I’ve gotten a bunch of reader questions over the last week or so about Alex Koyfman’s latest teaser pitch for a “Plastic Killer” out of Canada, so that’s where the Thinkolator is pointed today.

The ad is for Angel Publishing’s Microcap Insider (currently being sold for $1,999, 90-day refund period), and this is the latest headline we’ve seen in recent versions of the ad:

“A ‘Climate War’ Is About to Erupt — Here’s How to Tap Into This $2.5 Trillion Opportunity for Life-Changing Gains

“One Major Event on November 1, 2022, Could Make this Opportunity Soar…

“Find Out How Regular Investors Can Get in for Less Than $5”

And yes, this is the same story that Alex Koyfman was peddling back in September of 2021, just with a different lead-in — which is understandable, since the original pitch was all about how the latest Paris Agreement meeting, which ended on November 12, 2021, would send big coffee companies rushing to get help from this penny stock he’s teasing and maybe create windfall gains (“6,896% practically overnight” was the bait then, and remains the pitch now). Now they’ve updated it by a year and we’ve got that “November 1, 2022” event that will supposedly bring the windfall.

So what’s it all about? The meat of the ad has not changed, so most of what follows is what I originally wrote in covering this tease back on September 15, 2021, though I’ve added a few updates where warranted.

Here’s what’s being teased:

“One little-known Canadian company is about to disrupt the global $579 billion plastic market…

“Its patented biological plastic alternative could be worth billions soon….

“… major brands could soon depend on this company’s plastic alternative, developed in cooperation with the University of British Columbia.

“Wealthy insiders have poured almost $35 millions into this company… but it was closed to regular investors — until recently.”

OK, so that probably means it was funded by private placements or venture capital, and not with a huge profile — $35 million is a pretty small amount in this context.

And the promise is for huge gains:

“Right now, for a brief window, you have a chance to get in on the ground floor.

“Very soon, giants like Nestlé or Keurig could run to this tiny company for help, as they’ll have to replace their standard plastics.

“As a result, this company could rise as much as 6,896% practically overnight.

“Today you can get in on this opportunity for less than $5.”

And the email intro and the actual ad itself try to take advantage of polarization and fears of globalization, since they know that a little rising anger about “radical environmentalists” is going to get a substantial portion of their mailing list pretty fired up… there’s a lot of overlap for any marketing campaign focused on either “investing” or “conservative” political stuff — not least because investment newsletters have historically found their most fruitful hunting in the relatively affluent 50-60+ demographic, which also tends to be relatively conservative.

(That’s not a judgement, by the way, I just like to remind people that marketers are expert at poking you where you’re most sensitive — and for a lot of people, that’s related to hot-button political issues. So whatever side of any issue you’re on, remember that when you hear or read an advertisement and start nodding your head and saying “finally someone tells the truth,” whether that’s Elizabeth Warren or Donald Trump, or feeling some old-time religion drumbeats welling up in your soul, you’re being played by someone who’s trying desperately to sell. Odds are pretty good that they’re just trying to fire up your rawest emotions… because the more an ad plays to core beliefs or hot-button issues, the more affinity you’ll feel with the advertiser as a kindred spirit who’s on the right side of what you think the important debates might be, and the more likely you are to pull out your credit card).

The globalist/environmentalist hot button here is the Paris Agreement, the most recent climate accord that much of the world has signed on to, and we’re told that there’s an investment opportunity coming out of Paris…

“As you may know, the Paris Agreement is an international treaty on climate change.

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“However, the effects of this treaty will go way beyond just carbon reduction and clean air.

“Because countries across the globe are about to utilize the Paris Agreement to unleash a cutthroat economic battle….

“I’ve discovered one off-the-radar investment that’s expected to skyrocket because of this battle.

“This investment already soared 1,172% in less than six months.”

And the promise that there’s an upcoming catalyst which could make it soar even higher…

“With such huge gains already made, you might think you’ve missed this opportunity…

“But a single event scheduled for November 1, 2022, could make this investment rise much further…”

Back in September, that was “a single event scheduled for November 12, 2021”, and it tied in with the end of the latest Conference of the Parties for the Paris Agreement on Climate Change, abbreviated COP26. Now, it’s a lazily updated pitch for the next COP meeting, which will be COP27 (why lazy? Because COP27 is scheduled to start on November 8, 2022, in Sharm El-Sheikh, Egypt… if you’re going to invent a connection to a specific catalyst, why not get it right?)

But regardless of whether he’s convinced it will be in 2021 or 2022, the basic pitch is that Koyfman thinks the continuing followup meetings for the Paris Agreement will lead to stronger carbon tariffs or other similar pressure on carbon-emitting industries and countries, which will further incentivize businesses that can reduce emissions, and he thinks this secret company of his, the “plastic killer,” will be a big winner from that trend.

From the ad:

“… some countries plan to use carbon tariffs to force other states into compliance.

“As soon as this happens, the bioplastic sector could skyrocket…

“Because countries and businesses will have no other choice than finding alternatives to polluters like plastic. Otherwise their economic survival is at risk

“And I expect this all to be kicked off on November 1, 2022.

“That’s when a conference called COP 27 is taking place…

“It’s the U.N. Climate Change Conference of the Parties, a gathering of the parties to the Paris Agreement….

“As soon as one major industrialized country announces the enforcement of carbon tariffs, other countries will jump on the bandwagon.

“And it could happen as early as November 1 at the next Conference of the Parties.”

Will carbon tariffs or anything else that substantially boosts the demand for bioplastics come out of this meeting in Egypt? I have no idea. The Dublin meeting was not as strong on that carbon tariffs push as a lot of folks were hoping, but certainly carbon prices have kept rising, and there’s a general push to find ways to lower carbon emissions in most industries.

Kofyman points out the importance of a greener plastics business, which is part of the backdrop here…

“And there’s one huge contributor to carbon emissions most investors don’t have on their radar.

“It warms the planet twice as much as aviation and is the fifth-highest emitter in the world.

“According to the Center for International Environmental Law, this polluter is expected to account for 56 billion tons of carbon between now and 2050.

“That’s about 50 times the annual emissions of all of the coal power plants in the U.S.

“Solving this problem will be crucial for every country that wants to economically survive the zero-carbon battle.

“And I’ve found a little-known company that has developed a solution against the disastrous effects of this polluter in cooperation with the University of British Columbia.”

What other clues do we get about this company? Here are a few:

“Even the Canadian government has poured a ton of money into this firm….

“Because it wants to ensure “high-speed manufacturing“ of this company’s products.

“The Canadian minister of innovation went on record to say this firm is helping to secure ‘Canadian technological leadership.'”

And some specific hints, which I always appreciate — we get that “1,172%” stock chart of its past performance, a chart which conveniently ends at the company’s all-time high in February of 2021, but then also this:

“The stock is trading at a $100 million market cap as of this publication.

“To put that in the context of its competition…

“Some of the biggest players in this industry have market caps well above $200 billion.”

So what does this “plastic killer” company actually make? From the ad:

“This company figured out how to make a plastic alternative that doesn’t use any energy-intensive ethane at all…

“That can stand the amount of pressure and heat coffee pods have to endure…

“That doesn’t impede taste…

“And that essentially vanishes from the face of the Earth in as little as 35 days, leaving no waste and emitting practically no carbon.

“To achieve this remarkable feat, this company designed its own plant-based resins in cooperation with the University of British Columbia….

“Developing this bioplastic took this company five years and cost an astonishing $35 million.

“Wealthy venture capitalists and the Canadian government pumped all that cash into this firm while it was still private.”

So yes, while perhaps the dream is taking over the global plastics industry… right now they’re making replacements for the plastic pods and K-cups used in single-serve coffee machines. In Koyfman’s words…

“Even though this is an extremely profitable $29 billion market, coffee pods are just a showcase of this company’s ability to produce a high-performance plastic alternative.

“It’s aiming at the much bigger global plastic market, which is valued at as much as $579 billion.

“With a market cap as small as this company’s, it has to capture only a tiny fraction of all this cash to go parabolic.”

And they’ve got patents…

“With 10 patent applications filed, the company will soon have an insurmountable moat around its proprietary technology… “

We also get some oblique hints about big fellas sniffing around…

“… the company’s president recently revealed that it has receiving a lot of calls from big brands to use its product….

“Of course, all of this is still confidential. That’s why big commercial partnerships haven’t yet been announced officially.”

Other clues? None of the ad is really worded any differently than what we looked at five months ago (the market cap is down to about C$50 million, in case you’re wondering… so no, if there’s a 6,000% gain coming you haven’t missed it yet)… we’re told that they already have manufacturing in place, and are already selling their own brand of coffee pods… but that the big potential is licensing its technology out to folks like Keurig or Nestle for their coffee products (and, of course, eventually taking over the entire world of plastics at some point, you know, later).

So who’s being teased here? Thinkolator sez this is (still) NEXE Innovations (NEXE.V in Canada, NEXNF OTC in the US), which has indeed developed compostable Keurig-compatible and Nespresso-compatible coffee pods.

How do we match the clues? Kofyman says they’ve raised $35 million from early backers, and that’s pretty close to the the last fundraising round of $34.5 million, though they also did claim in January of 2021 to have raised $35 million by that point as their financing for five or so years of R&D work, so it may be that Koyfman is really using year-old data, not just six-months-old data.

And they are under $5. WAY under $5 these days, though they did actually tickle C$5 a share at their highest point, almost exactly a year ago. Right now the shares are down below C$0.60 (last trade was around 42 cents for the US shares trading OTC at NEXNF).

NEXE came public through a reverse merger late in 2020, with a “capital pool” company called Whatcom — sort of like a poor man’s SPAC deal. Whatcom had a tiny bit of cash, but was basically an empty shell on the Venture exchange, but that merger brought the company a Venture listing and NEXE raised another $15 million or so as part of the merger, and another C$34.5 million in their April 2021 financing (which also included warrants). And the folks who participated in those raises must be pretty disappointed, particularly those who paid $2 a share in the April 2021 equity raise.

They are putting the cash they raised to use, building their actual production facility and buying the required equipment for their basic assembly line, and they say they’ve been selling at least some pods under their own brand through their Amazon and their own e-commerce sites (Nexe Coffee for their Nespresso-compatible capsules, Xoma for their K-cups of “superfood” coffees (keto, mushrooms, turmeric, etc.)).

We still don’t know what the sales volume is in this initial market testing period, but they said in their presentation from May that most of the capital from their raises went to expanding production, and some cups were on sale for at least the second half of 2021. The last financials they’ve filed with SEDAR are now from the period ending in November of 2021, and, somewhat surprisingly, they did not recognize a single dollar of sales in that period, despite some of their products being at least theoretically available on Amazon starting in June 1 of last year. I don’t know what threshold they have to reach for sales to be reported, but you’d think they must have at least had some sales.

Their latest February 2022 presentation is very similar to the one from May of 2021, it just pushes some of the ambition and the “monetization strategy” out by another year… but, perhaps tellingly, the one big slide that they have dropped for the February 2022 presentation is the one that shows their annual capacity target — last summer they were anticipating that they would have the capacity to produce 220 million pods a year by the first quarter of 2022, and they’re no longer mentioning that target.

They still say that their plan is to go from their in-house brands and production to some kind of co-packing arrangement with other gourmet brands over the next year or two, maximizing their production capacity, then hopefully license out their technology or otherwise get other people to use their proprietary technology, to spur the next wave of growth.

In the near term, we know that their production capacity is far less than they were hoping six months ago… but we don’t actually know what it is right now, or if they’re making any sales. We also don’t really have any concept of what the operating costs are, or what it will take to make the in-house production pay for itself — the actual bioplastic cup is not the only input cost. Keurig used to have phenomenal gross margins on their K-cups of close to 40%, but that was back when they controlled the design and nobody could make generics, which is no longer the case, and, of course, their high-volume production must have been much more efficient, with cheap plastic cups, than any new alternative would be today.

I can’t imagine how NEXE could even break even selling just 220 million pods a year, assuming they eventually reach that capacity as they originally planned, though perhaps that’s just a failure of imagination on my part. If I’m right, that would mean they’d either need partnerships to come on fast… or they’ll need to invest in much more production capacity, which would presumably require more capital raises. Which is tough to pull off when you’ve got a penny stock and the share price has collapsed below your last fundraising, investors in penny stocks tend to hate chasing that kind of dilution.

What’s to like? Given time, they might surprise us with licensing deals to significantly expand their footprint, or they might become a powerful brand for environmentally conscious consumers. And who knows, maybe that will come by November, though that seems pretty optimistic to me — it’s not easy to break into these large consumer categories.

What’s not to like? The competition is stiff. Just a cursory glance around the internet will point you to other companies who are developing bioplastics, including some others who are specifically focused on the coffee pod market, like Biome Bioplastics. Maybe this NEXE one will end up being better than the incumbents, as they clearly believe, maybe it’s just one little step along the way and they’ll be swamped by the next innovation, like maybe plastics made from carbon dioxide, or just outcompeted by folks making other cheap competitors, like these folks who sell compostable single-serve pods that you can private-label with your own coffee for six cents each… I have no idea.

And, of course, there’s also some pushback not just from people who prefer regular ol’ plastic, but from those who say that bioplastics aren’t nearly as compostable or biodegradable in the real world as advertised.

Bioplastics often do offer a much smaller “carbon footprint,” thanks to the lack of hydrocarbons in their manufacture (assuming that their “bio” components aren’t farmed in an energy-intensive way, I guess, I haven’t looked into the specific technology NEXE uses — though yes, they did license it from UBC), so perhaps it will be a focus of carbon emission reductions, or will get a big boost from something akin to the “plastic bag” and “plastic water bottle” bans that so many cities have considered or enacted. I don’t know.

The exciting thing about penny stocks in big and heavy industrial sectors like basic materials and plastics, or in large consumer markets like coffee pods, is that the market is VAST and you don’t have to get much of the business to get some real revenue… but being one of hundreds or thousands of little players trying to shake up an established industry also means you’re probably wise to assume that the odds of gigantic or breakthrough success are very, very low.

That doesn’t mean it can’t work, just that I’d be honest with yourself about the odds. Maybe it’s worth a try — even developing a niche brand within the coffee pod business and getting that built up to a large enough business to be efficient, which is certainly possible, could eventually be enough to justify a company of this size… though if we’re being honest, they probably either need to catch some “brand lightning” with their own products, which would take either marketing money or luck, or get one of the major players (Nestle, Starbucks, Keurig, etc.) to license their technology and ramp up capacity for anything great to happen quickly. I don’t know if taking over the world of bioplastics is a rational dream here, but perhaps getting a meaningful chunk of the K-cup market could be, if all goes well.

Right now, NEXE has a market cap of about US$40 million. And yes, the timing of Koyfman’s ad is a bit disingenuous, because he still shows the exciting price chart of the shares moving from 30-40 cents or so in late 2020, before they did their go-public merger, to the highs near $5 in February of 2021… but the glowing stock chart he shows with those 1,127% gains cuts off well before he started promoting this pitch heavily last summer, months before the shares dropped by 70-80% from February to June of this year, and the shares have since fallen by another 30% or so. Those who invested in the early private placements in mid-2020 or wildly overpaid for the private placements since then, or bought after the company began publicly trading, are likely sitting on pretty substantial losses.

The irony is that they probably need the stock price to go up to do well. Unless they’re able to make the rounds of investor conferences, gin up more press releases, and report something exciting in their next quarterly update that gets the price back up, it will be hard to raise the next wave of growth capital, and building up manufacturing capacity and trying to break into a major consumer market costs a lot of money… so a lot is riding on either their ability to sell themselves, or them reporting great operating results next time they update investors. Didn’t happen in November… maybe it will happen at the next six-month update, in May? I wouldn’t bet on it, but it is, of course, possible.

One imagines that calling around to your favorite penny stock pitchmen and newsletters could be part of trying to build their profile, so perhaps that’s why Koyfman is pushing the stock again these days, but who knows (I’m not impugning Koyfman particularly here, penny stock newsletters get pitches from companies and their promoters all the time). NEXE has done its share of paid promotions in the past, through folks like Proactive Investors and Wealth Research Group, which is generally a reason for caution, but, in their defense, companies this small and new, who have to raise capital, often have to pay for fluffy and promotional coverage in order to get investor attention for their fundraising… that is, at least, very common for young companies on the Venture exchange who are trying to catch the eye of investors.

They’ll have to keep doing it without my money, however. I like the idea of bioplastics replacing those dumb K-cups, I wish them well, I just don’t see the odds of an investment being in my favor here… Maybe you can change my mind — see anything great to like here in NEXE? Have a different brilliant bioplastics idea to share? Want to buy me a cup of coffee? Our comment box below awaits your feedback, and I’ve left the original comments from our article six months ago attached as well… thanks for reading!