EDGAR 10-K Filing

Company CIK: 888981
Filing Year: 2022
Filename: 888981_10-K_2022_0001553350-22-000259.json

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ITEM 1. BUSINESS
Item 1. Business
Background
Nocopi Technologies, Inc. develops and markets specialty reactive inks for applications in the large educational and toy products market. We also develop and market technologies for document and product authentication, which we believe can reduce losses caused by fraudulent document reproduction or by product counterfeiting and/or diversion. We derive our revenues primarily from licensing our technologies on an exclusive or non-exclusive basis to licensees who incorporate our technologies into their product offering and from selling products incorporating our technologies to the licensees or to their licensed printers. Our website address is www.nocopi.com.
Unless the context otherwise requires, all references to the “Company,” “we,” “our” or “us” and other similar terms means Nocopi Technologies, Inc., a Maryland corporation.
Effects of COVID-19
To serve our customers while also providing for the safety of our employees and service providers, we have adapted various steps to protect our employees. Any employee who is uncomfortable coming into our facilities may choose not to come in. We have a large enough facility to enable all of our employees to social distance and we follow Centers for Disease Control and Prevention (CDC) guidelines. Our production employees work with chemicals and they have always used masks, respirators, etc., even before COVID-19. As a result, we continue to maintain the same level of productivity and effectiveness as prior to the COVID-19 pandemic.
The impact of COVID-19 on our Company had little effect on the financial results during the first six months of 2021 as the shortage of raw materials used in certain of our Company’s products experienced throughout 2020 as a consequence of the COVID-19 pandemic and the resultant price increases were at least temporarily eased, though still higher than pre-pandemic levels, so our Company’s gross margins on those products returned to similar levels as were experienced before the inception of the COVID-19 pandemic; however, during the last six months of 2021, certain of the Company’s licensees in the entertainment and toy products market who utilize printers in China to produce their products have been adversely affected by the cargo surge related to congestion experienced in certain Chinese ports due to a COVID-19 outbreak that began in the second quarter of 2021. The cargo surge continues to the present time, now adversely affecting major United States ports. The world-wide cargo surge along with a container shortage resulted in significantly higher shipping costs during the second half of 2021. These congestion shipping related delays are likely to continue well into 2022. Certain of our Company’s licensees in the entertainment and toy products market have responded by deferring or scaling back production and size of future orders and, in some cases, rescheduling the shipping of completed orders. Ink orders from our Company’s licensed printers in China fell significantly in the second half of 2021 compared to earlier periods. These supply chain disruptions are being experienced by many businesses including our Company’s licensees. A continuance of these supply chain disruptions may negatively impact the number and value of orders placed by our Company’s licensed printers in the entertainment and toy products market with a resultant negative impact on our Company’s results of operations and cash flow in future periods.
To date, we have not suffered a drop off in total earned royalties in the entertainment and toy products market as a result of COVID-19 as retail demand continues to be strong for the products marketed by our licensees in the entertainment and toy products market; however, during the second half of 2021, reflecting the significantly higher shipping costs caused by the COVID-19 related cargo surge at major China and United States ports and the world-wide container shortage, ink orders from the printers of our licensees in the entertainment and toy products market were significantly below historical levels. We continue to experience a negative impact on revenues in our smaller anti-counterfeiting and anti-diversion products market due to reduced production activity at certain printing facilities that utilize these technologies and anticipate that these conditions may continue for a period of time. We continue to retain licensing revenues at historical levels in the entertainment and toy products market through the current date despite the downturns in the overall economy. While the products of our licensees in the larger entertainment and toy products market are sold by both large and smaller retailers, some of whom remain open, and are also available for purchase online, we believe that revenues may not continue to be achieved at levels experienced to the current date due to the negative economic conditions that are expected to continue over the balance of 2022 and beyond as a result of COVID-19, its variants such as the Omicron variant identified in late 2021 and the newly identified BA.2 variant and other economic factors currently affecting the economy. A slowdown in overall consumer spending may affect the sales of products marketed by our licensees. Our major licensees in the entertainment and toy products market are large, well-known businesses in this market with whom we believe our long-term relationship will not be adversely affected by the current COVID-19 pandemic.
Entertainment and Toy Technologies and Products
Since 2004, we have marketed our Rub-it & Color technology to the entertainment and toy products market. This technology consists of specialty inks that are produced in a variety of colors and can be revealed by rubbing with a fingernail or other firm object such as a plastic pen cap. Rub-it & Color ink technology can be used for coloring books, activity kits, play sheets, single use place mats, greeting cards, board games, promotional products, or any other paper-based application that’s needs some “fun” factor added. Safe and non-toxic, Rub-it and Color conforms to ASTM D4236 and and other toxicology tests.
Every child loves to color, and every parent has a horror story about the cleanup. Our patented, revolutionary, and award-winning Rub-it & Color takes out all the messy stuff related to children’s coloring except the fun. No more crayons ground into the carpet and car upholstery. No more spilled paint on the rug. No more messy markers ruining clothes and furniture. Rub-it & Color ink technology can be used for coloring books, activity kits, play sheets, single use place mats, greeting cards, board games, promotional products, or any other paper-based application that’s needs some “fun” factor added. Safe and non-toxic, Rub-it and Color conforms to ASTM D4236 and and other toxicology tests.
We license our Rub-it & Color technology through various license agreements, including:
A. License agreement with a licensee who has a significant presence in the entertainment and toy products market. A license agreement, in effect from January 2012 through December 2017, permitted this licensee to exclusively market: (1) a specific line of products incorporating our technologies through a specific distribution channel but permitting us to license the covered technologies to others for applications and sale through channels of distribution not available to this licensee under the terms of the license, and (2) from January 2013 through December 2017, an additional technology on an exclusive basis in certain geographic areas of the world and on a non-exclusive basis in other geographic areas of the world. In early 2018, we entered into a new five-year license agreement with this licensee which permits the licensee to market products incorporating certain of our technologies, including the technologies permitted in the earlier license, on a non-exclusive basis throughout the world.
B. License agreement containing guaranteed minimum royalties over the initial term of the license, which have been met, with Bendon, Inc. (“Bendon”), an international, well-known children’s coloring and activity book publishing company that permits Bendon to exclusively market products with other characteristics that incorporate our technologies through a distinctly different channel of distribution. This four-year license agreement was completed in June 2015, replacing a previous three-year license agreement. In 2018, amendments to the license agreement were negotiated that (1) extend the license for a period of four years beginning in July 2019 containing guaranteed minimum royalty payments payable over the four-year period and (2) allow Bendon to: (a) market specific new technologies not covered in the license agreement, (b) expand certain rights relative to product content and design that were specifically excluded in the license agreement and (c) market merchandise permitted by the license through all channels of distribution, some of which were previously prohibited in the license agreement.
C. License agreement with a privately-held designer of creative educational products for children granting the licensee the non-exclusive right to utilize our Rub-it & Color ink technology in a newly-created vertical market in the United States. We receive a royalty based on units of product produced. The license originated in 2011 and was amended effective as of January 1, 2022 for a period of two years, now expiring in December 2023.
D. License agreement with a privately-held children’s meal entertainment program provider that allows the licensee to use our Rub-it & Color ink technology in children’s menus, placemats, butcher paper and certain other products for restaurant use and for sale in certain children’s retail outlets. The license originated in November 2012 and was renegotiated in December 2021 for an initial period of up to three years, expiring in December 2024.
E. License agreement with a privately-held international publisher of family products and publications based in Australia. The license originated in October 2015 and terminated in December 2018. The license agreement contained guaranteed minimum royalty payments and allowed the licensee to market certain products that incorporate specific technologies of our Company on an exclusive basis in certain countries and on a non-exclusive basis in other countries with the exclusion of the United States, Canada and Mexico. A new license containing guaranteed minimum royalty payments, allowing the licensee to market certain products that incorporate specific technologies of our Company on an exclusive basis in certain countries and on a non-exclusive basis in other countries with the exclusion of the United States, Canada and Mexico, was negotiated in November 2018. The new license, expanding the technologies that the licensee is authorized to incorporate into its products, became effective in January 2019 and terminates in October 2022. The licensee introduced products incorporating our technologies in 2016.
Certain of our license agreements with licensees contain renewal options and/or guaranteed minimum royalties, while others do not. We cannot assure you that any of our existing licenses will be renewed or will generate significant operating revenues for our Company in the future. In each of the years 2021 and 2020, we derived approximately 90% and 91%, respectively, of our total revenues from our licensees and their licensed printers in the entertainment and toy products market. We continue to pursue additional licensing opportunities for our Rub-it & Color ink technology in the large worldwide entertainment and toy products market through direct marketing efforts and attendance at trade shows. We also seek to renew existing license agreements with licensees.
Anti-Counterfeiting and Anti-Diversion Technologies and Products
Continuing developments in copying and printing technologies makes it easier than ever before to counterfeit a wide variety of documents. Product labels and packaging, retail receipts, event and transportation tickets and the like are all susceptible to counterfeiting, and product counterfeiting has long caused losses to manufacturers of brand name products. With improvements in the copying and printing technologies making it easier to counterfeit labeling and packaging, losses to businesses from such counterfeiting appear to have increased substantially.
Our COPIMARK and RUB & REVEAL technologies provide proprietary document authentication systems that are useful to businesses desiring to authenticate a wide variety of printed materials and products. Our COPIMARK system enables businesses to print invisibly on certain areas of a document. When authentication of certain documents is required, the invisible printing can be activated or revealed by use of a special highlighter pen. Other variations of the COPIMARK 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. Our RUB & REVEAL system permits the invisible printing of an authenticating symbol or code that can be revealed by rubbing a fingernail over the printed area.
Both technologies provide users with the ability to authenticate documents and detect counterfeit documents. Applications include the authentication of documents having intrinsic value, such as merchandise receipts, checks, travelers' checks, gift certificates and event tickets, and the authentication of product labeling and packaging. When applied to product labels and packaging, our systems allow detection of counterfeit products, the labels and packaging of which would not contain the authenticating marks invisibly printed on the packaging or labels of the legitimate product.
Our marketing efforts for these technologies are focused on specific industries we believe may be affected by product counterfeiting. These technologies also combat product diversion (i.e. sale of legitimate products through unauthorized distribution channels or in unauthorized markets). Another of our related technologies, our invisible inkjet technology, permits manufacturers and distributors to track the movement of products from production to ultimate consumption when coupled with proprietary software. We anticipate that the “track and trace” capability provided by this technology will be attractive to brand owners and marketers and we hope that our ongoing marketing initiatives will result in additional revenues in the future; although we cannot assure you that this will occur.
We currently participate in the retail receipt and document fraud market through licensing arrangements with four printers and distributors in the United States and Canada who provide loss prevention products to retailers and other outlets. We market these technologies through the use of licensed printers and distributors and continue to use our available internal sales and technical resources to expand the number of licensees marketing our technologies in this market.
Contrast Technologies, formerly known as Euro-Nocopi, S.A., is a former affiliate of our Company that, since June 2003, has held a perpetual royalty-free license to exploit certain of our anti-counterfeiting and anti-diversion technologies in Europe.
Product Revenue
The following table illustrates the approximate percentage of our Company’s total revenues accounted for by each type of its products for each of the two last fiscal years:
Year Ended December 31,
Product Type
Entertainment and Toy Technologies and Products 90 % 91 %
Anti-Counterfeiting and Anti-Diversion Technologies and Products 10 % 9 %
Marketing
We have identified two major markets for our technologies and products, the entertainment and toy products market and the anti-counterfeiting/anti-diversion market. Our marketing approach focuses on the sufficient flexibility in our products and technologies and our ability to provide innovative, cost effective technologies for the entertainment and toy products market as well as solutions to a wide variety of counterfeiting, diversion and copier fraud problems. As a technology company, we generate revenues primarily by collecting license fees and royalties from market-specific businesses that incorporate our technologies into their products and, in certain cases, sales of our inks to these licensees and their designated manufacturers. We also license our technologies directly to end-users. Our current marketing efforts are focused on our developed technologies that can be utilized in geographic or market areas not contractually committed to an existing licensee on an exclusive basis. We presently market our technologies through our own employees, sales travel and attendance at trade shows.
Major Customers
During 2021, we made sales or obtained revenues equal to 10% or more of our Company’s 2021 total revenues from two non-affiliated customers who individually accounted for approximately 48% and 27%, respectively, of 2021 revenues of our Company. During 2020, we made sales or obtained revenues equal to 10% or more of our Company’s 2020 total revenues from two non-affiliated customers who individually accounted for approximately 62% and 16%, respectively, of 2020 revenues of our Company.
Additional information concerning our major customers is contained in Note 10 to our Financial Statements, attached as Appendix A to this Annual Report on Form 10-K.
Manufacturing
Our Company operates a small manufacturing facility for the manufacture of its security inks that is located at our corporate headquarters at 480 Shoemaker Road, Suite 104, King of Prussia, Pennsylvania 19406, and we subcontract the manufacture of certain of our applications (mainly certain printing inks and coatings) to third party manufacturers. Our current mix of manufacturing processes are suitable for our Company, for both economic and technical reasons, and we have no plans to alter this mix in the near future. We have established a quality control program that currently entails laboratory analysis of developed technologies; and when warranted, our specially trained technicians travel to third party production facilities to install equipment, train client staff and monitor the manufacturing process.
Patents
Our Company has been granted various patents 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. We currently have patent protection on substantially all of our security inks including the RUB & REVEAL system, and on our Rub-it & Color technology. Our latest patent protects our newly developed technology that may have applications in the entertainment and toy products market.
In the United States and some other countries, patent applications are automatically published at a specified time after filing. Since we are obligated pay annuities from time to time on our patents to keep them in force, we annually evaluate our patent portfolio to determine which patents we will continue to maintain. In Europe, annuities for European patents are paid by Contrast Technologies, formerly known as Euro-Nocopi, S.A., since Europe is where they hold a perpetual royalty-free license to exploit certain of our anti-counterfeiting and anti-diversion technologies.
Research and Development
We have been involved in the research and development of our technologies since our inception. Although several years ago our adverse financial condition forced us to limit funding for research and development, we are presently actively conducting research and development activities in the following three areas, to the extent feasible: (1) refining our present family of products, (2) developing specific customer applications, and (3) expanding our technology into new areas of implementation. During the years ended December 31, 2021 and December 31, 2020, we expended approximately $181,500 and $173,500, respectively, on research and development. We cannot assure you that we will continue to have funds available to maintain our research and development activities at current or increased levels.
Competition
Our Company has competitors in all segments of our business. The entertainment and toy products markets are highly competitive and includes numerous competitors. The loss prevention market also includes numerous competitors, including large publicly traded and privately-held companies as well as regional paper converters. In the area of document and product authentication and serialization, competitors offer competitive covert and overt surface marking technologies requiring decoding implements or analytical methods to reveal certain information that are marketed for the same anti-counterfeiting and anti-diversion purposes for which our Company markets its covert technologies. These include, among others, biological DNA codes, microtaggants, thermochromic, UV and infrared inks as well as encryption, 2D symbology and laser engraving. Nonetheless, we believe our patented and proprietary technologies provide a unique and cost-effective solution to the problem of counterfeiting and gray marketing in the document and product authentication markets it has traditionally sought to exploit.
We are a small operating company and many of our existing and potential competitors have substantially greater research and product development capabilities and financial, marketing and human resources than we do.
Employees
We currently have five full-time employees and one part-time employee. We believe that we have good relations with our employees.
Financial Information about Foreign and Domestic Operations
We conduct our business operations solely within the United States; however, we have licensees and customers in Europe, South America, Asia and Australia. These licensees and customers accounted for approximately 58% of our gross revenues in 2021 and approximately 74% of our gross revenues in 2020. Additional information concerning our foreign and domestic operations is contained in Note 10 to our Financial Statements, attached as Appendix A to this Annual Report on Form 10-K.

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ITEM 1A. RISK FACTORS
Item 1A. Risk Factors
Our Company’s operating results, financial condition and stock price are subject to certain risks, some of which are beyond its control. These risks could cause our Company’s actual operating and financial results to differ materially from those expressed in its forward-looking statements, including the risks described below and the risks identified in other documents which are filed and furnished with the United States Securities and Exchange Commission.
Spread of the Novel Strain of Coronavirus (“COVID-19”). A novel strain of coronavirus, COVID-19, that was first identified in Wuhan, China in December 2019 has surfaced in many countries around the world including the United States. The World Health Organization has declared COVID-19 to constitute a global pandemic. Certain state and local governments reacted by placing significant restrictions on businesses including a closure in Pennsylvania of non-essential businesses that was announced on March 20, 2020. While many Pennsylvania businesses have been allowed to reopen, often at limited capacity and with certain restrictions, as of the current date, there can be no assurances that future closures will be avoided. A requirement to close our Company for a considerable period of time could result in a negative impact on our Company’s financial condition and results of operations. Additionally, as our Company imports certain raw materials from China, if an extended disruption of the supply of these raw materials were to occur, our ability to produce products for sale to our customers could be negatively impacted. Further, restrictions on our customers and licensees in areas affected by the COVID-19 could adversely affect our results of operations and financial condition. We cannot predict the scope or magnitude of the negative effect that may result from the impact of the COVID-19 pandemic on the Company’s financial condition and results of operations.
The COVID-19 pandemic will continue to negatively impact our results of operations, cash flow and financial position. The negative impact of COVID-19 on our Company’s financial results during 2020 resulted primarily from a significant increase in the price of raw materials used in certain of our Company’s products caused by shortages of these ingredients as a result of the COVID-19 pandemic along with a mix of our Company’s products purchased by our licensees’ third party printers toward certain products with formulations that require ingredients whose prices have increased as a result of COVID-19. During 2021, the shortage of raw materials used in certain of our Company’s products experienced throughout 2020 as a consequence of the COVID-19 pandemic and the resultant price increases were at least temporarily eased, though still higher than pre-pandemic levels, so our Company’s gross margins on those products returned to similar levels as were experienced before the inception of the COVID-19 pandemic; however, in the third quarter of 2021, certain of the Company’s licensees in the entertainment and toy products market who utilize printers in China to produce their products have been adversely affected by the cargo surge related to congestion experienced in certain Chinese ports due to a COVID-19 outbreak that began in the second quarter of 2021. The cargo surge continues to the present time, now adversely affecting major United States ports. The world-wide cargo surge along with a container shortage resulted in significantly higher shipping costs during the second half of 2021. Certain of our Company’s licensees in the entertainment and toy products market have responded by deferring or scaling back production and size of future orders and, in some cases, rescheduling the shipping of completed orders. Ink orders from our Company’s licensed printers in China fell significantly in the second half of 2021 compared to earlier periods. These supply chain disruptions are being experienced by many businesses including our Company’s licensees. A continuance of these supply chain disruptions may negatively impact the number and value of orders placed by our Company’s licensed printers in the entertainment and toy products market with a resultant negative impact on our Company’s results of operations and cash flow in future periods.
Other disruptions to our business operations due to COVID-19 with a resultant impact on our results of operations are expected to continue to occur as a result of quarantines of employees and suppliers in areas affected by the outbreak, availability of raw materials required to manufacture our products, disruption of supply chains that provide our raw materials, price increases of raw materials and supplies used in our production processes, facility closures of domestic and international customers who purchase and use our products, and travel and logistics restrictions affecting our inbound and outbound shipments in connection with the COVID-19 outbreak. While we expect this global COVID-19 pandemic to continue to negatively impact our results of operations, cash flow and financial position, the related financial impact cannot be reasonably estimated at this time.
The extent to which the COVID-19 pandemic will negatively impact our results of operations, cash flow and financial position is highly uncertain and cannot be reasonably estimated at this time. The COVID-19 pandemic has created significant worldwide uncertainty, volatility and economic disruption. The extent to which COVID-19 will negatively impact our results of operations, cash flow and financial position is dependent upon numerous factors, many of which are highly uncertain, rapidly changing and uncontrollable. These factors include, but are not limited to: (i) the duration and scope of the pandemic; (ii) governmental, business and individual actions that have been and continue to be taken in response to the pandemic, including travel restrictions, quarantines, social distancing, work-from-home and shelter-in-place orders and shut-downs; (iii) the impact on U.S. and global economies and the timing and rate of economic recovery; (iv) potential adverse effects on the financial markets and access to capital; (v) potential goodwill or other impairment charges; and (vi) the ability of our licensees and other customers to sell products that utilize or incorporate our technology.
Access to Capital. Our Company anticipates that it may need to raise additional capital in the future to fund its historical and new business operations. Additional financing may not be available to us, due to, among other things, our Company not having a sufficient income stream, profit level, asset base eligible to be collateralized, or market for its securities. If we raise additional funds by issuing equity or convertible debt securities, the percentage ownership of our existing shareholders may be reduced, and these securities may have rights superior to those of our common stock. If adequate funds are not available to satisfy our long-term capital requirements, or if planned revenues are not generated, we may be required to substantially limit our operations or cease operations altogether. We cannot assure you that, if required, we will be successful in obtaining additional financing in sufficient amounts to fund our ongoing business operations.
Dependence on Major Customers. We are dependent on our licensees to develop new products and markets that will generate increases in its licensing and product revenues. The inability of our licensees to maintain at least current levels of sales of products utilizing our technologies could adversely affect our operating results and cash flow. To the extent that our licensees are adversely affected by negative economic conditions such as those that may result from the present COVID-19 pandemic, our revenues may also be negatively impacted. We derive a significant percentage of our revenues through licensing relationships with two major customers. Revenues obtained directly from these customers and indirectly, through the customers’ third party licensed printers, equaled approximately 85% of our Company’s revenues in 2021. Receivables from these two licensees and their third party authorized printers were approximately 96% of our Company’s net accounts receivable at December 31, 2021. One of the license agreements expires in 2023 and contains guaranteed minimum royalties, which historically are met. The other license agreement expires in 2022. Both license agreements contain renewal options; but there can be no assurances that one or both of the licenses will continue in force at the same or more favorable terms beyond their current termination dates, nor can there be any assurances that the relationships with these two licensees will generate increased revenues for our Company in the future.
Possible Inability to Develop New Business. Our management believes that any significant improvement in our Company’s cash flow must result from increases in revenues from traditional sources and from new revenue sources. Our Company’s ability to develop new revenues may depend on the extent of both its marketing activities and its research and development activities, both of which are limited. We cannot assure you that the resources that our Company can devote to marketing and to research and development will be sufficient to increase its revenues to levels that will enable it to maintain positive operating cash flow in the future.
Inability to Obtain Raw Materials and Products for Resale. Our Company’s adverse financial condition in years prior to 2016 has required it from time to time to significantly defer payments due to (i) vendors who supply raw materials and other components of its security inks, (ii) providers of professional and other services and (iii) certain employees to whom salary and sales commissions are owed. As a result, the Company is required to pay cash in advance of shipment to certain of its suppliers. The inability to obtain materials on a timely basis and the possibility that certain vendors may permanently discontinue supplying our Company with needed products and services may result in delayed shipments to customers and further impact our Company’s ability to service its customers, thereby adversely affecting our Company’s relationships with its customers and licensees. We cannot assure you that our Company will be able to maintain its vendor relationships in an acceptable manner.
Uneven Pattern of Quarterly and Annual Operating Results. Our Company’s revenues, which are derived primarily from licensing and sales of products incorporating its technologies as well as royalties from these products, are difficult to forecast; such forecasting difficulty is due to, among other reasons, the long sales cycle of our Company’s technologies, the potential for customer delay or deferral of implementation of our Company’s technologies, the size and timing of inception of individual license agreements, the success of our 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 our revenue base is not substantial, delays in the finalization of license contracts, the implementation of the technology to initiate the revenue stream and the ordering decisions of customers can have a material adverse effect on our Company’s quarterly and annual revenue expectations. As our operating expenses are substantially fixed, income expectations will be subject to a similar adverse outcome. As licensees for the entertainment and toy products markets are added, the predictability of our Company’s revenue stream may be further impacted.
Volatility of Stock Price. The market price for our common stock has historically experienced significant fluctuations and may continue to do so. With the exception of 2007, 2013, 2014 and 2016 through 2021 from its inception, our Company has operated at a loss and it has not produced revenue levels traditionally associated with publicly-traded companies. Our common stock is not listed on a national or regional securities exchange and, consequently, our Company receives limited publicity regarding its business achievements and prospects. Additionally, securities analysts and traders do not extensively follow our stock and it is thinly traded. The market price for our common stock 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 our Company’s common stock.
Intellectual Property. Our Company relies on a combination of protections as may be available under applicable domestic, foreign or international patent, trademark and trade secret laws. We also rely on confidentiality, non-analysis and licensing agreements to establish and protect our rights in its proprietary technologies. While we attempt to protect these rights, our technologies may be compromised through reverse engineering, independent invention or other means. In addition, our ability to enforce our intellectual property rights through appropriate legal action has been and will continue to be limited by its tight liquidity. We cannot assure you that our Company will be able to protect the basis of its technologies from discovery by third parties or to preclude third parties from conducting activities that infringe on our Company’s rights. Our Company’s tight liquidity adversely impacts our ability to obtain patent protection on our intellectual property and to maintain protection on previously issued patents. We cannot assure you that we will be able to continue to prosecute new patents and maintain issued patents. As a result, our customer and licensee relationships could be adversely affected, and the value of our technologies and intellectual property (including their value upon liquidation) could be substantially diminished.
Economic Conditions. Our Company’s revenue is susceptible to changes in general economic conditions. Our sales, liquidity and overall results of operations may be negatively affected by decreasing consumer confidence, slowdowns in consumer spending or other downturns in the U.S. economy as a whole or in any geographic markets from which we derive revenue. In addition, these factors may result in decreased customer and licensee demand for our products and may negatively impact our ability to develop new customers and licensees. Due to uncertainties surrounding the worldwide economy, particularly in light of the COVID-19 pandemic, the Russia-Ukraine war and the supply chain disruptions related to both, we are unable to predict the effect of such conditions on our customers and licensees. Consequently, we cannot predict the scope or magnitude of the negative effect resulting from ongoing global financial uncertainties or economic slowdowns.
Potential undetected material weakness in internal controls. Our annual report does not include an attestation report of our Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit our Company to provide only management’s attestation in this annual report. As a result, a material weakness in our internal controls may remain undetected for a longer period.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments
None.

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ITEM 2. PROPERTIES
Item 2. Properties
Our corporate headquarters, research and ink production facilities are located at 480 Shoemaker Road, Suite 104, King of Prussia, Pennsylvania 19406. These premises consist of approximately 6,100 square feet of leased space. Our lease commenced in January 2014 and expires in April 2024. Current monthly rent under this lease is $4,467; this amount escalates an amount of approximately three percent each year. In addition to rent, we are also responsible for our pro-rata share of the operating costs of the building.
We incurred leasehold improvement expenditures of approximately $58,400 through March 17, 2022, and we believe that additional leasehold improvement expenditures will not be significant. We consider this space adequate for our current needs and additional space is available as needed.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings
None.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases Of Equity Securities
Market Information
Our common stock is traded on the OTC Pink tier of the over-the-counter (“OTC”) market under the symbol "NNUP". Investors can find Real-Time quotes and market information on our Company on www.otcmarkets.com. Any over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
Shareholders
As of March 17, 2022, there were approximately 520 holders of our common stock, including The Depository Trust Company, which holds shares of our common stock on behalf of an indeterminate number of beneficial owners.
Dividends
Our Company does not pay any cash dividends on its common stock. Our Business Loan Agreement with Santander Bank, N.A. restricts our ability to pay cash dividends on our common stock and it will continue to do so for the foreseeable future.
Securities Authorized for Issuance under Equity Compensation Plans
None.
Recent Sales of Unregistered Securities
Date
Security/Value
May 2021
Common Stock - 141,365 shares of common stock at $0.02 per share pursuant to warrant exercises for total proceeds of approximately $2,800.
No underwriters were utilized, and no commissions or fees were paid with respect to the above transactions. We relied on Section 4(a)(2) and/or Regulation D of the Securities Act of 1933, as amended, since the transactions did not involve any public offering.
Issuer Repurchases of Equity Securities
None.

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. [Reserved]
Not Applicable.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The information in this report contains forward-looking statements. All statements other than statements of historical fact made in this report are forward looking. In particular, the statements herein regarding industry prospects and future results of operations or financial position are forward-looking statements. These forward-looking statements can be identified by the use of words such as “believes,” “estimates,” “could,” “possibly,” “probably,” anticipates,” “projects,” “expects,” “may,” “will,” or “should” or other variations or similar words. No assurances can be given that the future results anticipated by the forward-looking statements will be achieved. Forward-looking statements reflect management’s current expectations and are inherently uncertain. Our actual results may differ significantly from management’s expectations.
The following discussion and analysis should be read in conjunction with our financial statements, included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management.
Background Overview
Nocopi Technologies, Inc. develops and markets specialty reactive inks for applications in the large educational and toy products market. We also develop and market technologies for document and product authentication, which we believe can reduce losses caused by fraudulent document reproduction or by product counterfeiting and/or diversion. We derive our revenues primarily from licensing our technologies on an exclusive or non-exclusive basis to licensees who incorporate our technologies into their product offering and from selling products incorporating our technologies to the licensees or to their licensed printers.
Unless the context otherwise requires, all references to the “Company,” “we,” “our” or “us” and other similar terms means Nocopi Technologies, Inc., a Maryland corporation.
Results of Operations
Our Company’s revenues are derived from (a) royalties paid by licensees of our technologies, (b) fees for the provision of technical services to licensees and (c) from the direct sale of (i) products incorporating our technologies, such as inks, security paper and pressure sensitive labels, and (ii) equipment used to support the application of our technologies, such as ink-jet printing systems. Royalties consist of guaranteed minimum royalties payable by our licensees in certain cases and additional royalties which typically vary with the licensee’s sales or production of products incorporating the licensed technology. Service fees and sales revenues vary directly with the number of units of service or product provided.
Our Company recognizes revenue on its lines of business as follows:
a. License fees for the use of our technology and royalties with guaranteed minimum amounts are recognized at a point in time when the term begins;
b. Product sales are recognized at the time of the transfer of goods to customers at an amount that our Company expects to be entitled to in exchange for these goods, which is at the time of shipment; and
c. Fees for technical services are recognized at the time of the transfer of services to customers at an amount that our Company expects to be entitled to in exchange for the services, which is when the service has been rendered.
We believe that, as fixed cost reductions beyond those we have achieved in recent years may not be achievable, our operating results are substantially dependent on revenue levels. Because revenues derived from licenses and royalties carry a much higher gross profit margin than other revenues, operating results are also substantially affected by changes in revenue mix.
Both the absolute amount of our Company’s revenues and the mix among the various sources of revenue are subject to substantial fluctuation. We have a relatively small number of substantial customers rather than a large number of small customers. Accordingly, changes in the revenue received from a significant customer can have a substantial effect on our Company’s total revenue, revenue mix and overall financial performance. Such changes may result from a substantial customer’s product development delays, engineering changes, changes in product marketing strategies, production requirements and the like. We cannot predict whether COVID-19 will materially affect our licensing fees or the demand for our products in 2022 and beyond. In addition, certain customers have, from time to time, sought to renegotiate certain provisions of their license agreements and, when our Company agrees to revise such terms, revenues from the customer may be affected.
Comparison of the Years ended December 31, 2021 and 2020
Revenues for 2021 were $1,951,900, a decrease of approximately 27%, or $706,800, from $2,658,700 in 2020.
Licenses, royalties and fees increased in 2021 by approximately 9%, or $65,900, to $809,900 from $744,000 in 2020. The increase in licenses, royalties and fees in 2021 compared to 2020 is due primarily to higher royalties from our Company’s licensees in the entertainment and toy products market due to ongoing strong retail demand for these products offset in part by lower revenues from our licensees in the security markets. We cannot assure you that the marketing and product development activities of our Company’s licensees or other businesses in the entertainment and toy products market will produce a significant increase in revenues for our Company, nor can the timing of any potential revenue increases be predicted, particularly given the uncertain economic conditions being experienced worldwide as a result of the COVID-19 pandemic that is continuing to negatively impact all worldwide economies along with the massive international supply chain disruptions currently being experienced. The products marketed by the Company’s major licensees in the entertainment and toy products markets are produced in China. Trans-Pacific ocean shipping has been negatively affected by container shortages and port delays both in the United States and China.
Product and other sales decreased by $772,700, or approximately 40%, to $1,142,000 in 2021 from $1,914,700 in 2020. The lower level of ink sales in 2021 compared to 2020 is due primarily to lower ink requirements of the third party authorized printers used by two of our Company’s major licensees in the entertainment and toy products market. Sales of ink to the licensed printers of its licensees in the entertainment and toy products market were approximately $751,500 lower in 2021 compared to 2020. Sales of security ink to our Company’s licensees in the retail receipt and document fraud market decreased by approximately $12,900 in 2021 compared to 2020 due primarily to reduced demand related to COVID-19 closures of retail outlets commencing in 2020 and continuing during 2021.
Our Company derived $1,758,200, or approximately 90% of total revenues, from licensees and their licensed printers in the entertainment and toy products market in 2021 compared to $2,419,000, or approximately 91% of total revenues, in 2020. The decrease in revenues from our licensees and their authorized printers in the entertainment and toy products market in 2021 compared to 2020 is due primarily to lower ink sales to the authorized printers of our Company’s licensees in the entertainment and toy products market in 2021 compared to 2020 offset in part by higher licensing revenue in 2021 compared to 2020 from one licensee in the entertainment and toy products market. Our Company’s licensees in the entertainment and toy products market continue to develop new products for this market and improve their current offerings; however, their sales will be affected by marketplace reaction to the new and improved products, economic conditions that influence this market segment and the economy as a whole. Revenues that the Company derives from these licensees will be similarly affected. We cannot assure you that the marketing and product development activities of licensees in the entertainment and toy products market will produce increased revenues for the Company in future periods, nor can the timing of any potential revenue increases be predicted, particularly given the uncertain economic conditions currently being experienced worldwide as a result of COVID-19 and its variants including the Omicron variant identified in 2021 and the newly identified BA.2 variant.
Our Company’s gross profit decreased to $1,213,800, or approximately 62% of revenues, in 2021 from $1,535,000, or approximately 58% of revenues, in 2020. The lower gross profit in 2021 compared to 2020 results primarily from lower gross revenues from product and other sales offset in part by higher licenses, royalties and fees in 2021 compared 2020.
Licenses, royalties and fees have historically carried a higher gross profit than product sales, which generally consist of supplies or other manufactured products that incorporate the Company’s technologies or equipment used to support the application of its technologies. These items (except for inks which are manufactured by our Company) are generally purchased from third-party vendors and resold to the end-user or licensee and carry a lower gross profit than licenses, royalties and fees. The lower gross profit in 2021 compared to 2020 reflects lower gross revenues from product and other sales offset in part by higher gross revenues from licenses, royalties and fees in 2021 compared to 2020.
As the variable component of cost of revenues related to licenses, royalties and fees is a low percentage of these revenues and the fixed component is not substantial, period to period changes in revenues from licenses, royalties and fees can significantly affect both gross profit from licenses, royalties and fees as well as overall gross profit. Due primarily to the higher revenues from licenses, royalties and fees in 2021 compared to 2020, the gross profit from licenses, royalties and fees increased to approximately 79% of revenues from licenses, royalties and fees in 2021 from approximately 70% in 2020.
The gross profit, expressed as a percentage of revenues, of product and other sales is dependent on both the overall sales volumes of product and other sales and on the mix of the specific goods produced and/or sold. The gross profit from product and other sales decreased to approximately 50% of revenues in 2021 compared to approximately 53% of revenues 2020. The decrease in gross profit in 2021 compared to 2020 is due primarily to significantly lower ink shipments to the third party authorized printer used by one of our Company’s major licensees in the entertainment and toy products market offset in part by (a) a decline in the cost of certain raw materials utilized by the Company in the manufacture of certain of its products as prices of these raw materials that had increased in 2020 due to the impact of the ongoing COVID-19 pandemic on the availability and supply of these raw materials have been at least temporarily eased in 2021, and (b) a favorable mix of products sold whereby the purchases of the Company’s products by the licensed printers of its licensees in the entertainment and toy products market in 2021 compared to 2020 were of higher margin products manufactured by the Company.
Research and development expenses were $181,500 in 2021 compared to $173,500 in 2020. The increase in 2021 compared to 2020 resulted primarily from product development expense in 2021 compared to 2020.
Sales and marketing expenses were $287,700 in 2021 compared to $356,400 in 2020. The decrease in 2021 compared to 2020 is due primarily to lower commission expense on the lower level of revenues in 2021 compared to 2020.
General and administrative expenses increased to $719,400 in 2021 from $526,100 in 2020. The increase in 2021 compared to 2020 is due primarily to significantly higher legal expenses in 2021 compared to 2020 offset in part by lower corporate relations expenses in 2021 compared to 2020.
Other income (expenses) in 2020 included interest on convertible debentures that were held by seven investors and interest income on invested funds.
Income taxes in 2021 and 2020 resulted from limitations placed on income tax net operating loss deductions by the Commonwealth of Pennsylvania.
Our lower net income of $49,400 in 2021 compared to net income of $508,000 in 2020 resulted primarily from a lower gross profit on a lower level of product and other sales and higher operating expenses in 2021 compared to 2020.
Our management does not believe that inflation and changing prices, with the exception of increases in the prices of certain raw materials that were most affected by shortages created by the COVID-19 pandemic in 2020, have had a significant effect on our revenues and results of operations during the years ended December 31, 2021 and December 31, 2020.
Plan of Operation, Liquidity and Capital Resources
Our Company’s cash increased to $1,846,700 at December 31, 2021 from $1,362,800 at December 31, 2020. During 2021, our Company generated $512,700 from its operating activities, received $2,800 upon the exercise of warrants and used $31,600 for capital expenditures.
Our Company’s revenues decreased approximately 27% to $1,951,900 in 2021 from $2,658,700 in 2020 primarily as a result of lower sales of ink to the authorized printers of our Company’s licensees in the entertainment and toy products market and lower revenues from licensees in the anti-counterfeiting and anti-diversion technologies and products market reflecting the impact of the ongoing COVID-19 pandemic on this market offset in part by higher royalty revenues from a licensee in the entertainment and toy products market. Our Company’s gross profit decreased approximately 21% to $1,213,800 in 2021 from $1,535,000 in 2020 primarily as a result of lower sales of ink to the licensed printers of our licensees in the entertainment and toy products market and to licensees in the anti-counterfeiting and anti-diversion technologies and products market.
Our Company’s total overhead expenses increased in 2021 compared to 2020, our Company’s net interest income increased in 2021 compared to 2020 and our Company’s income tax expense increased in 2021 compared to 2020. As a result of these factors, our Company generated net income of $49,400 in 2021 compared to $508,400 in 2020. Our Company had positive operating cash flow of $512,700 in 2021. At December 31, 2021, our Company had working capital of $3,197,500 and stockholders’ equity of $3,505,300. For the full year of 2020, our Company had net income of $508,400 and had positive operating cash flow of $702,400. At December 31, 2020, our Company had working capital of $2,801,100 and stockholders’ equity of $3,453,100.
In November 2018, our Company negotiated a $150,000 revolving line of credit (“Line of Credit”) with a bank to provide a source of working capital, if required. The Line of Credit is secured by all the assets of our Company and bears interest at the bank’s prime rate for a period of one year and its prime rate plus 1.5% thereafter. The Line of Credit is subject to an annual review and quiet period. There have been no borrowings under the Line of Credit since its inception. We may need to obtain additional capital in the future to further support the working capital requirements associated with our existing revenue base and to develop new revenue sources. We cannot assure you that we will be successful in obtaining such additional capital, if needed. We continue to maintain a cost containment program including curtailment, where possible, of discretionary research and development and sales and marketing expenses. Our plan of operation for the twelve months beginning with the date of this annual report consists of concentrating available human and financial resources to continue to capitalize on the specific business relationships our Company has developed in the entertainment and toy products market. This includes two licensees that have been marketing products incorporating the Company’s technologies since 2012. These two licensees maintain a significant presence in the entertainment and toy products market and are well known and highly regarded participants in this market. We anticipate that these two licensees will expand their current offerings that incorporate our technologies and will introduce and market new products that will incorporate our technologies available to them under their license agreements with our Company. We will continue to develop various applications for these licensees. We also plan to expand our licensee base in the entertainment and toy market. We currently have additional licensees marketing or developing products incorporating our technologies in certain geographic and niche markets of the overall entertainment and toy products market.
Our Company maintains its presence in the retail loss prevention market and believes that revenue growth in this market can be achieved through increased security ink sales to its licensees in this market. We will continue to adjust our production and technical staff as necessary and, subject to available financial resources, invest in capital equipment needed to support potential growth in ink production requirements beyond our current capacity. Additionally, we will pursue opportunities to market our current technologies in specific security and non-security markets. There can be no assurances that these efforts will enable our Company to generate additional revenues and positive cash flow.
Our Company has received, and may in the future seek, additional capital in the form of debt, equity or both, to support our working capital requirements and to provide funding for other business opportunities. Beyond the Line of Credit, we cannot assure you that if we require additional capital, that we will be successful in obtaining such additional capital, or that such additional capital, if obtained, will enable our Company to generate additional revenues and positive cash flow.
As previously stated, we generate a significant portion of our total revenues from licensees in the entertainment and toy products market. These licensees generally sell their products through retail outlets. In the future, such sales may be adversely affected by changes in consumer spending that may occur as a result of an uncertain economic environment in 2022 and beyond due to the COVID-19 virus and its effect on the global economy being experienced worldwide as a result of COVID-19 and its variants including the Omicron variant identified in late 2021 and the newly identified BA.2 variant. As a result, our revenues, results of operations and liquidity may be negatively impacted.
Contractual Obligations
We conduct our operations in leased facilities under a non-cancelable operating lease expiring in 2024. Future minimum lease payments under this operating lease at December 31, 2021 are: $54,600 - 2022; $56,200 - 2023 and $18,900 - 2024. Total rental expense under operating leases was $53,300 in each of the years ended December 31, 2021 and December 31, 2020.
Recently Adopted Accounting Pronouncements
As of December 31, 2021, there were no recently adopted accounting standards that had a material effect on our Company’s financial statements.
Recently Issued Accounting Pronouncements Not Yet Adopted
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. The amendments in this Update affect loans, debt securities, trade receivables, and any other financial assets that have the contractual right to receive cash. The ASU requires an entity to recognize expected credit losses rather than incurred losses for financial assets. For public entities, the amendments are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. ASU No. 2019-10 extends the effective dates for two years for smaller reporting companies and nonpublic companies.
In August 2020, the FASB issued ASU No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40), Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The amendments in this Update affect entities that issue convertible instruments and/or contracts in an entity’s own equity. For convertible instruments, the instruments primarily affected are those issued with beneficial conversion features or cash conversion features because the accounting models for those specific features are removed. However, all entities that issue convertible instruments are affected by the amendments to the disclosure requirements in this Update. For contracts in an entity’s own equity, the contracts primarily affected are freestanding instruments and embedded features that are accounted for as derivatives under the current guidance because of failure to meet the settlement conditions of the derivatives scope exception related to certain requirements of the settlement assessment. The Board simplified the settlement assessment by removing the requirements (1) to consider whether the contract would be settled in registered shares, (2) to consider whether collateral is required to be posted, and (3) to assess shareholder rights. Those amendments also affect the assessment of whether an embedded conversion feature in a convertible instrument qualifies for the derivatives scope exception. Additionally, the amendments in this Update affect the diluted EPS calculation for instruments that may be settled in cash or shares and for convertible instruments. The amendments in this Update are effective for public business entities that meet the definition of a Securities and Exchange Commission (SEC) filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Board specified that an entity should adopt the guidance as of the beginning of its annual fiscal year. The Board decided to allow entities to adopt the guidance through either a modified retrospective method of transition or a fully retrospective method of transition.
Off-Balance Sheet Arrangements
None.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not Applicable.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data
Our Financial Statements are attached as Appendix A (following Exhibits) and included as part of this Form 10-K Report. A list of our Financial Statements is provided in response to Item 15 of this Form 10-K Report.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes In And Disagreements With Accountants On Accounting and Financial Disclosure
None.

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, our Company evaluated the effectiveness and design and operation of its disclosure controls and procedures. Our Company’s disclosure controls and procedures are the controls and other procedures that we designed to ensure that our Company records, processes, summarizes, and reports in a timely manner the information that it must disclose in reports that our Company files with or submits to the Securities and Exchange Commission. Our principal executive officer and principal financial officer reviewed and participated in this evaluation. Based on this evaluation, our Company made the determination that its disclosure controls and procedures were effective.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal controls over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this evaluation, management has concluded that our internal control over financial reporting was effective as of December 31, 2021.
Our Company’s internal control over financial reporting includes policies and procedures that (1) pertain to maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of the assets of our Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of our Company are being made only in accordance with authorizations of management and directors of our Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.
Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. In addition, the design of any system of controls is based in part on certain assumptions about the likelihood of future events, and controls may become inadequate if conditions change. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
This annual report does not include an attestation report of our Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit our Company to provide only management’s attestation in this annual report.
Changes in Company Internal Controls
No change in our Company’s internal control over financial reporting occurred during our fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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ITEM 9B. OTHER INFORMATION
Item 9B. Other Information
Not Applicable.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this Item is incorporated by reference from the information contained within our Company’s definitive proxy statement for the 2022 Annual Meeting of Stockholders.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation
The information required by this Item is incorporated by reference from the information contained within our Company’s definitive proxy statement for the 2022 Annual Meeting of Stockholders.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item is incorporated by reference from the information contained within our Company’s definitive proxy statement for the 2022 Annual Meeting of Stockholders.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item is incorporated by reference from the information contained within our Company’s definitive proxy statement for the 2022 Annual Meeting of Stockholders.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accountant Fees and Services
The information required by this Item is incorporated by reference from the information contained within our Company’s definitive proxy statement for the 2022 Annual Meeting of Stockholders.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits, Financial Statement Schedules
(a) The following Audited Financial Statements are filed as part of this Form 10-K Report:
Report of Independent Registered Public Accounting Firm
Balance Sheets
Statements of Comprehensive Income
Statement of Stockholders’ Equity
Statements of Cash Flows
Notes to Financial Statements
(b) The following exhibits are filed as part of this report.
See Exhibit Index.