Borislav Tonev

BlueFire Equipment Corp (OTCMKTS:BLFR) Pumped Big Time

by Borislav Tonev August 14, 2013
BLFR.pngUntil about a couple of months ago, nobody could care less about BlueFire Equipment Corp (OTCMKTS:BLFR, BLFR message board). Trading was non existent and even the almighty QuoteMedia is not able to provide us with some historical value of the shares. Then, a 2 for 1 split was exercised and suddenly the ticker exploded onto the scene. Yesterday's session was pretty eventful with quite a lot of ups and downs and we decided to see what's going on.

On the face of it, things are looking really rather good. BLFR used to have a 60% stake in a joint venture that had set itself the task of developing proprietary technologies for the oil and gas industry. Their biggest achievement is a special Polycrystalline Diamond Cutter (PDC) drill bit that is supposed to drill deeper and for longer periods of time compared to the conventional cutter heads. They were generating some revenue but then, for some reason, their partners in the joint venture decided that they want to pursue different business opportunities and the mutual efforts were discontinued.

Apparently, however, BLFR were not ready to give up on their sturdy drill bit and they decided to press on. If the PR's are to be believed, their efforts have been particularly aggressive over the last couple of months. Between June 27 and August 12 they have made a total of twelve announcements and from them we learn that BFLR's technology has outperformed the products offered by the competition, we read about negotiations with potential clients being conducted and about new people joining the team.

All in all, it looks like they're working hard and, while it's still too early to call it for sure, if they manage to reach all the milestones set in their business plan, they could be in for some growth. There is one tiny problem, however. According to the latest 10-Q covering the first quarter of 2013, BLFR is in a pretty sorry financial state. Here are the most important figures found in the report:

  • cash: $3,123
  • current assets: $36 thousand
  • current liabilities: $241 thousand
  • no quarterly revenue
  • quarterly net loss: $89 thousand

It's pretty clear that they'll have some problems setting the industry on fire with this sort of financials and even though the report says that they have borrowed $150 thousand in April, BLFR's management team will still need to think through every single move if they want to ensure a streamlined production process and a positive cash flow. That shouldn't be your biggest concern, however.

The thing that you should be worried about the most is the rather big promotional campaign that's been running for the last couple of months. Rumors about BLFR ads showing up around search engines started flying around at the end of June which pretty much coincided with the start of the active trading. An entity called Financial Digest created a colorful landing page a few days later and on July 25 the newsletters also joined the party.

It's really difficult to estimate how big exactly the budget is, but we can safely say that someone is shedding quite a lot of money on pumping BLFR. Financial Digest, for example, disclose a $50 thousand compensation for ninety days of touting. Stock Mister, who joined the campaign yesterday, have pocketed the same amount while Stock Edge admit that they expect to receive a total of $295 thousand.

Who can profit from the whole thing? Well, we can't be sure, but there was a private placement back in July 2012 when some investors bought a total of 7.5 million pre-split BLFR shares for just $75 thousand. You can do the calculation for yourself and 5EXHI.pngsee how much money can be made from this stock.

This all leads us to believe that violent and painful corrections such as the ones displayed by Sanborn Resources Ltd (OTCBB:SANB) and Exlites Holdings Int (OTCMKTS:EXHI) are definitely possible which is why watching your step and considering every move carefully is absolutely crucial.

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