NOCOPI TECHNOLOGIES INC/MD/ (NNUP) stock intrinsic value fair value estimate & owner earnings analysis

Nocopi Technologies makes specialty inks. Its original business licenses an invisible ink revealed by a special marker, used in children's activity books and toys, and sells security inks used against counterfeiting and ticket fraud, from a small plant in Pennsylvania. In May 2026 it bought substantially all of the assets of Polymeric US of Kansas City, a maker of specialty inks and custom coatings founded in 1993 with about 20 staff, for $2.65 million: $1.75 million cash at closing, 500,000 new shares valued at $0.75 million, and a $150,000 holdback. Polymeric had $5.3 million of sales in 2025, nearly four times Nocopi's own $1.5 million, so the company is now mostly Polymeric. What the shares rest on. At June 30, 2026 Nocopi held $10.7 million of cash and no borrowings. After the $150,000 holdback and about $0.5 million kept for day-to-day operations, roughly $10.0 million is surplus, about $0.85 per share on roughly 11.9 million shares. That cash came from share sales, not from the business: a $5.0 million placement in 2023, $3.5 million in 2022, and further $1.50 placements in January and mid-2026. The share count has nearly doubled since 2020. The operating record is weak and hard to read. The original business last made solid money in 2018-2020 (about $0.6-1.0 million of cash a year), mostly from a few licence deals. In 2022 it booked $2.8 million of guaranteed minimum royalties as revenue in one go, even though the cash comes in over 2023-2028, about $0.52-0.57 million a year. We count that cash in the years it is actually collected. On that basis, cash earnings were negative in 2022-2024, partly because of heavy share-based pay ($2.6 million in 2024). In 2025 they were about $0.40 million, but almost all of that was interest on the cash pile. Without the interest, the original business roughly broke even, and that was only because it was still collecting the 2022 royalties. Its 2025 operating loss was $0.6 million. Two licensees provided about 80% of 2025 revenue. One licence runs to 2028, the other to 2027, and renewal is not assured, though one licence renewed in 2026. In the first half of 2026 licence income fell by half, to $167,000. Polymeric's record is also mixed. It lost $172,000 at the operating level in 2025, earned $144,000 in the first quarter of 2026, and earned about $85,000 of net income in its first six weeks under Nocopi. Its customers are spread out: the top five buy under 25% of sales. Nocopi's overhead has risen with the deal. Acquisition legal fees, a transition payment and new management pushed the second-quarter 2026 loss to $472,000. How we measured earnings. Because the business changed in May 2026, its earlier record describes a different company. We used the original business's five-year record (2021-2025) for that part, treating it as about breakeven before interest income, and a midpoint of Polymeric's 2025 loss and its early-2026 run rate for the rest. Interest on the cash is left out of the earning stream because the cash itself is counted separately. Owner earnings grew from a loss of $2.15 million in 2024 to $0.40 million in 2025, but that swing came from lower stock pay and interest income, not from operations. We assume no growth in year one, and none afterwards. Adding Polymeric is not growth: it is a business already bought and paid for. Base case: the main licences renew on terms similar to today's, Polymeric earns roughly what it has averaged, and corporate costs settle once the one-off deal fees are gone. Together the business produces about $0.2 million a year before interest income. We value that for 30 years, on the strength of Polymeric's 33-year history and a diverse customer base. That is worth about $2.8 million, plus $10.0 million of surplus cash, with nothing owed: about $12.8 million, or $1.08 per share. Bear case: neither main licence is renewed when it expires in 2027-2028, which ends the guaranteed royalty cash and most licence income. Polymeric falls back to its 2025 loss in an industrial slowdown like 2020's, and the company keeps paying today's overhead for several years before cutting it. We model losses of about $0.4 million a year for three years and $0.6 million a year for the following three, after which the company shrinks to breakeven. The business is then worth about minus $2.4 million, and the cash brings shareholders' equity to about $7.6 million with no debt: about $0.64 per share. A further risk that no case can price is that the remaining cash is spent on more acquisitions that earn less than the cash itself did. Bull case: the licences renew, Polymeric sustains the roughly $0.58 million annual run rate it showed in early 2026, and the original business earns a small profit on higher product sales, as in the first half of 2026. That is about $0.6 million a year for 30 years, worth $8.3 million, plus the cash: about $18.3 million, or $1.54 per share. We did not credit management's statement that the deal will be accretive, or any further acquisitions. Neither has a record behind it yet. Margin of safety price. We are fairly sure of the cash and fairly unsure of everything else. The business has not shown steady cash earnings since 2020, and the profits it reported in 2018 and 2022 came largely from booking several years of licence income at once. The worst plausible outcome is that management keeps spending the cash on acquisitions and overhead and the per-share value of the cash shrinks year after year. The company has no debt, so it cannot be forced into a restructuring, but it is a small, closely watched company with seven employees in the original business, and shareholders have no say over how the cash is spent. If we are wrong on both the licence renewals and Polymeric, the shares are worth about the bear case. Over the holding period, the cash earns interest (about 4 cents a share a year), but the company pays no dividend. A 20% annual return therefore requires the value to be recognised within about three years. The $0.60 price is below the bear-case value and well below the surplus cash alone, so a re-rating toward base value over three years implies about 20% a year, and the bear case implies no permanent loss from that price. Our margin of safety price is $0.60. What changed since our previous analysis: the Polymeric acquisition closed in May 2026 and now makes up most of revenue, $1.75 million of cash went into it, and one of the licences renewed. That shifts value from cash toward an operating business with a mixed record, which is why the base case is a little higher and the bull and bear cases a little lower than before.