Nocopi (NNUP) 10-Q 10 Aug 17 2017 Q2 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2017	Aug. 01, 2017
Document And Entity Information
Entity Registrant Name	NOCOPI TECHNOLOGIES INC/MD/
Entity Central Index Key	888,981
Document Type	10-Q
Document Period End Date	Jun. 30, 2017
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		58,599,016
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2,017

Statements of Operations

Statements of Operations - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Revenues
Licenses, royalties and fees	$ 131,900	$ 98,700	$ 290,700	$ 211,500
Product and other sales	227,700	104,700	410,300	274,700
Total revenues	359,600	203,400	701,000	486,200
Cost of revenues
Licenses, royalties and fees	26,800	16,900	47,800	36,500
Product and other sales	94,100	49,200	166,300	118,300
Total cost of revenues	120,900	66,100	214,100	154,800
Gross profit	238,700	137,300	486,900	331,400
Operating expenses
Research and development	36,500	32,400	72,900	70,000
Sales and marketing	59,800	47,400	120,700	103,900
General and administrative	68,900	66,800	159,600	154,300
Total operating expenses	165,200	146,600	353,200	328,200
Net income (loss) from operations	73,500	(9,300)	133,700	3,200
Other income (expenses)
Interest expense, bank charges and accretion of interest	(3,100)	(3,400)	(19,300)	(6,800)
Total other income (expenses)	(3,100)	(3,400)	(19,300)	(6,800)
Net income (loss)	$ 70,400	$ (12,700)	$ 114,400	$ (3,600)
Basic and diluted net income (loss) per common share	$ 0	$ 0	$ 0	$ 0
Weighted average common shares outstanding
Basic	58,599,016	58,599,016	58,599,016	58,599,016
Diluted	58,969,160	58,599,016	58,889,178	58,599,016

Balance Sheets

Balance Sheets - USD ($)	Jun. 30, 2017	Dec. 31, 2016
Current assets
Cash	$ 179,500	$ 199,100
Accounts receivable less $5,000 allowance for doubtful accounts	294,000	243,400
Inventory	86,400	70,900
Prepaid and other	30,000	29,600
Total current assets	589,900	543,000
Fixed assets
Leasehold improvements	19,700	19,700
Furniture, fixtures and equipment	183,200	178,300
Fixed assets, gross	202,900	198,000
Less: accumulated depreciation and amortization	186,500	183,000
Total fixed assets	16,400	15,000
Total assets	606,300	558,000
Current liabilities
Demand loans	10,000	10,000
Convertible debentures	95,000	128,300
Accounts payable	30,100	33,100
Accrued expenses	393,900	459,900
Deferred revenue	96,000	106,300
Total current liabilities	625,000	737,600
Convertible debentures	33,300
Stockholders' deficiency
Common stock, $0.01 par value, Authorized - 75,000,000 shares, Issued and outstanding - 58,599,016 shares	586,000	586,000
Paid-in capital	12,439,800	12,426,600
Accumulated deficit	(13,077,800)	(13,192,200)
Total stockholders' deficiency	(52,000)	(179,600)
Total liabilities and stockholders' deficiency	$ 606,300	$ 558,000

Balance Sheets (Parenthetical)

Balance Sheets (Parenthetical) - USD ($)	Jun. 30, 2017	Dec. 31, 2016
Statement of Financial Position [Abstract]
Allowance for doubtful accounts	$ 5,000	$ 5,000
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	75,000,000	75,000,000
Common stock, shares issued	58,599,016	58,599,016
Common stock, shares outstanding	58,599,016	58,599,016

Statements of Cash Flows

Statements of Cash Flows - USD ($)	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Operating Activities
Net income (loss)	$ 114,400	$ (3,600)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
Depreciation and amortization	3,500	3,700
Accretion of interest - convertible debentures	13,200	500
Net income adjusted for non-cash operating activities	131,100	600
(Increase) decrease in assets
Accounts receivable	(50,600)	85,100
Inventory	(15,500)	(26,300)
Prepaid and other	(400)	(12,500)
Increase (decrease) in liabilities
Accounts payable and accrued expenses	(69,000)	39,900
Deferred revenue	(10,300)	43,400
Total increase in operating capital	(145,800)	129,600
Net cash provided by (used in) operating activities	(14,700)	130,200
Investing Activities
Additions to fixed assets	(4,900)
Net cash used in investing activities	(4,900)
Financing Activities
Repayment of demand loans		(9,000)
Net cash used in financing activities		(9,000)
Increase (decrease) in cash	(19,600)	121,200
Cash at beginning of year	199,100	11,400
Cash at end of period	$ 179,500	$ 132,600

Financial Statements

Financial Statements	6 Months Ended
	Jun. 30, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Financial Statements	Note 1. Financial Statements The accompanying unaudited condensed financial statements have been prepared by Nocopi Technologies, Inc. (the “Company”). These statements include all adjustments (consisting only of normal recurring adjustments) which management believes necessary for a fair presentation of the statements and have been prepared on a consistent basis using the accounting policies described in the summary of Accounting Policies included in the Company's 2016 Annual Report on Form 10-K. Certain financial information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the accompanying disclosures are adequate to make the information presented not misleading. The Notes to Financial Statements included in the 2016 Annual Report on Form 10-K should be read in conjunction with the accompanying interim financial statements. The interim operating results for the three months and six months ended June 30, 2017 may not be necessarily indicative of the operating results expected for the full year. The Company follows Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 220 in reporting comprehensive income. Comprehensive income is a more inclusive financial reporting methodology that includes disclosure of certain financial information that historically has not been recognized in the calculation of net income. Since the Company has no items of other comprehensive income, comprehensive income (loss) is equal to net income (loss).

Going Concern

Going Concern	6 Months Ended
	Jun. 30, 2017
Going Concern [Abstract]
Going Concern	Note 2. Going Concern Since its inception, the Company has incurred significant losses and, as of June 30, 2017, had accumulated losses of $13,077,800. For the six months ended June 30, 2017, the Company had net income from operations of $133,700. At June 30, 2017, the Company had negative working capital of $35,100 and a stockholders’ deficiency of $52,000. For the year ended December 31, 2016, the Company’s net income from operations was $271,800. The Company, which is substantially dependent on its licensees to generate licensing revenues, may incur operating losses and experience negative cash flow in the future. Sustaining profitability and positive cash flow depends on the Company’s ability to maintain the increases in revenues and gross profits that it realized in 2016 from its traditional business. There can be no assurances that the Company will be able to generate sufficient revenues and gross profits to sustain profitability and positive cash flow in the future. Receipt of funds in earlier periods from investors and from demand loan holders have allowed the Company to remain in operation through the current date. Management of the Company believes that it may need additional capital in the future both to fund investments that may be needed to maintain operating revenues at levels that will sustain its operations and maintain the levels of operating income and positive cash flow achieved during 2016. There can be no assurances that the Company will be successful in obtaining sufficient additional capital, or if it does, that the additional capital will enable the Company to impact its revenues so as to have a material positive effect on the Company’s operations and cash flow. The Company believes that without additional capital, whether in the form of debt, equity or both, it may be not be able to satisfy its debts as they become due. The above mentioned factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the date the financial statements are issued. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Stock Based Compensation

Stock Based Compensation	6 Months Ended
	Jun. 30, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Stock Based Compensation	Note 3. Stock Based Compensation The Company follows FASB ASC 718, Compensation – Stock Compensation

Demand Loans

Demand Loans	6 Months Ended
	Jun. 30, 2017
Debt Disclosure [Abstract]
Demand Loans	Note 4. Demand Loans At June 30, 2017, the Company had a $10,000 unsecured loan from one individual outstanding. The loan bears interest at 8%. In late July 2017, the Company repaid this remaining $10,000 unsecured loan. During the first six months of 2016, the Company repaid $9,000 of the unsecured loans.

Convertible Debentures

Convertible Debentures	6 Months Ended
	Jun. 30, 2017
Convertible Debt [Abstract]
Convertible Debentures	Note 5. Convertible Debentures At June 30, 2017, the Company had convertible debentures totaling $128,300 outstanding, of which $95,000 are due during the third quarter of 2017 and $33,300 are due during the third quarter of 2018. The convertible debentures bear interest at 7%. At the option of the lender, the debentures and accrued interest are convertible in whole or part into common stock of the Company at $0.025 per share. During the first quarter of 2017, the Company’s Board of Directors approved and the holders of $33,300 of convertible debentures that had matured during the third quarter of 2016, one of which is held by a Director of the Company, accepted an offer of extension whereby the maturity dates of the convertible debentures are extended for two years and the conversion rate of the debentures and accrued interest into Common Stock of the Company is reduced from $0.05 to $0.025. In accordance with FASB ASC 470, this modification of the convertible debentures was recorded as a debt discount to the notes payable of approximately $13,200 with an offsetting credit to additional-paid in capital. In the three months ended March 31, 2017, the entire $13,200 was accreted through interest expense. The Company in 2012 and 2013 also granted warrants to purchase 691,365 shares of the Company’s common stock at $0.02 per share to the holders of the debentures. The warrants are exercisable two years after issuance and expire seven years after issuance. The fair value of the warrants was determined using the Black-Scholes pricing model. The relative fair value of the warrants was recorded as a discount to the notes payable with an offsetting credit to additional paid-in capital since the Company determined that the warrants were an equity instrument in accordance with FASB ASC 815. The debt discount related to the warrant issuances was accreted through interest expense over the original term of the notes payable. For the three months ended June 30, 2017 and June 30, 2016, $0 and approximately $300, respectively, was accreted through interest expense. For the six months ended June 30, 2017 and June 30, 2016, $0 and approximately $500, respectively, was accreted through interest expense. The following table summarizes the Company’s warrant position at June 30, 2017 and December 31, 2016: Weighted Average Number Exercise Exercise of Shares Price Price Outstanding warrants - December 31, 2016 721,365 $0.01 to $0.07 $ 0.021 Outstanding warrants - June 30, 2017 721,365 $0.01 to $0.07 $ 0.021 Weighted average remaining contractual life (years) 3.20 Exercisable warrants - June 30, 2017 721,365 $0.01 to $0.07 $ 0.021 Weighted average remaining contractual life (years) 3.20

Other Income (Expenses)

Other Income (Expenses)	6 Months Ended
	Jun. 30, 2017
Other Income and Expenses [Abstract]
Other Income (Expenses)	Note 6. Other Income (Expenses) Other income (expenses) in the three months and six months ended June 30, 2017 and June 30, 2016 includes interest on unsecured loans from two individuals and on convertible debentures held by nine investors. Also included in other income (expenses) is accretion of debt discounts in the six months ended June 30, 2017 related to the extension of the maturity dates of $33,300 of convertible debentures.

Income Taxes

Income Taxes	6 Months Ended
	Jun. 30, 2017
Income Tax Disclosure [Abstract]
Income Taxes	Note 7. Income Taxes There is no provision for income taxes for the three months and six months ended June 30, 2017 due to the availability of net operating loss carryforwards. There is no income tax benefit for the losses for the three months and six months ended June 30, 2016 because the Company has determined that the realization of the net deferred tax asset is not assured. The Company has created a valuation allowance for the entire amount of such benefits. There was no change in unrecognized tax benefits during the period ended June 30, 2017 and there was no accrual for uncertain tax positions as of June 30, 2017. Tax years from 2013 through 2016 remain subject to examination by U.S. federal and state jurisdictions.

Related Party Transactions

Related Party Transactions	6 Months Ended
	Jun. 30, 2017
Related Party Transactions [Abstract]
Related Party Transactions	Note 8. Related Party Transactions During the six months ended June 30, 2017, and June 30, 2016 the Company paid $116,200 and $15,000, respectively, to Michael A. Feinstein, M.D., the Company’s Chairman of the Board and Chief Executive Officer, representing a portion of previously deferred salary owed to him under an employment agreement with the Company. During each of the six month periods ended June 30, 2017 and June 30, 2016, Dr. Feinstein deferred $42,500 of salary. At June 30, 2017, Dr. Feinstein was owed approximately $227,500 of salary deferred by him. Since June 30, 2017, Dr. Feinstein has been paid approximately $11,800 of salary previously deferred by him. There is no interest payable on the deferred salary.

Earnings (Loss) per Share

Earnings (Loss) per Share	6 Months Ended
	Jun. 30, 2017
Weighted average common shares outstanding
Earnings (Loss) per Share	Note 9. Earnings (Loss) per Share In accordance with Earnings per Share

Major Customer and Geographic I

Major Customer and Geographic Information	6 Months Ended
	Jun. 30, 2017
Major Customer and Geographic Information [Abstract]
Major Customer and Geographic Information	Note 10. Major Customer and Geographic Information The Company’s revenues, expressed as a percentage of total revenues, from non-affiliated customers that equaled 10% or more of the Company’s total revenues were: Three Months ended June 30 Six Months ended June 30 2017 2016 2017 2016 Customer A 47 % 29 % 40 % 12 % Customer B 20 % 24 % 24 % 23 % Customer C 12 % 17 % 12 % 37 % The Company’s non-affiliate customers whose individual balances amounted to more than 10% of the Company’s net accounts receivable, expressed as a percentage of net accounts receivable, were: June 30 December 31 2017 2016 Customer A 44 % 26 % Customer B 25 % 47 % Customer C 14 % 5 % The Company performs ongoing credit evaluations of its customers and generally does not require collateral. The Company also maintains allowances for potential credit losses. The loss of a major customer could have a material adverse effect on the Company’s business operations and financial condition. The Company’s revenues by geographic region are as follows: Three Months ended June 30 Six Months ended June 30 2017 2016 2017 2016 North America $ 136,700 $ 100,400 $ 311,800 $ 226,400 Europe 200 – 200 – Asia 215,300 95,600 374,200 245,000 Australia 7,400 7,400 14,800 14,800 $ 359,600 $ 203,400 $ 701,000 $ 486,200

Convertible Debentures (Tables)

Convertible Debentures (Tables)	6 Months Ended
	Jun. 30, 2017
Convertible Debt [Abstract]
Schedule of Warrants Outstanding	The following table summarizes the Company’s warrant position at June 30, 2017 and December 31, 2016: Weighted Average Number Exercise Exercise of Shares Price Price Outstanding warrants - December 31, 2016 721,365 $0.01 to $0.07 $ 0.021 Outstanding warrants - June 30, 2017 721,365 $0.01 to $0.07 $ 0.021 Weighted average remaining contractual life (years) 3.20 Exercisable warrants - June 30, 2017 721,365 $0.01 to $0.07 $ 0.021 Weighted average remaining contractual life (years) 3.20

Major Customer and Geographic17

Major Customer and Geographic Information (Tables)	6 Months Ended
	Jun. 30, 2017
Segment Reporting [Abstract]
Schedule of Revenues from Non-affiliated Customers	The Company’s revenues, expressed as a percentage of total revenues, from non-affiliated customers that equaled 10% or more of the Company’s total revenues were: Three Months ended June 30 Six Months ended June 30 2017 2016 2017 2016 Customer A 47 % 29 % 40 % 12 % Customer B 20 % 24 % 24 % 23 % Customer C 12 % 17 % 12 % 37 %
Schedule of Non-affiliated Customers with Accounts Receivable More Than 10%	The Company’s non-affiliate customers whose individual balances amounted to more than 10% of the Company’s net accounts receivable, expressed as a percentage of net accounts receivable, were: June 30 December 31 2017 2016 Customer A 44 % 26 % Customer B 25 % 47 % Customer C 14 % 5 %
Schedule of Revenue by Geographic Region	The Company’s revenues by geographic region are as follows: Three Months ended June 30 Six Months ended June 30 2017 2016 2017 2016 North America $ 136,700 $ 100,400 $ 311,800 $ 226,400 Europe 200 – 200 – Asia 215,300 95,600 374,200 245,000 Australia 7,400 7,400 14,800 14,800 $ 359,600 $ 203,400 $ 701,000 $ 486,200

Going Concern (Details)

Going Concern (Details) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Dec. 31, 2016
Going Concern [Abstract]
Accumulated deficit	$ 13,077,800		$ 13,077,800		$ 13,192,200
Working capital deficit	35,100		35,100
Operating income	73,500	$ (9,300)	133,700	$ 3,200	271,800
Stockholders' deficiency	$ 52,000		$ 52,000		$ 179,600

Stock Based Compensation (Detai

Stock Based Compensation (Details)	Jun. 30, 2017USD ($)
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Unrecognized portion of expense related to stock option grants	$ 0

Demand Loans (Details)

Demand Loans (Details) - USD ($)	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Dec. 31, 2016
Debt Instrument [Line Items]
Demand loans	$ 10,000		$ 10,000
Repayment of demand loans		$ 9,000
Unsecured loan [Member]
Debt Instrument [Line Items]
Demand loans	$ 10,000
Debt instrument, interest rate	8.00%
Repayment of demand loans		$ 9,000

Convertible Debentures (Narrati

Convertible Debentures (Narrative) (Details) - USD ($)	3 Months Ended			6 Months Ended
	Jun. 30, 2017	Mar. 31, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Debt Instrument [Line Items]
Interest expense	$ 3,100		$ 3,400	$ 19,300	$ 6,800
Convertible Debt [Member]
Debt Instrument [Line Items]
Convertible debt amount outstanding	128,300			128,300
Convertible debt due during the third quarter of 2017	95,000			95,000
Convertible debt due during the third quarter of 2018	$ 33,300			$ 33,300
Debt instrument, interest rate	7.00%			7.00%
Number of shares of common stock that can be purchased through warrants	691,365			691,365
Price per share of warrants	$ 0.02			$ 0.02
Warrant exercisable term				2 years	2 years
Warrant expiration term				7 years	7 years
Interest expense	$ 0		$ 300	$ 0	$ 500
Convertible Debt [Member] | Conversion Price One [Member]
Debt Instrument [Line Items]
Debt instrument, conversion price per share	$ 0.025			$ 0.025
Convertible Debt [Member] | Conversion Price Two [Member]
Debt Instrument [Line Items]
Amount of principal that can be converted				$ 33,300
Debt instrument, conversion price per share	$ 0.05			$ 0.05
Debt discount recognized on notes payable		$ 13,200
Accretion of debt discount recognized as interest expense		$ 13,200

Convertible Debentures (Warrant

Convertible Debentures (Warrants Activity) (Details) - Warrant [Member] - $ / shares	6 Months Ended
	Jun. 30, 2017	Dec. 31, 2016
Warrants
Warrants outstanding	721,365	721,365
Price
Warrants outstanding	$ 0.021	$ 0.021
Warrants outstanding exercise price range, lower limit	0.01	0.01
Warrants outstanding exercise price range, upper limit	0.07	$ 0.07
Warrants exercisable exercise price range, lower limit	0.01
Warrants exercisable exercise price range, upper limit	$ 0.07
Weighted average remaining contractual life	3 years 2 months 12 days
Warrants exercisable, number	721,365
Warrants exercisable, weighted average exercise price	$ 0.021
Warrants exercisable, weighted average remaining contractual life	3 years 2 months 12 days

Income Taxes (Details)

Income Taxes (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Income Tax Contingency [Line Items]
Income tax provision
Change in unrecognized tax benefits during the period
Accrual for uncertain tax positions
Minimum [Member]
Income Tax Contingency [Line Items]
Tax years open for examination			2,013
Maximum [Member]
Income Tax Contingency [Line Items]
Tax years open for examination			2,016

Related Party Transactions (Det

Related Party Transactions (Details) - Related Party [Member] - USD ($)	1 Months Ended	6 Months Ended
	Aug. 10, 2017	Jun. 30, 2017	Jun. 30, 2016
Related Party Transaction [Line Items]
Deferred salary paid to related party		$ 116,200	$ 15,000
Portion of salary to related party deferred during period		42,500	$ 42,500
Deferred salary owed to related party		$ 227,500
Subsequent Event [Member]
Related Party Transaction [Line Items]
Deferred salary paid to related party	$ 11,800

Earnings (Loss) per Share (Deta

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

Major Customer and Geographic26

Major Customer and Geographic Information (Schedule of Revenues from Non-affiliated Customers) (Details) - Revenue [Member]	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Customer A [Member]
Revenue, Major Customer [Line Items]
Risk percentage	47.00%	29.00%	40.00%	12.00%
Customer B [Member]
Revenue, Major Customer [Line Items]
Risk percentage	20.00%	24.00%	24.00%	23.00%
Customer C [Member]
Revenue, Major Customer [Line Items]
Risk percentage	12.00%	17.00%	12.00%	37.00%

Major Customer and Geographic27

Major Customer and Geographic Information (Schedule of Non-affiliated Customers with Accounts Receivable) (Details) - Accounts Receivable [Member]	6 Months Ended	12 Months Ended
	Jun. 30, 2017	Dec. 31, 2016
Customer A [Member]
Concentration Risk [Line Items]
Risk percentage	44.00%	26.00%
Customer B [Member]
Concentration Risk [Line Items]
Risk percentage	25.00%	47.00%
Customer C [Member]
Concentration Risk [Line Items]
Risk percentage	14.00%	5.00%

Major Customer and Geographic28

Major Customer and Geographic Information (Schedule of Revenue by Geographic Region) (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	$ 359,600	$ 203,400	$ 701,000	$ 486,200
North America [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	136,700	100,400	311,800	226,400
Europe [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	200		200
Asia [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	215,300	95,600	374,200	245,000
Australia [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	$ 7,400	$ 7,400	$ 14,800	$ 14,800