U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES ACT OF 1934.
For the quarterly period ended March 31, 2002.
[ ] TRANSITION REPORT PURSUANT TO 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from _________________ to ______________
Commission file number 0-20333
NOCOPI TECHNOLOGIES, INC.
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(Exact name of small business issuer as
specified in its charter)
MARYLAND 87-0406496
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(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
537 Apple Street, West Conshohocken, PA 19428
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(Address of principal executive offices)
(610) 834-9600
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(Issuer's telephone number)
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Check whether the issuer has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 X No
----- -----
State the number of shares outstanding of each of the issuer's classes
of common equity, as of May 1, 2002: common stock, par value $.01 per share
41,438,908 shares.
Transitional Small Business Disclosure Format (check one): Yes No X
------ -----
NOCOPI TECHNOLOGIES, INC.
INDEX
Part I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Statements of Operations 1
Three Months ended March 31, 2002
and March 31, 2001
Balance Sheet 2
March 31, 2002
Statements of Cash Flows 3
Three Months ended March 31, 2002
and March 31, 2001.
Notes to Financial Statements 4 - 6
Item 2. Management's Discussion and Analysis of 7 - 11
Financial Condition and Results of Operations
Part II. OTHER INFORMATION 12
Signatures 13
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Nocopi Technologies, Inc.
Statements of Operations
(unaudited)
Three Months ended March 31
2002 2001
------------ ------------
Revenues
Licenses, royalties and fees $ 134,500 $ 123,800
Product and other sales 67,400 50,400
------------ ------------
201,900 174,200
Cost of sales
Licenses, royalties and fees 50,100 70,500
Product and other sales 48,200 27,000
------------ ------------
98,300 97,500
------------ ------------
Gross profit 103,600 76,700
Operating expenses
Research and development 66,100 54,700
Sales and marketing 78,500 64,600
General and administrative 183,700 201,300
------------ ------------
328,300 320,600
------------ ------------
Loss from operations (224,700) (243,900)
Other income (expenses)
Interest income 100 1,900
Bank charges (700) (300)
------------ ------------
(600) 1,600
------------ ------------
Net loss ($ 225,300) ($ 242,300)
============ ============
Basic and diluted loss per common share ($.01) ($.01)
Weighted average common shares outstanding 41,438,908 35,123,009
The accompanying notes are an integral part of these financial statements.
1
Nocopi Technologies, Inc.
Balance Sheet
(unaudited)
March 31
2002
------------
Assets
Current assets
Cash and cash equivalents $ 26,500
Accounts receivable less allowances 38,500
Prepaid and other 25,900
------------
Total current assets 90,900
Fixed assets
Leasehold improvements 39,500
Furniture, fixtures and equipment 476,200
------------
515,700
Less: accumulated depreciation 487,500
------------
28,200
Other assets
Investment in unconsolidated affiliate - net 110,600
------------
Total assets $ 229,700
============
Liabilities and Stockholders' Deficiency
Current liabilities
Accounts payable $ 300,500
Accrued expenses 312,800
Deferred revenue 59,300
------------
Total current liabilities 672,600
Stockholders' deficiency
Common stock, $.01 par value
Authorized - 75,000,000 shares
Issued and outstanding - 41,438,908 shares 414,400
Paid-in capital 10,914,400
Accumulated deficit (11,771,700)
------------
(442,900)
------------
Total liabilities and stockholders' deficiency $ 229,700
============
The accompanying notes are an integral part of these financial statements.
2
Nocopi Technologies, Inc.
Statements of Cash Flows
(unaudited)
Three Months ended March 31
2002 2001
--------- ---------
Operating Activities
Net loss ($225,300) ($242,300)
Adjustments to reconcile net loss to cash
used in operating activities
Depreciation 4,500 9,000
Allowance for doubtful accounts -- 3,000
--------- ---------
(220,800) (230,300)
(Increase) decrease in assets
Accounts receivable 1,100 (47,100)
Prepaid and other (3,200) 11,900
Increase (decrease) in liabilities
Accounts payable and accrued expenses 114,000 (5,200)
Deferred revenue (3,700) 17,500
--------- ---------
108,200 (22,900)
--------- ---------
Cash used in operating activities (112,600) (253,200)
Financing Activities
Issuance of common stock, net 139,000 311,000
--------- ---------
Cash provided by financing activities 139,000 311,000
--------- ---------
Increase in cash and cash
equivalents 26,400 57,800
Cash and cash equivalents - beginning of period 100 186,900
--------- ---------
Cash and cash equivalents - end of period $ 26,500 $ 244,700
========= =========
The accompanying notes are an integral part of these financial statements.
3
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. (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 the summary of
Accounting Policies included in the Company's 2001 Annual Report on
Form 10-KSB. 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 2001 Annual Report on Form 10-KSB should be read in conjunction
with the accompanying interim financial statements. The interim
operating results for the three months ended March 31, 2002 may not be
necessarily indicative of the operating results expected for the full
year.
Note 2. Affiliate
The Company organized Euro-Nocopi, S.A. (Euro) in 1994 to market the
Company's technologies in Europe under an exclusive license
arrangement. Euro was capitalized through a European private placement.
The Company holds an approximately 18% interest in Euro. During 2000,
there arose between Euro and the Company a number of areas of conflict
and dispute, leading each party to the licensing arrangement to assert
informally that the other was in breach of its obligations under that
arrangement. The parties initially sought to resolve their differences
by negotiating a transaction in which Euro would have purchased from
the Company its entire equity interest as well as the paid-up European
rights to the Company's technologies. These negotiations terminated
without agreement early in December 2000. Following the termination of
the transaction negotiations, the Company was informed by Euro that it
had adopted resolutions to liquidate and dissolve. In mid-December
2000, the Company terminated its license agreement with Euro in
accordance with its terms and discontinued the provision of support
(including the sale of proprietary inks) to Euro and its customers. As
a result of the license termination the technological dependency of
Euro on the Company ceased and the Company was no longer permitted to
account for its investment in Euro on the equity method. Accordingly,
the Company, effective October 1, 2000, changed its method of
accounting for its investment in Euro to the cost method and recorded
the carrying value at that date as the cost of its investment.
Euro responded to the license termination by denying that the Company's
action was permissible or effective, and by asserting a claim that, as
a result of alleged breaches of the licensing agreement by the Company,
it was entitled to a royalty-free license to exploit the Company's
technologies in Europe.
4
Promptly thereafter, Euro commenced an action before a court in Paris,
France in which it sought the entry of an order, in the nature of a
preliminary injunction, to compel the Company to honor the license
agreement pending judicial or arbitral resolution of the dispute
between the parties under the license agreement. In the French
litigation, Euro did not seek an adjudication on the merits of the
underlying dispute. Certain shareholders of Euro subsequently joined in
the proceedings commenced by Euro.
In March 2001, the Emergency Judge hearing the action issued a decision
denying the relief requested by Euro and the shareholders. The
decision, which does not purport to be a final adjudication of the
merits of the controversy but only of Euro's request for preliminary
relief, held that Euro was not entitled to the requested order because
the Company had validly terminated the licensing arrangement in
mid-December, and also ordered Euro to pay into escrow the
approximately $125,000 that the Company claimed was due and owing under
the licensing arrangement. In March 2001, Euro commenced an arbitration
proceeding before the American Arbitration Association in New York, NY
against the Company. In this proceeding, Euro has not asserted a claim
for damages but has asserted a claim for an award in the nature of a
declaratory judgment to the effect that, because the Company has
(allegedly) breached the license agreement, Euro is entitled to a
royalty-free license to exploit the Company's technologies in Europe.
The Company has filed a response denying that Euro is entitled to the
relief requested, asserting that it has validly terminated Euro's
license agreement, and seeking damages for Euro's breaches of the
licensing agreement. The arbitration currently is scheduled to be heard
by the arbitrators late in 2002.
In March 2001 certain shareholders of Euro filed suit in a court in
Paris, France against certain current and former officers and directors
of the Company and against a licensee of the Company. The Company is
not named as a defendant in the suit. The suit seeks damages in excess
of $7 million from the defendants for various alleged acts of
oppression, self-dealing and fraud in connection with the organization
and capitalization of Euro, the management of that company and the
Company's management of its relationship with that company. The
defendants have denied any liability to the plaintiffs and have sought
indemnification from the Company in connection with the lawsuit. The
Company has advanced certain costs of defense for the benefit of the
named defendants.
5
Note 3. Stockholders' Deficiency
During January 2002, the Company sold 2,316,667 shares of its common
stock to investors, including affiliates of the Company, for $139,000.
In May 2002, the Company sold 1,200,000 shares of its common stock to
non-affiliated investors for $72,000.
Note 4. Going Concern
Since its inception, the Company has incurred significant losses and,
as of March 31, 2002, had accumulated losses of $11,771,700. For the
years ended December 31, 2001 and 2000, the Company's net losses were
$828,600 and $382,700, respectively. In addition, the Company had
negative working capital of $581,700 at March 31, 2002. The Company may
incur further operating losses and experience negative cash flow in the
future. Achieving profitability and positive cash flow depends on the
Company's ability to generate and sustain significant increases in
revenues and gross profits from its traditional business. There can be
no assurances that the Company will be able to generate sufficient
revenues and gross profits to achieve and sustain profitability and
positive cash flow in the future.
In April 2002, the Company's Chairman of the Board and a non-affiliated
stockholder provided demand loans totaling $57,500 to the Company for
the purpose of continuing the arbitration proceedings with Euro-Nocopi,
S.A. and enabling the Company to complete the audit of its 2001
financial statements and file its 2001 Annual Report with the SEC. The
$72,000 received from investors in May enabled the Company to pay
annuities totaling approximately $15,000 on certain patents that the
Company believes vital to its business and provide a limited amount of
working capital funding. Management of the Company believes that, to
survive, it must obtain additional capital immediately to reduce the
average age of its accounts payable and improve vendor relations, to
fund continuing operating deficits and to fund investments needed to
increase its operating revenues to levels that will sustain its
operations. While the Company is actively seeking additional capital
investment, there can be no assurances that the Company will be
successful in obtaining sufficient additional capital, or if it does,
that the additional capital will enable the Company to improve its
business so as to have a material positive effect on the Company's
operations and cash flow. The Company believes that without substantial
immediate investment, it will be forced to cease operations by late in
the second quarter of 2002. Further, the Company requires investment to
continue to pay annuities on additional patents as they come due during
the balance of 2002 and to fund the ongoing arbitration with
Euro-Nocopi, S.A. There are no assurances that, even if funding, for
which the Company has no commitments and only limited prospects, is
arranged, the Company will prevail in the arbitration. It is uncertain
whether the Company's assets will retain any value if the Company
ceases operations. There are no assurances that the Company will be
able to secure additional equity investment before it is forced to
cease operations.
6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operation
Forward-Looking Information
The following Management's Discussion and Analysis of Results of Operations
and Financial Condition should be read in conjunction with our audited Financial
Statements and Notes thereto for the year ended December 31, 2001 included in
our Annual Report on Form 10-KSB filed with the Securities and Exchange
Commission.
The information in this discussion contains forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors, which may cause our actual results, performance or achievements
or industry results to be materially different from any future results,
performance or achievements expressed or implied by these forward-looking
statements. Such factors include those described in "Risk Factors." The
forward-looking statements included in this report may prove to be inaccurate.
In light of the significant uncertainties inherent in these forward-looking
statements, you should not consider this information to be a guarantee by us or
any other person that our objectives and plans will be achieved. The Company
does not undertake to publicly update or revise its forward-looking statements
even if experience or future changes make it clear that any projected results
(expressed or implied) will not be realized.
Results of Operations
The Company's revenues are derived from royalties paid by licensees of the
Company's technologies, fees for the provision of technical services to
licensees and from the direct sale of products incorporating the Company's
technologies, such as inks and pressure sensitive labels, and equipment used to
support the application of the Company's technologies, such as ink-jet printing
systems. Royalties consist of guaranteed minimum royalties payable by the
Company's licensees in certain cases and additional royalties which typically
vary with the licensee's sales or production of products incorporating the
licensed technology. Service fee and sales revenues vary directly with the
number of units of service or product provided.
Because the Company has a relatively high level of fixed costs, its
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 amounts of the Company's revenues and the mix among the
various sources of revenue are subject to substantial fluctuation. The Company
has 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 and on its revenue mix and overall financial performance. Such changes
may result from a customer's product development delays, engineering changes,
changes in product marketing strategies 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 terms, revenues
from the customer may be affected. The addition of a substantial new customer or
the loss of a substantial existing customer may also have a substantial effect
on the Company's total revenue, revenue mix and operating results.
7
Revenues for the first quarter of 2002 were $201,900 compared to $174,200
in the first quarter of 2001, a 16% increase. Licenses, royalties and fees
increased by $10,700, or 9%, in the first quarter of 2002 to $134,500 from
$123,800 in the first quarter of 2001. The increase in licenses, royalties and
fees is due primarily to revenues from a new license signed in the third quarter
of 2001 and royalties derived in the first quarter of 2002 from the Company's
European sales agent. Product sales were $67,400 in the first quarter of 2002
compared to $50,400 in the first quarter of 2001, an increase of $17,000 or 34%.
The increase in product sales reflects higher level of sales of the Company's
line of security papers in the first quarter of 2002 compared to the first
quarter of 2001.
The Company's gross profit increased to $103,600 in the first quarter of
2002 or 51% of revenues from $76,700 or 44% of revenues in the first quarter of
2000. Licenses, royalties and fees carry a substantially higher gross profit
than product sales, which generally consist of manufactured products which may
incorporate the Company's technologies or equipment used to support the
application of its technologies. These items are generally purchased from
third-party vendors and resold to the end-user or licensee and carry a
significantly lower gross profit than licenses, royalties and fees. The higher
gross profit in absolute dollars and as a percentage of revenues in the first
quarter of 2002 compared to the first quarter of 2001 results principally from
an increase in the portion of revenues represented by licenses, royalties and
fees. Additionally, in the first quarter of 2001 the Company incurred
commissions under a long-standing license agreement with a partner/supplier.
This license agreement terminated at the end of March 2001 and no further
commissions were payable. The gross profit related to product and other sales
decreased in absolute dollars in the first quarter of 2002 compared to the first
quarter of 2001 as a result of higher expenditures both for paper purchased by
the Company for resale and for the raw materials utilized in the production of
Company's security inks.
Research and development expenses were $66,100 in the first quarter of 2002
compared to $54,700 in the first quarter of 2001. The increase relates primarily
to higher compensation expense, as the addition of an applications chemist was
required in the second quarter of 2001 to support the Company's existing
technologies.
Sales and marketing expenses increased to $78,500 in the first quarter of
2002 from $64,600 in the first quarter of 2001. The increase reflects the hiring
of a sales executive in the fourth quarter of 2001 offset in part by fees paid
to sales agents and consultants in the first quarter of 2001 which were not
incurred in the first quarter of 2002.
8
General and administrative expenses decreased by $17,600 in the first
quarter of 2002 to $183,700 from $201,300 in the first quarter of 2001. The
decrease results principally from lower professional fees and consulting
expenses incurred in the first quarter of 2002 compared to the first quarter of
2001 due to lower audit fees in the first quarter of 2002 compared to the first
quarter of 2001 offset in part by higher legal fees related to the ongoing
litigation and arbitration proceedings with the Company's former European
exclusive licensee and the provision for fees related to the renewal of
annuities, primarily in Europe, for certain patents. The Company's professional
expenses were $96,500, or 48% of revenues, in the first quarter of 2002 compared
to $111,500, or 64% of revenues, in the first quarter of 2001.
Other income (expense) includes interest income on funds invested. The
decline in interest income in the first quarter of 2002 compared to the first
quarter of 2001 relates to lower levels of cash invested.
The net loss declined to $225,300 in the first quarter of 2002 from
$242,300 in the first quarter of 2000. The decrease in the first quarter net
loss from the prior year period resulted primarily from increases in revenue and
gross profit offset in part by higher levels of compensation expense related to
technical and sales positions filled during 2001.
Plan of Operation, Liquidity and Capital Resources
The Company's cash and cash equivalents increased to $26,500 at March 31,
2002 from $100 at December 31, 2001. During the first quarter of 2002, the
Company sold 2,316,667 shares of its common stock to investors, including
affiliates of the Company, for $139,000 and used $112,600 to fund operations
over the three-month period.
The loss of a number of customers during the past three years and the
termination of the Company's exclusive European licensee in 2000 has had a
material adverse effect on the Company's results of operations and upon its
liquidity and capital resources. The Company believes that the conditions
arising from these circumstances raise substantial doubts about the Company's
ability to continue as a going concern. The receipt of funds in conjunction with
the sale of 2,316,667 shares of the Company's common stock in January 2002 has
permitted it to continue in operation through the end of the first quarter of
2002. In addition, the Company's increasing illiquidity has forced it to follow
a policy of deferring payment to its vendors, even where such deferral has not
been agreed to by the vendors. As a result, the Company's trade payables have
increased to $300,500 at March 31, 2002 from $237,400 at December 31, 2001.
Accordingly, the Company is currently in default of the payment terms extended
by a significant number of its suppliers, professional service providers and
other vendors.
9
In April 2002, the Company received demand loans totaling $57,500 from its
Chairman of the Board and a non-affiliated stockholder for the purpose of
continuing the arbitration proceedings with Euro-Nocopi, S.A. and enabling the
Company to complete the audit of its 2001 financial statements and file its 2001
Annual Report with the SEC. Proceeds from the sale of 1,200,000 shares of the
Company's common stock in May 2002 for $72,000 enabled the Company to pay
annuities totaling approximately $15,000 to keep in force certain patents that
it feels vital for its business. Additionally, as part of a review of its patent
portfolio, the Company elected to discontinue patent protection on patents it
holds in certain jurisdictions where it believes the patent protection provides
little economic value. It has been advised that patent and trademark maintenance
fees approximating $3,000 will be due through September 2002. The Company has
not yet made a decision on keeping any or all of these patents in force.
Management of the Company believes that, to survive, it must obtain additional
capital immediately to reduce its substantial obligations, fund continuing
operating deficits and fund investment needed to increase its operating revenues
to levels that will sustain its operations. The Company continues to actively
seek such capital investment; however, if the Company fails to significantly
increase its cash balances through further equity investment, for which it has
no commitments and only very limited prospects, it will be forced to cease
operations due to a lack of cash by late in the second quarter of 2002. There
can be no assurances that the Company will be able to secure additional equity
investment before it is forced to cease operations.
Risk Factors
The Company's operating results and stock price are dependent upon a number of
factors, some of which are beyond the Company's control. These include:
Inability to Continue in Operation Without Immediate New Equity Investment. The
Company had a negative working capital of $581,700 at March 31, 2002 and
experienced negative cash flow from operations of $112,600 in the three months
ended March 31, 2002. Additionally, it experienced negative cash flow from
operations of $603,800 in the year ended December 31, 2001. Management does not
believe the Company can significantly improve its negative cash flow in the near
future. Since year-end 2001, the Company continued to experience negative cash
flow and, at the present time is in need of immediate equity or other
investment; otherwise, it will be forced to cease operations due to a lack of
cash by late in the second quarter of 2002. It is uncertain whether the
Company's assets will retain any value if the Company ceases operations. There
are no assurances that the Company will be able to secure additional equity
investment before it is forced to cease operations.
Continuing Euro-Nocopi Litigation. The Company is currently expending sums
representing a substantial portion of it revenues for professional fees and
costs relating to legal disputes between the Company and its former affiliate,
Euro-Nocopi, S.A. as described under the heading "Litigation" in the Company's
Annual Report on Form 10-KSB. Management believes that successful resolution of
the disputes between it and Euro-Nocopi is necessary for the Company to be able
to license its technologies to European users and that the ability to license
European users (including as part of worldwide license arrangements) is
necessary for the viability of its business. The Company cannot continue to pay
the costs of this dispute unless it can obtain substantial new capital
investment, of which there can be no assurances, and the Company will not
prevail in this dispute if it cannot continue to pay such costs. Even if the
Company is able to continue its dispute with Euro-Nocopi through resolution,
there can be no assurance that the resolution will be a successful one for the
Company.
Possible Inability to Develop New Business. Even if the Company is able to raise
cash through additional equity investment or otherwise, it must quickly improve
its operating cash flow. Because the Company has already significantly reduced
its operating expenses, Management believes that any significant improvement in
the Company's cash flow must result from increases in its revenues from
traditional sources and from new revenue sources. The Company's ability to
develop new revenues may depend on the extent of both its marketing activities
and its research and development activities. While the Company has, since
mid-September of 2001, hired a new sales executive, initiated a dealer sales
program, completed a licensing agreement for the use of its technologies in the
gaming industry and renewed other licensing arrangements, there are no
assurances that the resources the Company can devote to marketing and to
research and development will be sufficient to increase the Company's revenues
to levels resulting in positive cash flow.
10
Uneven Pattern of Quarterly and Annual Operating Results. The Company's
revenues, which are derived primarily from licensing and royalties, are
difficult to forecast due to the long sales cycle of the Company's technologies,
the potential for customer delay or deferral of implementation of the Company's
technologies, the size and timing of inception of individual license agreements,
the success of the Company's licensees and strategic partners in exploiting the
market for the licensed products, modifications of customer budgets, and uneven
patterns of royalty revenue and product orders. As the Company's revenue base is
not substantial, delays in finalizing license contracts, implementing the
technology to initiate the revenue stream and customer ordering decisions can
have a material adverse effect on the Company's quarterly and annual revenue
expectations and, as the Company's operating expenses are substantially fixed,
income expectations will be subject to a similar adverse outcome.
Volatility of Stock Price. The market price for the Company's common stock has
historically experienced significant fluctuations and may continue to do so. The
Company has, since its inception, operated at a loss and has not produced
revenue levels traditionally associated with publicly traded companies. The
Company's common stock is not listed on a national or regional securities
exchange and, consequently, the Company receives limited publicity regarding its
business achievements and prospects, nor do securities analysts and traders
extensively follow it. The market price may be affected by announcements of new
relationships or modifications to existing relationships. The stock prices of
many developing public companies, particularly those with small capitalizations,
have experienced wide fluctuations not necessarily related to operating
performance. Such fluctuations may adversely affect the market price of the
Company's common stock.
Intellectual Property. The Company relies on a combination of protections
provided under applicable international patent, trademark and trade secret laws.
It also relies on confidentiality, non-analysis and licensing agreements to
establish and protect its rights in its proprietary technologies. While the
Company actively attempts to protect these rights, the Company's technologies
could possibly be compromised through reverse engineering or other means. In
addition, the Company's ability to enforce its intellectual property rights
through appropriate legal action has been and will continue to be limited by the
Company's adverse liquidity. There can be no assurances that the Company will be
able to protect the basis of its technologies from discovery by unauthorized
third parties or to preclude unauthorized persons from conducting activities
that infringe on the Company's rights. The Company's adverse liquidity situation
has also impacted its ability to obtain patent protection on its intellectual
property and to maintain protection on previously issued patents. There can be
no assurances that the Company will be able to continue to prosecute new patents
and maintain issued patents. In all events, the Company's customer and licensee
relationships could be adversely affected.
11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable
Item 2. Changes in Securities
During January 2002, Registrant sold an aggregate of 2,316,667 shares
of its common stock to investors, including affiliates of the Company,
for $139,000, or $0.06 per share, in a private transaction exempt from
registration pursuant to Section 4(2) of the Securities Act. No
underwriters were involved in the transaction or received any
commissions or other compensation. Proceeds of the sales were used to
fund working capital requirements.
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) The Registrant filed the following Current Report on Form 8-K
during the quarter ended March 31, 2002.
March 26, 2002 - Changes in Registrant's Certifying Accountant
12
SIGNATURES
Pursuant to the requirement 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 15, 2002 /s/ Michael A Feinstein, M.D.
-----------------------------
Michael A Feinstein, M.D.
Chairman of the Board
DATE: May 15, 2002 /s/ Rudolph A. Lutterschmidt
-----------------------------
Rudolph A. Lutterschmidt
Vice President & Chief Financial Officer
13