10-Q

United States

Securities and Exchange Commission

Washington, D.C. 20549

Form 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2019

or

¨TRANSITION REPORT 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 area code)

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 þ  No ¨

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

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 58,616,716 shares of common stock, par value $0.01, as of August 9, 2019.

NOCOPI TECHNOLOGIES, INC.

INDEX

	PAGE
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements	1
Statements of Operations for Three Months and Six Months Ended June 30, 2019 and June 30, 2018	1
Balance Sheets at June 30, 2019 and December 31, 2018	2
Statements of Cash Flows for Six Months Ended June 30, 2019 and June 30, 2018	3
Statements of Stockholders’ Equity for Three Months and Six Months ended June 30, 2019 and June 30, 2018	4
Notes to Financial Statements	5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
Item 4. Controls and Procedures	15
Part II. OTHER INFORMATION
Item 6. Exhibits	16
SIGNATURES	17
EXHIBIT INDEX	18

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Nocopi Technologies, Inc.

Statements of Operations*

(unaudited)

	Three Months ended June 30						Six Months ended June 30
	2019			2018			2019			2018
Revenues
Licenses, royalties and fees	$	192,000		$	1,655,600		$	382,500		$	1,830,500
Product and other sales		324,100			218,100			543,000			468,600
		516,100			1,873,700			925,500			2,299,100
Cost of revenues
Licenses, royalties and fees		31,600			24,200			56,800			49,200
Product and other sales		123,400			93,400			213,700			185,600
		155,000			117,600			270,500			234,800
Gross profit		361,100			1,756,100			655,000			2,064,300
Operating expenses
Research and development		39,400			36,100			77,400			73,200
Sales and marketing		74,300			168,500			143,200			238,600
General and administrative		86,900			101,500			181,000			204,200
		200,600			306,100			401,600			516,000
Net income from operations		160,500			1,450,000			253,400			1,548,300
Other income (expenses)
Interest income		1,500			300			2,600			700
Interest expense, bank charges and accretion of interest		(2,700	)		(2,800	)		(5,400	)		(5,700	)
		(1,200	)		(2,500	)		(2,800	)		(5,000	)
Net income before income taxes		159,300			1,447,500			250,600			1,543,300
Income taxes		10,400			–			16,300			–
Net income	$	148,900		$	1,447,500		$	234,300		$	1,543,300
Basic and diluted net income per common share	$	.00		$	.02		$	.00		$	.03
Weighted average common shares outstanding
Basic		58,616,716			58,616,716			58,616,716			58,616,716
Diluted		58,973,280			58,989,480			58,988,005			58,955,344

*See accompanying notes to these financial statements.

1

Nocopi Technologies, Inc.

Balance Sheets*

	June 30			December 31
	2019			2018
	(unaudited)			(audited)
Assets
Current assets
Cash	$	506,500		$	400,800
Accounts receivable less $5,000 allowance for doubtful accounts		837,800			579,000
Inventory		164,900			133,500
Prepaid and other		53,200			43,600
Total current assets		1,562,400			1,156,900
Fixed assets
Leasehold improvements		19,700			19,700
Furniture, fixtures and equipment		185,400			185,400
		205,100			205,100
Less: accumulated depreciation and amortization		199,900			197,600
		5,200			7,500
Other assets
Long-term receivable		1,158,200			1,352,200
Operating lease right of use – building		221,800			–
		1,380,000			1,352,200
Total assets	$	2,947,600		$	2,516,600
Liabilities and Stockholders' Equity
Current liabilities
Convertible debentures	$	128,300		$	128,300
Accounts payable		42,900			16,500
Accrued expenses		201,700			163,000
Income taxes		16,300			38,600
Operating lease liability, current		40,400			–
Total current liabilities		429,600			346,400
Other liabilities
Accrued expenses, non-current		81,200			94,700
Deferred income taxes		54,400			108,800
Operating lease liability, non-current		181,400			–
		317,000			203,500
Stockholders' equity
Common stock, $0.01 par value
Authorized – 75,000,000 shares
Issued and outstanding – 58,616,716 shares		586,200			586,200
Paid-in capital		12,440,000			12,440,000
Accumulated deficit		(10,825,200	)		(11,059,500	)
Total stockholders' equity		2,201,000			1,966,700
Total liabilities and stockholders' equity	$	2,947,600		$	2,516,600

*See accompanying notes to these financial statements.

2

Nocopi Technologies, Inc.

Statements of Cash Flows*

(unaudited)

	Six Months ended June 30
	2019			2018
Operating Activities
Net income	$	234,300		$	1,543,300
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Depreciation and amortization		2,300			3,500
Deferred income taxes		(54,400	)		–
Other assets		(27,800	)		(1,521,700	)
Other liabilities		208,300			106,500
Cumulative effect of accounting change		–			96,100
		362,700			227,700
(Increase) decrease in assets
Accounts receivable		(258,800	)		6,100
Inventory		(31,400	)		(12,000	)
Prepaid and other		(9,600	)		5,700
Increase (decrease) in liabilities
Accounts payable and accrued expenses		65,100			(190,000	)
Taxes on income		(22,300	)		–
Deferred revenue		–			(99,400	)
		(257,000	)		(289,600	)
Net cash provided by (used in) operating activities		105,700			(61,900	)
Investment Activities
Additions to fixed assets		–			(500	)
Net cash used in investing activities		–			(500	)
Increase (decrease) in cash		105,700			(62,400	)
Cash at beginning of year		400,800			360,400
Cash at end of period	$	506,500		$	298,000
Supplemental Disclosure of Non Cash Lease Activities
Operating lease right of use – building	$	241,100		$	–
Operating lease liability	$	(241,100	)	$	–

*See accompanying notes to these financial statements.

3

Nocopi Technologies, Inc.

Statements of Stockholders’ Equity*

For the Periods December 31, 2018 through June 30, 2019 and December 31, 2017 through June 30, 2018

(unaudited)

	Common stock				Paid-in		Accumulated
	Shares		Amount		Capital		Deficit			Total
Balance – December 31, 2018		58,616,716	$	586,200	$	12,440,000	$	(11,059,500	)	$	1,966,700
Net income								85,400			85,400
Balance – March 31, 2019		58,616,716		586,200		12,440,000		(10,974,100	)		2,052,100
Net income								148,900			148,900
Balance – June 30, 2019		58,616,716	$	586,200	$	12,440,000	$	(10,825,200	)	$	2,201,000

	Common stock				Paid-in		Accumulated
	Shares		Amount		Capital		Deficit			Total
Balance – December 31, 2017		58,616,716	$	586,200	$	12,440,000	$	(12,811,000	)	$	215,200
Cumulative effect of accounting change at January 1, 2018, Note 2								96,100			96,100
Net income								95,800			95,800
Balance – March 31, 2018		58,616,716		586,200		12,440,000		(12,619,100	)		407,100
Net income								1,447,500			1,447,500
Balance – June 30, 2018		58,616,716	$	586,200	$	12,440,000	$	(11,171,600	)	$	1,854,600

* See accompanying notes to these financial statements.

4

NOCOPI TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

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 the summary of Accounting Policies included in our Company's 2018 Annual Report on Form 10-K. Certain financial information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although our Company believes that the accompanying disclosures are adequate to make the information presented not misleading. The Notes to Financial Statements included in the 2018 Annual Report on Form10-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, 2019 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.  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.

Note 2. Revenues

On January 1, 2018, our Company adopted ASU 214-09, Revenue from Contracts with Customers (“Topic 606”), using the modified retrospective method. Results for periods beginning on or after January 1, 2018 are presented under Topic 606; however, prior period amounts are not adjusted and continue to be reported in accordance with Topic 605, Revenue Recognition, which was in effect for those periods.

Our Company recorded a decrease to the opening balance of the accumulated deficit of $96,100 and a corresponding charge to deferred revenue as of January 1, 2018 due to the cumulative impact of the adoption of Topic 606. The impact to the revenue for the quarter ended March 31, 2018 as a result of applying Topic 606 was not material. The disclosure of disaggregated revenue is disclosed in Note 10.

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

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

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

Accumulated deficit – January 1, 2018	$	(12,811,000	)
Net earnings		1,543,300
Cumulative effect of accounting change at January 1, 2018		96,100
Accumulated deficit – June 30, 2018	$	(11,171,600	)

5

NOCOPI TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

Note 3. 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, 2019, 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, 2019.

Note 4. Line of Credit

In November 2018, our Company negotiated a $150,000 revolving line of credit with a bank to provide a source of working capital, if required. The line of credit is secured by all the assets of our Company and bears interest at the 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.

Note 5. Convertible Debentures

At June 30, 2019, our Company had convertible debentures totaling $128,300 outstanding, which are due during the third quarter of 2019. 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 our Company at $0.025 per share. As of the current date, holders of $92,900 of those convertible debentures have agreed to extend the maturity dates of the convertible debentures for one year with no change in the terms or conditions of the debentures.

Our Company also granted warrants to purchase 691,365 shares of our Company’s common stock at $0.02 per share to the holders of the debentures. The warrants are currently exercisable and expire at various dates in the third quarter of 2020 and the third quarter of 2021. 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 June 30, 2019 and December 31, 2018:

				Weighted Average
	Number		Exercise	Exercise
	of Shares		Price	Price
Outstanding warrants -
December 31, 2018		691,365	$0.02	$0.02
Outstanding warrants -
June 30, 2019		691,365	$0.02	$0.02
Weighted average remaining
contractual life (years)		1.33
Currently exercisable warrants -
June 30, 2019		691,365	$0.02	$0.02

The aggregate intrinsic value of warrants outstanding and exercisable as of June 30, 2019 was approximately $18,500. The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying warrants and the closing stock price of $0.0468 for the Company’s common stock on June 30, 2019.

Note 6. Other Income (Expenses)

Other income (expenses) for the three months and six months ended June 30, 2019 and 2018 includes interest on convertible debentures held by nine investors.

6

NOCOPI TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

Note 7. Income Taxes

There is no provision for federal income taxes for the three and six months ended June 30, 2019 and 2018 due to the availability of net operating loss carryforwards. Our Company has established a valuation allowance for the entire amount of benefits resulting from our Company’s net operating loss carryforwards because our Company has determined that the realization of the net deferred tax asset is not assured.

The components for state income tax expense resulting from the limitation on the use of net operating losses are:

	Three Months ended June 30				Six Months ended June 30
	2019		2018		2019			2018
Current state taxes	$	10,400		–	$	70,700			–
Deferred state taxes		–		–		(54,400	)		–
	$	10,400		–	$	16,300			–

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

Tax years from 2015 through 2018 remain subject to examination by U.S. federal and state jurisdictions.

Note 8. Related Party Transactions

During the six months ended June 30, 2018, our Company paid $235,400 to Michael A. Feinstein, M.D., our Company’s Chairman of the Board and Chief Executive Officer, representing the balance of previously deferred salary owed to him under an employment agreement with our Company. During the five month period ended May 31, 2018, Dr. Feinstein deferred $35,400 of salary. The deferred salary was fully repaid to Dr. Feinstein during 2018 and, at June 30, 2019, there was no deferred salary owed to him. There was no interest payable on the deferred salary.

Note 9. Earnings per Share

In accordance with FASB ASC 260, Earnings per Share, basic earnings per common share is computed using net earnings divided by the weighted average number of common shares outstanding for the periods presented. The computation of diluted earnings per common share involves the assumption that outstanding common shares are increased by shares issuable upon exercise of those warrants for which the market price exceeds the exercise price. The number of shares issuable upon the exercise of such warrants is decreased by shares that could have been purchased by our Company with related proceeds. For the three and six months ended June 30, 2019, the number of incremental common shares resulting from the assumed conversion of warrants was 356,564 and 371,289, respectively. For the three and six months ended June 30, 2018, the number of incremental common shares resulting from the assumed conversion of warrants was 372,764 and 338,628, respectively.

Note 10. 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:

	Three Months ended June 30						Six Months ended June 30
	2019			2018			2019			2018
Customer A		36	%		8	%		35	%		13	%
Customer B		24	%		85	%		27	%		74	%
Customer C		10	%		2	%		11	%		5	%

7

NOCOPI TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

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:

	June 30			December 31
	2019			2018
Customer A		10	%		6	%
Customer B		82	%		86	%

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

Our Company’s revenues by geographic region are as follows:

	Three Months ended June 30				Six Months ended June 30
	2019		2018		2019		2018
North America	$	225,800	$	1,674,400	$	442,400	$	1,859,300
South America		–		–		–		1,500
Europe		100		100		100		100
Asia		290,200		199,200		483,000		438,200
	$	516,100	$	1,873,700	$	925,500	$	2,299,100

Note 11. 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.

Future minimum lease payments under non-cancelable operating leases with initial or remaining terms of one year or more at June 30, 2019 are: $25,200 – 2019; $51,600 – 2020; $53,100 – 2021; $54,600 – 2022; $56,200 – 2023 and $18,900 – 2024.

Total lease expense under operating leases for the three and six months ended June 30, 2019 was $13,400 and $26,700, respectively. Total lease expense under operating leases for the three and six months ended June 30, 2018 was $11,300 and $22,500, respectively.

8

NOCOPI TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

Maturities of lease liabilities are as follows:

	Operating Leases
Year ending December 31
2019	$	25,200
2020		51,600
2021		53,100
2022		54,600
2023		56,200
2024		18,900
Total lease payments		259,600
Less imputed interest		(37,800	)
Total	$	221,800

9

Item 2. Management’s Discussion and Analysis of 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 growth and earnings

· Anticipated levels of capital expenditures for fiscal year 2019 and beyond

· Current or future volatility in market conditions

· Our belief that we have sufficient liquidity to fund our business operations during the next twelve months

· Strategy for customer retention, growth, product development, market position, financial results and reserves

· Strategy for risk management

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.

· Our ability to improve our current credit rating with our vendors and the impact on our raw materials and other costs and competitive position of doing so.

· The impact of losing our intellectual property protections or the loss in value of our intellectual property.

· Changes in customer demand.

· The adequacy of our cash flow and earnings and other conditions which may affect our ability to timely service our debt obligations.

· The occurrence of hostilities, political instability or catastrophic events.

· Such other factors as discussed throughout Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations in this report, and throughout Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations and in Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2018.

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

The following discussion and analysis should be read in conjunction with our Condensed financial statements, included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management. This information should also be read in conjunction with our audited historical financial statements which are included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed with the Securities and Exchange Commission on March 29, 2019.

10

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 affected.

Revenues for the second quarter of 2019 were $516,100 compared to $1,873,700 in the second quarter of 2018, a decrease of $1,357,600, or approximately 72%. Revenues in the second quarter of 2018 included, in accordance with ASU 214-09, Revenue from Contracts with Customers (“Topic 606”), revenue of $1,521,700 representing the present value of guaranteed royalty payments that will be payable over a four-year period beginning in the third quarter of 2019 as a result of an amendment to a license agreement with a licensee that, in addition to expanding the technologies that our licensee is permitted to market, provides for a four year extension to the license agreement beginning in July 2019. Since the performance obligation is to grant the license for the use of certain patented ink technology as it exists at the time that it is granted, the promise to grant the license is a performance obligation satisfied at a point in time in accordance with Topic 606. Previously, we recognized revenue from licenses and royalties on a straight-line basis over the term of the related license agreement. Licenses, royalties and fees decreased by $1,463,600, or approximately 88%, to $192,000 in the second quarter of 2019 from $1,655,600 in the second quarter of 2018. The decrease in licenses, royalties and fees is due primarily to the adoption of Topic 606 in the second quarter of 2018 described above. There can be no assurances 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 being experienced worldwide.

11

On a comparative basis, excluding revenues related to the adoption of Topic 606 in the second quarter of 2018, revenues of $516,100 in the second quarter of 2019 were $164,100, or 47% higher than revenues of $352,000 in the second quarter of 2018. On a comparative basis, excluding revenues related to the adoption of Topic 606 in the second quarter of 2018, revenues from licenses, royalties and fees of $192,000 in the second quarter of 2019 were $58,100, or 43% higher than revenues of $133,900 from licenses, royalties and fees in the second quarter of 2018.

Product and other sales increased by $106,000, or approximately 49%, to $324,100 in the second quarter of 2019 from $218,100 in the second quarter of 2018. Sales of ink increased in the second quarter of 2019 compared to the second quarter of 2018 due primarily to higher ink shipments to the third party authorized printers used by two of our Company’s major licensees in the entertainment and toy products market. In the second quarter of 2019, our Company derived revenues of approximately $436,100 from our licensees and their authorized printers in the entertainment and toy products market compared to revenues of approximately $1,806,700 in the second quarter of 2018.

For the first six months of 2019, revenues were $925,500, representing a decrease of $1,373,600, or approximately 60%, from revenues of $2,299,100 in the first six months of 2018. Licenses, royalties and fees decreased by $1,448,000, or approximately 79%, to $382,500 in the first six months of 2019 from $1,830,500 in the first six months of 2018. As in the second quarter of 2019, the decrease in licenses, royalties and fees is due primarily to the adoption of Topic 606 described above.

On a comparative basis, excluding revenues related to the adoption of Topic 606 in the first six months of 2018, revenues of $925,500 in the first six months of 2019 were $148,100, or 19% higher than revenues of $777,400 in the first six months of 2018. On a comparative basis, excluding revenues related to the adoption of Topic 606 in the first six months of 2018, revenues from licenses, royalties and fees of $382,500 in the first six months of 2019 were $73,700, or 24% higher than revenues of $308,800 from licenses, royalties and fees in the first six months of 2018.

Product and other sales increased by $74,400, or approximately 16%, to $543,000 in the first six months of 2019 from $468,600 in the first six months of 2018. Sales of ink increased in the first six months of 2019 compared to the first six of 2018 due primarily to higher ink shipments to the third party authorized printers used by two of our Company’s major licensees in the entertainment and toy products market and higher ink shipments to our Company’s licensees in the retail receipt and document fraud market. Our Company derived revenues of approximately $772,000 from licensees and their authorized printers in the entertainment and toy products market in the first six months of 2019 compared to revenues of approximately $2,176,000 in the first six months of 2018.

Our Company’s gross profit decreased to $361,100 in the second quarter of 2019, or approximately 70% of revenues, from $1,756,100 in the second quarter of 2018 or approximately 94% of revenues. Licenses, royalties and fees have historically carried a higher gross profit than product and other sales. Such other sales 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. The lower gross profit in the second quarter of 2019 compared to the second quarter of 2018 results primarily from lower licenses, royalties and fees due to the adoption of Topic 606 in the second quarter of 2018 offset in part by higher gross revenues from product and other sales in the second quarter of 2019 compared to the second quarter of 2018.

For the first six months of 2019, gross profit was $655,000, or approximately 71% of revenues, compared to $2,064,300, or approximately 90% of revenues, in the first six months of 2018. The lower gross profit in the first six months of 2019 compared to the first six months of 2018 results primarily from lower licenses, royalties and fees due to the adoption of Topic 606 in the second quarter of 2018 offset in part by higher gross revenues from product and other sales in the first six months of 2019 compared to the first six months of 2018.

As the variable component of cost of revenues related to licenses, royalties and fees is a low percentage of these revenues and the fixed component is not substantial, period to period changes in revenues from licenses, royalties and fees can significantly affect both the gross profit from licenses, royalties and fees as well as overall gross profit. The gross profit from licenses, royalties and fees decreased to approximately 84% in the second quarter of 2019 compared to approximately 99% in the second quarter of 2018 and to approximately 85% of revenues from licenses, royalties and fees in the first six months of 2019 from approximately 97% in the first six months of 2018.

12

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 62% of revenues in the second quarter of 2019 compared to approximately 57% of revenues in the second quarter of 2018. This increase was due to higher sales volume of product and other sales and a favorable mix of products sold. For the first six months of 2019, the gross profit, expressed as a percentage of revenues, increased to approximately 61% of revenues from product and other sales compared to approximately 60% of revenues from product and other sales in the first six months of 2018.

Research and development expenses of $39,400 and $77,400 in the second quarter and first six months of 2019, respectively, were comparable to $36,100 and $73,200 in the second quarter and first six months of 2018, respectively.

Sales and marketing expenses decreased to $74,300 in the second quarter of 2019 from $168,500 in the second quarter of 2018 and to $143,200 in the first six months of 2019 from $238,600 in the first six months of 2018. This decrease is due primarily to lower commission expense on the lower level of sales in the second quarter and first six months of 2019 compared to the second quarter and first six months of 2018 related to the additional revenue generated in 2018 as a result of the adoption of Topic 606 in the second quarter of 2018.

General and administrative expenses decreased in the second quarter of 2019 to $86,900 from $101,500 in the second quarter of 2018. In the first six months of 2019, general and administrative expenses decreased to $181,000 from $204,200 in the first six months of 2018. The decrease in the second quarter of 2019 compared to the second quarter of 2018 is due primarily to lower patent related expenses and lower employment expenses in the second quarter of 2019 compared to the second quarter of 2018. The decrease in the first six months of 2019 compared to the first six months of 2018 is due primarily to lower patent related expenses, lower legal expenses and lower employment expenses in the first six months of 2019 compared to the first six months of 2018.

Other income (expenses) in the second quarter and first six months of 2019 and 2018 included interest on convertible debentures held by nine investors.

The net income of $148,900 in the second quarter of 2019 compared to net income of $1,447,500 in the second quarter of 2018 resulted primarily from a lower gross profit on a lower level of revenues in the second quarter of 2019 compared to the second quarter of 2018 related to the adoption of Topic 606 in the second quarter of 2018 offset in part by lower overhead expenses in the second quarter of 2019 compared to the second quarter of 2018. The net income of $234,300 in the first six months of 2019 compared to net income of $1,543,300 in the first six months of 2018 resulted primarily from a lower gross profit on a lower level of revenues in the first six months of 2019 compared to the first six months of 2018 related to the adoption of Topic 606 in the second quarter of 2018 offset in part by lower overhead expenses in the first six months of 2019 compared to the first six months of 2018.

Plan of Operation, Liquidity and Capital Resources

During the first six months of 2019, our Company’s cash increased to $506,500 at June 30, 2019 from $400,800 at December 31, 2018. During the first six months of 2019, our Company generated $105,700 from its operating activities.

During the first six months of 2019, our Company’s revenues decreased approximately 60% to $925,500 in the first six months of 2019 from $2,299,100 in the first six months of 2018 of which an increase of 6%, or $148,100, is attributable to a 19% increase in revenues from historical operations in the first six months of 2019 compared to the first six months of 2018 offset by a decrease of $1,521,700, or 66%, that is attributable the reduction of the Company’s revenues in the first six months of 2019 compared to the first six months of 2018 as a result of the adoption of Topic 606 in the second quarter of 2018.

Additionally, our total overhead expenses decreased in the first six months of 2019 compared to the first six months of 2018 and our Company’s net interest expense decreased in the first six months of 2019 compared to the first six months of 2018. As a result of these factors, our Company generated net income of $234,300 in the first six months of 2019 compared to $1,543,300 in first six months of 2018. Our Company had positive operating cash flow of $105,700 during the first six months of 2019. At June 30, 2019, our Company had positive working capital of $1,132,800 and stockholders’ equity of $2,201,000. For the full year of 2018, our Company had net income of $1,655,400 and had positive operating cash flow of $40,900. At December 31, 2018, our Company had positive working capital of $810,500 and stockholders’ equity of $1,966,700.

13

Our Company has $128,300 of convertible debentures outstanding that are due during the third quarter of 2019. As of the current date, holders of $92,900 of the convertible debentures have agreed to extend the maturity dates of the convertible debentures for one year with no change in the terms or conditions of the debentures. These borrowings allowed our Company to remain in operation through late 2016 when our Company’s cash flow increased significantly.

We may need to obtain additional capital in the future to support the working capital requirements associated with our existing revenue base and to fund potential operating losses that could occur if our licensees are unable to at least maintain current levels of sales of products utilizing our Company’s technologies. We cannot assure you that we will be successful in obtaining sufficient additional capital, or if we do so, that the additional capital will enable our Company to continue to operate profitably in the future and develop new revenue sources to have a material positive effect on our Company’s operations and cash flow. Without additional investment, we may be forced to cease operations at an undetermined time in the future if we are unable to sustain revenues at levels approximating revenues achieved in recent years. 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. We continue to maintain a cost containment program including curtailment, where possible, of discretionary research and development and sales and marketing expenses.

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

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

Our Company has received and continues to seek additional capital, in the form of debt, equity or both, to support our working capital requirements and to provide funding for other business opportunities. Beyond the Line of Credit, we cannot assure you that we will be successful in obtaining 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. As a result, our revenues, results of operations and liquidity may be negatively impacted as they were in earlier years.

Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) and subsequent related updates. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from operating leases. Our Company adopted the standard effective January 1, 2019 under the optional transition method which allows the entity to apply the new lease standard at the adoption date and recognize a cumulative-effect adjustment, if any, to the opening balance of retained earnings in the period of adoption. The standard had a material impact on the balance sheet (see Note 11).

14

Recently Issued Accounting Pronouncements Not Yet Adopted

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

Off-Balance Sheet Arrangements

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

Item 4. Controls and Procedures

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

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

15

PART II - OTHER INFORMATION

Item 6.Exhibits

(a) Exhibits

31.1	Certification of Chief Executive Officer required by Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer required by Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Linkbase
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase

16

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 13, 2019	/s/ Michael A. Feinstein, M.D.
	Michael A. Feinstein, M.D.
	Chairman of the Board, President & Chief Executive Officer
DATE: August 13, 2019	/s/ Rudolph A. Lutterschmidt
	Rudolph A. Lutterschmidt
	Vice President & Chief Financial Officer

17

EXHIBIT INDEX

31.1	Certification of Chief Executive Officer required by Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer required by Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Linkbase
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase

18

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

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;

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;

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:

(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;

(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;

(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

(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

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

(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.

Date: August 13, 2019

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

Michael A. Feinstein, M.D.

Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Rudolph A. Lutterschmidt, Vice President and 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;

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;

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:

(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;

(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;

(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

(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

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

(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.

Date: August 13, 2019

/s/ Rudolph A. Lutterschmidt

Rudolph A. Lutterschmidt

Vice President and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

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, 2019 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 Rudolph A. Lutterschmidt, 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 13, 2019

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

Michael A. Feinstein, M.D.

Principal Executive Officer

/s/ Rudolph A. Lutterschmidt

Rudolph A. Lutterschmidt

Principal Financial Officer

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2019	Aug. 09, 2019
Document And Entity Information
Entity Registrant Name	NOCOPI TECHNOLOGIES INC/MD/
Entity Central Index Key	0000888981
Document Type	10-Q
Document Period End Date	Jun. 30, 2019
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		58,616,716
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2019
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Incorporation State Country Name	MD
Entity File Number	000-20333

XML

Statements of Operations - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Revenues
Licenses, royalties and fees	$ 192,000	$ 1,655,600	$ 382,500	$ 1,830,500
Product and other sales	324,100	218,100	543,000	468,600
Total revenues	516,100	1,873,700	925,500	2,299,100
Cost of revenues
Licenses, royalties and fees	31,600	24,200	56,800	49,200
Product and other sales	123,400	93,400	213,700	185,600
Total cost of revenues	155,000	117,600	270,500	234,800
Gross profit	361,100	1,756,100	655,000	2,064,300
Operating expenses
Research and development	39,400	36,100	77,400	73,200
Sales and marketing	74,300	168,500	143,200	238,600
General and administrative	86,900	101,500	181,000	204,200
Total operating expenses	200,600	306,100	401,600	516,000
Net income from operations	160,500	1,450,000	253,400	1,548,300
Other income (expenses)
Interest income	1,500	300	2,600	700
Interest expense, bank charges and accretion of interest	(2,700)	(2,800)	(5,400)	(5,700)
Total other income (expenses)	(1,200)	(2,500)	(2,800)	(5,000)
Net income before income taxes	159,300	1,447,500	250,600	1,543,300
Income taxes	10,400		16,300
Net income	$ 148,900	$ 1,447,500	$ 234,300	$ 1,543,300
Basic and diluted net income per common share	$ 0.00	$ 0.02	$ 0.00	$ 0.03
Weighted average common shares outstanding
Basic	58,616,716	58,616,716	58,616,716	58,616,716
Diluted	58,973,280	58,989,480	58,988,005	58,955,344

XML

Balance Sheets - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Current assets
Cash	$ 506,500	$ 400,800
Accounts receivable less $5,000 allowance for doubtful accounts	837,800	579,000
Inventory	164,900	133,500
Prepaid and other	53,200	43,600
Total current assets	1,562,400	1,156,900
Fixed assets
Leasehold improvements	19,700	19,700
Furniture, fixtures and equipment	185,400	185,400
Fixed assets, gross	205,100	205,100
Less: accumulated depreciation and amortization	199,900	197,600
Total fixed assets	5,200	7,500
Other assets
Long-term receivable	1,158,200	1,352,200
Operating lease right of use - building	221,800
Other assets	1,380,000	1,352,200
Total assets	2,947,600	2,516,600
Current liabilities
Convertible debentures	128,300	128,300
Accounts payable	42,900	16,500
Accrued expenses	201,700	163,000
Income taxes	16,300	38,600
Operating lease liability, current	40,400
Total current liabilities	429,600	346,400
Other liabilities
Accrued expenses, non-current	81,200	94,700
Deferred income taxes	54,400	108,800
Operating lease liability, non-current	181,400
Total other liabilities	317,000	203,500
Stockholders' equity
Common stock, $0.01 par value Authorized - 75,000,000 shares Issued and outstanding - 58,616,716	586,200	586,200
Paid-in capital	12,440,000	12,440,000
Accumulated deficit	(10,825,200)	(11,059,500)
Total stockholders' equity	2,201,000	1,966,700
Total liabilities and stockholders' equity	$ 2,947,600	$ 2,516,600

XML

Balance Sheets (Parenthetical) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
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	58,616,716	58,616,716
Common stock, shares outstanding	58,616,716	58,616,716

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Statements of Cash Flows - USD ($)	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Operating Activities
Net income	$ 234,300	$ 1,543,300
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Depreciation and amortization	2,300	3,500
Deferred income taxes	(54,400)
Other assets	(27,800)	(1,521,700)
Other liabilities	208,300	106,500
Cumulative effect of accounting change		96,100
Net income adjusted for non-cash operating activities	362,700	227,700
(Increase) decrease in assets
Accounts receivable	(258,800)	6,100
Inventory	(31,400)	(12,000)
Prepaid and other	(9,600)	5,700
Increase (decrease) in liabilities
Accounts payable and accrued expenses	65,100	(190,000)
Taxes on income	(22,300)
Deferred revenue		(99,400)
Total increase in operating capital	(257,000)	(289,600)
Net cash provided by (used in) operating activities	105,700	(61,900)
Investment Activities
Additions to fixed assets		(500)
Net cash used in investing activities		(500)
Increase (decrease) in cash	105,700	(62,400)
Cash at beginning of year	400,800	360,400
Cash at end of period	506,500	298,000
Supplemental Disclosure of Non Cash Lease Activities
Operating lease right of use - building	241,100
Operating lease liability	$ (241,100)

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Statements of Stockholders' Equity - USD ($)	Common Stock [Member]	Paid-In Capital [Member]	Accumulated Deficit [Member]	Total
Balance at Dec. 31, 2017	$ 586,200	$ 12,440,000	$ (12,811,000)	$ 215,200
Balance shares at Dec. 31, 2017	58,616,716
Cumulative effect of accounting change			96,100	96,100
Net income			95,800	95,800
Balance at Mar. 31, 2018	$ 586,200	12,440,000	(12,619,100)	407,100
Balance shares at Mar. 31, 2018	58,616,716
Balance at Dec. 31, 2017	$ 586,200	12,440,000	(12,811,000)	215,200
Balance shares at Dec. 31, 2017	58,616,716
Cumulative effect of accounting change				96,100
Net income				1,543,300
Balance at Jun. 30, 2018	$ 586,200	12,440,000	(11,171,600)	1,854,600
Balance shares at Jun. 30, 2018	58,616,716
Balance at Mar. 31, 2018	$ 586,200	12,440,000	(12,619,100)	407,100
Balance shares at Mar. 31, 2018	58,616,716
Net income			1,447,500	1,447,500
Balance at Jun. 30, 2018	$ 586,200	12,440,000	(11,171,600)	1,854,600
Balance shares at Jun. 30, 2018	58,616,716
Balance at Dec. 31, 2018	$ 586,200	12,440,000	(11,059,500)	$ 1,966,700
Balance shares at Dec. 31, 2018	58,616,716			58,616,716
Net income			85,400	$ 85,400
Balance at Mar. 31, 2019	$ 586,200	12,440,000	(10,974,100)	2,052,100
Balance shares at Mar. 31, 2019	58,616,716
Balance at Dec. 31, 2018	$ 586,200	12,440,000	(11,059,500)	$ 1,966,700
Balance shares at Dec. 31, 2018	58,616,716			58,616,716
Net income				$ 234,300
Balance at Jun. 30, 2019	$ 586,200	12,440,000	(10,825,200)	$ 2,201,000
Balance shares at Jun. 30, 2019	58,616,716			58,616,716
Balance at Mar. 31, 2019	$ 586,200	12,440,000	(10,974,100)	$ 2,052,100
Balance shares at Mar. 31, 2019	58,616,716
Net income			148,900	148,900
Balance at Jun. 30, 2019	$ 586,200	$ 12,440,000	$ (10,825,200)	$ 2,201,000
Balance shares at Jun. 30, 2019	58,616,716			58,616,716

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Financial Statements

6 Months Ended

Jun. 30, 2019

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 the summary of Accounting Policies included in our Company's 2018 Annual Report on Form 10-K. Certain financial information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although our Company believes that the accompanying disclosures are adequate to make the information presented not misleading. The Notes to Financial Statements included in the 2018 Annual Report on Form10-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, 2019 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.  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.

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Revenues

6 Months Ended

Jun. 30, 2019

Revenue from Contract with Customer [Abstract]

Revenues

Note 2. Revenues

On January 1, 2018, our Company adopted ASU 214-09, Revenue from Contracts with Customers (“Topic 606”), using the modified retrospective method. Results for periods beginning on or after January 1, 2018 are presented under Topic 606; however, prior period amounts are not adjusted and continue to be reported in accordance with Topic 605, Revenue Recognition, which was in effect for those periods.

Our Company recorded a decrease to the opening balance of the accumulated deficit of $96,100 and a corresponding charge to deferred revenue as of January 1, 2018 due to the cumulative impact of the adoption of Topic 606. The impact to the revenue for the quarter ended March 31, 2018 as a result of applying Topic 606 was not material. The disclosure of disaggregated revenue is disclosed in Note 10.

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

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

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

Accumulated deficit – January 1, 2018	$	(12,811,000	)
Net earnings		1,543,300
Cumulative effect of accounting change at January 1, 2018		96,100
Accumulated deficit – June 30, 2018	$	(11,171,600	)

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Stock Based Compensation

6 Months Ended

Jun. 30, 2019

Share-based Payment Arrangement [Abstract]

Stock Based Compensation

Note 3. 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, 2019, 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, 2019.

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Line of Credit

6 Months Ended

Jun. 30, 2019

Line of Credit Facility [Abstract]

Line of Credit

Note 4. Line of Credit

In November 2018, our Company negotiated a $150,000 revolving line of credit with a bank to provide a source of working capital, if required. The line of credit is secured by all the assets of our Company and bears interest at the 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.

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Convertible Debentures

6 Months Ended

Jun. 30, 2019

Convertible Debt [Abstract]

Convertible Debentures

Note 5. Convertible Debentures

At June 30, 2019, our Company had convertible debentures totaling $128,300 outstanding, which are due during the third quarter of 2019. 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 our Company at $0.025 per share. As of the current date, holders of $92,900 of those convertible debentures have agreed to extend the maturity dates of the convertible debentures for one year with no change in the terms or conditions of the debentures.

Our Company also granted warrants to purchase 691,365 shares of our Company’s common stock at $0.02 per share to the holders of the debentures. The warrants are currently exercisable and expire at various dates in the third quarter of 2020 and the third quarter of 2021. 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 June 30, 2019 and December 31, 2018:

				Weighted Average
	Number		Exercise	Exercise
	of Shares		Price	Price
Outstanding warrants -
December 31, 2018		691,365	$0.02	$0.02
Outstanding warrants -
June 30, 2019		691,365	$0.02	$0.02
Weighted average remaining
contractual life (years)		1.33
Currently exercisable warrants -
June 30, 2019		691,365	$0.02	$0.02

The aggregate intrinsic value of warrants outstanding and exercisable as of June 30, 2019 was approximately $18,500. The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying warrants and the closing stock price of $0.0468 for the Company’s common stock on June 30, 2019.

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Other Income (Expenses)

6 Months Ended

Jun. 30, 2019

Other Income and Expenses [Abstract]

Other Income (Expenses)

Note 6. Other Income (Expenses)

Other income (expenses) for the three months and six months ended June 30, 2019 and 2018 includes interest on convertible debentures held by nine investors.

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Income Taxes

6 Months Ended

Jun. 30, 2019

Income Tax Disclosure [Abstract]

Income Taxes

Note 7. Income Taxes

There is no provision for federal income taxes for the three and six months ended June 30, 2019 and 2018 due to the availability of net operating loss carryforwards. Our Company has established a valuation allowance for the entire amount of benefits resulting from our Company’s net operating loss carryforwards because our Company has determined that the realization of the net deferred tax asset is not assured.

The components for state income tax expense resulting from the limitation on the use of net operating losses are:

	Three Months ended June 30				Six Months ended June 30
	2019		2018		2019			2018
Current state taxes	$	10,400		–	$	70,700			–
Deferred state taxes		–		–		(54,400	)		–
	$	10,400		–	$	16,300			–

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

Tax years from 2015 through 2018 remain subject to examination by U.S. federal and state jurisdictions.

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Related Party Transactions

6 Months Ended

Jun. 30, 2019

Related Party Transactions [Abstract]

Related Party Transactions

Note 8. Related Party Transactions

During the six months ended June 30, 2018, our Company paid $235,400 to Michael A. Feinstein, M.D., our Company’s Chairman of the Board and Chief Executive Officer, representing the balance of previously deferred salary owed to him under an employment agreement with our Company. During the five month period ended May 31, 2018, Dr. Feinstein deferred $35,400 of salary. The deferred salary was fully repaid to Dr. Feinstein during 2018 and, at June 30, 2019, there was no deferred salary owed to him. There was no interest payable on the deferred salary.

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Earnings per Share

6 Months Ended

Jun. 30, 2019

Weighted average common shares outstanding

Earnings per Share

Note 9. Earnings per Share

In accordance with FASB ASC 260, Earnings per Share, basic earnings per common share is computed using net earnings divided by the weighted average number of common shares outstanding for the periods presented. The computation of diluted earnings per common share involves the assumption that outstanding common shares are increased by shares issuable upon exercise of those warrants for which the market price exceeds the exercise price. The number of shares issuable upon the exercise of such warrants is decreased by shares that could have been purchased by our Company with related proceeds. For the three and six months ended June 30, 2019, the number of incremental common shares resulting from the assumed conversion of warrants was 356,564 and 371,289, respectively. For the three and six months ended June 30, 2018, the number of incremental common shares resulting from the assumed conversion of warrants was 372,764 and 338,628, respectively.

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Major Customer and Geographic Information

6 Months Ended

Jun. 30, 2019

Major Customer and Geographic Information [Abstract]

Major Customer and Geographic Information

Note 10. 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:

	Three Months ended June 30						Six Months ended June 30
	2019			2018			2019			2018
Customer A		36	%		8	%		35	%		13	%
Customer B		24	%		85	%		27	%		74	%
Customer C		10	%		2	%		11	%		5	%

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:

	June 30			December 31
	2019			2018
Customer A		10	%		6	%
Customer B		82	%		86	%

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

Our Company’s revenues by geographic region are as follows:

	Three Months ended June 30				Six Months ended June 30
	2019		2018		2019		2018
North America	$	225,800	$	1,674,400	$	442,400	$	1,859,300
South America		–		–		–		1,500
Europe		100		100		100		100
Asia		290,200		199,200		483,000		438,200
	$	516,100	$	1,873,700	$	925,500	$	2,299,100

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Leases

6 Months Ended

Jun. 30, 2019

Lessee Disclosure [Abstract]

Leases

Note 11. 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.

Future minimum lease payments under non-cancelable operating leases with initial or remaining terms of one year or more at June 30, 2019 are: $25,200 – 2019; $51,600 – 2020; $53,100 – 2021; $54,600 – 2022; $56,200 – 2023 and $18,900 – 2024.

Total lease expense under operating leases for the three and six months ended June 30, 2019 was $13,400 and $26,700, respectively. Total lease expense under operating leases for the three and six months ended June 30, 2018 was $11,300 and $22,500, respectively.

Maturities of lease liabilities are as follows:

	Operating Leases
Year ending December 31
2019	$	25,200
2020		51,600
2021		53,100
2022		54,600
2023		56,200
2024		18,900
Total lease payments		259,600
Less imputed interest		(37,800	)
Total	$	221,800

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Revenues (Tables)

6 Months Ended

Jun. 30, 2019

Revenue from Contract with Customer [Abstract]

Change in Accumulated Deficit Balance

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

Accumulated deficit – January 1, 2018	$	(12,811,000	)
Net earnings		1,543,300
Cumulative effect of accounting change at January 1, 2018		96,100
Accumulated deficit – June 30, 2018	$	(11,171,600	)

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Convertible Debentures (Tables)

6 Months Ended

Jun. 30, 2019

Convertible Debt [Abstract]

Schedule of Warrants Outstanding

The following table summarizes our Company’s warrant position at June 30, 2019 and December 31, 2018:

				Weighted Average
	Number		Exercise	Exercise
	of Shares		Price	Price
Outstanding warrants -
December 31, 2018		691,365	$0.02	$0.02
Outstanding warrants -
June 30, 2019		691,365	$0.02	$0.02
Weighted average remaining
contractual life (years)		1.33
Currently exercisable warrants -
June 30, 2019		691,365	$0.02	$0.02

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Income Taxes (Tables)

6 Months Ended

Jun. 30, 2019

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 June 30				Six Months ended June 30
	2019		2018		2019			2018
Current state taxes	$	10,400		–	$	70,700			–
Deferred state taxes		–		–		(54,400	)		–
	$	10,400		–	$	16,300			–

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Major Customer and Geographic Information (Tables)

6 Months Ended

Jun. 30, 2019

Segment Reporting [Abstract]

Schedule of Revenues from Non-affiliated Customers

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:

	Three Months ended June 30						Six Months ended June 30
	2019			2018			2019			2018
Customer A		36	%		8	%		35	%		13	%
Customer B		24	%		85	%		27	%		74	%
Customer C		10	%		2	%		11	%		5	%

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:

	June 30			December 31
	2019			2018
Customer A		10	%		6	%
Customer B		82	%		86	%

Schedule of Revenue by Geographic Region

Our Company’s revenues by geographic region are as follows:

	Three Months ended June 30				Six Months ended June 30
	2019		2018		2019		2018
North America	$	225,800	$	1,674,400	$	442,400	$	1,859,300
South America		–		–		–		1,500
Europe		100		100		100		100
Asia		290,200		199,200		483,000		438,200
	$	516,100	$	1,873,700	$	925,500	$	2,299,100

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Leases (Tables)

6 Months Ended

Jun. 30, 2019

Lessee Disclosure [Abstract]

Maturities of Lease Liabilities

Maturities of lease liabilities are as follows:

	Operating Leases
Year ending December 31
2019	$	25,200
2020		51,600
2021		53,100
2022		54,600
2023		56,200
2024		18,900
Total lease payments		259,600
Less imputed interest		(37,800	)
Total	$	221,800

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Revenues (Details) - USD ($)	3 Months Ended				6 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Revenue from Contract with Customer [Abstract]
Accumulated deficit		$ (11,059,500)		$ (12,811,000)	$ (11,059,500)	$ (12,811,000)
Net earnings	$ 148,900	$ 85,400	$ 1,447,500	95,800	234,300	1,543,300
Cumulative effect of accounting change				$ 96,100		96,100
Accumulated deficit	(10,825,200)		11,171,600		(10,825,200)	11,171,600
Long-term receivable	$ 1,158,200		1,521,700		$ 1,158,200	$ 1,521,700	$ 1,352,200
Selling expense			$ 106,500

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Stock Based Compensation (Details)	Jun. 30, 2019 USD ($)
Share-based Payment Arrangement [Abstract]
Unrecognized portion of expense related to stock option grants	$ 0

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Line of Credit (Details)	6 Months Ended
	Jun. 30, 2019 USD ($)
Line of Credit Facility [Abstract]
Line of credit borrowing capacity	$ 150,000
Interest rate	The line of credit is secured by all the assets of our Company and bears interest at the bank’s prime rate for a period of one year and its prime rate plus 1.5% thereafter.

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Convertible Debentures (Narrative) (Details) - Convertible Debt [Member]	Jun. 30, 2019 USD ($) $ / shares shares
Debt Instrument [Line Items]
Convertible debt amount outstanding	$ 128,300
Convertible debentures extended for one year	$ 92,900
Debt instrument, interest rate	7.00%
Debt instrument, conversion price per share | $ / shares	$ 0.025
Number of shares of common stock that can be purchased through warrants | shares	691,365
Price per share of warrants | $ / shares	$ 0.02
Warrants outstanding intrinsic value	$ 18,500
Warrants exercisable intrinsic value	$ 18,500
Closing stock price | $ / shares	$ 0.0468

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Convertible Debentures (Warrants Activity) (Details) - Warrant [Member] - $ / shares	6 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Warrants
Warrants outstanding	691,365	691,365
Exercise price	$ 0.02	$ 0.02
Weighted average exercise price	$ 0.02	0.02
Weighted average remaining contractual life	1 year 3 months 29 days
Exercisable	691,365
Currently exercisable weighted average exercise price	$ 0.02	$ 0.02

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Income Taxes (Details) - USD ($)	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Income Tax Contingency [Line Items]
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	2015
Maximum [Member]
Income Tax Contingency [Line Items]
Tax years open for examination	2018

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Income Taxes (Components for State Income Tax Expense) (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Income Tax Disclosure [Abstract]
Current state taxes	$ 10,400		$ 70,700
Deferred state taxes			(54,400)
Income tax expense	$ 10,400		$ 16,300

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Related Party Transactions (Details) - Related Party [Member] - USD ($)	5 Months Ended	6 Months Ended
	May 31, 2018	Jun. 30, 2018	Jun. 30, 2019
Related Party Transaction [Line Items]
Deferred salary paid to related party		$ 235,400
Portion of salary to related party deferred during period	$ 35,400
Deferred salary owed to related party			$ 0

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Earnings per Share (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Weighted average common shares outstanding
Number of incremental common shares resulting from the assumed conversion of warrants	356,564	372,764	371,289	338,628

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Major Customer and Geographic Information (Schedule of Revenues from Non-affiliated Customers) (Details) - Revenue [Member]	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Customer A [Member]
Revenue, Major Customer [Line Items]
Risk percentage	36.00%	8.00%	35.00%	13.00%
Customer B [Member]
Revenue, Major Customer [Line Items]
Risk percentage	24.00%	85.00%	27.00%	74.00%
Customer C [Member]
Revenue, Major Customer [Line Items]
Risk percentage	10.00%	2.00%	11.00%	5.00%

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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, 2019	Dec. 31, 2018
Customer A [Member]
Concentration Risk [Line Items]
Risk percentage	10.00%	6.00%
Customer B [Member]
Concentration Risk [Line Items]
Risk percentage	82.00%	86.00%

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Major Customer and Geographic Information (Schedule of Revenue by Geographic Region) (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	$ 516,100	$ 1,873,700	$ 925,500	$ 2,299,100
North America [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	225,800	1,674,400	442,400	1,859,300
South America [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues				1,500
Europe [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	100	100	100	100
Asia [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	$ 290,200	$ 199,200	$ 483,000	$ 438,200

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Leases (Narrative) (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Lessee Disclosure [Abstract]
2019	$ 25,200		$ 25,200
2020	51,600		51,600
2021	53,100		53,100
2022	54,600		54,600
2023	56,200		56,200
2024	18,900		18,900
Lease expense	$ 13,400	$ 11,300	$ 26,700	$ 22,500
Incremental borrowing rate	6.00%		6.00%

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Leases (Maturities of Lease Liabilities) (Details)	Jun. 30, 2019 USD ($)
Lessee Disclosure [Abstract]
2019	$ 25,200
2020	51,600
2021	53,100
2022	54,600
2023	56,200
2024	18,900
Total lease payments	259,600
Less imputed interest	(37,800)
Total	$ 221,800