10-Q

United States

Securities and Exchange Commission

Washington, D.C. 20549

Form 10-Q

(Mark One)

☒  QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended June 30, 2023

or

☐  TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from ____________ to ______________

Commission File Number: 000-20333

NOCOPI TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

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

480 Shoemaker Road, Suite 104, King of Prussia,PA 19406

(Address of principal executive offices) (Zip Code)

(610) 834-9600

(Registrant’s telephone number, including areacode)

Securities registered pursuant to Section 12(b) of the Act: None.

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒  No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer   ☐	Accelerated filer   ☐
Non-accelerated Filer     ☒	Smaller reporting company  ☒
	Emerging growth company  ☐

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Securities Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☒

Indicate the number of shares outstanding

of each of the issuer’s classes of common stock, as of the latest practicable date: 9,251,178 shares of common stock, par value $0.01, as of August 9, 2023.

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NOCOPI TECHNOLOGIES, INC.

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INDEX

	PAGE
Part I. FINANCIAL INFORMATION
Item 1.      Financial Statements	1
Statements of Comprehensive Income for Three Months and Six Months Ended June 30, 2023 and June 30, 2022	1
Balance Sheets at June 30, 2023 and December 31, 2022	2
Statements of Cash Flows for Six Months Ended June 30, 2023 and June 30, 2022	3
Statements of Stockholders’ Equity for Three Months and Six Months Ended June 30, 2023 and June 30, 2022	4
Notes to Financial Statements	5
Item 2.      Management’s Discussion and Analysis of Financial<br> Condition and Results of Operations	10
Item 3.      Quantitative and Qualitative Disclosures About Market<br> Risk	15
Item 4.      Controls and Procedures	15
Part II. OTHER INFORMATION
Item 1.       Legal Proceedings	16
Item 1A.   Risk Factors	16
Item 2.       Unregistered Sales of Equity Securities<br> and Use of Proceeds.	16
Item 3.      Defaults<br> Upon Senior Securities	16
Item 4.      Mine<br> Safety Disclosures	16
Item 5.      Other<br> Information	16
Item 6.       Exhibits	16
SIGNATURES	17
EXHIBIT INDEX	18

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Nocopi Technologies, Inc.

Statements of Comprehensive Income*

(unaudited)

	Three<br> Months ended <br> June 30						Six<br> Months ended <br> June 30
	2023			2022			2023			2022
Revenues
Licenses, royalties and fees	$	150,200		$	169,800		$	273,200		$	307,100
Product and other sales		449,000			344,500			918,100			546,600
Total revenues		599,200			514,300			1,191,300			853,700
Cost of revenues
Licenses, royalties and fees		49,800			46,400			108,500			85,900
Product and other sales		179,200			154,800			401,000			281,500
Total cost of revenues		229,000			201,200			509,500			367,400
Gross profit		370,200			313,100			681,800			486,300
Operating expenses
Research and development		35,300			32,500			80,100			72,000
Sales and marketing		61,100			76,700			147,400			141,500
General and administrative		223,300			506,700			424,500			784,400
Total operating expenses		319,700			615,900			652,000			997,900
Net income (loss) from operations		50,500			(302,800	)		29,800			(511,600	)
Other income (expenses)
Interest income		60,400			6,100			122,500			11,900
Interest expense and bank charges		(4,400	)		(300	)		(5,000	)		(700	)
Total other income (expenses)		56,000			5,800			117,500			11,200
Net income (loss) before income taxes		106,500			(297,000	)		147,300			(500,400	)
Income taxes		27,400			—			37,900			—
Net income (loss)	$	79,100		$	(297,000	)	$	109,400		$	(500,400	)
Net income (loss) per common share
Basic	$	.01		$	(.04	)	$	.01		$	(.07	)
Diluted	$	.01		$	(.04	)	$	.01		$	(.07	)
Weighted average common shares outstanding
Basic		9,251,178			6,751,178			9,251,178			6,751,178
Diluted		9,251,178			6,751,178			9,251,178			6,751,178

*See accompanying notes to these financial statements.

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Nocopi Technologies, Inc.

Balance Sheets*

(unaudited)

			December 31
			2022
Assets
Current assets
Cash	5,463,200		$	5,337,800
Accounts receivable less 12,000 allowance for doubtful accounts	1,345,600			1,103,500
Inventory	368,100			486,400
Prepaid and other	107,900			103,300
Total current assets	7,284,800			7,031,000
Fixed assets
Leasehold improvements	65,600			58,400
Furniture, fixtures and equipment	169,100			164,400
Fixed assets, gross	234,700			222,800
Less: accumulated depreciation and amortization	186,000			167,800
Total fixed assets	48,700			55,000
Other assets
Long-term receivable	2,149,500			2,463,100
Operating lease right of use – building	43,400			68,300
Other assets	2,192,900			2,531,400
Total assets	9,526,400		$	9,617,400
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable	68,000		$	97,700
Accrued expenses	188,600			173,700
Income taxes	148,300			287,100
Operating lease liability – current	43,400			50,700
Total current liabilities	448,300			609,200
Other liabilities
Accrued expenses – non-current	150,300			172,200
Operating lease liability – non-current	—			17,600
Total other liabilities	150,300			189,800
Stockholders' equity
Common stock, 0.01 par value Authorized – 75,000,000 shares Issued and outstanding – 9,251,178 shares	92,500			92,500
Paid-in capital	16,659,600			16,659,600
Accumulated deficit	(7,824,300	)		(7,933,700	)
Total stockholders' equity	8,927,800			8,818,400
Total liabilities and stockholders' equity	9,526,400		$	9,617,400

All values are in US Dollars.

*See accompanying notes to these financial statements.

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Nocopi Technologies, Inc.

Statements of Cash Flows*

(unaudited)

	Six Months ended <br> June 30
	2023			2022
Operating Activities
Net income (loss)	$	109,400		$	(500,400	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Depreciation and amortization		18,200			17,000
Other assets		338,500			208,400
Other liabilities		(46,800	)		(36,400	)
Net income adjusted for non-cash<br> operating activities		419,300			(311,400	)
(Increase) decrease in assets
Accounts receivable		(242,100	)		(108,200	)
Inventory		118,300			(31,900	)
Prepaid and other		(4,600	)		100,500
Increase (decrease) in liabilities
Accounts payable and accrued expenses		(14,800	)		97,700
Taxes on income		(138,800	)
Total increase in operating capital		(282,000	)		58,100
Net cash provided by (used in) operating activities		137,300			(253,300	)
Investing Activities
Additions to fixed assets		(11,900	)		—
Net cash used in investing activities		(11,900	)		—
Increase (decrease) in cash		125,400			(253,300	)
Cash at beginning of year		5,337,800			1,846,700
Cash at end of period	$	5,463,200		$	1,593,400

*See accompanying notes to these financial statements.

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Nocopi Technologies, Inc.

Statements of Stockholders’ Equity*

For the Periods December 31, 2022 through June30, 2023 and December 31, 2021 through June 30, 2022

(unaudited)

	Common stock				Paid-in		Accumulated
	Shares		Amount		Capital		Deficit			Total
Balance at December 31, 2022		9,251,178	$	92,500	$	16,659,600	$	(7,933,700	)	$	8,818,400
Net income				-		-		30,300			30,300
Balance at March 31, 2023		9,251,178		92,500		16,659,600		(7,903,400	)		8,848,700
Net income		—		—		—		79,100			79,100
Balance – June 30, 2023		9,251,178	$	92,500	$	16,659,600	$	(7,824,300	)	$	8,927,800
	Common stock				Paid-in		Accumulated
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	Shares		Amount		Capital		Deficit			Total
Balance – December 31, 2021		6,751,178	$	67,500	$	13,184,600	$	(9,746,800	)	$	3,505,300
Net loss		—		—		—		(203,400	)		(203,400	)
Balance – March 31, 2022		6,751,178		67,500		13,184,600		(9,950,200	)		3,301,900
Net loss		—		—		—		(297,000	)		(297,000	)
Balance June 30, 2022		6,751,178	$	67,500	$	13,184,600	$	(10,247,200	)	$	3,004,900

* See accompanying notes to these financial statements.

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NOCOPI TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

Note 1. Financial Statements

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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 our Company’s Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the Securities and Exchange Commission on March 31, 2023, as amended on April 28, 2023 (the “2022 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 2022 Annual Report 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, 2023 may not be necessarily indicative of the operating results expected for the full year.

Our Company follows Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 220 in reporting comprehensive income (loss).  Comprehensive income (loss) 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 (loss).  Since our Company has no items of other comprehensive income (loss), comprehensive income (loss) is equal to net income (loss).

Note 2. Stock Based Compensation

Our Company follows FASB ASC 718, Compensation– Stock Compensation, and uses the Black-Scholes option pricing model to calculate the grant-date fair value of an award. At June 30, 2023, our Company did not have an active stock option plan. There was no unrecognized portion of expense related to stock option grants at June 30, 2023.

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NOCOPI TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

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Note 3. Cash and Cash Equivalents

Schedule of Cash and Cash Equivalents
	June 30<br> <br>2023		December 31<br> <br>2022
Cash and cash equivalents
Cash and money market funds	$	2,130,800	$	917,400
U.S. Treasury Bills		3,332,400		4,420,400
Cash and cash equivalents	$	5,463,200	$	5,337,800

The amortized cost and fair value of securities held to maturity at June 30, 2023 are as follows:

Schedule of amortized cost and fair value of securities held to maturity
	Amortized<br> <br>Cost		Fair<br> <br>Value
U.S. Treasury Bills
Due July 13, 2023		1,111,700		1,123,400
Due October 5, 2023		1,099,400		1,109,800
Due January 25, 2024		1,084,100		1,092,700
Total	$	3,295,200	$	3,325,900

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Note 4. Long-term Receivables

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As of June 30, 2023, the Company had long-term receivables

of $2,149,500 from three licensees representing the present value of fixed guaranteed royalty payments that will be payable over varying periods of two through five years that commenced in the second half of 2022 and terminate in the second quarter of 2028. The fixed guaranteed royalty payments result from amendments to license agreements with two existing licensees and a license agreement with a new licensee. The receivable represents the present value of the fixed minimum annual payments due under the license agreements, discounted at the Company's incremental borrowing rate of 4%.

The three agreements grant licenses for the use of certain patented ink technology as it exists at the time that it is granted which is considered functional intellectual property. Under Topic 606, a performance obligation to transfer a license for functional intellectual property is satisfied at a point in time and the fixed consideration could be recognized upfront when the Company transfers control of the licensee if certain criteria are met. Specifically, the minimum royalty guarantee could be recognized upfront if the following conditions are met:

·	The royalty payment is fixed or determinable
·	Collection of the royalty payment is considered probable
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·	The licensee has the ability to benefit from the licensed technology
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The Company determined that the above conditions were

met upon execution of the agreements and, in the year ended December 31, 2022, recognized $2,810,600 of royalty revenue along with $206,600 of commission expense net of imputed interest of $131,300. The commissions are payable over the term of the license agreements and are due when payments are received by the Company. As of June 30, 2023, the accrued commission payable balance was approximately $194,700.

The current portion of the three new license agreements

and one license agreement entered into in prior years, in the amount of $623,600 and $507,500, is included in accounts receivable on the balance sheets as of June 30, 2023 and December 31, 2022, respectively.

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NOCOPI TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

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The following table summarizes the future minimum payments due under the three new license agreements as of June 30, 2023:

Schedule of future minimum payments
Year Ending December 31:
	2023	$	315,000
	2024		642,000
	2025		570,000
	2026		570,000
	2027		557,500
	2028		260,000
	Total	$	2,914,500

The Company has evaluated the collectibility of the long-term receivables and believes them to be fully collectible as of June 30, 2023. However, there can be no assurance that the receivables will not be impaired in the future due to changes in the licensees’ financial condition or other factors.

The long-term receivables are recorded at its present

value as of June 30, 2023, and will be amortized over the term of the license agreements using the effective interest method. The unamortized balance of the long-term receivables as of June 30, 2023 is $2,149,500.

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Note 5. Line of Credit

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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 were no borrowings under the line of credit since its inception. The line of credit was closed as of June 30, 2023.

Note 6. Income Taxes

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At June 30, 2023, our Company had federal and state

taxable income of approximately $138,400 and $88,400, respectively. State income taxes in the six months ended June 30, 2023 resulted from limitations placed on income tax net operating loss deductions by the Commonwealth of Pennsylvania. There was no income tax benefit for the losses for the three and six months ended June 30, 2022 because our Company determined that the realization of the net deferred tax asset was not assured. Our Company created a valuation allowance for the entire amount of such benefits.

The components for federal and state income tax expense are:

State Income Tax Expense
	Three Months ended<br> <br>June 30				Six Months ended<br> <br>June 30
	2023		2022		2023		2022
Current federal taxes	$	21,000	$	—	$	29,100	$	—
Current state taxes		6,400		—		8,800		—
Income tax expense (benefit)	$	27,400	$	—	$	37,900	$	—

There was no change in unrecognized tax benefits during the period ended June 30, 2023 and there was no accrual for uncertain tax positions as of June 30, 2023. Tax years from 2020 through 2022 remain subject to examination by U.S. federal and state jurisdictions

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NOCOPI TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

Note 7. Earnings (Loss) per Share

In accordance with FASB ASC 260, Earnings per Share, basic earnings (loss) per common share is computed using net earnings (loss) divided by the weighted average number of common shares outstanding for the periods presented. Diluted earnings (loss) per share are computed using weighted average number of common shares plus dilutive common share equivalents outstanding during the period. Since our Company did not have any common stock equivalents outstanding as of June 30, 2023 and June 30, 2022, basic and diluted earnings (loss) per share were the same.

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 the Company’s total revenues were:

Company's Revenues As Percentage Of Revenue
	Three Months ended<br> <br>June 30						Six Months ended<br> <br>June 30
	2023			2022			2023			2022
Customer A		67	%		63	%		69	%		55	%
Customer B		20	%		22	%		16	%		24	%

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:

Schedule of Non-affiliated Customers with Accounts Receivable More Than 10%
	June 30			December 31
	2023			2022
Customer A		11	%		6	%
Customer B		77	%		84	%

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:

Company's Revenue by Geographic Region
	Three Months ended<br> <br>June 30				Six Months ended<br> <br>June 30
	2023		2022		2023		2022
North America	$	145,800	$	160,900	$	273,600	$	284,800
South America		—		—		—		1,600
Asia		435,200		330,000		876,700		527,900
Australia		18,200		23,400		41,000		39,400
	$	599,200	$	514,300	$	1,191,300	$	853,700

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NOCOPI TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

Note 9. Leases

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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 6.5%. 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 the

three and six months ended June 30, 2023 was $13,400 and $26,700, respectively. Total lease expense under operating leases for the three and six months ended June 30, 2022 was $13,400 and $26,700, respectively.

Maturities of lease liabilities are as follows:

Maturities of Lease Liabilities
		Operating Leases
Year ending December 31
2023		28,300
2024		18,900
Total lease payments		47,200
Less imputed interest		(3,800	)
Total	$	43,400

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Note 10. Employee Retention Tax Credit

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The CARES Act, signed into law on March 27, 2020

with subsequent amendments, provides for refundable employee retention credit to employers whose operations were suspended due to COVID-19 or whose revenue significantly decreased. On June 15, 2023, the Company filed a Form 941-X to claim a refundable employee retention credit for the first quarter and third quarter 2021 payroll in the total amount of $84,000. The Company will record the credit as other income in the Statement of Comprehensive Income in the period the refund is received.

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

Forward-Looking Information

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

·	Expected operating results, such as revenue, expenses and capital expenditures
·	Current or future volatility in market conditions
·	Our belief that we have sufficient liquidity to fund our business operations during the next twelve months
·	Strategy for customer retention, growth, product development, market position, and risk management

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following:

·	The extent to which we are successful in gaining new long-term relationships with customers or retaining significant existing customers and the level of service failures that could lead customers to use competitors' services.
·	Strategic actions, including business acquisitions and our success in integrating acquired businesses.
·	Our ability to improve our current credit rating with our vendors and the impact on our raw materials and other costs and competitive position of doing so.
·	The impact of losing our intellectual property protections or the loss in value of our intellectual property.
·	Changes in customer demand.
·	The occurrence of hostilities, political instability or catastrophic events.
·	Developments and changes in laws and regulations, including increased regulation of our industry through legislative action and revised rules and standards.
·	Security breaches, cybersecurity attacks and other significant disruptions in our information technology systems.
·	Such other factors as discussed throughout Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations in this Quarterly Report on Form 10-Q, and throughout Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations and in Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2022.

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Any forward-looking statement made by us in this Report on Form 10-Q is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

The following discussion and analysis should be read in conjunction with our condensed financial statements, included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management. This information should also be read in conjunction with our audited historical financial statements which are included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the Securities and Exchange Commission on March 31, 2023, as amended on April 28, 2023.

Background Overview

Nocopi Technologies, Inc. develops and markets specialty reactive inks for applications in the large educational and toy products market. We also develop and market technologies for document and product authentication, which we believe can reduce losses caused by fraudulent document reproduction or by product counterfeiting and/or diversion. We derive our revenues primarily from licensing our technologies on an exclusive or non-exclusive basis to licensees who incorporate our technologies into their product offering and from selling products incorporating our technologies to the licensees or to their licensed printers.

Unless the context otherwise requires, all references to the “Company,” “we,” “our” or “us” and other similar terms means Nocopi Technologies, Inc., a Maryland corporation.

Results of Operations

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

Our Company recognizes revenue on its lines of business as follows:

a.	License fees for the use of our technology and royalties with guaranteed minimum amounts are recognized at a point in time when the term begins;
b.	Product sales are recognized at the time of the transfer of goods to customers at an amount that our Company expects to be entitled to in exchange for these goods, which is at the time of shipment; and
c.	Fees for technical services are recognized at the time of the transfer of services to customers at an amount that our Company expects to be entitled to in exchange for the services, which is when the service has been rendered.

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

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

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Revenues for the second quarter of 2023 were $599,200 compared to $514,300 in the second quarter of 2022, an increase of $84,900, or approximately 17%. Licenses, royalties and fees decreased by $19,600, or approximately 12%, to $150,200 in the second quarter of 2023 from $169,800 in the second quarter of 2022. The decrease in licenses, royalties and fees in the second quarter of 2023 compared to the second quarter of 2022 is due primarily to lower royalties from our Company’s licensees in entertainment and toy products markets. We cannot assure you that the marketing and product development activities of our Company’s licensees or other businesses in the entertainment and toy products market will produce a significant increase in revenues for our Company, nor can the timing of any potential revenue increases be predicted, particularly given the uncertain economic conditions presently being experienced.

Product and other sales increased by $104,500, or approximately 30%, to $449,000 in the second quarter of 2023 from $344,500 in the second quarter of 2022. Sales of ink increased in the second quarter of 2023 compared to the second quarter of 2022 due primarily to higher ink shipments to the third party authorized printer used by two of our Company’s major licensees in the entertainment and toy products market. In the second quarter of 2023, our Company derived revenues of approximately $578,800 from our licensees and their authorized printers in the entertainment and toy products market compared to revenues of approximately $471,200 in the second quarter of 2022.

For the first six months of 2023, revenues were $1,191,300, representing an increase of $337,600, or approximately 40%, from revenues of $853,700 in the first six months of 2022. Licenses, royalties and fees decreased by $33,900, or approximately 11%, to $273,200 in the first six months of 2023 from $307,100 in the first six months of 2022. The decrease in licenses, royalties and fees is due primarily to higher royalties from our Company’s licensees in the entertainment and toy products market. We cannot assure you that the marketing and product development activities of our Company’s licensees or other businesses in the entertainment and toy products market will produce a significant increase in revenues for our Company, nor can the timing of any potential revenue increases be predicted, particularly given the uncertain economic conditions presently being experienced.

Product and other sales increased by $371,500, or approximately 68%, to $918,100 in the first six months of 2023 from $546,600 in the first six months of 2022. Sales of ink increased in the first six months of 2023 compared to the first six of 2022 due primarily to higher ink shipments to the third party authorized printer used by two of our Company’s major licensees in the entertainment and toy products market. Our Company derived revenues of approximately $1,120,300 from licensees and their authorized printers in the entertainment and toy products market in the first six months of 2023 compared to revenues of approximately $777,800 in the first six months of 2022.

Our Company’s gross profit increased to $370,200 in the second quarter of 2023, or approximately 62% of revenues, from $313,100 in the second quarter of 2022, or approximately 61% of revenues. Licenses, royalties and fees have historically carried a higher gross profit than product and other sales, which generally consist of supplies or other manufactured products which incorporate our Company’s technologies or equipment used to support the application of its technologies. These items (except for inks which are manufactured by our Company) are generally purchased from third-party vendors and resold to the end-user or licensee and carry a lower gross profit than licenses, royalties and fees.

For the first six months of 2023, gross profit was $681,800, or approximately 57% of revenues, compared to $486,300, or approximately 57% of revenues, in the first six months of 2022. The higher gross profit in the first six months of 2023 compared to the first six months of 2022 was primarily due to an increase in gross profit from product and other sales.

As the variable component of cost of revenues related to licenses, royalties and fees is a low percentage of these revenues and the fixed component is not substantial, period to period changes in revenues from licenses, royalties and fees can significantly affect both the gross profit from licenses, royalties and fees as well as overall gross profit. The gross profit from licenses, royalties and fees decreased to approximately 67% in the second quarter of 2023 compared to approximately 73% in the second quarter of 2022 and to approximately 60% of revenues from licenses, royalties and fees in the first six months of 2023 from approximately 72% in the first six months of 2022.

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The gross profit, expressed as a percentage of revenues, of product and other sales is dependent on both the overall sales volumes of product and other sales and on the mix of the specific goods produced and/or sold. The gross profit from product and other sales increased to approximately 60% of revenues in the second quarter of 2023 compared to approximately 55% of revenues in the second quarter of 2022. For the first six months of 2023, the gross profit, expressed as a percentage of revenues, increased to approximately 56% of revenues from product and other sales compared to approximately 48% of revenues from product and other sales in the first six months of 2022

Research and development expenses increased in the second quarter of 2023 to $35,300 from $32,500 in the second quarter of 2022 and to $80,100 in the first six months of 2023 from $72,000 in the first six months of 2022 due primarily to higher employee and lab expenses in the second quarter and first six months of 2023 compared to the second quarter and first six months of 2022.

Sales and marketing expenses decreased to $61,100 in the second quarter of 2023 from $76,700 in the second quarter of 2022 and increased to $147,400 in the first six months of 2023 from $141,500 in the first six months of 2022. The increase in the second quarter of 2023 compared to the second quarter of 2022 is due primarily to lower commission and employee related expenses in the second quarter of 2023 compared to the second quarter of 2022. The decrease in the first six months of 2023 compared to the first six months of 2022 is due primarily to higher commission expense on the higher level of revenues in the first six months of 2023 compared to the first six months of 2022.

General and administrative expenses decreased in the second quarter and first six months of 2023 to $223,300 and $424,500, respectively, from $506,700 and $784,400, respectively, in the second quarter and first six months of 2022 due primarily to lower professional fees offset in part by higher employee related expenses and higher insurance expense in the second quarter and first six months of 2023 compared to the second quarter and first six months of 2022.

Income taxes in the second quarter and first six months of 2023 include federal and state income taxes. The state income taxes result from limitations placed on income tax net operating loss deductions by the Commonwealth of Pennsylvania.

The net income of $79,100 in the second quarter of 2023 compared to net loss $297,000 in the second quarter of 2022 resulted primarily from a higher gross profit on a higher level of product sales, lower operating expenses and interest income in the second quarter of 2023 compared to the second quarter of 2022. The net income of $109,400 in the first six months of 2023 compared to net loss of $500,400 in the first six months of 2022 resulted primarily from a higher gross profit on a higher level of product sales in the first six months of 2023 compared to the first six months of 2022, lower operating expenses and interest income in the first six months of 2023 compared to the first six months of 2022.

Plan of Operation, Liquidity and Capital Resources

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During the first six months of 2023, our Company’s cash increased to $5,463,200 at June 30, 2023 from $5,337,800 at December 31, 2022. During the first six months of 2023, our Company generated $137,300 from its operating activities and used $11,900 for capital expenditures.

During the first six months of 2023, our Company’s revenues increased approximately 40% primarily as a result of higher sales of ink to an authorized printer of our Company’s licensees in the entertainment and toy products market offset in part by lower royalty revenues from our Company’s licensees in the entertainment and toy products market. Our total overhead expenses decreased in the first six months of 2023 to $652,000 compared to $997,900 in the first six months of 2022, our Company’s interest income and our Company’s income tax expense increased in the first six months of 2023 compared to the first six months of 2022. As a result of these factors, our Company generated net income of $109,400 in the first six months of 2023 compared to a net loss of $500,400 in the first six months of 2022. Our Company had positive operating cash flow of $137,300 during the first six months of 2023. At June 30, 2023, our Company had positive working capital of $6,836,500 and stockholders’ equity of $8,927,800. For the full year of 2022, our Company had net income of $1,813,100 and had negative operating cash flow of $8,100. At December 31, 2022, our Company had working capital of $6,421,800 and stockholders’ equity of $8,818,400.

In November 2018, our Company negotiated a $150,000 revolving line of credit (“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, therefore the line of credit has been closed as of June 30, 2023. We may need to obtain additional capital in the future to further support the working capital requirements associated with our existing revenue base and to develop new revenue sources. We cannot assure you that we will be successful in obtaining such additional capital, if needed. We continue to maintain a cost containment program including curtailment, where possible, of discretionary research and development and sales and marketing expenses.

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

Our Company maintains its presence in the retail loss prevention market and believes that revenue growth in this market can be achieved through increased security ink sales to its licensees in this market. We will continue to adjust our production and technical staff as necessary and, subject to available financial resources, invest in capital equipment needed to support potential growth in ink production requirements beyond our current capacity. Additionally, we will pursue opportunities to market our current technologies in specific security and non-security markets. We cannot assure you that these efforts will enable our Company to generate additional revenues and positive cash flow.

Our future growth strategy includes expanding our business through acquisitions of other companies with competing or complementary services, technologies or businesses in order to expand our product and service offerings to grow our free cash flow. We are currently actively engaged in the process to identify acquisition candidates and negotiate transactions. As of the date of this report on Form 10-Q, we have no agreements to make any acquisition. We expect to fund our business expansion through the issuance of debt or equity securities, the payment of cash, the exchange of services, or any combination thereof.

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

As previously stated, we generate a significant portion of our total revenues from licensees in the entertainment and toy products market. These licensees generally sell their products through retail outlets. In the future, such sales may be adversely affected by changes in consumer spending that may occur as a result of an uncertain economic environment in 2023 and beyond due to any future effects of the COVID-19 pandemic and its effect on the global economy, geopolitical instability including the Russia-Ukraine war and the supply chain disruptions related to both as well as the record inflation and significantly higher interest rates currently being experienced in the United States along with the probability of an economic recession both in the United States and globally. As a result, our revenues, results of operations and liquidity may be further negatively impacted in future periods.

Contractual Obligations

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As of June 30, 2023, there were no material changes in our contractual obligations from those disclosed in our Annual Report on Form 10-K filed with the SEC on March 31, 2023, as amended on April 28, 2023, other than those appearing elsewhere in this Quarterly Report on Form 10-Q.

Recently Adopted Accounting Pronouncements

As of June 30, 2023, there were no recently adopted accounting standards that had a material effect on our Company’s financial statements.

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Recently Issued Accounting Pronouncements Not YetAdopted

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. The amendments in this Update affect loans, debt securities, trade receivables, and any other financial assets that have the contractual right to receive cash. The ASU requires an entity to recognize expected credit losses rather than incurred losses for financial assets. For public entities, the amendments are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. ASU No.

2019-10

extends the effective dates for two years for smaller reporting companies and nonpublic companies.

Off-Balance Sheet Arrangements

Our Company does not have any off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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Not Applicable

Item 4. Controls and Procedures

Evaluation of Disclosure Controlsand Procedures. Our Company’s management, with the participation of our Company’s Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of our Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of June 30, 2023. Based on this evaluation, our Company’s Principal Executive Officer and Principal Financial Officer concluded that, as of June 30, 2023, our Company’s disclosure controls and procedures were effective, in that they provide reasonable assurance that information required to be disclosed by our Company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and is accumulated and communicated to our Company’s management, including our Company’s Principal Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal ControlOver Financial Reporting. There were no changes in our internal control over financial reporting during the quarter ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

None

Item 1A. Risk Factors.

Not applicable

Item 2. Unregistered Sales of Equity Securitiesand Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities.

None

Item 4. Mine Safety Disclosures.

Not applicable

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Item 5.  OtherInformation

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None

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Item 6.  Exhibits

(a) Exhibits

Exhibit Number	Description	Location
31.1	Certification of Chief Executive Officer required by Rule 13a-14(a)/15d-14(a), as adopted pursuant<br> to Section 302 of the Sarbanes-Oxley Act of 2002.	Filed herewith
31.2	Certification of Chief Financial Officer required by Rule 13a-14(a)/15d-14(a), as adopted pursuant<br> to Section 302 of the Sarbanes-Oxley Act of 2002.	Filed herewith
32.1	Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section<br> 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	Filed herewith
101.INS	Inline XBRL Instance Document–the instance document does not appear<br> in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document
101.SCH	Inline XBRL Taxonomy Extension Schema
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase
104	Cover page formatted as Inline XBRL and contained in Exhibit 101

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SIGNATURES

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

	NOCOPI TECHNOLOGIES, INC.
DATE: August 11, 2023	/s/ Michael A. Feinstein, M.D.
	Michael A. Feinstein, M.D.
	Chairman of the Board, President & Chief Executive Officer
DATE: August 11, 2023	/s/ Debra E. Glickman
	Debra E. Glickman
	Chief Financial Officer

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EXHIBIT INDEX

Exhibit Number	Description	Location
31.1	Certification of Chief Executive Officer required by Rule 13a-14(a)/15d-14(a), as adopted pursuant<br> to Section 302 of the Sarbanes-Oxley Act of 2002.	Filed herewith
31.2	Certification of Chief Financial Officer required by Rule 13a-14(a)/15d-14(a), as adopted pursuant<br> to Section 302 of the Sarbanes-Oxley Act of 2002.	Filed herewith
32.1	Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section<br> 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	Filed herewith
101.INS	Inline XBRL Instance Document–the instance document does not appear<br> in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document
101.SCH	Inline XBRL Taxonomy Extension Schema
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase
104	Cover page formatted as Inline XBRL and contained in Exhibit 101

18

EXHIBIT 31.1

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CERTIFICATIONOF CHIEF EXECUTIVE OFFICER

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I, Michael A. Feinstein, M.D., Chief Executive Officer of Nocopi Technologies, Inc., certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Nocopi Technologies, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
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(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: August 11, 2023

/s/ Michael A. Feinstein, M.D.

Michael A. Feinstein, M.D.

Chief Executive Officer

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EXHIBIT 31.2

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CERTIFICATIONOF CHIEF FINANCIAL OFFICER

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I, Debra  E. Glickman, Chief Financial Officer of Nocopi Technologies, Inc., certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Nocopi Technologies, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (registrant’s fourth fiscal quarter in the case of annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
---	---
(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: August 11, 2023

/s/ Debra  E. Glickman

Debra  E. Glickman

Chief Financial Officer

Exhibit 32.1

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CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Nocopi Technologies, Inc. (the "Company") on Form 10-Q for the Quarter ended June 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, Michael A. Feinstein, M.D., Chief Executive Officer, and Debra E. Glickman, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that;

(1) The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

August 11, 2023

/s/ Michael A. Feinstein, M.D.

Michael A. Feinstein, M.D.

Principal Executive Officer

/s/ Debra  E. Glickman

Debra  E. Glickman

Chief Financial Officer