ERF Wireless, Inc. (OTC:ERFW) gained 35% last Thursday, thus closing the session at $0.135, which is the highest value for the month. The surge was accompanied by a huge volume spike. More than 12 million shares changed hands, marking both a five-fold increase over the daily average volume and the best score since early-January. The same scenario occurred on Friday, at a much smaller scale, though – ERFW gained additional 3% to a new month-high of $0.139 on a volume of 6 million.
So far, so good. However, the real reason behind that movement is far from clear. The last corporate update popped up more than two weeks ago. In addition, third parties have not launched any investor awareness programs since mid-February. Yet, ERFW stock has exploded, throwing investors into confusion. Not surprisingly, various hypothetical explanations have started to come up.
One of the most logical ideas is that of an iHub poster who has described the current situation as a possible ‘rinse and repeat’ effect. This hypothesis is based on the notion that some yet-to-be-published positive news have already leaked to selected investors.
Since ERFW has already submitted its full 2010 annual report, let us take a look at the 10-K form. It shows:
- $43 thousand in cash;
- a working capital deficit going beyond the $2.6 million mark;
- $6 million in sales revenue;
- a net loss of $8.5 million.
As it seems, ERFW’s financial state is not as attractive as it could be. Therefore, a press release about a commercially viable undertaking might really be in the works. In case one sees the light of day soon, ERFW will get a chance to earn investors’ trust and raise additional capital. Otherwise, the company can always dilute its shareholders since it still disposes of more than 580 million shares of A/S.
