ERF Wireless, Inc. (ERFB)

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Before we talk about the 10k... let me talk about an analogy.

If you were 10 years old and you had some money to spend in a candy shop, you have 2 choices in this town. Choice one is in a nice neighborhood where you buy your candy and walk home... no problem.

Choice 2 is a little scarier... this store is in a tough neighborhood. When you buy candy at this store you know that you are going to lose some to a bully on the way home... thing is, the bully only takes 50% of your candy every time.

So which candy store would you go to? Not to tough to figure that out. But before we make a decision on where we are going to buy some teeth rot, let's look at one more variable.

The store on the bad side of town sells its candy at 75% off. Now we have a decision. If you are brave and can stand the bully taking half your candy, you end up with more for your dollar by going to the other side of town. If you want to pay full retail and not have someone take from you, then you will end up with less loot at the end of the day.

Choices... hmmm. A ten dollar bill buys you $10 dollars worth of candy from one... and ten dollars of candy on the other side of town lets you bring home $20 worth... even after you had half taken away.


Buying ERF is like buying discounted candy. The Big D bully is going to take half away someday... but you are buying it at a huge discount and you will take home a whole lot more if you have the stomach for it.

Look at buying in from a Market Cap point of view. Let's make up some numbers for the sake of argument. Let's assume that ERF is CFP this quarter and at the end of 2011 is has an EBITDA of $15m. What is it worth on the street? I will use a PE of 10 to be safe and some rounded up numbers for issued shares, 500m today and 1 billion post bullying. At $15m EBITDA, the PPS is 15 cents with bullying and 30 cents without. So it would be likely the the PPS would end up somewhere in between because it isn't likely that all the authorized get dumped into the system in 12 months.

Now before we get too far down the road here... the big questions are these... is the company going to turn the corner? And if they do, what are the kind of numbers they can pull?

I believe that ... finally... ERF has turned the corner... I am basing that on the March 16th's fluff PR and I quote ""I'm very pleased to report to our shareholders that the potential that ERF Wireless has long seen in our oil and gas business has now become a reality." He is saying that ERF turned the corner.

So... is a $15M EBITDA within reach... and where could it be in another year? I think it could be 2 or three times higher than that. Use a spread sheet and go back to the Mithra report to pull some numbers .... I can see some huge potential here and I am only using the numbers from the O&G industry. The numbers compound as these are reoccurring revenues with great margins, so ERF is perfectly capable of making some serious money over the next 2-5 years... even if the Big D is going to get us.


So ... what about Q4 numbers? Q3 total revenue was just under $1.5m if I remember right... so I am looking for $3m as huge improvement... $2.5m would make me comfortable. Under $2.5 and I will be disappointed. But really, Q4 isn't that important. Even with a $3m, call it a triple for you baseball guys, that would be great but I really don't expect to see a ton of PPS movement if it is a triple.

I want to hear what comes out after the 10K and then I want to see the 10Q in May. That is the time line for PPS movement. Remember how DC said in that same PR, "these factors should significantly improve the potential for ERF Wireless to soon achieve our short term objective of becoming cash flow positive and ultimately achieve overall profitability." ... let's look for some headlines soon. The 10k is only going to confirm that some progress was made... but the FIRST QUARTER numbers are going to make this all so real...

If we get numbers today, or next week ... or the next week... that is good. Because we need to hear more from the front office... we need to figure out what the real potential is and we have to understand that we are owners of a very undervalued company.

If ERF could find the right guy for the job... it is time for the ROADSHOW... someone to hit the big cities where the investors are and start beating the drum because... finally, at long last... ERF has a story that people would want to hear about.

Double digits just before or just after the first quarter numbers are released... that is what I am looking forward to.

GL and BOL ... this is our year!

A1