United States

Securities and Exchange Commission

Washington, D.C. 20549

Form 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2025

☐ 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 ☒ No ☐

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

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

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

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 10,792,913 shares of common stock, par value $0.01, as of May 7, 2025.

NOCOPI TECHNOLOGIES, INC.

INDEX

	PAGE
Part I. FINANCIAL INFORMATION

Item 1. Financial Statements	1

Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2025 and March 31, 2024	1
Balance Sheets at March 31, 2025 and December 31, 2024	2
Statements of Cash Flows for the Three Months Ended March 31, 2025 and March 31, 2024	3
Statements of Stockholders’ Equity for the Three Months ended March 31, 2025 and March 31, 2024	4
Notes to Financial Statements	5

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	12

Item 3. Quantitative and Qualitative Disclosures About Market Risk	16

Item 4. Controls and Procedures	16

Part II. OTHER INFORMATION

Item 1. Legal Proceedings	17

Item 1A. Risk Factors	17

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	17

Item 3. Defaults Upon Senior Securities	17

Item 4. Mine Safety Disclosures	17

Item 5. Other Information	17

Item 6. Exhibits	17

SIGNATURES	18

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

Nocopi Technologies, Inc.

Statements of Comprehensive Income (Loss)*

(unaudited)


	Three Months ended March 31
	2025			2024
Revenues
Licenses, royalties and fees	$	190,300		$	86,500
Product and other sales		288,700			311,800
Total revenues		479,000			398,300
Cost of revenues
Licenses, royalties and fees		43,500			51,800
Product and other sales		161,800			180,900
Total cost of revenues		205,300			232,700
Gross profit		273,700			165,600
Operating expenses
Research and development		45,000			41,400
Sales and marketing		91,000			69,000
General and administrative		223,500			1,214,800
Total operating expenses		359,500			1,325,200
Net loss from operations		(85,800	)		(1,159,600	)

Other income (expenses)
Interest income		117,200			137,100
Interest expense and bank charges		(5,900	)		(5,700	)
Total other income (expenses)		111,300			131,400
Net income (loss) before income taxes		25,500			(1,028,200	)
Income taxes		—			—
Net income (loss)	$	25,500		$	(1,028,200	)
Net income (loss) per common share
Basic and Diluted	$	.002		$	(.10	)
Weighted average common shares outstanding
Basic and Diluted		10,792,913			10,501,178

*See accompanying notes to these condensed financial statements.

Nocopi Technologies, Inc.

Balance Sheets*

(unaudited)


	March 31			December 31
	2025			2024

Assets
Current assets
Cash and cash equivalents	$	11,209,400		$	10,839,700
Accounts receivable less $12,000 allowance for credit losses		1,179,300			1,234,500
Inventory, net of allowance of $81,000 and $85,400		323,800			349,600
Prepaid and other		94,100			155,700
Total current assets		12,806,600			12,579,500

Fixed assets
Leasehold improvements		81,500			81,500
Furniture, fixtures and equipment		179,700			179,700
Fixed assets, gross		261,200			261,200
Less: accumulated depreciation and amortization		246,200			244,500
Total fixed assets		15,000			16,700
Other assets
Long-term receivables		1,196,800			1,292,800
Operating lease right of use – building		13,100			32,400
Total other assets		1,209,900			1,325,200
Total assets	$	14,031,500		$	13,921,400

Liabilities and Stockholders' Equity
Current liabilities
Accounts payable	$	62,900		$	20,900
Accrued expenses		155,000			108,300
Stock compensation payable		48,400			26,800
Operating lease liability – current		14,200			35,200
Total current liabilities		280,500			191,200

Long-term liabilities
Accrued expenses, non-current		83,700			90,400
Total liabilities		364,200			281,600

Stockholders' equity
Common stock, $0.01 par value Authorized – 75,000,000 shares Issued and outstanding – March 31, 2025-10,792,913 shares, December 31, 2024-10,501,178 shares		107,900			107,900
Paid-in capital		25,582,400			25,580,400
Accumulated deficit		(12,023,000	)		(12,048,500	)
Total stockholders' equity		13,667,300			13,639,800
Total liabilities and stockholders' equity	$	14,031,500		$	13,921,400

*See accompanying notes to these condensed financial statements.

Nocopi Technologies, Inc.

Statements of Cash Flows*

(unaudited)


	Three Months ended March 31
	2025			2024
Operating Activities
Net income (loss)	$	25,500		$	(1,028,200	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Depreciation and amortization		1,700			14,200
Stock-based compensation		23,600			912,000
Amortization of operating lease right of use-building		19,300			13,200
Inventory reserve		(4,400	)		(38,300	)
(Increase) decrease in assets
Accounts receivable		55,200			139,200
Inventory		30,200			116,000
Interest receivable		—			(45,100	)
Prepaid and other current assets		61,600			21,200
Long-term receivables		96,000			150,400
Increase (decrease) in liabilities
Accounts payable		42,000			22,800
Accrued expenses		40,000
Operating lease liability-current		(21,000	)		(13,200	)
Net cash provided by operating activities		369,700			264,200

Investing Activities
Additions to fixed assets		—			(8,000	)
Sale of short-term investments		—			1,074,700
Net cash provided by investing activities		—			1,066,700

Increase in cash and cash equivalents		369,700			1,330,900

Cash and Cash Equivalents
Beginning of period		10,839,700			2,269,200
End of period	$	11,209,400		$	3,600,100

*See accompanying notes to these condensed financial statements.

Nocopi Technologies, Inc.

Statements of Stockholders’ Equity*

For the Three Months ended March 31, 2025 and March 31, 2024

(unaudited)



	Common stock				Paid-in		Accumulated
	Shares		Amount		Capital		Deficit			Total
Balance at December 31, 2024		10,792,913	$	107,900	$	25,580,400	$	(12,048,500	)	$	13,639,800
Stock-based compensation						2,000					2,000
Net income				—		—		25,500			25,500
Balance at March 31, 2025		10,792,913	$	107,900	$	25,582,400	$	(12,023,000	)	$	13,667,300


	Common stock				Paid-in		Accumulated
	Shares		Amount		Capital		Deficit			Total
Balance at December 31, 2023		10,501,178	$	105,000	$	21,647,100	$	(9,369,600	)	$	12,382,500
Net loss				—		—		(1,028,200	)		(1,028,200	)
Balance at March 31, 2024		10,501,178	$	105,000	$	21,647,100	$	(10,397,800	)	$	11,354,300

* See accompanying notes to these condensed financial statements.

NOCOPI TECHNOLOGIES, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1. Financial Statements

The accompanying unaudited condensed financial statements have been prepared by Nocopi Technologies, Inc. (the “Company”). These statements include all adjustments (consisting only of normal recurring adjustments) which management believes necessary for a fair presentation of the statements and have been prepared on a consistent basis using the accounting policies described in 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, 2024, as filed with the Securities and Exchange Commission on March 25, 2025 (the “2024 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 the Company believes that the accompanying disclosures are adequate to make the information presented not misleading. The notes to financial statements included in the 2024 Annual Report should be read in conjunction with the accompanying interim financial statements. The interim operating results for the three months ended March 31, 2025 may not be necessarily indicative of the operating results expected for the full year.

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

Reclassifications

Certain reclassifications have been made to the 2024 financial statements in order to conform to the 2025 financial statement presentation.

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740). The amendments in this Update related to the rate reconciliation and income taxes paid disclosures improve the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. The amendments allow investors to better assess, in their capital allocation decisions, how an entity’s worldwide operations and related tax risks and tax planning and operational opportunities affect its income tax rate and prospects for future cash flows. The other amendments in this Update improve the effectiveness and comparability of disclosures by (1) adding disclosures of pretax income (or loss) and income tax expense (or benefit) to be consistent with U.S. Securities and Exchange Commission (SEC) Regulation S-X 210.4-08(h), Rules of General Application—General Notes to Financial Statements: Income Tax Expense, and (2) removing disclosures that no longer are considered cost beneficial or relevant. For public business entities, the amendments in this Update are effective for annual periods beginning after December 15, 2024. For entities other than public business entities, the amendments are effective for annual periods beginning after December 15, 2025. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The amendments in this Update should be applied on a prospective basis. Retrospective application is permitted. We are evaluating the effect that this guidance will have on our consolidated financial statements and related disclosures.

In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (ASU 2024-03). The new guidance requires disaggregated information about certain income statement expense line items on an annual and interim basis. This guidance will be effective for annual periods beginning the year ended December 31, 2027 and for interim periods thereafter. The new standard permits early adoption and can be applied prospectively or retrospectively. We are evaluating the effect that this guidance will have on our consolidated financial statements and related disclosures.

Recently Adopted Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires public entities to disclose significant segment expenses and other segment items on an interim and annual basis and provide in interim periods all disclosures about a reportable segment's profit or loss and assets that are currently required annually. The ASU does not change how a public entity identifies its operating segments, aggregates them, or applies the quantitative threshold to determine its reportable segments. The new disclosure requirements are also applicable to entities that account and report as a single operating segment entity. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. The Company adopted the guidance for the annual reporting period ended December 31, 2024. There was no impact on the Company’s reportable segments identified and additional required disclosures have been included in Note 15 - Segment Reporting.

NOCOPI TECHNOLOGIES, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

Note 2. Stock-Based Compensation

The 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. On June 17, 2024, the Company’s shareholders approved the Nocopi Technologies, Inc. 2024 Incentive Compensation Plan (the “2024 Plan”), which allows the Company to issue equity awards to directors, officers, other employees and consultants of the Company. As of March 31, 2025, 5,000 unvested restricted stock units (“RSUs”) are outstanding under the 2024 Plan. In addition, as of March 31, 2025, 149,805 shares have been issued in settlement of vested RSUs granted under the 2024 Plan. As of March 31, 2025, the unamortized value related to grants under the 2024 Plan was $6,100.

As part of an employment agreement, the Company granted (the “Prior Grant”) to an executive a one-time equity award of 1,000,000 RSUs valued at $3,580,000, fair value, which award was originally set to vest in its entirety on August 18, 2024. The fair market value of the restricted stock award was determined based on the closing price of the Company’s common stock on the grant date and was expensed on a straight-line basis to general and administrative expense as stock-based compensation over the one-year vesting term. The Company recorded stock-based compensation expense of $890,100 for the three months ended March 31, 2024. Under the original terms of the award, to the extent the Company had not established an employee equity compensation plan on or prior to August 18, 2024, the RSUs may have been converted, at the election of the executive, in full or in part, into cash compensation, at a rate of $3.58 per share of common stock, which was the fair market value of the common stock on October 10, 2023, which was the date the Board of Directors approved the grant. Since the issuance of the RSUs can be settled in cash, the monthly expense was credited to a liability account, stock compensation liability, instead of equity.

On August 16, 2024, the executive agreed to cancel and forfeit the Prior Grant and, in lieu of the Prior Grant, the Company granted the executive 1,649,769 RSUs (“Replacement Grant”), pursuant to and subject to the 2024 Plan and an award agreement, as approved by the Board of Directors. The fair market value of the replacement grant was $3,580,000, which was determined based on the closing price of the Company’s common stock on the grant date. The shares of common stock underlying the Replacement Grant shall vest ratably and quarterly over a two-year period beginning on the Replacement Grant date, August 16, 2024. The cancellation and issuance of the Replacement Grant is treated as a modification of an award under FASB ASC 718. This modification resulted in an incremental fair value of $1,410,000, calculated as the difference between the fair value of the Replacement Grant and the fair value of the Prior Grant on the modification date. The incremental fair value will be recognized as additional compensation expense on a straight-line basis over the new two-year vesting period. The Company will relieve the stock compensation liability on a proportional basis as the Replacement Grant vests. On December 23, 2024, the executive agreed to forfeit to the Company all remaining 1,443,548 shares underlying the unvested RSUs outstanding under the Replacement Grant. The fair market value of $3,132,500 was recorded as a credit to equity and a debit to stock compensation payable.

Note 3. Cash and Cash Equivalents

Schedule of cash and cash equivalents
	March 31 2025		December 31 2024
Cash and cash equivalents
Cash and money market funds	$	11,209,400	$	10,839,700
Cash and cash equivalents	$	11,209,400	$	10,839,700

Note 4. Inventories

Schedule of inventories
	March 31 2025			December 31 2024
Inventories consist of the following
Raw materials	$	404,700		$	428,000
Finished goods		100			7,000
Inventory gross		404,800			435,000
Less: Allowance		(81,000	)		(85,400	)
Inventory	$	323,800		$	349,600

NOCOPI TECHNOLOGIES, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

Note 5. Long-term Receivables

As of March 31, 2025 and December 31, 2024, the Company had long-term receivables of $1,196,800 and $1,292,800, respectively, from three and two licensees, respectively, 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 three existing licensees. 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 6.32% for two licensees that renewed in 2022 and 8.14% for one licensee that renewed in January 2025.

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

The royalty payment is fixed or determinable

Collection of the royalty payment is considered probable

The licensee has the ability to benefit from the licensed technology

The Company determined that the above conditions were met upon execution of the three license agreements. The commissions are payable over the term of the license agreements and are due when payments are received by the Company. As of March 31, 2025 and December 31, 2024, the accrued commission payable balance was $125,200 and $128,500, respectively, included on the balance sheet in accrued expenses and accrued expenses, non-current.

The current portion of the three license agreements in the amount of $593,700 and $545,700, is included in accounts receivable on the balance sheets as of March 31, 2025 and December 31, 2024, respectively.

The following table summarizes the future minimum payments due under the three license agreements as of March 31, 2025:

Schedule of future minimum payments
Year Ending December 31:
2025	$	465,000
2026		624,000
2027		557,500
2028		260,000
Total	$	1,906,500

The Company has evaluated the collectability of the long-term receivables and believes them to be fully collectible as of March 31, 2025. 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, 2025, and the receivable and imputed interest 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, 2025 and December 31, 2024 was $1,196,800 and $1,292,800, respectively. The unamortized imputed interest balance as of March 31, 2025 and December 31, 2024 was $108,400 and $110,500, respectively, which will be recognized as interest income through June 30, 2028. Interest income derived from long-term receivables was $4,900 and $3,200 for the three months ended March 31, 2025 and 2024, respectively, included in the statements of comprehensive income (loss).

Note 6. Stockholders’ Equity

On September 11, 2023, the 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 the Company’s common stock to an investor at a purchase price of $4.00 per share. On September 11, 2023, the sale pursuant to the Purchase Agreement closed. No placement fees or commissions were paid in connection with this transaction. 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 total fair market value on the date of grant of $263,160, which shares shall be issued as follows: one-third (21,930 shares) on September 11, 2024, which was issued on such date, one-third (21,930 shares) on September 11, 2025 and one-third (21,930 shares) on September 11, 2026. The Company expenses the value of the stock grant, which is determined to be the fair market value of the shares at the date of grant, straight-line over the term of the advisory agreement. For the three months ended March 31, 2025 and 2024, the Company recognized $21,600 and $21,800, respectively, of consulting expense associated with this issuance. On September 11, 2024, the Company issued 21,930 shares of its common stock for advisory services upon the vesting of the first tranche described above with a fair value of $87,700, which was fully expensed upon issuance. As of March 31, 2025, the unamortized value related to the grant for advisory services was $127,000.

On December 24, 2024, an executive of the Company was granted 10,000 RSUs, of which 5,000 RSU’s vested on December 24, 2024 and the remaining 5,000 RSUs vest on December 24, 2025, with a total fair market value on date of grant of $16,700 of which $8,350 was vested. The Company expenses the value of the stock grant, which is determined to be the fair market value of the non-vested shares at the date of grant, straight-line over the vesting period. For the three months ended March 31, 2025 and 2024, the Company recognized $2,100 and $0, respectively, of stock-based compensation expense.

NOCOPI TECHNOLOGIES, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

Note 7. Income Taxes

There was no income tax expense reflected in the results of operations for the quarter ended March 31, 2025 and the year ended December 31, 2024, because the Company carried forward net losses for tax purposes.

As of March 31, 2025 and December 31, 2024, the Company had federal net operating loss carry forwards of $664,000 and $707,000, respectively, and state net operating loss carryforwards of $2,546,000 and $2,568,000, respectively, which may be used to offset future taxable income. The remaining federal NOL's will not expire but will be limited to 80% of taxable income. The Pennsylvania NOL's began to expire in 2024, with $1,307,000 expiring by 2032. The remaining Pennsylvania NOL's expire in 20 years and the Florida NOL's will not expire.

The tax effects of temporary differences which give rise to deferred tax assets (liabilities) are summarized as follows:


	March 31, 2025			December 31, 2024

Deferred tax assets/(liabilities)
Net operating loss carryforward	$	336,700		$	595,300
R&D Credits		39,000			41,300
Stock-based compensation		600			—
Operating lease assets		300			800
Capitalize research & development costs		81,300			73,400
Depreciation & amortization		900			600
Total deferred tax assets		458,800			711,400
Valuation allowance		(458,800	)		(711,400	)
Net	$	—		$	—

For the quarter ended March 31, 2025, the net decrease in valuation allowance was $252,600.

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Deferred tax assets consist primarily of the tax effect of NOL carry-forwards. The Company has provided a full valuation allowance on the deferred tax assets because of the uncertainty regarding its realizability.

Reconciliation of the statutory federal income tax to the Company's effective tax:


	March 31, 2025						December 31, 2024
	Amount			%			Amount			%
Statutory federal tax rate		5,300			21.00			(568,900	)		(21.00	)
State tax, net of federal benefit		3,100			12.00			(272,900	)		(10.00	)
NOL adjustment and other attributes		244,200			959.00			(168,000	)		(6.00	)
Stock based compensation		—			—			1,027,100			38.00
Other		—			—			(136,300	)		(5.00	)
Valuation allowance		(252,600	)		(992.00	)		119,000			4.00

Provision (Benefit) for income taxes		—			—			—			—

Internal Revenue Code Section 382 limits the ability to utilize net operating losses if a 50% change in ownership occurs over a three-year period. Such limitation of the net operating losses may have occurred, but we have not analyzed it at this time as the deferred tax asset is fully reserved.

The Company’s policy is to record interest and penalties associated with unrecognized tax benefits as additional income taxes in the statement of operations. The Company did not recognize any interest or penalties during 2024 related to unrecognized tax benefits.

Tax years 2021 through 2024 remain open to examination for federal income tax purposes and by other major taxing jurisdictions to which the Company is subject.

Note 8. Earnings (Loss) per Share

In accordance with FASB ASC 260, Earnings per Share, basic earnings (loss) per common share is computed using net earnings (loss) divided by the weighted average number of common shares outstanding for the periods presented. Diluted earnings (loss) per share are computed using weighted average number of common shares plus dilutive common share equivalents outstanding during the period. Since the Company did not have any common stock equivalents outstanding as of March 31, 2025 and March 31, 2024, basic and diluted earnings (loss) per share were the same.

NOCOPI TECHNOLOGIES, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

Note 9. Major Customer and Geographic Information

The Company’s revenues, expressed as a percentage of total revenues, from non-affiliated customers that equaled 10% or more of the Company’s total revenues were:


	Three Months ended March 31
	2025			2024
Customer A		51	%		68	%
Customer B		12	%		16	%
Customer C		21	%		0	%

The Company’s non-affiliate customers whose individual balances amounted to more than 10% of the Company’s net accounts receivable, expressed as a percentage of net accounts receivable, were:


	March 31 2025			December 31 2024
Customer A		13	%		15	%
Customer B		75	%		78	%

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

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


	Three Months ended March 31
	2025		2024
North America	$	185,100	$	77,700
Asia		272,200		302,000
Australia		21,700		18,600
	$	479,000	$	398,300

NOCOPI TECHNOLOGIES, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

Note 10. Leases

The Company conducts its operations in leased facilities under a non-cancelable operating lease expiring on May 31, 2025.

The Company entered into a second amendment to the operating lease agreement, relating to the leased facilities. The second amendment provides for an extension term to December 31, 2027, and for monthly rent payments of, initially, $7,147.00, escalating annually by 3.5%. The second amendment was signed on March 21, 2025 but is not effective until June 1, 2025. As such, no adjustments have been made to the condensed financial statements. The Company will account for the lease modification in the second quarter 2025 in accordance with ASC 842.

Other than as set forth above, the terms of the Lease Agreement remain unchanged.

The Company has capitalized the present value of the minimum lease payments commencing May 1, 2024, 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 March 31, 2025 and December 31, 2024, the operating lease asset amounted to $13,100 and $32,400, respectively, and operating lease liability amounted to $14,200 and $35,200, respectively.

There are no other material operating leases. The Company has elected not to recognize right-of-use assets and lease liabilities arising from short-term leases.

Total operating lease costs were $19,800 and $13,300 for the three months ended March 31, 2025 and 2024, respectively.

Undiscounted future minimum lease payments as of March 31, 2025, by year and in aggregate are as follows:


	Operating Leases
Year ending December 31
2025	$	14,300
Total lease payments		14,300
Less imputed interest		(100	)
Total	$	14,200

Note 11. Segment Reporting

The Company operates as a single reportable segment, as the Chief Operating Decision Maker (“CODM”), the Chief Executive Officer (“CEO”), evaluates the business on a consolidated basis and does not receive discrete financial information for multiple business units.

Measure of Segment Profit or Loss

The CODM assesses the Company’s financial performance based on operating loss, which aligns with the amount reported in the statement of comprehensive loss. The following table presents a reconciliation of segment operating loss to net income (loss):


	Three Months ended March 31
	2025			2024
Revenues
Licenses, royalties and fees	$	190,300		$	86,500
Product and other sales		288,700			311,800
Total revenues		479,000			398,300
Cost of revenues
Licenses, royalties and fees		43,500			51,800
Product and other sales		161,800			180,900
Total cost of revenues		205,300			232,700
Gross profit		273,700			165,600

Operating expenses
Research and development		45,000			41,400
Sales and marketing		91,000			69,000
General and administrative		223,500			1,214,800
Total operating expenses		359,500			1,325,200
Net loss from operations		(85,800	)		(1,159,600	)

Other income (expenses)
Interest income		117,200			137,100
Interest expense and bank charges		(5,900	)		(5,700	)
Total other income (expenses)		111,300			131,400
Net income (loss) before income taxes		25,500			(1,028,200	)
Income taxes		—			—
Net income (loss)	$	25,500		$	(1,028,200	)

NOCOPI TECHNOLOGIES, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

Significant Segment Expenses

The Company considers the following as significant expenses in evaluating its segment performance:

Research and Development: includes costs related to personnel, laboratory materials and supplies and product development and testing for ink technologies.

General and Administrative: includes personnel costs, professional fees, and other overhead expenses.

Sales and Marketing: includes personnel costs and other sales related expenses.

Cost of Revenues: represents labor costs, material costs and manufacturing overhead costs associated with the production of materials transferred to the customer from the Company’s facility.

Since the Company has only one reportable segment, no additional segment disclosures are required beyond entity-wide disclosures presented below.

Entity-Wide Disclosures

Geographic Revenue Information: For the three months ended March 31, 2025 39% of the Company’s net sales were generated in North America and 61% internationally. For the three months ended March 31, 2024, 20% of the Company’s net sales were generated in North America and 80% were generated internationally. Refer to Note 9.

Major Customers:. The Company had three customers that accounted for 84% of revenue and 88% of net accounts receivable for the three months ended March 31, 2025. In addition, the Company had two customers that accounted for 84% of revenue for the three months ended March 31, 2024 and 93% of net accounts receivable as of December 31, 2024. Refer to Note 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, expenses and capital expenditures
	·	Current or future volatility in market conditions
	·	Our belief that we have sufficient liquidity to fund our business operations during the next twelve months
	·	Strategy for customer retention, growth, product development, market position, and risk management

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

	·	The extent to which we are successful in gaining new long-term relationships with customers or retaining significant existing customers and the level of service failures that could lead customers to use competitors' services.
	·	Strategic actions, including business acquisitions and our success in integrating acquired businesses.
	·	Our ability to improve our current credit rating with our vendors and the impact on our raw materials and other costs and competitive position of doing so.
	·	The impact of losing our intellectual property protections or the loss in value of our intellectual property.
	·	Changes in customer demand.
	·	The occurrence of hostilities, political instability or catastrophic events.
	·	Developments and changes in laws and regulations, including increased regulation of our industry through legislative action and revised rules and standards.
	·	Security breaches, cybersecurity attacks and other significant disruptions in our information technology systems.
	·	Such other factors as discussed throughout Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations in this Quarterly Report on Form 10-Q, and throughout Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations and in Part I, Item 1A. Risk Factors of the 2024 Annual Report.

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

The following discussion and analysis should be read in conjunction with our condensed financial statements, included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management. This information should also be read in conjunction with our audited historical financial statements which are included in the Annual Report.

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

The 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.

The 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 the 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 the 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 the 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 the 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 the Company agrees to revise such terms, revenues from the customer may be adversely affected.

Revenues for the first quarter of 2025 were $479,000 compared to $398,300 in the first quarter of 2024, an increase of $80,700, or approximately 20%. Licenses, royalties and fees increased by $103,800, or approximately 120%, in the first quarter of 2025 to $190,300 from $86,500 in the first quarter of 2024. The increase in licenses, royalties and fees in the first quarter of 2025 compared to the first quarter of 2024 is due primarily to the renewal of one of our existing licenses, which resulted in the recognition of the future minimum guaranteed royalty payments of $101,600. We cannot assure you that the marketing and product development activities of the Company’s licensees or other businesses in the entertainment and toy products market will produce a significant increase in revenues for the Company, nor can the timing of any potential revenue increases be predicted, particularly given the uncertain economic conditions presently being experienced.

Product and other sales decreased by $23,100, or approximately 7%, to $288,700 in the first quarter of 2025 from $311,800 in the first quarter of 2024. Sales of ink decreased in the first quarter of 2025 compared to the first quarter of 2024 due primarily to lower ink shipments to the third party authorized printer used by two of the Company’s major licensees in the entertainment and toy products market. In the first quarter of 2025, the Company derived revenues of approximately $354,900 from the Company’s licensees and their authorized printers in the entertainment and toy products market compared to revenues of approximately $369,500 in the first quarter of 2024.

The Company’s gross profit increased to $273,700, or approximately 57% of gross revenues, in the first quarter of 2025 from $165,600, or approximately 42% of gross revenues, in the first quarter of 2024 due to increase in licenses and royalties and a decrease in fees and product and other sales revenues. Licenses, royalties and fees have historically carried a higher gross profit than product and other sales, which generally consist of either supplies or other manufactured products which incorporate the Company’s technologies or equipment used to support the application of its technologies. These items (except for inks which are manufactured by the 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.

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 these sources as well as the Company’s overall gross profit. The gross profit from licenses, royalties and fees increased to approximately 77% in the first quarter of 2025 from approximately 40% in the first quarter of 2024.

The gross profit of product and other sales, expressed as a percentage of revenues, 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. Primarily due to lower sales of ink and other products and the overall mix in the first quarter of 2025 compared to the first quarter of 2024, there was a higher gross profit from product and other sales of approximately 44% of revenues in the first quarter of 2025 compared to a gross profit of approximately 42% of revenues in the first quarter of 2024.

Research and development expenses increased in the first quarter of 2025 to $45,000 compared to $41,400 in the first quarter of 2024 due primarily to higher lab expenses in the first quarter of 2025 compared to the first quarter of 2024.

Sales and marketing expenses increased to $91,000 in the first quarter of 2025 from $69,000 in the first quarter of 2024 due primarily to higher commission expense on the higher level of revenues in the first quarter of 2025 compared to the first quarter of 2024 as well as an increase in rent & occupancy expenses.

General and administrative expenses decreased in the first quarter of 2025 to $223,500 compared to $1,214,800 in the first quarter of 2024 due primarily to lower stock-based compensation, higher professional fees, and lower employee related expenses in the first quarter of 2025 compared to the first quarter of 2024.

For the first quarter of 2025, there was no income tax benefit for the net income for the first quarter of 2025 due to the recording of a full valuation allowance since it is more likely than not that that the realization of the net deferred tax assets would not be realized. Income taxes in the first quarter of 2024 include federal and state income taxes. The state income taxes result from limitations placed on income tax net operating loss deductions by the Commonwealth of Pennsylvania.

The net income of $25,500 in the first quarter of 2025 compared to the net loss of $1,028,200 in the first quarter of 2024 resulted primarily from a higher level of ink licenses, product, and other sales revenue in combination with lower quarterly operating expenses, as well as the positive other income generated in the first quarter of 2025, when compared to the first quarter of 2024.

Plan of Operation, Liquidity and Capital Resources

During the first quarter of 2025, the Company’s cash increased to $11,209,400 at March 31, 2025 from $10,839,700 at December 31, 2024. During the first quarter of 2025, the Company generated $369,700 from its operating activities.

During the first quarter of 2025, the Company’s revenues increased approximately 20% primarily as a result of higher licenses, royalties and fees revenue in the entertainment and toy products, which more than offset a modest decline in product and other sales of ink to an authorized printer of the Company. Our total overhead expenses decreased in the first quarter of 2025 to $359,500 compared to $1,325,200 in the first quarter of 2024, and the Company’s interest income decreased in the first quarter of 2025 compared to the first quarter of 2024. As a result of these factors, the Company generated net income of $25,500 in the first quarter of 2025 compared to a net loss of $1,028,200 in the first quarter of 2024. The Company had positive operating cash flow of $369,700 during the first quarter of 2025. At March 31, 2025, the Company had working capital of $12,526,100 and stockholders’ equity of $13,667,300. For the full year of 2024, the Company had a net loss of $2,678,900 and had positive operating cash flow of $594,800. At December 31, 2024, the Company had working capital of $12,388,300 and stockholders’ equity of $13,639,800.

Our plan of operation for the twelve months beginning with the date of this Quarterly Report on Form 10-Q consists of concentrating available human and financial resources to continue to capitalize on the specific business relationships the Company has developed in the entertainment and toy products market. This includes two licensees that have been marketing products incorporating the 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 the 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.

The 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 the Company to generate additional revenues and positive cash flow.

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

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

As previously stated, we generate a significant portion of our total revenues from licensees in the entertainment and toy products market. These licensees generally sell their products through retail outlets. In the future, such sales may be adversely affected by changes in consumer spending that may occur as a result of an uncertain economic environment in 2025 and beyond and its effect on the global economy, geopolitical instability including the ongoing conflict between Russia and Ukraine war and conflicts in the Middle East and the supply chain disruptions related to both as well as the record inflation and significantly higher interest rates currently being experienced in the United States along with the probability of an economic recession both in the United States and globally. As a result, our revenues, results of operations and liquidity may be negatively impacted in future periods.

Contractual Obligations

As of March 31, 2025, there were no material changes in our contractual obligations from those disclosed in the 2024 Annual Report, other than those appearing in the notes to the financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.

Recently Adopted Accounting Pronouncements

As of March 31, 2025 and for the period then ended, there are no recently adopted accounting standards that have a material effect on the Company's financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

As of March 31, 2025, there were no recently issued accounting standards not yet adopted that would have a material effect on the Company’s financial statements.

Off-Balance Sheet Arrangements

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not Applicable

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures. The Company’s management, with the participation of the Company’s Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of the 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 March 31, 2025. Based on this evaluation, the Company’s Principal Executive Officer and Principal Financial Officer concluded that, as of March 31, 2025, the Company’s disclosure controls and procedures were effective, in that they provide reasonable assurance that information required to be disclosed by the 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 the Company’s management, including the 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 (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

None

Item 1A. Risk Factors.

Information about risk factors for the quarter ended March 31, 2025 does not differ materially from that set forth in Part I, Item 1A of the 2024 Annual Report.

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

None

Item 3. Defaults Upon Senior Securities.

None

Item 4. Mine Safety Disclosures.

Not applicable

Item 5. Other Information.

From time to time, certain of our executive officers and directors have, and we expect they will in the future, enter into, amend or terminate written trading arrangements pursuant to Rule 10b5-1 of the Securities and Exchange Act or otherwise.

For the quarter ended March 31, 2025, none of our officers or directors adopted or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act and/or any “non-Rule 10b5-1 trading arrangement,” as defined in Item 408 of Regulation S-K.

Item 6. Exhibits.

(a) Exhibits

The following exhibits are included herein:

Exhibit Number	Description	Location
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.	Filed herewith
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.	Filed herewith
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.	Furnished herewith
101.INS	Inline XBRL Instance Document–the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document	Filed herewith
101.SCH	Inline XBRL Taxonomy Extension Schema	Filed herewith
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase	Filed herewith
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase	Filed herewith
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase	Filed herewith
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase	Filed herewith
104	Cover page formatted as Inline XBRL and contained in Exhibit 101	Filed herewith

SIGNATURES

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

		NOCOPI TECHNOLOGIES, INC.

DATE: May 13, 2025		/s/ Matthew C. Winger
		Matthew C. Winger
		Chairman of the Board, President & Chief Executive Officer (Principal Executive Officer)

DATE: May 13, 2025		/s/ Debra E. Glickman
		Debra E. Glickman
		Chief Financial Officer (Principal Financial and Accounting Officer)