NOCOPI TECHNOLOGIES INC/MD/ Files 10-Q for Period Ending March 31, 2024

TL;DR

<b>NOCOPI TECHNOLOGIES INC/MD/ filed its Q1 2024 10-Q, detailing financial performance and customer concentration risks.</b>

AI Summary

NOCOPI TECHNOLOGIES INC/MD/ (NNUP) filed a Quarterly Report (10-Q) with the SEC on May 15, 2024. NOCOPI TECHNOLOGIES INC/MD/ filed a 10-Q report for the period ending March 31, 2024. The company is incorporated in Maryland (MD) and operates in the Games, Toys & Children's Vehicles sector. The filing includes data related to common stock, additional paid-in capital, and retained earnings for various periods. Specific customer concentration risks are noted for Customer A and Customer B, impacting sales revenue and accounts receivable. Geographic revenue breakdown shows data for North America and Asia, with specific mentions of Australia (AU).

Why It Matters

For investors and stakeholders tracking NOCOPI TECHNOLOGIES INC/MD/, this filing contains several important signals. The 10-Q filing provides a quarterly update on NOCOPI TECHNOLOGIES INC/MD/'s financial health and operational status, crucial for investors to assess recent performance. Details on customer concentration risk highlight potential dependencies and vulnerabilities in revenue streams, which could impact future financial stability.

Risk Assessment

Risk Level: medium — NOCOPI TECHNOLOGIES INC/MD/ shows moderate risk based on this filing. The company's reliance on specific customers (Customer A and Customer B) for sales revenue and accounts receivable introduces a medium-level risk due to potential concentration issues.

Analyst Insight

Investors should monitor NOCOPI TECHNOLOGIES INC/MD/'s customer diversification strategies and the impact of customer concentration on its financial results.

Key Numbers

• 2024-03-31 — Period End Date (Quarterly report period)
• 2024-05-15 — Filing Date (Date the report was filed)
• 3944 — SIC Code (Standard Industrial Classification for Games, Toys & Children's Vehicles)
• 000-20333 — SEC File Number (SEC's file number for the company)

Key Players & Entities

• NOCOPI TECHNOLOGIES INC/MD/ (company) — Filer name
• 2024-03-31 (date) — Period of report
• 2024-05-15 (date) — Filed as of date
• 3944 (industry_code) — Standard Industrial Classification
• MD (state) — State of incorporation
• PA (state) — Business address state
• Customer A (company) — Customer concentration risk
• Customer B (company) — Customer concentration risk

FAQ

Risk Factors

• Customer Concentration Risk [medium — financial]: The company faces risks due to significant reliance on a few customers for a substantial portion of its sales revenue and accounts receivable.

Key Dates

• 2024-03-31: Quarter End — End of the reporting period for the 10-Q filing.
• 2024-05-15: Filing Date — Date the 10-Q report was officially submitted to the SEC.

Glossary

10-Q

A quarterly report required by the U.S. Securities and Exchange Commission (SEC) that provides a continuing disclosure by public companies. (Provides a snapshot of the company's financial performance and condition during the quarter.)

Customer Concentration Risk

The risk associated with having a small number of customers accounting for a large percentage of a company's revenue or receivables. (Highlights potential revenue instability if key customers reduce their business or terminate relationships.)

Key Financial Figures

• $0 — ,178 shares of common stock, par value $0.01, as of May 15, 2024 . NOCOPI TECHN
• $38,400 — d state taxable income of approximately $38,400 and $40,800, respectively. State income
• $40,800 — ble income of approximately $38,400 and $40,800, respectively. State income taxes in th

Filing Documents

• nnup_10q.htm (10-Q) — 364KB
• ex31x1.htm (EX-31.1) — 10KB
• ex31x2.htm (EX-31.2) — 10KB
• ex32x1.htm (EX-32.1) — 4KB
• 0001079973-24-000722.txt (&nbsp;) — 2582KB
• nnup-20240331.xsd (EX-101.SCH) — 22KB
• nnup-20240331_cal.xml (EX-101.CAL) — 40KB
• nnup-20240331_def.xml (EX-101.DEF) — 57KB
• nnup-20240331_lab.xml (EX-101.LAB) — 227KB
• nnup-20240331_pre.xml (EX-101.PRE) — 181KB
• nnup_10q_htm.xml (XML) — 216KB

FINANCIAL INFORMATION

Part I. FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements 1 1 Balance Sheets at March 31, 2024 and December 31, 2023 2 3 4

Notes to Financial Statements

Notes to Financial Statements 5

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk 15

Controls and Procedures

Item 4. Controls and Procedures 15

OTHER INFORMATION

Part II. OTHER INFORMATION

Legal Proceedings

Item 1. Legal Proceedings 16

Risk Factors

Item 1A. Risk Factors 16

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 16

Defaults Upon Senior Securities

Item 3. Defaults Upon Senior Securities 16

Mine Safety Disclosures

Item 4. Mine Safety Disclosures 16

Other Information

Item 5. Other Information 16

Exhibits

Item 6. Exhibits 16

– FINANCIAL INFORMATION

PART I – FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements. Nocopi Technologies, Inc. (unaudited) Three Months ended March 31 2024 2023 Revenues Licenses, royalties and fees $ 86,500 $ 123,000 Product and other sales 311,800 469,100 Total revenues 398,300 592,100 Cost of revenues Licenses, royalties and fees 51,800 58,700 Product and other sales 180,900 221,800 Total cost of revenues 232,700 280,500 Gross profit 165,600 311,600 Operating expenses Research and development 41,400 44,800 Sales and marketing 69,000 86,300 General and administrative 1,214,800 201,200 Total operating expenses 1,325,200 332,300 Net loss from operations ( 1,159,600 ) ( 20,700 ) Other income (expenses) Interest income 137,100 62,100 Interest expense and bank charges ( 5,700 ) ( 600 ) Total other income (expenses) 131,400 61,500 Net income (loss) before income taxes ( 1,028,200 ) 40,800 Income taxes — 10,500 Net income (loss) $ ( 1,028,200 ) $ 30,300 Basic net income (loss) per common share $ ( .10 ) $ .00 Diluted net income (loss) per common share $ ( .10 ) $ .00 Weighted average common shares outstanding Basic 10,501,178 9,251,178 Diluted 10,501,178 9,251,178 *See accompanying notes to these financial statements. 1 Nocopi Technologies, Inc. Balance Sheets* (unaudited) March 31 December 31 2024 2023 Assets Current assets Cash $ 3,600,100 $ 2,269,200 Accounts receivable less $ 12,000 allowance for credit losses 981,500 1,120,700 Inventory 370,300 448,000 Interest receivable 205,100 160,000 Short-term investments 6,910,900 7,985,600 Prepaid and other 100,600 121,800 Total current assets 12,168,500 12,105,300 Fixed assets Leasehold improvements 81,500 81,500 Furniture, fixtures and equipment 177,800 169,800 Fixed assets, gross 259,300 251,300 Less: accumulated depreciation and amortization 229,000 214,800 T

NOTES TO FINANCIAL STATEMENTS

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 Note 2 Significant Accounting Policies included in the Notes to Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the Securities and Exchange Commission on March 25, 2024 (the "2023 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 2023 Annual Report should be read in conjunction with the accompanying interim financial statements. The interim operating results for the three months ended March 31, 2024 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 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 (loss), comprehensive income (loss) is equal to net income (loss). Recently Issued Accounting Pronouncements Not Yet Adopted As of March 31, 2024, there are no recentl

NOTES TO FINANCIAL STATEMENTS

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) Note 3 . Cash and Cash Equivalents March 31 2024 December 31 2023 Cash and cash equivalents Cash and money market funds $ 3,600,100 $ 2,269,200 $ 3,600,100 $ 2,269,200 Note 4. Short-term Investments Schedule of short term investments March 31 December 31 2024 2023 Short-term investments U.S. Treasury Bills $ 6,910,900 $ 7,985,600 Short-term investments $ 6,910,900 $ 7,985,600 Schedule of amortized cost and fair value of securities held to maturity Amortized Cost Fair Value U.S. Treasury Bills Due April 18, 2024 $ 1,087,900 $ 1,122,200 Due July 11, 2024 1074,800 1,108,800 Due September 5, 2024 4,748,200 4,888,400 Total $ 6,910,900 $ 7,119,400 Total interest income recognized for U.S. Treasury Bills was $ 95,400 and $ 239,600 for the three months ended March 31, 2024 and year ended December 31, 2023. Interest receivable was $ 205,100 and $ 160,000 for the three months ended March 31, 2024 and for the year ended December 31, 2023. Note 5. Long-term Receivables As of March 31, 2024, the Company had long-term receivables of $ 1,701,300 from two of the 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

NOTES TO FINANCIAL STATEMENTS

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) The following table summarizes the future minimum payments due under the three license agreements as of March 31, 2024: Schedule of future minimum payments Year Ending December 31: 2024 $ 642,000 2025 570,000 2026 570,000 2027 557,500 2028 260,000 Total $ 2,599,500 The Company has evaluated the collectability of the long-term receivables and believes them to be fully collectible as of March 31, 2024. 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 March 31, 2024, 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 March 31, 2024 is $ 1,701,300 . Note 6. 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 and the line of credit was terminated on July 13, 2023 Note 7. Stockholders' Equity On September 11, 2023 our Company entered into a stock purchase agreement in connection with a private placement for total gross proceeds of $ 5.0 million. The stock purchase agreement provided for the issuance of an aggregate of 1,250,000 shares of our Company's common stock to an investor at a purchase price of $ 4.00 per share. In addition, as consideration for general advisory services until the third anniversary, the Company agreed to issue an aggregate total of 65,790 shares of common stock with a

NOTES TO FINANCIAL STATEMENTS

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 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: Schedule of revenues as percentage of revenue Three Months ended March 31 2024 2023 Customer A 68 % 71 % Customer B 16 % 12 % 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 March 31 December 31 2024 2023 Customer B 85 % 82 % 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: Schedule of revenue by geographic region Three Months ended March 31 2024 2023 North America $ 77,700 $ 127,800 Asia 302,000 441,500 Australia 18,600 22,800 $ 398,300 $ 592,100 9 NOCOPI TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) Note 11. Leases Our Company conducts its operations in leased facilities under a non-cancelable operating lease expiring in 2024. The lease has been extended for 13 months beginning on May 1, 2024 and expiring on May 31, 2025. 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 operating lease costs for each of the three month periods ended March 31, 2024 and March 31, 2023 was $ 13,300 . Maturities of lease liabilities were as follows: Schedule of maturities of lease liabilities Operating Leases Year ending December 31 2024 $ 4,700 Total lease payments 4,700 Less imputed interest ( 300 ) Total $ 4,400 10

Management's Discussion and Analysis

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, 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 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 w

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