Extreme Biodiesel Inc (PINK:BRKM) Started their Engines
Did you know that if you have a car with a diesel engine, you can get the used vegetable oil from your deep fryer, put it in the tank, and it will run happily? The only problem is, you could wreak havoc with some of the vital bits of the engine but, fortunately, there’s a solution. Once the grease is purified, filtered and processed, it turns into biodiesel – a clean fuel that you can use every day without worrying about damaging your car or polluting the atmosphere. As their name would suggest, Extreme Biodiesel Inc (PINK:BRKM) pride themselves on being experts in this field.
They have been at it for a while now and they seem to be quite serious about the whole affair. They have a facility in which they do the whole processing of the oil. They have vehicles with which to distribute it and, on the whole, things seem to be looking up. If only they could turn a profit…
That is correct. Although they seem to have what it takes to be successful and all the news that we read from them suggest that the demand for biodiesel will explode in the foreseeable future, they are apparently unable to make the fuel at a price which will fill up their bank account. The result of all this is a steady decline in the share price over the last couple of years and a financial statement for the third quarter of 2012 that looks like this:
- cash: $2,105
- current assets: $30 thousand
- current liabilities: $408 thousand
- revenue: $32 thousand
- net loss: $27 thousand
The fact that they have been working at a loss ever since they started means that it’s quite difficult for them to maintain a normal working environment for their employees. The officers, for example seem to have been working without getting paid for some time which means that during the quarter covered in the report, BRKM were forced to issue 2.2 million common shares as compensation for the unpaid salaries.
They also borrowed a total of $100 thousand in 2010. The note matured in 2011 and they are still not able to pay it off. This means that the note holders are absolutely free to convert the money into common shares, which is bad enough on its own, but when you consider that the conversion price is equal to the par value of the shares ($0.001), it gets rather terrifying. As of November 19, 2012 a total of 22 million shares were issued for the settlement of debt and, if deemed necessary, BRKM might need to put out an additional 78 million to cover the whole note.
That would result in some terrible dilution, but it will also mean that the people holding the note will have 100 million shares of common stock to play with. Those shares will probably be sold at a massive profit, which could leave a lot of investors quite badly burnt. This, by the way, won’t be a first for people who have believed promotions for BRKM over the years. The last one took place back in June 2011 and as evident from BRKM‘s chart, it kick-started the downward trend that they have been following ever since.
Speaking of paid promotions, we have to note that such a drop is not uncommon for companies featured in those pumps once the hype has stopped. ITonis Inc (PINK:ITNS), for example, got pumped by Jet-Life Penny Stocks at the end of January. A bit over a month has passed since then and they have wiped out a whopping 75% of their price.
We can’t be sure that the same thing will happen to BRKM, but it pays to have all the above facts in mind and weighing the risks carefully when making your decision.
