Description

Warning: ILLIQUID AND HARD TO BORROW.

But if you can play...NUZE has a $500mm market cap, stock is up from its $9 offering in June to a current price of $35, and last FY did revenue of $2 milllion and had ebit of -$5 million.  Stock trades at 275x revenue which is expensive even for a Saas company but NUZE is a contract manufacturer of single serve pour over coffee (which has not really caught on in the USA and is very different than k cups, pods, etc)...not exactly a booming biz.  The company had a going concern until it hired Benchmark to raise $7mm at $9.00 per share in late June.  Besides the valuation, some of the numerous red flags include: bad business model, 2 customers represent over 50% of revenue, material weaknesses, burning cash, Nevada corp, unclear if/when will ever be profitable, CFO was an oil and gas banker...need i go on???

There has been no real news which might justify the huge stock price increase...although insiders control 50% which can contribute to a squeeze.

Again, NUZE is just a contract manufacturer.  It utilizes high end machines to make its products and it believes that its exclusive access to these machines gives it a competitive advantage....well, it used to give them a competitive advantage because the exclusivity was terminated on June 30!  Interestingly, the termination occurred one week after the equity offering closed!  

NUZE says "We own sophisticated packing equipment developed by East Asian companies for pour over coffee production. We believe these manufacturers are the world leaders for supplying such machines. While lower-grade equipment alternatives do exist, availability is extremely limited for the top-grade equipment that generates co-packing products to the exacting specifications we believe large, established companies will demand. For example, we estimate, based solely on our experience, the current wait time for the production and delivery of co-packing machinery of the type we use in our Vista, California plant is approximately two years. We obtained these machines under a written exclusivity agreement with the premier supplier of the type of high-quality packing equipment we use for our products, FUSO Industries Co. Ltd. (“FUSO”), which contractually remains in effect in the North American market until June 30, 2020, and which we believe significantly restricts our North American competitors’ access to this equipment. However, FUSO has exercised its rights to terminate the exclusivity agreement on six months’ prior written notice.

The FUSO agreement expired on June 30, 2020.  Does NUZE lose a competitive advantage? Does new competition enter the field? Why did Fuso terminate the agreement?  All interesting questions but at 275x revenue, do the answers really matter?  

What is Pour Over Coffee?

Pour-over coffee is the simplest method of coffee brewing. No expensive machines needed, simply pour hot water over the grounds. The pour over method of making coffee extracts robust flavored coffee and delicious aroma into your cup. 

Catalyst

potentially negative press, some reality coming back