Less than three months ago shares of Freedom Energy Holdings, Inc. (PINKSHEETS: FDMF) were trading at 0.05 and while that was a far cry from their 52-week high of 0.12 set back in January they have the look of “the good old days” compared to where the share price is today, kicking around the 0.0045 – 0.0057 range and heading south. FDMF received a boost on Wednesday as several stock promoters began touting the company to their followers, a move that sent trading volume well above the 9 million mark but did little to push the share price up as they opened the day at 0.0066 before closing at 0.0055.
Of course the promotion coincided with a press release distributed by FDMF concerning their joint venture agreement with Central State Shingle Recycling (CSSR) in which they would be providing the company with their proprietary asphalt shingle recycling technology SR-139. The announcement then mentions that CSSR has accumulated more than 1 million tons of post-consumer shingles at their Phoenix location and they are expecting to process as much as 50 tons of shingles per hour, a process that is said to require up to 1,000 gallons of SR-139 per hour, of which FDMF will receive a royalty rate of $0.25 per gallon.
Quick math will tell investors that FDMF could be walking away with around $5 million from this deal as they receive $250 an hour for a process that, if done around the clock, would result in 1,200 tons of shingles being processed in a single day; again quick math will tell you that the project will take more than two years to complete if CSSR maintains a 24-7 pace. Investors won’t turn their noses up at $5 million, even if it is spread out over a period of time but the real caveat of the joint venture comes in the third paragraph.
The program isn’t exactly ready to go at the moment and it will require CSSR to invest an estimated $700,000 in equipment to get on track. They figure they will be fully operational in the first quarter of 2012 and by the end of the year they will be processing up to 500 tons of asphalt shingles per hour, if that happens then it would obviously be a financial gain for FDMF but first things first CSSR needs to actually prove they can process 50 tons per hour.
Give credit where credit is due as FDMF managed to partner with CSSR, which happens to be the largest shingle recycler in the United States, securing nearly 1/10 of the 11 million tons of shingles disposed each year in the country. The fact that they have the joint venture agreement in place is something that FDMF CEO Brian Kistler tried to push to investors saying, “This is an extraordinary opportunity for Freedom. Not only will it provide a steady stream of reoccurring revenue, but also opens a new multi-billion dollar market and brings credibility to the effectiveness of our technology.”
That multi-billion dollar market that Kistler refers to is the alternative fuel market and technology behind SR-139 is designed to break down asphalt shingles and allow for the recovery of hydrocarbons which can then be converted into High Quality Burner Fuel. According to FDMF “This clean energy source is created, market ready, by our process and will be sellable to any of the major United States users of burner fuels such as: Pre-mix (Asphalt) plants; Forge furnaces; Aluminum furnaces; Copper furnaces; Sand driers; Rotary kilns…”
FDMF says there are about 2 million tons of hydrocarbons being discarded annually; FDMF places the value of the discarded hydrocarbons around $4 billion.
All of this sounds really great but FDMF has announced partnerships and anticipated deals in the past that haven’t exactly proven financially beneficial to shareholders. Back in late July the company issued a press release they had “been presented with a “major new business opportunity” in the aviation sector, as a result of its recently announced commercial joint venture agreement with RMT Holding, Inc (“RMT”). RMT is a foreign based commodities trading company, dealing primarily in the purchase and sale of jet fuel and heavy diesel term contracts on a global basis.” The last line of that release said “Further details will be made public once anticipated contracts have been formalized.” Three months later and those details still haven’t been provided.
As much as FDMF has been highlighting SR-139 their only consistent form of revenue at the moment is consulting fees which, for the six month period ending June 30, 2011, accounted for $175,700 or the entire revenue total for FDMF during that period. In their quarterly filing FDMF reported cash of just over $5,500 and a working capital deficit of $1,529,259 while also publishing revealing that they have incurred losses of $5,406,908.
Shareholder value has already been diluted enough, adding another 45 million outstanding shares over the first six months, yet FDMF has few resources at the moment that will generate the necessary capital to continue operations. They can continue to tell investors that they are forming partnerships and entering billion dollar markets but that has been played before and investors now want to see revenue from the product. If SR-139 works as well as the company claims then taking a shot while shares are as low as they are may be worth it but that being said if SR-139 works as well as FDMF says don’t be surprised to see bigger companies developing their own products to recover hydrocarbons.