As a general rule we ignore development stage companies with no revenue, heavy losses, and need for additional financing. Fundamentally this is clearly the story about investing in Sulphco stock. They are going through almost 2 million dollars a month. We estimate that without additional financiang, their current cash position may not even last them past the end of 2007. Their auditors also advise caution and have slapped a "Going Concern" on their financial statements. We urge any potential investor that is crazy enough to proceed in this ultra high risk investment to use extreme caution.
To us their technology quite frankly sounds to us like something out of a sci fi movie. But experts around the world seem to be very interested in what this company is doing. Frost and Sullivan gave "Sonocracking" the Oil Refining technology of the year award in 2006. The giants of the oil industry are also taking this very seriously. They have signed LOI's and testing agreements with several major players in the oil business such as Total (France), Petrobras (Brazil), SK Corporation (South Korea), Hyundai Oilbank Co. LTD (South Korea) and OMV (Austria). The Government of Fujairah, UAE formed a joint venture with the company and requested a facility that can process 200,000 bbl per day of oil.
Last march they successfully completed a $27 million dollar private placement, they used about 20 million of this to construct a Sonocracking test facility in Fujairah, UAE. 2006 was a rough year for them and it seems some of their arabian contractors did not meet up to their expectations. We would love to know the story behind that. But I guess we have all had the experience of contractors falling behind schedule. Now, a year later than their anticipated production commencement date, they claim that they can begin shipping in mid June.
Fujairah facility from a photo on Sulphco's corporate site. It looks to be near completion
If they do finish this facility what would it mean as far as revenue? We have no idea and neither does the company. According to the MD&A section of their 10-k they have no contracts in place for this technology and at this point and are not sure in what form an agreement would materialize if one materializes at all.
What adds further volatility to the situatioin is that approximately 18% of the publicly available float has been sold short. If this company has a postitive development you can see a lot of scared short sellers buying the stock back to cover. On the flipside such a huge ammount of naysayers would be likely to sell short more shares on any negative news.
References:
What adds further volatility to the situatioin is that approximately 18% of the publicly available float has been sold short. If this company has a postitive development you can see a lot of scared short sellers buying the stock back to cover. On the flipside such a huge ammount of naysayers would be likely to sell short more shares on any negative news.
References:
- Annual Report on file with Securities Exchange Commission
- Sulphco's corporate website
| Name | Age | Position |
| Brain Savino | Pres and Member of Exec. Management Team | |
| Kristina Ligon-Gunnerman | Assistant Sec. | |
| Larry Ryan PhD | Chief Exec. Officer | |
| Loren J. Kalmen CPA | 54 | Chief Financial Officer, Principal Accounting Officer and VP of Fin. |
| Richard L. Masica | 70 | Consultant, Independent Director, Member of Compensation Committee and Member of Option Committee |
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