Nocopi (NNUP) 10-Q 14 May 21 2021 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2021	May 12, 2021
Document And Entity Information
Entity Registrant Name	NOCOPI TECHNOLOGIES INC/MD/
Entity Central Index Key	0000888981
Document Type	10-Q
Document Period End Date	Mar. 31, 2021
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		67,353,690
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2021
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Incorporation State Country Name	MD
Entity File Number	000-20333

Statements of Operations (Unaud

Statements of Operations (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Revenues
Licenses, royalties and fees	$ 185,500	$ 164,600
Product and other sales	425,900	355,700
Total revenues	611,400	520,300
Cost of revenues
Licenses, royalties and fees	47,100	49,700
Product and other sales	173,200	201,600
Total cost of revenues	220,300	251,300
Gross profit	391,100	269,000
Operating expenses
Research and development	44,500	41,100
Sales and marketing	83,200	84,000
General and administrative	145,500	139,700
Total operating expenses	273,200	264,800
Net income from operations	117,900	4,200
Other income (expenses)
Interest income	4,800	3,800
Interest expense and bank charges	(600)	(2,500)
Total other income (expenses)	4,200	1,300
Net income before income taxes	122,100	5,500
Income taxes	7,300	(47,100)
Net income	$ 114,800	$ 52,600
Basic and diluted net income per common share	$ .00	$ .00
Weighted average common shares outstanding
Basic	67,353,690	61,044,698
Diluted	67,477,603	61,530,910

Balance Sheets (Unaudited)

Balance Sheets (Unaudited) - USD ($)	Mar. 31, 2021	Dec. 31, 2020
Current assets
Cash	$ 1,728,200	$ 1,362,800
Accounts receivable less $12,000 allowance for doubtful accounts	1,167,600	1,280,800
Inventory	384,700	324,800
Prepaid and other	63,600	97,800
Total current assets	3,344,100	3,066,200
Fixed assets
Leasehold improvements	27,800	27,800
Furniture, fixtures and equipment	163,700	163,700
Fixed assets, gross	191,500	191,500
Less: accumulated depreciation and amortization	110,400	104,300
Total fixed assets	81,100	87,200
Other assets
Long-term receivables	465,300	559,500
Operating lease right of use - building	149,400	160,300
Other assets	614,700	719,800
Total assets	4,039,900	3,873,200
Current liabilities
Accounts payable	52,600	5,700
Accrued expenses	193,800	178,600
Income taxes	43,600	36,300
Operating lease liability - current	45,200	44,500
Total current liabilities	335,200	265,100
Other liabilities
Accrued expenses, non-current	32,600	39,200
Operating lease liability - non-current	104,200	115,800
Total other liabilities	136,800	155,000
Stockholders' equity
Common stock, $0.01 par value Authorized - 75,000,000 shares, Issued and outstanding - 67,353,690 shares	673,500	673,500
Paid-in capital	12,575,800	12,575,800
Accumulated deficit	(9,681,400)	(9,796,200)
Total stockholders' equity	3,567,900	3,453,100
Total liabilities and stockholders' equity	$ 4,039,900	$ 3,873,200

Balance Sheets (Unaudited) (Par

Balance Sheets (Unaudited) (Parenthetical) - USD ($)	Mar. 31, 2021	Dec. 31, 2020
Statement of Financial Position [Abstract]
Allowance for doubtful accounts	$ 12,000	$ 12,000
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	75,000,000	75,000,000
Common stock, shares issued	67,353,690	67,353,690
Common stock, shares outstanding	67,353,690	67,353,690

Statements of Cash Flows (Unaud

Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Operating Activities
Net income	$ 114,800	$ 52,600
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization	6,100	4,400
Deferred income taxes		(47,400)
Other assets	105,100	105,900
Other liabilities	(17,500)	(16,900)
Net income adjusted for non-cash operating activities	208,500	98,600
(Increase) decrease in assets
Accounts receivable	113,200	457,600
Inventory	(59,900)	(59,400)
Prepaid and other	34,200	42,900
Increase (decrease) in liabilities
Accounts payable and accrued expenses	62,100	(15,100)
Income taxes	7,300	300
Total increase in operating capital	156,900	426,300
Net cash provided by operating activities	365,400	524,900
Investment Activities
Additions to fixed assets		(7,500)
Net cash used in investing activities		(7,500)
Increase in cash	365,400	517,400
Cash at beginning of year	1,362,800	688,000
Cash at end of period	$ 1,728,200	$ 1,205,400

Statements of Stockholders' Equ

Statements of Stockholders' Equity (Unaudited) - USD ($)	Common Stock	Paid-In Capital	Accumulated Deficit	Total
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
Net income			52,600	52,600
Balance at Mar. 31, 2020	$ 610,400	12,483,900	(10,252,000)	2,842,300
Balance shares at Mar. 31, 2020	61,044,698
Balance at Dec. 31, 2020	$ 673,500	12,575,800	(9,796,200)	$ 3,453,100
Balance shares at Dec. 31, 2020	67,353,690			67,353,690
Net income			114,800	$ 114,800
Balance at Mar. 31, 2021	$ 673,500	$ 12,575,800	$ (9,681,400)	$ 3,567,900
Balance shares at Mar. 31, 2021	67,353,690			67,353,690

Financial Statements

Financial Statements	3 Months Ended
	Mar. 31, 2021
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. (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 Note 2 Significant Accounting Policies included in the Notes to Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the Securities and Exchange Commission on March 30, 2021, as amended on April 30, 2021 (the “2020 Annual Report”). 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 2020 Annual Report should be read in conjunction with the accompanying interim financial statements. The interim operating results for the three months ended March 31, 2021 may not be necessarily indicative of the operating results expected for the full year. A novel strain of coronavirus, COVID-19, that was first identified in Wuhan, China in December 2019 has surfaced in many countries around the world including the United States. Many countries continue to experience reoccurrences of COVID-19 to the current date. The World Health Organization has declared COVID-19 to constitute a global pandemic. Certain state and local governments reacted by placing significant restrictions on businesses including a closure in Pennsylvania of non-essential businesses that was announced on March 20, 2020. While many Pennsylvania businesses have been allowed to reopen, often at limited capacity and with certain restrictions, as of the current date, there can be no assurances that future closures will be avoided. A requirement to close our Company for a considerable period of time could result in a negative impact on our Company’s financial condition and results of operations. Additionally, as our Company imports certain raw materials from China, if an extended disruption of the supply of these raw materials were to occur, our ability to produce products for sale to our customers could be negatively impacted. Further, restrictions on our customers and licensees in areas affected by the COVID-19 could adversely affect our results of operations and financial condition. We cannot predict the scope or magnitude of the negative effect that may result from the impact of the COVID-19 pandemic on the Company’s financial condition and results of operations. Our Company’s results of operations were negatively affected in 2020 in part as a result of a significant increase in the cost of raw materials utilized by our Company in the manufacture of certain of its products as a result of price increases related to the impact of the ongoing COVID-19 pandemic on the availability and supply of these raw materials. While prices of these raw materials have declined at the present time, there can be no assurances that raw material prices will remain at current levels or decrease to pre-COVID-19 pandemic levels in future periods. As the COVID-19 pandemic continues to spread, any future 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.

Stock Based Compensation

Stock Based Compensation	3 Months Ended
	Mar. 31, 2021
Share-based Payment Arrangement [Abstract]
Stock Based Compensation	Note 2. Stock Based Compensation Our Company follows FASB ASC 718, Compensation – Stock Compensation

Line of Credit

Line of Credit	3 Months Ended
	Mar. 31, 2021
Line of Credit Facility [Abstract]
Line of Credit	Note 3. 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 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.

Stock Warrants

Stock Warrants	3 Months Ended
	Mar. 31, 2020
Convertible Debt [Abstract]
Stock Warrants	Note 4. Stock Warrants At March 31, 2021, our Company had warrants outstanding to purchase 141,365 of our Company’s common stock at $0.02 per share. The warrants were granted in 2014 to two individuals who acquired convertible debentures from the Company in 2014. 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 March 31, 2021 and December 31, 2020: Weighted Average Number Exercise Exercise of Shares Price Price Outstanding warrants - December 31, 2020 141,365 $ 0.02 $ 0.02 Outstanding warrants - March 31, 2021 141,365 $ 0.02 $ 0.02 Weighted average remaining contractual life (years) .27 Exercisable warrants - March 31, 2021 141,365 $ 0.02 $ 0.02 The aggregate intrinsic value of warrants outstanding and exercisable as of March 31, 2021 was approximately $19,800. The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying warrants and the closing stock price of $0.16 for our Company’s common stock on March 31, 2021.

Other Income (Expenses)

Other Income (Expenses)	3 Months Ended
	Mar. 31, 2021
Other Income and Expenses [Abstract]
Other Income (Expenses)	Note 5. Other Income (Expenses) Other income (expenses) for the three months ended March 31, 2020 included interest on debentures held by seven investors.

Income Taxes

Income Taxes	3 Months Ended
	Mar. 31, 2021
Income Tax Disclosure [Abstract]
Income Taxes	Note 6. Income Taxes There is no provision for federal income taxes for the three months ended March 31, 2021 and March 31, 2020 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 March 31, 2021 2020 Current state taxes $ 7,300 $ 300 Deferred state taxes — (47,400 ) $ 7,300 $ (47,100 ) 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 March 31, 2021 and there was no accrual for uncertain tax positions as of March 31, 2021. Tax years from 2017 through 2020 remain subject to examination by U.S. federal and state jurisdictions.

Earnings per Share

Earnings per Share	3 Months Ended
	Mar. 31, 2021
Weighted average common shares outstanding
Earnings per Share	Note 7. Earnings per Share In accordance with FASB ASC 260, Earnings per Share

Major Customer and Geographic I

Major Customer and Geographic Information	3 Months Ended
	Mar. 31, 2021
Major Customer and Geographic Information [Abstract]
Major Customer and Geographic Information	Note 8. Major Customer and Geographic Information 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 March 31 2021 2020 Customer A 67 % 43 % Customer B — 21 % Customer C 19 % 19 % 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: March 31 December 31 2021 2020 Customer A 30 % 25 % Customer C 65 % 65 % 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. Our Company’s revenues by geographic region are as follows: Three Months ended March 31 2021 2020 North America $ 169,700 $ 183,400 South America 1,500 1,400 Asia 413,500 335,500 Australia 26,700 — $ 611,400 $ 520,300

Leases

Leases	3 Months Ended
	Mar. 31, 2021
Lessee Disclosure [Abstract]
Leases	Note 9. Leases Our Company conducts its operations in leased facilities under a non-cancelable operating lease expiring in 2024. Due to the adoption of the new lease standard under the optional transition method which allows the entity to apply the new lease standard at the adoption date, our Company has capitalized the present value of the minimum lease payments commencing January 1, 2019, using an estimated incremental borrowing rate of 6%. The minimum lease payments do not include common area annual expenses which are considered to be non-lease components. As of January 1, 2019 the operating lease right-of-use asset and operating lease liability amounted to $241,100 with no cumulative-effect adjustment to the opening balance of accumulated deficit. There are no other material operating leases. Our Company has elected not to recognize right-of-use assets and lease liabilities arising from short-term leases. Total lease expense under operating leases for each of the three month periods ended March 31, 2021 and March 31, 2020 was $13,300. Maturities of lease liabilities were as follows: Operating Leases Year ending December 31 2021 $40,000 2022 54,600 2023 56,200 2024 18,900 Total lease payments 169,700 Less imputed interest (20,300) Total $149,400

Stock Warrants (Tables)

Stock Warrants (Tables)	3 Months Ended
	Mar. 31, 2020
Convertible Debt [Abstract]
Schedule of warrant outstanding	The following table summarizes our Company’s warrant position at March 31, 2021 and December 31, 2020: Weighted Average Number Exercise Exercise of Shares Price Price Outstanding warrants - December 31, 2020 141,365 $ 0.02 $ 0.02 Outstanding warrants - March 31, 2021 141,365 $ 0.02 $ 0.02 Weighted average remaining contractual life (years) .27 Exercisable warrants - March 31, 2021 141,365 $ 0.02 $ 0.02

Income Taxes (Tables)

Income Taxes (Tables)	3 Months Ended
	Mar. 31, 2021
Income Tax Disclosure [Abstract]
Components for State Income Tax Expense	The components for state income tax expense resulting from the limitation on the use of net operating losses are: Three months ended March 31, 2021 2020 Current state taxes $ 7,300 $ 300 Deferred state taxes — (47,400 )

Major Customer and Geographic_2

Major Customer and Geographic Information (Tables)	3 Months Ended
	Mar. 31, 2021
Segment Reporting [Abstract]
Company's Revenues As Percentage Of Revenue	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 March 31 2021 2020 Customer A 67 % 43 % Customer B — 21 % Customer C 19 % 19 %
Schedule of Non-affiliated Customers with Accounts Receivable More Than 10%	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: March 31 December 31 2021 2020 Customer A 30 % 25 % Customer C 65 % 65 %
Company's Revenue by Geographic Region	Our Company’s revenues by geographic region are as follows: Three Months ended March 31 2021 2020 North America $ 169,700 $ 183,400 South America 1,500 1,400 Asia 413,500 335,500 Australia 26,700 — $ 611,400 $ 520,300

Leases (Tables)

Leases (Tables)	3 Months Ended
	Mar. 31, 2021
Lessee Disclosure [Abstract]
Maturities of Lease Liabilities	Maturities of lease liabilities were as follows: Operating Leases Year ending December 31 2021 $40,000 2022 54,600 2023 56,200 2024 18,900 Total lease payments 169,700 Less imputed interest (20,300) Total $149,400

Stock Based Compensation (Detai

Stock Based Compensation (Details Narrative)	Mar. 31, 2021USD ($)
Share-based Payment Arrangement [Abstract]
Unrecognized portion of expense related to stock option grants	$ 0

Line of Credit (Details Narrat

Line of Credit (Details Narrative)	3 Months Ended
	Mar. 31, 2021USD ($)
Line of Credit Facility [Abstract]
Line of credit	$ 150,000
Interest rate	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.

Stock Warrants (Warrants Activi

Stock Warrants (Warrants Activity) (Details) - Warrant [Member] - $ / shares	3 Months Ended
	Mar. 31, 2021	Dec. 31, 2020
Warrants
Outstanding warrants at beginning	141,365	141,365
Exercise price at beginning	$ 0.02	$ 0.02
Weighted average exercise price	$ 0.02	$ 0.02
Weighted average remaining contractual life (years)	3 months 8 days
Exercisable	141,365
Exercisable price	$ 0.02
Exercisable weighted average exercise price	$ 0.02

Stock Warrants (Details Narrat

Stock Warrants (Details Narrative) - Warrant [Member] - USD ($)	Mar. 31, 2021	Dec. 31, 2020
Debt Instrument [Line Items]
Outstanding warrants	141,365	141,365
Exercise price	$ 0.02	$ 0.02
Intrinsic value	$ 19,800
Intrinsic value exercisable	$ 19,800
Stock price	$ 0.16

Income Taxes (Components for St

Income Taxes (Components for State Income Tax Expense) (Details) - USD ($)	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Income Tax Disclosure [Abstract]
Current state taxes	$ 7,300	$ 300
Deferred state taxes		(47,400)
Income tax expense (benefit)	$ 7,300	$ (47,100)

Income Taxes (Details Narrative

Income Taxes (Details Narrative)	3 Months Ended
	Mar. 31, 2021USD ($)
Income Tax Contingency [Line Items]
Reversal accrued income taxes	$ 47,400
Unrecognized tax benefits
Uncertain tax positions
Minimum [Member]
Income Tax Contingency [Line Items]
Tax years open for examination	2017
Maximum [Member]
Income Tax Contingency [Line Items]
Tax years open for examination	2020

Earnings per Share (Details Na

Earnings per Share (Details Narrative) - shares	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Weighted average common shares outstanding
Number of incremental common shares resulting from the assumed conversion of warrants	123,913	486,212

Major Customer and Geographic_3

Major Customer and Geographic Information (Schedule of Revenues from Non-affiliated Customers) (Details) - Revenue [Member]	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Customer A [Member]
Revenue, Major Customer [Line Items]
Risk percentage	67.00%	43.00%
Customer B [Member]
Revenue, Major Customer [Line Items]
Risk percentage	0.00%	21.00%
Customer C [Member]
Revenue, Major Customer [Line Items]
Risk percentage	19.00%	19.00%

Major Customer and Geographic_4

Major Customer and Geographic Information (Schedule of Non-affiliated Customers with Accounts Receivable) (Details) - Accounts Receivable [Member]	3 Months Ended	12 Months Ended
	Mar. 31, 2021	Dec. 31, 2020
Customer A [Member]
Concentration Risk [Line Items]
Risk percentage	30.00%	25.00%
Customer C [Member]
Concentration Risk [Line Items]
Risk percentage	65.00%	65.00%

Major Customer and Geographic_5

Major Customer and Geographic Information (Schedule of Revenue by Geographic Region) (Details) - USD ($)	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	$ 611,400	$ 520,300
North America [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	169,700	183,400
South America [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	1,500	1,400
Asia [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	413,500	335,500
Australia [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	$ 26,700	$ 0

Leases (Maturities of Lease Lia

Leases (Maturities of Lease Liabilities) (Details) - USD ($)	Mar. 31, 2021	Jan. 01, 2019
Lessee Disclosure [Abstract]
2021	$ 40,000
2022	54,600
2023	56,200
2024	18,900
Total lease payments	169,700
Less imputed interest	(20,300)
Total	$ 149,400	$ 241,100

Leases (Details Narrative)

Leases (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020	Jan. 01, 2019
Lessee Disclosure [Abstract]
Lease expense	$ 13,300	$ 13,300
Incremental borrowing rate				6.00%
Operating lease right-of-use asset	149,400		$ 160,300	$ 241,100
Operating lease liability	$ 149,400			$ 241,100