The Plummet of ERF Wireless, Inc. (OTCBB:ERFB)

ERF Wireless, Inc. (OTCBB:ERFB) is one of the few companies in the OTC Markets that have decent financial reserves, are making revenue and are expanding in their industry. The big problem that we see is the inability of ERFB to operate at a profit, but this is not the actual cause for yesterday’s big drop in price.

ERFB isn’t one of the most traded stocks out there and yesterday’s session started as usual, with little trades and a price that was going in a seemingly straight line. 

That, however, changed in the final hours as it became clear that the company didn’t achieve success in the claim they had against Schlumberger Canada Limited (SCL), which was made in an attempt to resolve various financial issues in the reseller agreements between the two parties.

The stock immediately started going down and it had lost 53% of its value in a matter of hours and closed the day with a price of $0.21 per share. The total amount of shares that had switched hands in the session was more than 10 times their average with 885 thousand, that helped generate a trade value of $260 thousand.

On the bright side one might say that they will recover, because they are underpriced with a market cap of $2.4 million, considering their latest financial statement. On the other hand an argument against that can be made as they are still not managing to operate at a profit and because of the high amounts in liabilities that they have.

• cash: $1.2 million
• total current assets: $3.1 million
• total current liabilities: $6.8 million
• total liabilities: $10.6 million
• total sales: $1.5 million
• net loss: $2.2 million

As you can see, the company has ,indeed, a very good cash reserve and is making a decent profit. However, the huge amounts in liabilities are taking their toll on the stock’s price and when you add the fact that the net loss has almost doubled, while they have made $100 thousand less in sales looking back at the same period in 2012 things start to look grim.

All in all the stock is risky and can move in any direction, depending on the news. This is why we advise you to do your due diligence and weigh out the risks if you have any thoughts of investing in this particular stock.