Form 10-KSB
================================================================================
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB
================================================================================


(Mark One)

--------------------------------------------------------------------------------
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 
    SECURITIES EXCHANGE ACT OF 1934 
    For the fiscal year ended ___December 31, 1998_______________
[ ] 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 _______0-20333_____________________________________

____________________________Nocopi Technologies, Inc._________________________
                 (Name of small business issuer in its charter)

____________Maryland____________           ____________87-0406496______________
  (State or other jurisdiction             (I.R.S. Employer Identification No.)
of incorporation or organization)


537 Apple Street, West Conshohocken, PA                        19428         
-----------------------------------------------     ----------------------------
 (Address of principal executive offices)                   (Zip Code)

Issuer's telephone number            (610) 834-9600
                          ---------------------------------------

Securities registered under Section 12(b) of the Exchange Act:

          Title of each class         Name of each exchange on which registered

               None                             Not Applicable  
--------------------------------      ------------------------------------------
--------------------------------      ------------------------------------------

Securities registered under section 12(g) of the Exchange Act:

      Common Stock $.01 par value
--------------------------------------------------------------------------------
                                           (Title of class)
--------------------------------------------------------------------------------
                                           (Title of class)

     Check whether the issuer (1) 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 [ ]

     Check if no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.

<PAGE>

Form 10-KSB
--------------------------------------------------------------------------------

     State issuer's revenues for its most recent fiscal year.   $2,423,900
                                                              ----------------
     State the aggregate market value of the voting and non-voting common equity
held by non-affiliates of the issuer.    $5,000,000 at March 26, 1999.
                                      --------------------------------

                   (APPLICABLE ONLY TO CORPORATE REGISTRANTS)

        State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date. 33,587,332 shares of Common
Stock, $.01 par value at March 26, 1999.

                       DOCUMENTS INCORPORATED BY REFERENCE
                       -----------------------------------

                                      None

    Transitional Small Business Disclosure Format (Check one): Yes [ ] No |X|



<PAGE>


                                     PART I

ITEM 1. BUSINESS

Background

Nocopi Technologies, Inc. (hereinafter "Nocopi" or "Registrant") was originally
organized to utilize a technology developed by its founders for impeding the
reproduction of documents on office copiers. In its early stages of development,
Nocopi's business consisted primarily of selling burgundy colored, copy
resistant paper to protect corporate documents, that is, to provide document
security. In the last several years, Registrant has continued to refine its
document security technologies but has increasingly focused on developing and
marketing technologies for document and product authentication which can reduce
losses caused by fraudulent document reproduction and by product counterfeiting
and/or diversion.

Registrant is involved in the business of product and document authentication
and security. It has developed and markets a variety of products--special inks
and paper which deters photocopying and transmission by facsimile and
proprietary inks which print invisibly until activated for the purpose of
identifying counterfeit or diverted products. Registrant's document
authentication products and technologies, over the last three years, have become
the most substantial market for Registrant. Sales are made either through
licensees or directly to end-users.

Anti-Counterfeiting and Anti-Diversion Technologies and Products

Recent developments in copying and printing technologies have made it ever
easier to counterfeit a wide variety of documents. Lottery tickets, gift
certificates, event and transportation tickets, travelers' checks and the like
are all susceptible to counterfeiting, and Registrant believes that losses from
such counterfeiting have increased substantially with improvements in
technology. Counterfeiting has long caused losses to manufacturers of brand name
products, and Registrant believes these losses have also increased as the
counterfeiting of labeling and packaging has become easier.

Registrant's document authentication technologies are useful to businesses
desiring to authenticate a wide variety of printed materials and products. These
include a technology with the ability to print invisibly on certain areas of a
document which can be activated or revealed by use of a special highlighter pen
when authentication is required. This is sold under the trade mark COPIMARK(TM).
Other variations of the COPIMARK(TM) technology involve multiple color responses
from a common pen, visible marks of one color that turn another color with the
pen or visible and invisible marks that turn into a multicolored image. A
related technology is Nocopi's RUB & REVEAL(R) system, which permits the
invisible printing of an authenticating symbol or code that can be revealed by
rubbing a fingernail over the printed area. These technologies provide users
with the ability to authenticate documents and detect counterfeit documents.
Applications include the authentication of documents having intrinsic value,
such as checks, travelers' checks, gift certificates and event tickets, and the
authentication of product labeling and packaging. The Rub & Reveal(R) technology
was enhanced during 1995 permitting its use in documents produced on laser
printers, thus affording expanded market opportunities for this technology. When
applied to product labels and packaging, such technologies can be used to detect
counterfeit products whose labels and packaging would not contain the
authenticating marks invisibly printed on the packaging or labels of the
legitimate product, as well as to combat product diversion (i.e., the sale of
legitimate products through unauthorized distribution channels or in
unauthorized markets). During 1993, Registrant developed its invisible inkjet
technology which permits manufacturers and distributors to track the movement of
products from production to ultimate consumption when coupled with proprietary
software. During 1994, Registrant developed a new technology to address the
widespread problem of counterfeiting in the apparel industry consisting of a
reactive thread which can be woven into a label which is then sewn into a
garment. The woven label can be activated in the same manner as a reactive paper
label to reveal the authenticity of the garment. During 1995, Registrant
developed a new covert authenticating technology which allows a manufacturer of
compact discs to identify CD's produced by that manufacturer. Registrant
believes that this technology can provide CD manufacturers and publishers a tool
with which to combat the significant losses sustained as a result of illegal
pirating and counterfeiting of data, music and video discs. Registrant has not
developed substantial revenues from the woven label or CD technologies.


Document Security Products

The first product Nocopi developed was a burgundy colored paper that deterred
photocopying and transmission by facsimile. The color was chosen and designed so
that it absorbed most of the light projected on documents during photocopying
except for light in the part of the spectrum the copy process is incapable of
detecting. This colored paper exhibited the ability to inhibit reproduction at
the cost of legibility to the reader. The darker it was, the better it worked.
The trade-off was, and is, tied to security. If a client needed the security, he
would put up with the diminished legibility. Registrant currently markets its
copy resistant papers in three grades, each balancing improved copy resistance
against diminished legibility.

                                       1
<PAGE>

The next step in the evolution of Registrant's products was the development of a
product which enables the user to select certain areas of a document for copy
protection. This led to the development of user defined, pre-printed forms on
which certain areas were already activated, such as a doctor's prescription form
with the signature area protected or a financial instrument exhibiting the same
kind of protection. This product line is called SELECTIVE NOCOPI(TM). Registrant
also developed several inks which impede photocopying by color copiers. This
technology is called COLORBLOC(R).

During 1993, Registrant developed a technology for providing secure faxes. Using
this technology, a message printed by a receiving telecopier cannot be read
until the paper has been activated by the recipient. This technology initially
was available for use only in thermal facsimile machines, limiting its
marketability. During 1996, Registrant developed a new technology to allow plain
paper ink jet facsimile machines to receive confidential faxes. This new
technology is called INFOBLOC(TM). Applications utilizing this technology enable
an ink jet printer to produce documents in which, at the discretion of the
author, a portion or all of the document can be rendered confidential until
activation. During 1997 and 1998, Registrant engaged in market studies of the
potential for these technologies, one of which was intended to be marketed under
the name SECRETPRINT(TM). These market studies included the investigation of
potential relationships with manufacturers of inkjet computer printers as well
as authors and publishers of computer software for applications which might
benefit from the use of these technologies. Registrant has obtained no
commitment for the use or sale of products incorporating these technologies, and
there can be no assurance that sales will be realized.

The following table illustrates the approximate percentage of Registrant's
revenues accounted for by each type of its products for each of the two last
fiscal years:

<TABLE>
<CAPTION>

                                                                  Year Ended December 31,
                                                                  -----------------------
Product Type                                                       1998            1997
------------                                                       ----            ----
<S>                                                                 <C>             <C>
Anti-Counterfeiting & Anti-Diversion Technologies and Products      97%             97%
Document Security Products                                           3%              3%

</TABLE>


Marketing

The marketing approach of Registrant is to have sufficient flexibility in its
products and technologies so as to provide cost effective solutions to a wide
variety of counterfeiting, diversion and copier fraud problems. As a technology
company, Registrant generates revenues primarily by collecting license fees from
market-specific manufacturers who incorporate Registrant's technologies into
their manufacturing process and their products. Registrant also licenses its
technologies directly to end users.

Registrant has identified a number of major markets for its technologies and
products, including security printers, manufacturers of labels and packaging
materials and distributors of brand name products. Within each market, key
potential users have been identified, and, in many cases, already licensed.
Within North America, sales efforts include direct selling by company personnel
to create end user demand and selling through licensee sales forces with support
from company personnel. Registrant has determined that technical sales support
by its personnel is of great importance to increasing its licensees' sales of
products incorporating Registrant's technologies and, therefore, maintains its
commitment to providing such support.

As continued improvements in color copier and desktop publishing technology make
counterfeiting and fraud opportunities less expensive and more available,
Registrant intends to maintain an interactive product development and
enhancement program with the combined efforts of marketing, applications
engineering and research and development. Registrant's objective is to
concentrate its efforts on developing market-ready products with the most
beneficial ratios of market potential to development time and cost.

Euro-Nocopi, S.A.

In 1994, the Registrant formed a European company, Euro-Nocopi, S.A., to market
the Company's technologies in Europe under an exclusive license agreement.
Euro-Nocopi, S. A., headquartered in Paris, has sales representatives in France,
England and Germany. Euro-Nocopi sells the full range of Nocopi products and
technologies in the European market, both to European-based companies and to
subsidiaries of U.S.-based corporations. The Registrant receives a minimum
licensing fee and, when certain annual revenue levels are attained by
Euro-Nocopi, an additional royalty stream from revenues generated in Europe. The
Registrant owns approximately an 18% interest in Euro-Nocopi and holds warrants
permitting it to increase its interest to 55%. As part of a settlement agreement
resulting from a dispute between Euro-Nocopi, S. A. and the Registrant in the
second quarter of 1997, the Registrant agreed to modify its warrant by extending
its term through December 2001 but making it exercisable beginning the earlier
of 1) January 1, 2001; 2) in the event of a sale of all or part of Euro-Nocopi;
or 3) in the event of a public listing of Euro-Nocopi's shares on a stock
market. Prior to the modification, the warrants were exercisable at any time.


                                       2
<PAGE>

Beginning in August 1999, the Euro-Nocopi stock sold to investors may be
converted into approximately one million shares of the Registrant's common stock
in the event that no public offering of Euro-Nocopi has been made by that date.
If no public offering of Euro-Nocopi has been made by January 2001, Registrant
may acquire, at the same conversion rate available to Euro-Nocopi investors, any
Euro-Nocopi shares not previously converted. This call right expires 
December 31, 2001.

Major Customers

During 1998, Registrant made sales or obtained revenues equal to 10% or more of
Registrant's 1998 total revenues from two customers, Paxar Corporation and 3M
Corporation, which accounted for approximately 24% and 20%, respectively, of
1998 revenues. The license agreement with 3M Corporation was mutually terminated
in April 1998.

Outside Sales Agents

The Company has engaged outside sales agents who are paid commissions on sales
to various customers of the Company and also receive payment for certain
expenses. During 1998 the total payments to outside sales agents was
approximately $170,000 as compared to such payments of approximately $200,000 in
1997.

Manufacturing

Nocopi does not have substantial manufacturing facilities. Registrant presently
subcontracts the manufacture of its applications to third party manufacturers
and expects to continue such subcontracting. Applications of Registrant's
technology are effected mainly through printing and coating. The inks are custom
manufactured by the Company. Because some of the processes that Nocopi uses in
its applications are based on relatively common manufacturing technologies,
there appears to be no technical or economic reason for Registrant to invest
capital in its own manufacturing facilities. Registrant has a $75,000 investment
in equipment which is capable of supplying commercial quantities of its security
ink.

Registrant has established a quality control program which currently entails
laboratory analysis of developed technologies. Registrant intends to expand this
program to include placing specially trained Nocopi technicians on site at third
party production facilities to monitor the manufacturing process, where
warranted. There can be no assurance that Registrant will, in fact, expand this
quality control program.

Patents

Nocopi has received various patents and has patents pending in the United
States, Canada, South Africa, Saudi Arabia, Australia, New Zealand, Japan,
France, the United Kingdom, Belgium, the Netherlands, Germany, Austria, Italy,
Sweden, Switzerland, Luxembourg, and Liechtenstein. Patent applications for
Registrant's technology (including improvements in the technology) have been
filed in numerous other jurisdictions where commercial usage is foreseen,
including other countries in Europe, Japan, Australia, and New Zealand, and the
rights under such applications have been assigned to Registrant. Registrant's
patent counsel, which conducted the appropriate searches in Canada and the
United States, has reviewed the results of searches conducted in Europe and
advised management that effective patent protection for Registrant's technology
should be obtainable in all countries in which the patent applications have been
filed. There can be no assurance, however, that such protection will be
obtained.

When a new product or process is developed, the developer may seek to preserve
for itself the economic benefit of the product or process by applying for a
patent in each jurisdiction in which the product or process is likely to be
exploited. Generally speaking, in order for a patent to be granted, the product
or process must be new and be inventively different from what has been
previously patented or otherwise known anywhere in the world. Patents generally
have a duration of 17 years from the date of grant or 20 years from the date of
application depending on the jurisdiction concerned, after which time any person
is free to exploit the product or process covered by a patent. A person who is
the owner of a patent has, within the jurisdiction in which the patent is
granted, the exclusive right to exploit the patent either directly or through
licensees, and is entitled to prevent any person from infringing on the patent.

The granting of a patent does not prevent a third party from seeking a judicial
determination that the patent is invalid. Such challenges to the validity of a
patent are not uncommon and are occasionally successful. There can be no
assurance that a challenge will not be filed to one or more of Registrant's
patents and that, if filed, such challenge(s) will not be successful.

In the United States and Canada, the details of the product or process which is
sought to be patented are not publicly disclosed until a patent is granted.
However, in some other countries, patent applications are automatically
published at a specified time after filing.

                                       3
<PAGE>

Research and Development

Nocopi has been involved in research and development since its inception, and
intends to continue its research and development activities in three areas.
First, Registrant will continue to refine its present family of products.
Second, Registrant will seek to expand its technology into new areas of
implementation. Third, Registrant will seek to develop specific customer
applications.

During the years ended December 31, 1998, and 1997, Nocopi expended
approximately $376,400 and $480,500, respectively, on research and development
activities (excluding capital expenditures related to research and development
activities).

Competition

In the area of document and product authentication and serialization, Registrant
is aware of other technologies, both covert and overt surface marking
techniques, requiring decoding implements or analytical methods to reveal the
relevant information. These technologies are offered by other companies for the
same anti-counterfeiting and anti-diversion purposes the Registrant markets its
covert technologies. These include, among others, biological DNA codes,
microtaggants, thermochronic, UV and infrared inks as well as encryption, 2D
symbology and laser engraving. Registrant believes its patented and proprietary
technologies provide a unique and cost-effective solution to the problem of
counterfeiting and grey marketing. Registrant is not aware of any competitors
that market paper which functions in the same way as Nocopi security papers,
although management is aware of a limited number of competitors which are
attempting different approaches to the same problems which Registrant's products
address. Registrant is aware of a Japanese company that has developed a film
overlay which is advertised as providing protection from photocopying.
Registrant has examined the film overlay and believes that it has a limited
number of applications. Nocopi security paper is also considerably less
expensive than the film overlay.

Other indirect competitors are marketing products utilizing the hologram and
copy void technologies. The hologram, which has been incorporated into credit
cards to foil counterfeiting, is considerably more costly than Registrant's
technology. Copy void is a security device which has been developed to indicate
whether a document has been photocopied.

Registrant has limited resources, and there can be no assurance that businesses
with greater resources than Registrant will not enter the market and compete
with Registrant.

Employees

At March 31, 1999, Registrant had 9 full-time employees, including management.
Registrant maintains key-person life insurance of at least $1 million on each
of the following executives and consultants: Richard A. Check, Norman A. Gardner
and Dr. Arshavir Gundjian.

Financial Information about Foreign and Domestic Operations

Certain information concerning Registrant's foreign and domestic operations is
contained in Note 8 to Registrant's Financial Statements included elsewhere in
this Annual Report on Form 10-KSB, and is incorporated herein by reference.

ITEM 2. PROPERTIES

Registrant's corporate headquarters and research facilities are located at 537
Apple Street, West Conshohocken, Pennsylvania 19428. Its telephone number at
that location is (610) 834-9600. These premises consist of approximately 14,800
square feet of space leased from an unaffiliated third party under a lease
expiring in February 2003. Current monthly rental under this lease is $8,000
subject to further annual increases on the anniversary date of the lease in each
of the next four years. Registrant is also responsible for the operating costs
of the building.

Registrant's former corporate headquarters, located at 230 Sugartown Road,
Wayne, Pennsylvania 19087, has been sub-let for the duration of the lease term
at a monthly rental approximating the Registrant's rental obligation. These
premises consist of approximately 2,800 square feet of space leased from an
unaffiliated third party under a lease expiring in July 2001. Current monthly
rental under this lease is $5,000.

Registrant believes its facilities are adequate for its current needs.

ITEM 3. LEGAL PROCEEDINGS

Registrant is not aware of any material pending litigation (other than ordinary
routine litigation incidental to its business where, in management's view, the
amount involved is less than 10% of Registrant's current assets) to which
Registrant is or may be a party, or to which any of its properties is or may be
subject, nor is it aware of any pending or contemplated proceedings against it


                                       4
<PAGE>

by any governmental authority. Registrant knows of no material legal proceedings
pending or threatened, or judgments entered against, any director or officer of
Registrant in his capacity as such.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

During the fourth quarter of the fiscal year ended December 31, 1998, no matters
were submitted to a vote of Registrant's security holders.

                                     PART II

ITEM 5. MARKET PRICE OF AND DIVIDENDS ON REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS

Registrant's Common Stock is traded on the over-the-counter market and quoted on
the NASD over-the-counter Bulletin Board under the symbol "NNUP". The table
below presents the range of high and low bid quotations of Registrant's Common
Stock by calendar quarter for the last two full fiscal years and for a recent
date, as reported by the National Quotation Bureau, Inc. The quotations
represent prices between dealers and do not include retail markup, markdown, or
commissions; hence, such quotations do not represent actual transactions.

                                               High Bid        Low Bid
                                               --------        -------

      January 1, 1997 to March 31, 1997         $1.19           $.59
      April 1, 1997 to June 30, 1997             $.69           $.38
      July 1, 1997 to September 30, 1997         $.41           $.25
      October 1, 1997 to December 31, 1997       $.47           $.13

      January 1, 1998 to March 31, 1998          $.25           $.16
      April 1, 1998 to June 30, 1998             $.44           $.17
      July 1, 1998 to September 30, 1998         $.21           $.08
      October 1, 1998 to December 31, 1998       $.16           $.07

      January 1, 1999 to March 26, 1999          $.16           $.08

As of March 26, 1999, 33,587,332 shares of Registrant's Common Stock were
outstanding. The number of holders of record of Registrant's Common Stock was
approximately 1,100. However, Registrant estimates that it has a significantly
greater number of Common Stockholders because a number of shares of Registrant's
Common Stock are held of record by broker-dealers for their customers in street
name. In addition to the 33,587,332 shares of Common Stock which are
outstanding, Registrant, at March 26, 1999, has reserved for issuance 15,033,983
shares of its Common Stock which underlie outstanding options (including the two
million share 1999 Stock Option Plan approved by the Board of Directors in
February 1999) and warrants to purchase Common Stock of the Registrant and
securities issued by Euro-Nocopi, S.A., which may be converted into Registrant's
common stock.

Registrant has paid no cash dividends on its Common Stock and does not
anticipate paying any such dividends in the foreseeable future.


ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

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 pressure sensitive labels. 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.

                                       5
<PAGE>

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.

Revenues for 1998 were $2,423,900, a decline of 20% from $3,046,000 in 1997.
Licenses, royalties and fees declined by 14% to $1,796,600 in 1998 from
$2,085,300 in 1997. The $288,700 decline is due in part to lower license fees
and royalties from certain U.S. customers resulting primarily from the
re-negotiation in early 1997 of an exclusive license with 3M Corporation. The
license was mutually terminated effective April 30, 1998. Fees of $90,000 were
derived from 3M Corporation in 1998 compared to $210,000 in 1997. Product and
other sales were $627,300 in 1998 compared to $960,700 in 1997, a decline of
$333,400 or 35%. The decline results from lower sales of pressure-sensitive
labels and inkjet equipment in 1998 compared to 1997.

Gross profit declined to $1,479,000 or 61% of revenues in 1998 from $1,504,500,
or 49% of revenues in 1997. The gross profit, expressed in absolute dollars, was
negatively affected by the $288,700 decline in licenses, royalties and fees.
Partially offsetting the decline was a non-recurring charge in 1997 related to
the settlement with Euro-Nocopi during the first half of 1997. The settlement
involved a dispute with Euro-Nocopi whereby, in the second quarter of 1997, the
Company agreed to credit Euro-Nocopi $154,500 as its share of certain minimum
royalties under a worldwide agreement with a manufacturer who distributed
products incorporating the Company's technologies.

Research and development expenses declined to $376,400 in 1998 from $480,500 in
1997. The decline relates primarily to a cost containment program, including
staff reductions, implemented during 1997, the full impact of which was
experienced in 1998.

Sales and marketing expenses increased to $790,800 in 1998 from $662,900 in
1997. During 1997, the Company reduced its sales and marketing expenses through
staff reductions and lower discretionary sales promotion expenses as the Company
sought to conserve cash during a period of adverse liquidity. The increase in
1998 reflects the Company's commitment to develop new markets for its
technologies.

General and administrative expenses declined to $733,600 in 1998 from $903,600
in 1997 due primarily to lower professional fees incurred in 1998.

Other income (expenses) include interest on the Series B 7% Subordinated
Convertible Promissory Notes issued in May 1993 and amortization of debt issue
costs related to the notes. The reduction in interest expense in 1998 compared
to 1997 reflects the repayment of $825,000 principal amount of notes in 1998.
The $125,000 balance was extended for a period of two years to March 31, 2000 at
an interest rate of 9% and are convertible into 625,000 shares of the Company's
common stock. Interest income increased in 1998 compared 1997 due to the
investment of funds raised in the private placement completed in late 1997.

Equity in net loss of affiliate represents the proportionate share in the net
loss of Euro-Nocopi attributable to the Company's approximate 18% ownership
share of Euro-Nocopi.

The net loss for 1998 was $548,800 compared to $847,000 in 1997, a reduction of
$298,200 or 35%, for the reasons explained above.

Liquidity and Capital Resources

The Company's cash and cash equivalents declined to $1,372,900 at December 31,
1998 from $2,714,600 at December 31, 1997. The cash was used primarily to fund
operations throughout the year and repay $825,000 principal amount of its Series
B 7% Subordinated Convertible Promissory Notes due March 31, 1998.

In the first quarter of 1998, the Company relocated its Corporate headquarters
to a new location and relocated its research facilities to this location in
August 1998. The Company has invested approximately $40,000 in leasehold
improvements at this location in which it conducts all of its business
operations.

The Company does not currently plan any significant capital investment over the
next twelve months.

The Company believes that it has sufficient working capital to support its
operations and debt service requirements over the next twelve months.

The Company is aware of Year 2000 potential problems. These potential problems
exist because many computer software applications use two digits to designate a
year. Any computer hardware and programs that have date sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000. The
inability to properly process dates beyond 1999 may cause computer systems to
process information incorrectly or not at all. As its internal information
systems consist primarily of third party software systems, the Company intends
to purchase and install available Year 2000 compliant upgrade versions by
mid-1999. The Company has determined that the vendor's upgrade software is


                                       6
<PAGE>

available and is Year 2000 compliant. The Company estimates the costs to
purchase and install the upgrades at less than $10,000. The Company continues to
communicate with vendors, financial institutions and others to assure their
compliance to Year 2000 issues. However, there can be no assurance that the
systems of other companies on which the Company relies will be converted in a
timely manner.

The foregoing contains forward-looking information within the meaning of the
Private Securities Litigation Act of 1995. Such forward-looking statements
involve certain risks and uncertainties including the particular factors
described in this Management's Discussion and Analysis. In each case, actual
results may differ materially from such forward-looking statements. 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.

Factors That May Affect Future Growth and Stock Price

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:

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 for 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.

New Business Opportunities. The Company, with limited research and development
resources, is compelled to develop new technologies which it believes will
enhance and expand its position in the anti-counterfeiting and anti-diversion
marketplace it serves. There can be no assurance that the resources expended in
this effort will generate significant revenues for the Company.

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. There
can be no assurance that the Company will be able to protect the basis of its
technologies from discovery by unauthorized third parties, thus adversely
affecting its customer and licensee relationships.

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 is it extensively followed by securities
analysts and traders. 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.

Recently Issued Accounting Standard

Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities", effective for periods ending
after June 15, 1999, establishes standards for disclosing information about
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. Because the Company does not engage
in derivative instruments and hedging activities, adoption of this statement is
not expected to impact financial statements or disclosures of the Company.

ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Financial Statements of Registrant meeting the requirements of Regulation S-B
(except section 228.310 and Article 11 of Regulation S-X thereof) are included
herein beginning at page F-1 of this Annual Report on Form 10-KSB.

For information required with respect to this Item 7, see "Financial Statements
and Schedules on pages F-1 through F-12 of this report.



                                       7
<PAGE>

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

In October 1997, Registrant appointed BDO Seidman, LLP as the Registrant's
independent public accountant to audit the Registrant's financial statements
replacing Coopers & Lybrand L.L.P. who resigned in August 1997. These events are
more fully described in 8-K filings dated August 25, 1997 and October 27, 1997
which are incorporated herein by reference.


                                    PART III

ITEM 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
With section 16(a) of the Exchange Act.

The directors and officers of the Company, their ages, present positions with
the Company, and a summary of their business experience are set forth below.

Susan A. Cox, 45, a director, has been, since May 1994, a director of American
Equities Overseas (UK) Ltd., London, a wholly owned subsidiary of American
Equities Overseas Inc., a private securities brokerage and corporate finance
firm, after having served as a consultant to the UK company from March 1981.
Previously Ms. Cox was employed by EF Hutton and Oppenheimer & Co. Ms.
Cox is also a director of Euro-Nocopi, S.A.

Dr. Arshavir Gundjian, 63, was Senior Vice President, Technology & Technical
Sales Worldwide from 1995 until January 1, 1999 and a director (since 1991) of
the Company. Dr. Gundjian held a teaching and research position in the
specialized areas of electronic semi-conductors and laser optics at McGill
University in Montreal, Quebec since 1965, and has published more than 25 papers
in these areas. He was Chairman of Graduate Studies of the McGill University
Department of Electrical Engineering until 1989. Dr. Gundjian is also Chairman
of the International Electro-Technical Commission Canadian Subcommittee on laser
equipment. He is a member of the Optical Society of America and the New York
Academy of Sciences. Dr. Gundjian now serves as a consultant to the Company.

Jack H. Halperin, 52, Interim Chairman of the Board of Directors, has been
engaged in the practice of Corporate and Securities Law for 26 years. He holds
an A.B. degree (summa cum laude) from Columbia College and a J.D. degree from
New York University School of Law where he was Note-and-Comment Editor of the
Law Review. Mr. Halperin is also a director of AccuMed International, Inc.,
I-Flow Corporation and Memry Corporation.

Neal Sroka, 46, a director, was President of Sroka Associates, Inc. an
investigative consulting firm, from 1991 to 1997. From 1997 to the present, he
has been Chairman and Chief Executive Officer of Management Services
International.

Rudolph A. Lutterschmidt, 52, Vice President and Chief Financial Officer (since
1994) of the Company, has been employed by the Company for more than five years.
He is a member of the Financial Executives Institute, the Institute of
Management Accountants and is a Certified Management Accountant.

As reported on a Form 8-K filed on June 22, 1998, due to their relationship with
the European investors and American Equities Overseas Inc., the placement agent
in the 1997 private placement, Ms. Cox and Messrs. Halperin and Sroka may be
deemed to be in control of the Registrant to the extent that they agree on a
particular matter or matters affecting the Registrant.





                                       8
<PAGE>

Item 10.  EXECUTIVE COMPENSATION

The following table sets forth information concerning compensation for 1998,
1997 and 1996 earned by or paid to Richard A. Check, the Company's Chief
Executive Officer, and the only other executives whose total annual salary and
bonus for 1998 exceeded $100,000 (the "Named Executives").

<TABLE>
<CAPTION>
                           SUMMARY COMPENSATION TABLE
                                                                     Long-Term Compensation
                                                            ------------------------------------------
                                                                                           Payouts
                                                                                         -------------
                                 Annual Compensation                    Awards 
                            ------------------------------  ----------------------------     All
                                                 Other      Restricted  Options   LTIP      Other      
                            Salary    Bonus     Annual        Stock      SARs    Payout  Compensation  
Name and Position    Year     ($)      ($)    Compensation   Awards      (#)      ($)        ($)       
-------------------  ------ --------  ------  ------------  ----------  -------  ------- --------------
<S>                  <C>    <C>       <C>      <C>           <C>         <C>      <C>     <C>
Richard A. Check(2)  1998   149,599            10,800(1)
                     1997    60,211             1,800(1)                200,000

Norman A. Gardner(3) 1998   173,983            10,800(1)                325,000
                     1997   168,448             8,930(1)                200,000
                     1996   195,000            13,458(1)

Dr. Arshavir         1998   128,931            10,000(1)
Gundjian             1997   142,341            14,333(4)
  Sr. VP             1996   165,000            21,500(4)                 20,000
  Technology &
  Technical Sales
  Worldwide
-------------------
</TABLE>

(1)  Reimbursement of automobile expense.
(2)  Mr. Check resigned as President and Chief Executive Officer and a director
     on February 24, 1999.
(3)  Mr. Gardner resigned as President & Chief Executive Officer effective
     October 24, 1997 and resigned as a director effective March 27, 1998.
(4)  Reimbursement of automobile expenses and expense allowances related to
     extended foreign travel.

The following table furnishes information concerning stock options granted
during 1998.

<TABLE>
<CAPTION>
                                OPTIONS/SAR GRANTS IN LAST FISCAL YEAR

                        Individual Grants
                    ---------------------------
                                   % of Total                         Potential Realizable Value  
                    Securities      Options/                         At Assumed Annual Rates of  
                    Underlying        SARs                             Stock Price Appreciation    
                     Options/        Granted      Exercise               For Option Term(1)      
                       SARs          To All        Of Base      -----------------------------------
                     Granted       Employees In     Price       Expiration
       Name            (#)          Fiscal Year     ($/SH)        date        5%($)         10% ($)
       ----         -----------    ------------   ----------    ----------    ------    -----------
<S>                  <C>              <C>           <C>          <C>          <C>         <C>   
Norman A. Gardner    125,000          31.3          0.30         3/2006       17,900      42,900

Norman A. Gardner    200,000          50.0          0.45         3/2006       42,900     103,000

-------------------
</TABLE>

(1) As required by the rules of the Securities and Exchange Commission, the
    dollar amounts reflected in these columns represent the hypothetical gain
    that would exist for the options based on assumed 5% and 10% annual
    compounded rates of stock price appreciation over the full option term.
    These assumed rates would result in a Common Stock price on March 26, 2006,
    the date the options first listed above expire, of $.44 and $.64
    respectively. If these price appreciation assumptions are applied to all of
    the Company's outstanding Common Stock on the grant date, such Common stock
    would appreciate in the aggregate by approximately $5 million and $11
    million, respectively, over the same term. These prescribed rates are not
    intended to forecast possible future appreciation, if any, of the Common
    Stock.

The following table sets forth the aggregate number of shares of Common stock
subject to options held by the Named Executives at December 31, 1998.

                                       9
<PAGE>



               AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND
                          FISCAL YEAR END OPTION VALUES

<TABLE>
<CAPTION>
                                                                  Number of             Value of    
                                                                  Securities          Unexercised   
                                                                  Underlying            In-the-     
                                                                 Unexercised             Money      
                                                                  Options at           Options at   
                                                                 Fiscal Year          Fiscal Year   
                                     Shares                          End                  End       
                                   Acquired on                 -----------------     ---------------
                                    Exercise       Value          Exercisable/         Exercisable/
              Name                      (#)       Realized       Unexercisable        Unexercisable
              ----                 -----------    --------     -----------------     ---------------
<S>                                                              <C>                 <C>
Richard A. Check.................................                100,000/100,000            -/-

Norman A. Gardner..............................                     -/325,000               -/-

Arshavir Gundjian.................................                   53,250/-               -/-

Employment Contracts
</TABLE>

In October 1997 the Company entered into an Employment Agreement with Richard A.
Check pursuant to which he served as President and Chief Executive Officer of
the company. The Agreement had a three-year term and provided for base
compensation at the rate of $180,000 per annum. Mr. Check's agreement also
provided for a bonus equal to 10% of the excess, if any, or the Company's net
income before taxes for any year over $250,000. By agreement in 1998, Mr. Check
was paid at the rate of $150,000 per annum because of the Company's cash
constraints. Mr. Check resigned as President, Chief Executive Officer and a
director on February 24, 1999. Mr. Check will remain as a consultant to the
Company through December 31, 1999 and will be paid at the rate of $150,000 per
annum during the consultancy period.

Norman A. Gardner entered into an Employment Agreement dated October 24, 1997,
initially having a three-year term. The Agreement was amended effective March
27, 1998. The Agreement, as amended, provides for Mr. Gardner to serve as Senior
Advisor to the Company with a salary at the rate of $180,000 per annum. Mr.
Gardner's agreement also provides for a bonus equal to 10% of the excess, if
any, of the Company's net income before taxes for any year over $250,000. The
bonus may not exceed $125,000 for any year. The term of the Agreement, as
amended, expires on October 31, 2002. Mr. Gardner also received stock options to
purchase 125,000 and 200,000 shares at exercise price of $0.30 and $0.45 per
share, respectively..

The Agreement is terminable for cause consisting of (i) breach by Mr. Gardner of
his obligations under the Agreement or (ii) that Mr. Gardner has committed an
act of dishonesty, moral turpitude or theft.

The Company employed Dr. Arshavir Gundjian through December 31, 1998 under an
agreement that provided for a base salary of $165,000 per annum. By agreement in
1998, Dr. Gundjian was paid at the rate of $130,000 per annum due to the
Company's cash constraints. Under the terms of the agreement, the Company
elected not to renew Dr. Gundjian's employment beyond December 31, 1998, and
thereby exercised its option to retain Dr. Gundjian as a consultant to the
Company for a period of four years under which he will be compensated at the
rate of $82,500 per annum for two years and $62,500 per annum for the final two
years of the agreement. The agreement provides for a cash bonus of up to $82,500
in each of the first two years of the consulting period if certain financial
goals of the Company are met. In addition, the Company has agreed to pay Dr.
Gundjian's lodging and automobile expenses in Pennsylvania, as well as the cost
of travel between the Company's headquarters in West Conshohocken, Pennsylvania
and Dr. Gundjian's home in Montreal, Quebec.

Dr. Gundjian has recently been diagnosed with a serious illness. It is likely
that the illness and the associated treatment will make him unable to perform
services for the Company for a period of three months. The Company cannot
predict any further impact that such illness will have on Dr. Gundjian's 
ability to render services to the Company.

The agreement may be terminated by the Company for legal cause, or upon Dr.
Gundjian's death or disability. In the event that Dr. Gundjian's employment is
terminated without cause as a result of his disability or death, Dr. Gundjian
(or his estate) is entitled to receive the balance of the base salary payable to
him through the remaining term of the agreement. The agreement confirms the
Company's ownership of all intellectual property developed during Dr. Gundjian's
employment, and contains his undertaking not to compete with the Company for a
period of three years from the termination of his employment.

Director Compensation

Directors have not been paid any fees for their services as such during the year
ended December 31, 1998. All directors have been and will be reimbursed for
reasonable expenses incurred in connection with attendance at Board of
Directors' meetings.



                                       10
<PAGE>

Item 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth as of March 26, 1999, The stock ownership of each
person known by the Company to be the beneficial owner of more than 5% of the
Company's Common Stock.

<TABLE>
<CAPTION>
                                                                                 Common Stock
                                                                           -------------------------
                                                                             Number
                                                                           Of Shares
                                                                           Beneficially   Percentage
Name and Address of Beneficial Owners                                        Owned        Of Class
----------------------------------------------------------------------     -----------    ----------

<S>                                                                         <C>              <C>
Daniel Benasutti, 2002 Kerwood Drive, Broomall, PA  19008.............      537,000          1.6
Ross L Campbell, 675 Lewis Lane, Ambler, PA  19002....................      959,150          2.9
Joseph Falcone, Wyntrelea Drive, Bryn Mawr, PA........................      130,000           *
Michael A. Feinstein, M.D., P.C., 801 Spruce Street, 3rd Floor,             518,500          1.5
Philadelphia, PA  19107
Stanley Knowlton, 12 Egypt Close, East Hampton, NY  11937.............      559,000          1.7
Michael Voticky, 610 Brazos, #300, Austin, TX  78721..................        1,000            *
                                                                           -----------    ----------
                                                                           2,704,650         8.1
</TABLE>

According to a joint filing on Schedule 13D dated February 20, 1999, the
above-named individuals possess voting and disposative power with respect
thereto.

The following table sets forth, as of March 26, 1999, the stock ownership of
each director and Named Executive (as set forth under the heading `Executive
Compensation") individually, and of all directors and executive officers of the
Company as a group.

<TABLE>
<CAPTION>
                                                                                 Common Stock
                                                                          ---------------------------
                                                                            Number     
                                                                          Of Shares         Percentage
                                                                          Beneficially         of
Name of Beneficial Owner                                                   Owned           Class (1)
------------------------                                                   -----           ---------
<S>                                                                        <C>             <C> 
Susan A. Cox(2)......................................................          0               *
Dr. Arshavir Gundjian(3).............................................       135,750            *
Jack H. Halperin.....................................................          0               *
Neal Sroka...........................................................          0               *
Richard A. Check(4)..................................................       150,000            *
Norman A. Gardner(5).................................................       880,000          2.61
All Executive Officers and Directors as a Group (5 individuals)......       163,600(6)         *
---------------
* Less than 1.0%.
</TABLE>


(1)  Where the Number of Shares Beneficially Owned (reported in the preceding
     column) includes shares which may be purchased upon the exercise of
     outstanding stock options which are or within 60 days will become
     exercisable ("presently exercisable options") the percentage of class
     reported in this column has been calculated assuming the exercise of such
     presently exercisable options.

(2)  Does not include 780,267 Warrants to purchase a like number of shares of
     common stock owned by American Equities Overseas, Inc.

(3)  Includes presently exercisable stock options to purchase 53,250 shares.

(4)  Mr. Check resigned as President, Chief Executive Officer and as a director
     effective February 24, 1999. Includes presently exercisable options to
     purchase a total of 100,000 shares.

(5)  Includes presently exercisable options to purchase a total of 150,000
     shares.

(6)  Includes presently exercisable options to purchase a total of 80,500
     shares.

Except as stated herein, there are no arrangements known to the Company which
may result in a change in control of the Company and each stockholder has sole
voting and investment power with respect to the Company's common shares included
in the above table.




                                       11
<PAGE>

Item 12. Certain Relationships and Related Transactions

Joel A. Pinsky, Secretary, General Counsel and a director of the Company until
March 27, 1998, is a partner in the Montreal law firm of Gross Pinsky, which
rendered legal services to the Company during the fiscal year ended December 31,
1998. Fees for 1998 services were $61,000. Mr. Pinsky resigned as Secretary and
General Counsel on February 24, 1999.

William F. Drake, a director of the Company until March 27, 1998, is of counsel
to the law firm of Montgomery, McCracken, Walker & Rhoads, Philadelphia,
Pennsylvania. Such law firm furnished legal services to the Company during the
fiscal year ended December 31, 1998. Fees for 1998 services were less than
$60,000.

Jack H. Halperin, Interim Chairman of the Board of Directors and Securities
Counsel, furnished legal services to the Company during the fiscal year ended
December 31, 1998. Fees for 1998 services were less than $60,000.

Susan A. Cox, a director, is employed by American Equities Overseas (UK) Ltd., a
wholly owned subsidiary of American Equities Overseas, Inc., an investment
banking firm. American Equities provided financial public relations services to
the Company during fiscal year ended December 31, 1998. Fees for 1998 services
were less than $60,000.



ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

(a) The following Financial Statements are filed as part of this Annual Report
on Form 10-KSB

                                                                   PAGE
                                                                   ----
Report of Independent Certified Public
Accountants                                                         F-1

Balance Sheet as of December 31, 1998                               F-2

Statements of Operations for the Years Ended
December 31, 1998 and 1997                                          F-3

Statements of Stockholders' Equity for the
Years Ended December 31, 1998 and 1997                              F-4

Statements of Cash Flows for the Years Ended
December 31, 1998 and 1997                                          F-5

Notes to Financial Statements                               F-6 to F-12



(b) The Exhibit Index begins on Page 14 of this Annual Report on Form 10-KSB.

(c)  Registrant has not filed any reports on Form 8-K during the last quarter of
     the fiscal year covered by this Annual Report on Form 10-KSB.



                                       12
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 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.
                                   Registrant

Dated: April 14, 1998           By: /s/ Jack H. Halperin
                                   ------------------------
                                        Jack H. Halperin
                                        Interim Chairman of the Board

Dated: April 14, 1998           By: /s/ Rudolph A. Lutterschmidt
                                     --------------------------------
                                        Rudolph A. Lutterschmidt,
                                        Vice President, Chief Financial Officer
                                        and Chief Accounting Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.


Date: April 14, 1998             /s/ Susan Cox
                                 -------------------------------
                                 Susan Cox, Director

Date: April 14, 1998             /s/ Dr. Arshavir Gundjian
                                 -------------------------------
                                 Dr. Arshavir Gundjian, Director

Date: April 14, 1998             /s/ Jack H. Halperin
                                 -------------------------------
                                 Jack H. Halperin, Interim Chairman of the Board

Date: April 14, 1998             /s/ Neal Sroka
                                 -------------------------------
                                 Neal Sroka, Director




                                       13
<PAGE>

The following Exhibits are filed as part of this Annual Report on Form 10-K:


<TABLE>
<CAPTION>

       Exhibit
       Number                            Description
       ------                            -----------

<S>       <C>      
          3.1  Articles of Incorporation(1)

          3.2  Bylaws(1)

          3.3  Articles of Amendment to Articles of Incorporation(4)

          3.4  Article of Amendment to Articles of Incorporation

         10.1  Amended and Restated Non-Qualified Stock Option Plan(3)

         10.2  Amended and Restated Incentive Stock Option Plan(3)

         10.3  Summary Plan Description for Nocopi Technologies, Inc. 401(k)
               Profit Sharing Plan(2)

         10.4  License Agreement between Registrant and Euro-Nocopi S.A.(3)

         10.5  Service Agreement between Registrant and Euro-Nocopi S.A.(3)

         10.6  Memorandum of Agreement between Registrant and Euro-Nocopi S.A.(3)

         10.7  Nocopi Technologies, Inc. 1996 Stock Option Plan(4)

         10.8  Settlement Agreement between Registrant and Euro-Nocopi S.A.(6)

         10.9  Employment Agreement between Registrant and Richard A. Check(6)

         10.10 Employment Agreement between Registrant and Norman A. Gardner(6)

         10.11 Employment Agreement between Registrant and Dr. A. Gundjian(6)

         10.12 Form of Common Stock Purchase Warrant(6)

         10.13 Lease Agreement dated February 17, 1998 relating to premises at
               537 Apple Street, West Conshohocken, PA 19428(6)

         10.14 Nocopi Technologies, Inc. 1999 Stock Option Plan

         10.15 Amended Summary Plan Description for Nocopi Technologies, Inc. 401(k) Profit Sharing Plan

         10.16 Amendment to Employment Agreement between Registrant and Norman A. Gardner.

         10.17 Severance Agreement between Registrant and Richard A. Check

         10.18 Form of Series B Promissory Note due March 31, 2000

          16.1 Letter dated August 25, 1997 from Coopers & Lybrand L.L.P. re: Change in Certifying Accountant(5)

          23.1 Consent of BDO Seidman, LLP

          27.0 Financial Data Schedule
</TABLE>


                                       14
<PAGE>

(1)  Incorporated by reference to Registrant's Registration Statement on Form
     10, as filed with the Commission on or about August 19, 1992

(2)  Incorporated by reference to Registrant's Annual Report on Form 10-K for
     the Year Ended December 31, 1993

(3)  Incorporated by reference to Registrant's Annual Report on Form 10-K for
     the Year Ended December 31, 1994

(4)  Incorporated by reference to Registrant's Annual Report on Form 10-K for
     the Year Ended December 31, 1996

(5)  Incorporated by reference to Registrant's Current Report on Form 8-K dated
     August 25, 1997

(6)  Incorporated by reference to Registrant's Annual Report on Form 10-K for
     the Year Ended December 31, 1997





                                       15
<PAGE>


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Shareholders and Board of Directors of Nocopi Technologies, Inc.
W. Conshohocken, Pennsylvania

We have audited the accompanying balance sheet of Nocopi Technologies, Inc. as
of December 31, 1998 and the related statements of operations, stockholders'
equity, and cash flows for each of the two years in the period ended December
31, 1998. The financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the financial
statements and schedule. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, based on our audits, the financial statements referred to above
present fairly, in all material respects, the financial position of Nocopi
Technologies, Inc. at December 31, 1998, and the results of its operations and
its cash flows for each of the two years in the period ended December 31, 1998,
in conformity with generally accepted accounting principles.





                                                                BDO SEIDMAN, LLP
Philadelphia, Pennsylvania
March 5, 1999





<PAGE>



                            Nocopi Technologies, Inc.
                                  Balance Sheet
                                                                    December 31
                                                                       1998
                                                                    -----------
                                     Assets

Current assets
 Cash and cash equivalents                                          $1,372,900
 Accounts receivable less $55,500 allowance
   for doubtful accounts                                               130,800
 Prepaid and other                                                      52,400
                                                                    -----------
  Total current assets                                               1,556,100

Fixed assets
 Leasehold improvements                                                 39,100
 Furniture, fixtures and equipment                                     439,400
                                                                    -----------
                                                                       478,500
 Less: accumulated depreciation                                        373,800
                                                                    -----------
                                                                       104,700

Other assets
 Investment in and advances to unconsolidated                          206,000
   affiliate
 Patents, net of $321,300 accumulated amortization                     518,900
 Other                                                                   7,100
                                                                    -----------
                                                                        732,000
                                                                    -----------
                                                                     $2,392,800
                                                                    ===========

                      Liabilities and Stockholders' Equity

Current liabilities
 Accounts payable                                                     $219,900
 Accrued expenses                                                      142,600
 Accrued commissions                                                   126,300
 Deferred revenue                                                      122,300
                                                                    -----------
  Total current liabilities                                            611,100

Long-term notes payable                                                125,000

Commitments and contingencies

Stockholders' equity
 Series A preferred stock $1.00 par value
  Authorized - 300,000 shares
   Issued and outstanding - none
Common stock, $.01 par value
  Authorized - 75,000,000 shares
   Issued and outstanding - 33,587,332 shares                          335,900
 Paid-in capital                                                    10,406,200
 Accumulated other comprehensive loss                                   (12,900)
 Accumulated deficit                                                 (9,072,500)
                                                                    -----------
                                                                     1,656,700
                                                                    -----------
                                                                    $2,392,800
                                                                    ===========
See notes to financial statements.

                                      F-2

<PAGE>



                            Nocopi Technologies, Inc.
                            Statements of Operations
<TABLE>
<CAPTION>

                                                                  Years ended December 31
                                                               1998                    1997
                                                            ----------               ----------

 Revenues
<S>                                                         <C>                      <C>       
  Licenses, royalties and fees                              $1,796,600               $2,085,300
  Product and other sales                                      627,300                  960,700
                                                            ----------               ----------
                                                             2,423,900                3,046,000

 Cost of sales
  Licenses, royalties and fees                                 358,700                  582,900
  Product and other sales                                      586,200                  958,600
                                                            ----------               ----------
                                                               944,900                1,541,500
                                                            ----------               ----------
   Gross profit                                              1,479,000                1,504,500

 Operating expenses
  Research and development                                     376,400                  480,500
  Sales and marketing                                          790,800                  662,900
  General and administrative                                   733,600                  903,600
  Related party expenses                                       156,600                  197,100
                                                            ----------               ----------
                                                             2,057,400                2,244,100
                                                            ----------               ----------
   Loss from operations                                       (578,400)                (739,600)

 Other income (expenses)
  Amortization of debt issuance costs                           (6,300)                 (25,300)
  Interest income                                               93,600                   27,800
  Interest and bank charges                                    (30,600)                 (71,000)
  Equity in loss of unconsolidated affiliate                   (27,100)                 (38,900)
                                                            ----------               ----------
                                                                29,600                 (107,400)
                                                            ----------               ----------
   Net loss                                                  ($548,800)               ($847,000)
                                                            ==========               ==========

 Basic and diluted loss
  per common share                                               ($.02)                   ($.05)

 Weighted average common shares outstanding                 33,587,332               17,192,323

</TABLE>


 See notes to financial statements.

                                      F-3

<PAGE>


                            Nocopi Technologies, Inc.
                       Statements of Stockholders' Equity
<TABLE>
<CAPTION>

                                                                                                      Accumulated
                                                                                                         Other
                                                Common stock              Paid-in       Accumulated   Comprehensive  Comprehensive
                                           Shares          Amount         Capital         Deficit     Income (Loss)      Loss
                                           ------          ------         -------       -----------   -------------  -------------
<S>                                      <C>              <C>           <C>             <C>             <C>               <C>   
Balance-January 1, 1997                  14,080,654      $ 140,800      $ 7,651,000     ($7,676,700)      57,100

Deconsolidation of Euro-Nocopi S.A.                                         377,300

Private placement, net of expenses       19,506,678        195,100        2,352,900

Stock options issued as compensation                                         15,000

Net loss                                                                                   (847,000)                      ($847,000)

Translation adjustment                                                                                   (81,000)           (81,000)
                                         ----------      ---------      -----------     -----------     --------          ---------
Balance-December 31, 1997                33,587,332        335,900       10,396,200      (8,523,700)     (23,900)         ($928,000)
                                                                                                                          =========
Stock options issued as compensation                                         10,000

Net loss                                                                                   (548,800)                      ($548,800)

Translation adjustment                                                                                    11,000             11,000
                                         ----------      ---------      -----------     -----------     --------          ---------
Balance-December 31, 1998                33,587,332      $ 335,900      $10,406,200     ($9,072,500)    ($12,900)         ($537,800)
                                         ==========      =========      ===========     ===========     ========          =========

</TABLE>


See notes to financial statements.

                                      F-4

<PAGE>

                            Nocopi Technologies, Inc.
                            Statements of Cash Flows
<TABLE>
<CAPTION>

                                                                  Years ended December 31
                                                                1998                 1997
                                                             -----------          -----------
<S>                                                         <C>                  <C>          
Operating Activities
 Net loss                                                   ($   548,800)        ($   847,000)
 Adjustments to reconcile net loss to
  cash used in operating activities
  Depreciation                                                    61,200               73,300
  Amortization                                                    64,600               81,200
  Allowance for doubtful accounts, net                            11,400                7,000
  Equity in loss of unconsolidated affiliate                      27,100               38,900
  Stock option compensation                                       10,000               18,000
                                                             -----------          -----------
                                                                (374,500)            (628,600)

Decrease in assets
 Accounts receivable                                              25,200              187,600
 Prepaid and other                                                 2,300               95,900
Increase (decrease) in liabilities
 Accounts payable and accrued expenses                          (121,700)             131,800
 Deferred revenue                                                 53,700               (6,600)
                                                             -----------          -----------
                                                                 (40,500)             408,700
                                                             -----------          -----------
  Cash (used in) operating activities                           (415,000)            (219,900)

Investing Activities
 Additions to fixed assets                                       (52,100)             (19,500)
 Additions to patents                                            (36,600)            (137,300)
 Cash of Euro, beginning of year                                                   (1,641,200)
 Advances to affiliate, net                                      (13,000)             (44,700)
                                                             -----------          -----------
  Cash (used in) investing activities                           (101,700)          (1,842,700)

Financing Activities
 Repayment of notes                                             (825,000)
 Issuance of common stock                                                           2,548,000
                                                             -----------          -----------
  Cash (used in) provided by financing activities               (825,000)           2,548,000
                                                             -----------          -----------
    Increase (decrease) in cash and cash equivalents          (1,341,700)             485,400
Cash and cash equivalents
 Beginning of year                                             2,714,600            2,229,200
                                                             -----------          -----------
 End of year                                                 $ 1,372,900          $ 2,714,600
                                                             ===========          ===========

Supplemental cash flow data
  Interest paid                                              $    22,300          $    66,500

Deconsolidation of Euro-Nocopi S.A                                                $   377,300

</TABLE>


See notes to financial statements.

                                      F-5

<PAGE>



                          NOTES TO FINANCIAL STATEMENTS


1.   Organization of the Company

     Nocopi Technologies, Inc. (the Company) is organized under the laws of the
     State of Maryland. Its main business activities are the development and
     distribution of document security products and the licensing of its
     patented authentication technologies in the United States and foreign
     countries. The Company operates in one principal industry segment.


2.   Significant Accounting Policies

     Estimates - The preparation of the financial statements in conformity with
     Generally Accepted Accounting Principles requires management to make
     estimates and assumptions that affect the reported amounts of assets and
     liabilities and disclosure of contingent liabilities at the dates of
     financial statements and the reported amounts of revenues and expenses
     during the reported periods. Actual results could differ from those
     estimates.

     Cash and cash equivalents - Cash equivalents consist principally of time
     deposits and highly liquid investments with an original maturity of three
     months or less placed with major banks and financial institutions. Cash
     equivalents are carried at the lower of cost, plus accrued interest, or
     market value and are held in money market accounts at local banks. At
     December 31, 1998, Nocopi's investments in money market accounts amounted
     to $1,343,700.

     Fixed assets are carried at cost less accumulated depreciation and
     amortization. Furniture, fixtures and equipment are generally depreciated
     on the straight-line method over their estimated service lives. Leasehold
     improvements are amortized on a straight-line basis over the shorter of
     five years or the term of the lease. Major renovations and betterments are
     capitalized. Maintenance, repairs and minor items are expensed as incurred.
     Upon disposal, assets and related depreciation are removed from the
     accounts and the net amount, less proceeds from disposal, is charged or
     credited to income.

     Investment in Affiliate - The Company's investment, approximately 18%, in
     Euro-Nocopi, S.A. (Euro) is accounted for under the equity method due to
     its representation on Euro's Board of Directors and the technical
     dependence of Euro on the Company. (See note 8.)

     Patents are stated at cost less amortization and are being amortized on a
     straight-line basis over the lives of the patents (approximately fifteen
     years).

     Revenues, consisting primarily of license fees and royalties, are recorded
     as earned over the license term. Product sales are recognized upon shipment
     of products.

     Income taxes - Deferred income taxes are provided for all temporary
     differences and net operating loss and tax credit carryforwards. Deferred
     tax assets are reduced by a valuation allowance when, in the opinion of
     management, it is more likely than not that some portion or all of the
     deferred tax assets will not be realized.

     Fair value - The carrying amounts reflected in the balance sheets for cash,
     cash equivalents, accounts receivable, and accounts payable approximate
     fair value due to the short maturities of these instruments. The fair
     values represent estimates of possible value which may not be realized in
     the future.

     Loss per share - the Company adopted SFAS No. 128, "Earnings Per Share"
     resulting in the presentation of basic and diluted earnings per share.
     Because the Company reported a net loss in 1998 and 1997, common stock
     equivalents, including stock options, warrants and convertible notes were
     anti-dilutive.

     Recoverability of Long Lived Assets - Long-lived assets and certain
     identifiable intangibles, such as patents, are reviewed for impairment
     whenever events or changes in circumstances indicate that the carrying

                                      F-6

<PAGE>

     amount of the asset may not be recoverable. The Company is not aware of any
     events or circumstances which indicate the existence of an impairment that
     would be material to the Company's quarterly or annual financial
     statements.

     Comprehensive income (loss) - the Company adopted SFAS No. 130, "Reporting
     Comprehensive Income", and, accordingly, reports all components of
     comprehensive income (loss) in the accompanying statement of stockholders'
     equity.

     Recently Issued Accounting Standard
     Statement of Financial Accounting Standards No. 133, "Accounting for
     Derivative Instruments and Hedging Activities" ("SFAS 133"), effective for
     periods ending after June 15, 1999, establishes standards for disclosing
     information about derivative instruments, including certain derivative
     instruments embedded in other contracts, and for hedging activities.
     Because the Company does not engage in derivative instruments and hedging
     activities, adoption of this statement is not expected to impact financial
     statements or disclosures of the Company.


3.   Long-term Notes and Stockholders' Equity

     During 1998, the Company repaid $825,000 of its $950,000 Series B 7%
     Subordinated Convertible Promissory Notes which were payable on March 31,
     1998. The remaining $125,000 was extended to March 31, 2000. Under the
     extension arrangement, these notes bear interest at 9% and are convertible
     into 625,000 shares of the Company's common stock. The carrying cost of the
     notes at December 31, 1998 approximates their fair value because the
     interest rate approximates current market rates.

     During 1998, the Company amended its Articles of Incorporation to increase
     the number of authorized shares of common stock from 50,000,000 to
     75,000,000.

     During 1997, the Company completed a private placement in Europe whereby
     9,753,339 units (each unit consisting of two shares of common stock and one
     warrant to purchase common stock) were sold, raising $2,926,000 in cash
     ($2,548,000 net of expenses). Each warrant is exercisable for the purchase
     of one share of the Company's common stock at a price of $.25 per share
     during the first three years after issuance, subject to escalation on the
     third anniversary of the issuance of the warrants. The warrants will expire
     five years after issuance unless extended by the Board of Directors. In
     conjunction with the private placement, warrants for 780,267 shares, having
     the same terms and conditions as those issued as part of the units, were
     issued as partial commission to the Placement Agent. The European investors
     were also given the right to appoint two representatives to the Company's
     Board of Directors.


4.   Income Taxes

     At December 31, 1998 and 1997, the Company had net operating loss
     carryforwards ("NOLs") approximating $8,700,000 and $8,200,000,
     respectively. These operating losses are available to offset future taxable
     income through the years 2014 and 2013, respectively. As a result of the
     sale of the Company's common stock in an equity offering in late 1997 and
     the issuance of additional shares, the amount of the NOL's carryforwards
     may be limited. Additionally, the utilization of these NOL's if available,
     to reduce the future income taxes will depend on the generation of
     sufficient taxable income prior to their expiration. The Company has
     established a 100% valuation allowance for the deferred tax assets due to
     uncertainty of their realization.


5.   Related Party Transactions

     Payments and payment commitments aggregating $156,600 and $472,000 in 1998
     and 1997, respectively, were made to firms employing certain officers and
     directors for legal fees, consulting services and related expenses. Of
     these amounts, $274,900 was charged in 1997 to paid-in capital for
     placement and legal fees related to the 1997 European private placement
     (See note 3). In October 1997, an executive officer of the wholly-owned
     subsidiary of the Placement Agent was appointed to the Company's Board of
     Directors as a representative of the European investors in that private
     placement.

                                      F-7
<PAGE>


6.   Commitments and Contingencies

     The Company conducts its operations in leased facilities and leases
     equipment under non-cancelable operating leases expiring at various dates
     to 2003.

     Future minimum lease payments under non-cancelable operating leases with
     initial or remaining terms of one year or more at December 31, 1998 are:
     $100,800 - 1999; $105,400 - 2000; $110,600 - 2001; $112,000 - 2002; and
     $18,400 - 2003.

     Total rental expense under operating leases was $140,600 and $123,100 in
     1998 and 1997, respectively. The Company has sub-let its former corporate
     headquarters for the duration of the least term at a monthly rental
     approximating the Company's rental obligation.

     The Company has employment and consulting agreements with certain current
     and former executive officers and employees, the terms of which expire at
     various dates through 2002. Future minimum compensation payments under
     these agreements at December 31, 1998 are: $412,500 - 1999; $262,500 -
     2000; $242,500 - 2001; and $212,500 - 2002.

     From time to time, the Company may be subject to legal proceedings and
     claims that arise in the ordinary course of its business. In the opinion of
     management, the amount of ultimate liability with respect to any present
     actions will not materially affect the financial position or results of
     operations of the Company.

7.   Stock Options and 401(k) Savings Plan

     The 1996 Stock Option Plan provides for the granting of up to 700,000
     incentive and non-qualified stock options to employees, non-employee
     directors, consultants and advisors to the Company. In the case of options
     designated as incentive stock options, the exercise price of the options
     granted must be not less than the fair market value of such shares on the
     date of grant. Non-qualified stock options may be granted at any amount
     established by the Stock Option Committee or, in the case of Discounted
     Options issued to non-employee directors in lieu of any portion of an
     Annual Retainer, in accordance with a formula designated in the Plan.

     A summary of stock options under these plans follows:

                                      F-8
<PAGE>

<TABLE>
<CAPTION>

                                                                      Exercise          Weighted
                                                  Number of          Price Range        Average
                                                    Shares            Per Share      Exercise Price
                                                  ---------         ------------     --------------
<S>                                                <C>              <C>                  <C>  
Outstanding at December 31, 1996                   680,366          $.75 to 4.35         $3.22
Options granted                                    525,000           .30 and .45           .36
Options canceled                                  (422,300)          .75 to 4.35          3.03
                                                   -------
Outstanding at December 31, 1997                   783,066           .75 to 4.35          1.40
Options granted                                    400,000           .30 and .45           .38
Options canceled                                  (328,966)          .30 to 4.05          1.30
                                                   -------
Outstanding at December 31, 1998                   854,100          $.30 to $4.35         $ .96
                                                   =======
</TABLE>

<TABLE>
<CAPTION>

                                                                      Exercise          Weighted
                                                    Option          Price Range         Average
                                                    Shares            Per Share      Exercise Price
                                                   -------          ------------     --------------
<S>                                                <C>              <C>                  <C>  
Exercisable at year end:
   1997                                            377,666          $.30 to $4.35        $2.44
   1998                                            426,300          $.30 to $4.35        $1.52

Options available for future grant
  under all plans:

   1997                                            175,000
   1998                                               0

</TABLE>






         The following table summarizes information about stock options
                        outstanding at December 31, 1998:

<TABLE>
<CAPTION>

                                                        Ranges
                                           --------------------------------
                                            1996 Plan         Former Plans            Total
Range of exercise prices                   $.30 to $.45      $3.10 to $4.35       $.30 to $4.35
                                           ------------      --------------       -------------

<S>                                          <C>                 <C>                 <C>    
Number outstanding at  December 31,
1998                                         700,000             154,100             854,100
                                             -------             -------             -------

Weighted average remaining
contractual life (years)                       5.81               1.79                5.08
                                               ----               ----                ----

Weighted average exercise price
                                               $.34               $3.79               $.96
                                               ----               -----               ----

Exercisable options:
   Number outstanding at
   December 31, 1998                         275,000             151,300             426,300
                                             -------             -------             -------

  Weighted average remaining
  contractual life (years)                     3.73               1.77                3.03
                                               ----               ----                ----

  Weighted average exercise price              $.30               $3.74               $1.52
                                               ----               -----               -----
</TABLE>


The weighted average fair value per share of options granted was $.19 and $.16
in 1998 and 1997, respectively.

                                      F-9
<PAGE>


The Company continues to account for stock-based compensation using the
intrinsic value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees". Compensation cost for stock options,
if any, is measured as the excess of the quoted market price of the Company's
stock at the date of grant over the amount an employee must pay to acquire the
stock. Compensation costs for shares issued under performance share plans is
recorded based upon the current market value of the Company's stock at the end
of each period. The Company has adopted the disclosure-only provisions of
Statement of Financial accounting Standards ("SFAS") No. 123, "Accounting for
Stock Based Compensation" for employees and employee-directors as defined in
SFAS No. 123. Accordingly, no compensation cost has been recognized for stock
option and warrant grants that occurred in 1998 and 1997. Had compensation cost
for the Company's stock option grants to employees and employee-directors been
determined based on the fair value at the date of grants in accordance with the
provisions of SFAS No. 123, the Company would have amortized the cost over the
vesting period of the option. The Company's 1998 and 1997 net loss per common
share would have been increased to the following pro forma amounts:


<TABLE>
<CAPTION>

                                                           1998                  1997
                                                           ----                  ----

<S>                                                     <C>                   <C>       
Net loss applicable to common stockholders
   As reported                                          ($548,800)            ($847,000)
   Pro forma                                            ($616,000)            ($929,700)

Loss per share applicable to common shares
   As reported                                            ($.02)                ($.05)
   Pro forma                                              ($.02)                ($.06)

</TABLE>

                                      F-10

<PAGE>


     The fair value of each option granted is estimated on the date of grant
     based on a modified Black-Scholes option-pricing model with the following
     weighted-average assumptions used for grants in 1998 and 1997,
     respectively: expected volatility of 46% and 46%; risk free interest rates
     of 5.7% and 6.0% to 7.2% and expected lives of two years.

     At December 31, 1998, the Company has reserved 13,033,983 shares of common
     stock for possible future issuance upon exercise of stock options, warrants
     and convertible securities. Subsequent to 1998, the Company's Board of
     Directors approved the 1999 Stock Option Plan consisting of two million
     shares of common stock.

     The Company sponsors a 401(k) savings plan, covering substantially all
     employees, providing for employee and employer contributions. Employer
     contributions are made at the discretion of the Company. There were no
     contributions charged to expense during 1998 or 1997.


8.   Affiliate

     The Company's affiliate, Euro-Nocopi, S.A. (Euro), was formed in 1994 to
     market the Company's technologies in Europe under an exclusive license
     arrangement. Euro was capitalized through a European private placement
     which allows those investors to convert the Euro stock into approximately
     one million shares of Nocopi Technologies, Inc. common stock beginning in
     August 1999 in the event that no public offering of Euro has been made by
     that date.

     The Company holds an approximately 18% interest in Euro and warrants
     permitting it to increase its interest in Euro to 55%. Prior to 1997, the
     Company exercised operational and financial control over Euro and,
     accordingly, consolidated the accounts of Euro with those of the Company.
     During 1997, however, the Company ceased to exercise effective control over
     Euro resulting from a dispute between the Company and Euro under the
     license agreement concerning Euro's contention that it was entitled to a
     share of certain minimum royalties under a worldwide agreement with a
     manufacturer which distributes products incorporating the Company's
     technologies. In accordance with a 1997 settlement, the Company agreed to
     credit Euro $154,500 as Euro's share of previously collected minimum
     royalties to be applied to license fee payments due the Company by Euro
     through the first quarter of 1998. The Company also agreed to pay Euro 35%
     of future guaranteed royalties from this manufacturer. The $154,500
     settlement was charged to cost of sales in 1997.

     In connection with the settlement agreement, the Company also agreed to
     modify its warrant by extending its term through December 2001 but making
     it exercisable beginning the earlier of 1) January 1, 2001; 2) in the event
     of a sale of all or part of Euro; or 3) in the event of a public listing of
     Euro's shares on a stock market. In addition, the Company agreed to defer
     to January 1, 2001 its right to acquire, under certain conditions, all
     remaining shares of Euro for shares of the Company at the same conversion
     rate available to Euro's European investors. This call right expires
     December 31, 2001.

     The licensing agreement between the two companies was also amended relative
     to the negotiation of future worldwide licensing contracts, the five
     directors of Euro who were also Nocopi directors resigned from Euro's
     Board, and the Company ceased to exercise effective control of Euro.
     Subsequently, a Euro director was appointed to Nocopi's Board of Directors.
     Additionally, Euro is dependent on the Company for the technology it
     licenses from the Company and markets in Europe. Accordingly, the Company
     ceased consolidating effective January 1, 1997, applied the equity method,
     and recorded an adjustment to paid-in capital of $377,300 to record its
     approximate 18% share of Euro's net equity at January 1, 1997 resulting
     primarily from the expiration in 1997 of certain liquidation privileges on
     the 82% of Euro's stock not owned by the Company.

     In 1998 and 1997, revenues totaling approximately $240,000 and $200,000,
respectively, were derived from Euro.

                                      F-11
<PAGE>

 9.  Major Customer Information

     The Company's two largest customers accounted for approximately 24% and
     20%, respectively, of 1998 revenues, approximately 26% and 20%,
     respectively, of 1997 revenues and approximately 29% and 0%, respectively,
     of accounts receivable at December 31, 1998. The Company performs ongoing
     credit evaluations of its customers and generally does not require
     collateral. The Company also maintains allowances for potential credit
     losses.

                                      F-12
<PAGE>


The following Exhibits are filed as part of this Annual Report on Form 10-K:

Exhibit
Number                         Description
------                         -----------

  3.1    Articles of Incorporation(1)

  3.2    Bylaws(1)

  3.3    Articles of Amendment to Articles of Incorporation(4)

  3.4    Article of Amendment to Articles of Incorporation*

  10.1   Amended and Restated Non-Qualified Stock Option Plan(3)

  10.2   Amended and Restated Incentive Stock Option Plan(3)

  10.3   Summary Plan Description for Nocopi Technologies, Inc. 401(k) Profit
         Sharing Plan(2)

  10.4   License Agreement between Registrant and Euro-Nocopi S.A.(3)

  10.5   Service Agreement between Registrant and Euro-Nocopi S.A.(3)

  10.6   Memorandum of Agreement between Registrant and Euro-Nocopi S.A.(3)

  10.7   Nocopi Technologies, Inc. 1996 Stock Option Plan(4)

  10.8   Settlement Agreement between Registrant and Euro-Nocopi S.A.(6)

  10.9   Employment Agreement between Registrant and Richard A. Check(6)

  10.10  Employment Agreement between Registrant and Norman A. Gardner(6)

  10.11  Employment Agreement between Registrant and Dr. A. Gundjian(6)

  10.12  Form of Common Stock Purchase Warrant(6)

  10.13  Lease Agreement dated February 17, 1998 relating to premises
         at 537 Apple Street, West Conshohocken, PA 19428(6)

  10.14  Nocopi Technologies, Inc. 1999 Stock Option Plan*

  10.15  Amended Summary Plan Description for Nocopi Technologies, Inc. 401(k)
         Profit Sharing Plan*

  10.16  Amendment to Employment Agreement between Registrant and Norman A.
         Gardner.*

  10.17  Severance Agreement between Registrant and Richard A. Check*

  10.18  Form of Series B Promissory Note due March 31, 2000*

  16.1   Letter dated August 25, 1997 from Coopers & Lybrand L.L.P. re: Change
         in Certifying Accountant(5)

  23.1   Consent of BDO Seidman, LLP

  27.0   Financial Data Schedule*


<PAGE>

(1)  Incorporated by reference to Registrant's Registration Statement on Form
     10, as filed with the Commission on or about August 19, 1992

(2)  Incorporated by reference to Registrant's Annual Report on Form 10-K for
     the Year Ended December 31, 1993

(3)  Incorporated by reference to Registrant's Annual Report on Form 10-K for
     the Year Ended December 31, 1994

(4)  Incorporated by reference to Registrant's Annual Report on Form 10-K for
     the Year Ended December 31, 1996

(5)  Incorporated by reference to Registrant's Current Report on Form 8-K dated
     August 25, 1997

(6)  Incorporated by reference to Registrant's Annual Report on Form 10-K for
     the Year Ended December 31, 1997