diluted shares outstanding 59,836,570 58,980,420 |
Comprehensive income | Comprehensive income |
Recoverability of Long-Lived Assets | Recoverability of Long-Lived Assets Our Company follows FASB ASC 360-35, Impairment or Disposal of Long-Lived Assets. The Statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Our Company is not aware of any events or circumstances which indicate the existence of an impairment which would be material to our Companys annual financial statements. |
Recently Adopted Accounting Pronouncements | Recently Adopted Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) and subsequent related updates. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from operating leases. The 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 on the balance sheet. As of January 1, 2019, the operating lease right of use asset and operating lease liability amounted to $241,000 with no cumulative-effect adjustment. In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842), Targeted Improvements Leases In May 2017, the FASB issued ASU No. 2017-09, Compensation Stock Compensation (Topic 718), Scope of Modification Accounting |
Recently Issued Accounting Pronouncements Not Yet Adopted | Recently Issued Accounting Pronouncements Not Yet Adopted As of December 31, 2019, there are no recently issued accounting standards not yet adopted which would have a material effect on the Companys financial statements. |
Significant Accounting Polici_3
Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
Change in Accumulated Deficit Balance | The change in accumulated deficit on our Balance Sheet at December 31, 2018, including the aggregate impact of the change in accounting principles which was effective on January 1, 2018, was as follows: Accumulated deficit January 1, 2018 $ (12,811,000 ) Net income 1,655,400 Cumulative effect of accounting change at January 1, 2018 96,100 Accumulated deficit December 31, 2018 $ (11,059,500 ) |
Computation of Basic and Diluted Weighted Average Common Shares Outstanding | The table below presents the computation of basic and diluted weighted average common shares outstanding: 2019 2018 Basic shares outstanding 59,443,207 58,616,716 Incremental shares from assumed conversion of warrants 393,363 363,704 Diluted shares outstanding 59,836,570 58,980,420 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
State Income Tax Expense | The components for state income tax expense resulting from the limitation on the use of net operating losses are: Year ended December 31 2019 2018 Current state taxes $ 52,400 $ 93,400 Deferred state taxes 108,800 $ 52,400 $ 202,200 |
Reconciliation of the Statutory Fedreal Rate | The reconciliation of the statutory federal rate to our Companys effective tax rate follows: 2019 2018 Amount % Amount % Income tax at U.S. federal income tax rate $ 158,600 21 $ 398,200 21 State tax net of federal tax effect 52,300 7 202,200 7 Utilization of operating losses (158,600 ) (21) (398,200 ) (21 ) $ 52,300 7 $ 202,200 7 |
Deferred Tax Assets and Liabilities | The components of deferred tax assets and liabilities as of December 31, 2019 and 2018 are as follows: 2019 2018 Deferred tax asset for NOL carryforwards $ 454,200 $ 693,800 Deferred tax liability - other (47,400 ) (108,800 ) Valuation allowance (454,200 ) (693,800 ) $ (47,400 ) $ (108,800 ) |
Federal Income Tax Expense | The income tax provision consists of the following: 2019 2018 Current $ 119,700 $ 97,000 Deferred (67,400 ) 108,800 $ 52,300 $ 205,800 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Maturities of Lease Liabilities | Maturities of lease liabilities are as follows: Operating Leases Year ending December 31 2020 $ 51,600 2021 53,100 2022 54,600 2023 56,200 2024 18,900 Total lease payments 234,400 Less imputed interest (32,400 ) Total $ 202,000 |
Stock Options, Warrants and 4_2
Stock Options, Warrants and 401(k) Savings Plan (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Share-based Payment Arrangement [Abstract] | |
Warrants Outstanding | A summary of outstanding warrants follows: Weighted Exercise Average Number of Price Range Exercise Shares Per Share Price Outstanding at December 31, 2018 and December 31, 2019 691,365 $0.02 $0.02 Weighted average remaining contractual life (years) .83 Weighted Exercise Average Number of Price Range Exercise Shares Per Share Price Exercisable warrants at year end: 2019 691,365 $0.02 $0.02 Weighted average remaining contractual life (years) .83 |
Major Customer and Geographic_2
Major Customer and Geographic Information (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Segment Reporting [Abstract] | |
Revenues from Non-affiliated Customers | Our Companys revenues, expressed as a percentage of total revenues, from non-affiliated customers that equaled 10% or more of our Companys total revenues were: Year ended December 31 2019 2018 Customer A 55% 21% Customer B 18% 59% |
Non-affiliated Customers with Accounts Receivable More Than 10% | Our Companys non-affiliate customers whose individual balances amounted to more than 10% of our Companys net accounts receivable, expressed as a percentage of net accounts receivable, were: December 31 2019 2018 Customer A 26% 6% Customer B 67% 86% |
Revenue by Geographic Region | Our Companys revenues by geographic region are as follows: Year ended December 31 2019 2018 North America $ 856,300 $ 2,280,000 South America 1,500 Europe 600 200 Asia 1,630,500 1,020,000 Australia 50,000 40,000 $ 2,537,400 $ 3,341,700 |
Significant Accounting Polici_4
Significant Accounting Policies (Details) - USD ($) | Dec. 31, 2019 | Jan. 01, 2019 | Dec. 31, 2018 |
Accounting Policies [Abstract] | |||
Operating lease right of use asset | $ 202,000 | $ 241,000 | |
Operating lease liability | $ 202,000 | $ 241,000 |
Significant Accounting Polici_5
Significant Accounting Policies (Revenues) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Long-term receivable | $ 957,000 | $ 1,352,200 |
Accrued expenses, non-current | 67,000 | 94,700 |
Accumulated deficit | (11,059,500) | (12,811,000) |
Net income | 754,900 | 1,655,400 |
Cumulative effect of accounting change | 96,100 | |
Accumulated deficit | $ (10,304,600) | (11,059,500) |
Topic 606 [Member] | ||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Long-term receivable | 1,521,700 | |
Accrued expenses, non-current | $ 106,500 |
Significant Accounting Polici_6
Significant Accounting Policies (Basic and Diluted Weighted Average Common Shares Outstanding) (Details) - shares | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Accounting Policies [Abstract] | ||
Basic shares outstanding | 59,443,207 | 58,616,716 |
Incremental shares from assumed conversion of warrants | 393,363 | 363,704 |
Diluted shares outstanding | 59,836,570 | 58,980,420 |
Concentration of Credit Risk (D
Concentration of Credit Risk (Details) | Dec. 31, 2019USD ($) |
Risks and Uncertainties [Abstract] | |
Cash uninsured by FDIC | $ 438,000 |
Line of Credit (Details)
Line of Credit (Details) | 12 Months Ended |
Dec. 31, 2019USD ($) | |
Line of Credit Facility [Abstract] | |
Line of credit borrowing capacity | $ 150,000 |
Interest rate | 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. |
Convertible Debentures (Details
Convertible Debentures (Details) - Convertible Debt [Member] - USD ($) | 3 Months Ended | |
Sep. 30, 2019 | Dec. 31, 2019 | |
Debt Instrument [Line Items] | ||
Debt outstanding | $ 97,900 | |
Convertible debentures extended for one year | $ 97,900 | |
Interest rate | 7.00% | |
Conversion price | $ 0.025 | |
Debt converted | $ 30,400 | |
Interest converted | $ 12,300 | |
Shares issued | 1,707,982 | |
Stock purchased through warrants | 691,365 | |
Price per share of warrants | $ 0.02 |
Stockholders' Equity (Details)
Stockholders' Equity (Details) | 12 Months Ended |
Dec. 31, 2019USD ($)shares | |
Class of Stock [Line Items] | |
Issuance of common stock | $ 25,400 |
Common stock [Member] | |
Class of Stock [Line Items] | |
Issuance of common stock | $ 7,100 |
Issuance of common stock shares | shares | 720,000 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Operating Loss Carryforwards [Line Items] | ||
Net operating loss carryforwards | $ 1,622,000 | $ 2,478,000 |
Deferred tax assets valuation allowance | 454,200 | 693,800 |
Unrecognized tax benefits | ||
Change in unrecognized tax benefits during the period | ||
Accrual for uncertain tax positions | ||
Interest and penalties from tax examinations recognized in the statement of operations | 3,600 | |
Interest and penalties from tax examinations recognized on the balance sheet | $ 3,600 | |
Minimum [Member] | ||
Operating Loss Carryforwards [Line Items] | ||
Tax years open for examination | 2016 | |
Maximum [Member] | ||
Operating Loss Carryforwards [Line Items] | ||
Net operating loss carryforwards expiration date | Dec. 31, 2032 | |
Tax years open for examination | 2019 |
Income Taxes (State Income Tax
Income Taxes (State Income Tax Expense) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | ||
Current state taxes | $ 52,400 | $ 93,400 |
Deferred state taxes | 108,800 | |
Income tax expense | $ 52,400 | $ 202,200 |
Income Taxes (Reconciliation of
Income Taxes (Reconciliation of the Statutory Fedreal Rate) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Amount: | ||
Income tax at U.S. federal income tax rate | $ 158,600 | $ 398,200 |
State tax net of federal tax effect | 52,300 | 202,200 |
Utilization of operating losses | (158,600) | (398,200) |
Total | $ 52,300 | $ 202,200 |
Percent: | ||
Income tax at U.S. federal income tax rate | 21.00% | 21.00% |
State tax net of federal tax effect | 7.00% | 7.00% |
Utilization of operating losses | (21.00%) | (21.00%) |
Total | 7.00% | 7.00% |
Income Taxes (Deferred Tax Asse
Income Taxes (Deferred Tax Assets and Liabilities) (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Income Tax Disclosure [Abstract] | ||
Deferred tax asset for NOL carryforwards | $ 454,200 | $ 693,800 |
Deferred tax liability - other | (47,400) | (108,800) |
Valuation allowance | (454,200) | (693,800) |
Deferred tax liability | $ (47,400) | $ (108,800) |
Income Taxes (Income Tax Provis
Income Taxes (Income Tax Provision) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | ||
Current | $ 119,700 | $ 97,000 |
Deferred | (67,400) | 108,800 |
Income taxes | $ 52,300 | $ 205,800 |
Related Party Transactions (Det
Related Party Transactions (Details) - Chief Executive Officer [Member] - USD ($) | 5 Months Ended | 12 Months Ended | |
May 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | |
Related Party Transaction [Line Items] | |||
Amount of salary deferred by related party | $ 35,400 | $ 85,000 | |
Amount of deferred salary owed to related party | $ 0 | ||
Portions of deferred salary paid to related party | $ 235,400 |
Commitments and Contingencies_2
Commitments and Contingencies (Operating Leases) (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Jan. 01, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |||
Operating lease right of use asset | $ 202,000 | $ 241,000 | |
Operating lease liability | $ 202,000 | $ 241,000 | |
Incremental borrowing rate | 6.00% | ||
Lease expiration | Dec. 31, 2024 | ||
Future minimum payments due under operating leases: | |||
2020 | $ 51,600 | ||
2021 | 53,100 | ||
2022 | 54,600 | ||
2023 | 56,200 | ||
2024 | 18,900 | ||
Lease expense | $ 53,300 | $ 45,100 |
Commitments and Contingencies_3
Commitments and Contingencies (Maturities of Lease Liabilities) (Details) - USD ($) | Dec. 31, 2019 | Jan. 01, 2019 |
Lessee Disclosure [Abstract] | ||
2020 | $ 51,600 | |
2021 | 53,100 | |
2022 | 54,600 | |
2023 | 56,200 | |
2024 | 18,900 | |
Total lease payments | 234,400 | |
Less imputed interest | (32,400) | |
Total | $ 202,000 | $ 241,000 |
Commitments and Contingencies_4
Commitments and Contingencies (Employment Agreements) (Details) - Employment Agreement [Member] | 12 Months Ended |
Dec. 31, 2019USD ($) | |
Other Commitments [Line Items] | |
Future minimum compensation payments due year 2020 | $ 195,000 |
Future minimum compensation payments due year 2021 | $ 68,800 |
Chief Executive Officer [Member] | |
Other Commitments [Line Items] | |
Employment contract, expiration date | 2021-05 |
Annual base compensation owed to employee per employment agreement | $ 120,000 |
Chief Operating Officer [Member] | |
Other Commitments [Line Items] | |
Employment contract, expiration date | 2021-03 |
Annual base compensation owed to employee per employment agreement | $ 75,000 |
Commission rate owed to employee expressed as percentage of sales | 7.00% |
Stock Options, Warrants and 4_3
Stock Options, Warrants and 401(k) Savings Plan (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Compensation expense from options not yet recognized | $ 0 | $ 0 |
Employer contributions for 401(k) savings plan charged to expense during period | 0 | 0 |
Stock option compensation expense | 0 | $ 0 |
Warrant intrinsic value | 38,000 | |
Warrant intrinsic value exercisable | $ 38,000 | |
Closing stock price | $ 0.075 | |
Common shares reserved for future issue | 6,297,543 | |
Value of outstanding convertible debentures and accrued interest possibly converted | $ 97,900 | |
Number of common shares reserved for future debt conversion | 5,606,178 | |
Maximum [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Warrants expiration date | 2021-07 |
Stock Options, Warrants and 4_4
Stock Options, Warrants and 401(k) Savings Plan (Outstanding Warrants) (Details) - Warrant [Member] - $ / shares | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Warrants outstanding | 691,365 | 691,365 |
Warrants exercise price | $ 0.02 | $ 0.02 |
Weighted average remaining contractual life (years) | 9 months 29 days | |
Warrants exercisable | 691,365 | 691,365 |
Weighted average exercise price, exercisable | $ 0.02 | $ 0.02 |
Warrants exercisable, weighted average remaining contractual life (years) | 9 months 29 days |
Major Customer and Geographic_3
Major Customer and Geographic Information (Non-affiliated Customers) (Details) - Revenue [Member] | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Customer A [Member] | ||
Revenue, Major Customer [Line Items] | ||
Risk percentage | 55.00% | 21.00% |
Customer B [Member] | ||
Revenue, Major Customer [Line Items] | ||
Risk percentage | 18.00% | 59.00% |
Major Customer and Geographic_4
Major Customer and Geographic Information (Non-affiliated Customers with Accounts Receivable) (Details) - Accounts Receivable [Member] | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Customer A [Member] | ||
Concentration Risk [Line Items] | ||
Risk percentage | 26.00% | 6.00% |
Customer B [Member] | ||
Concentration Risk [Line Items] | ||
Risk percentage | 67.00% | 86.00% |
Major Customer and Geographic_5
Major Customer and Geographic Information (Revenue by Geographic Region) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Revenues | $ 2,537,400 | $ 3,341,700 |
North America [Member] | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Revenues | 856,300 | 2,280,000 |
South America [Member] | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Revenues | 1,500 | |
Europe [Member] | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Revenues | 600 | 200 |
Asia [Member] | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Revenues | 1,630,500 | 1,020,000 |
Australia [Member] | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Revenues | $ 50,000 | $ 40,000 |