The stock was recommended last week on Dirigo Research's web site: www.DirigoResearch.com
SUMMARY
Many investors are of the opinion that the greatest stock market opportunities lie in new issues Initial Public Offerings but we have long held to the belief that uncovering small companies that are not widely followed by analysts or investors can be even more rewarding. For one thing, IPOs have been known to run up instantly and
give back most or all of their gains before the less-than-nimble can get out with a profit. When this happens,
investors are faced with a longer term holding period than had been anticipated or a "too late" sale which results
in a loss. Investing in a low-priced stock that is virtually unknown but is on the threshold of a dramatic breakout,
often has a higher reward-risk ratio and can provide the astute investor with outstanding gains. We believe that
we've found just such a situation in Nu Electric Corporation: a company formed to take advantage of
opportunities in technology, whenever and wherever they appear. Nu Electric has an effective float of
approximately 250,000 shares, is currently trading at 11/16, and is within days of signing a Letter of Intent to
acquire an exciting new technology which will be the recipient of new government mandates for cleaner water.
Without knowing the EPA's eventual standards, it's far too early to project revenues for Nu Electric, but one
study has indicated a multi-billion dollar market in California alone. Don't wait for the Street to take notice; buy
now!
BACKGROUND
Nu Electric's president, Laurie C. Scala, has an extensive background in finance, consisting of a twenty-plus
year successful record in the brokerage industry as a sales, marketing, and compliance executive. This
experience has resulted in her ability to recognize exciting new companies with growth potential, and to know
both how and where to raise the necessary capital to assist them. Initially, Nu Electric intended to take advantage
of the deregulation of the electric power industry in a similar fashion to the companies which profited from the
earlier breakup of the telephone monopoly. It turned out, however, that this industry appears destined to suffer
the same pains that the deregulated telephone industry did in past years, and the picture will probably not clear
for some time. But electric power was never intended to be this company's only area of endeavor; and while
waiting for a better-defined entry point into the deregulated electric power field, a more exciting opportunity
came Nu Electric's way. Always on the lookout for technology-related opportunities, the company's interest was
aroused upon being approached by UTEK Corporation a self-described innovative technology merchant which
specializes in identifying, acquiring and financing university-produced intellectual property for public technology
firms. In 1998, UTEK entered into a three-year agreement with the University of South Florida Research
Foundation (USFRF) to find licensees for technologies developed at the university and to help bring those
inventions to the commercial marketplace. Among its efforts was the introduction of a water treatment process to
Nu Electric.
CLEAN WATER
Water is vitally important for human life. We require a minimum of one-half gallon of drinking water every day
to sustain us under normal circumstances, and that requirement increases to as much as four gallons if we
perform heavy work in a hot and humid environment. And quality is equally as important as quantity: our
drinking water must be safe. To assure that the water we drink is safe, the U.S. Environmental Protection
Agency (EPA) has already set over eighty standards and treatment requirements, and we may assume that
additional standards will be set as more contaminants are found in the nation's water supplies.
In 1996, the Safe Drinking Water Act was amended requiring the EPA to revise the existing standard for arsenic,
a mineral which occurs naturally in the earth's crust and is a known carcinogen. In addition, arsenic is reported
to affect the vascular system and is a possible cause of diabetes. People may also be exposed from industrial
sources, as arsenic is used in semiconductor manufacturing, wood preservatives, animal feed additives and
herbicides. To meet the coming requirements for eliminating arsenic from our drinking water, a new technology
was developed at the University of South Florida that can remove almost all of the arsenic before the water
reaches the consumer. Without going into detail, the basis of this technology is a filter that combines two
naturally occurring materials: iron and zeolites. This solution to the arsenic problem is economically viable and
the residue can be disposed of in a nonhazardous waste landfill without any further treatment.
CLEAN WATER TECHNOLOGIES
UTEK formed a subsidiary Clean Water Technologies, Inc. which is 93% owned by UTEK and 7% owned by
the University of South Florida Research Foundation , and it is this company that Nu Electric will acquire in the
near future. A Letter of Intent with UTEK will be announced within days, and complete details of the combined
stock-royalty agreement will be spelled out. Nu Electric's near-to-medium term revenues and earnings will result
from Clean Water Technologies alone although the company will continue to look for additional acquisitions and
it is premature to attempt to project financial results today. The new preliminary EPA standards are not due to be
released until January 1, and the final arsenic rule is expected on January 1, 2001. Until these standards are set,
the true cost of the water purification process, the selling price of the solution, and the resulting profits cannot be
estimated with any confidence. A 1997 study conducted for the Association of California Water Agencies
estimated that statewide capital costs could run as high as $7 billion and annual costs to maintain compliance
would be in the range of $33 million to $1.2 billion. These eye-popping numbers are for California alone and
there are 75,000 water systems affected nationwide. We envision a glowing future for Nu Electric, and fully
expect that the company's bottom line will provide extremely satisfying reading for shareholders.
RECOMMENDATION
Last October, with the stock languishing at less than 50¢, the company's management announced that family
members had purchased an additional 55,000 shares on the open market bringing their holdings to over 453,000
free-trading shares. President Laurie Scala stated: "We believe that Nu Electric's outlook is very exciting, and
we've put our money where our mouths are. We raised our position by an additional 12% because we feel that
the recent small-cap market drop created a wonderful long-term buying opportunity." Now that Nu Electric is
about to acquire Clean Water Technologies, we join the company's management in seeing a "wonderful"
opportunity, and we urge you to follow their lead. When the acquisition is completed and the EPA standards are
released, the public will begin to see the growth potential in this company. We don't advise waiting until
revenues and earnings are obvious and the future can be projected with increased confidence. In our view, this
stock will not remain undiscovered for long. Now is the time to take positions in NRGE for outstanding capital
gains in months and seasons to come. Nu Electric's web site nrge.com will inform investors of the
company's progress, and we intend to issue updates as well. |
