Independence Energy Corp (OTC:IDNG)’s Pump Yields no Results

It’s been going for ten long days now. The first email about Independence Energy Corp (OTC:IDNG) hit the inboxes back on March 5 and the promotional machine has been working virtually non-stop since then. The result of all this effort is pretty obvious from the chart on the right – there was an impressive jump during the first day of the campaign after which the performance has been pretty underwhelming.

On the bright side, other penny stocks would have dropped to the triple zeros by now, but IDNG are still hanging on despite losing a bit of ground in the last couple of days. Does this mean that IDNG will be one of the few small cap companies that won’t suffer the infamous pump effect? Well, this is largely dependent on the way the company has been managed so far and, of course, on their plans for the future.

Let’s start with a history lesson. IDNG were incorporated back in 2005, and unlike other penny stocks that have been jumping from one business to another every few months, IDNG have been solely devoted to pumping oil and natural gas out of the ground. Yet, the latest quarterly report was published more or less exactly seven years after their inception, and from it we see that that the net loss that they have accumulated for this period is just $244 thousand. A quick calculation reveals that that they have been spending less than $100 per day on operations. That’s not a lot for a company dreaming of becoming big. At the same time, they have not pumped even a single drop of oil out of the ground which means that there is no revenue. It’s fair to say that they haven’t been very busy so far.

Can they change things around, though? Well we can say that there is some movement. A quick comparison with the financial report covering the same period in 2011 reveals that they have been working during the last twelve months. They have apparently acquired some oil and gas properties, they have also increased the assets and took care of a tiny bit of their liabilities. That said, the report still doesn’t inspire any confidence. Here are the figures:

• cash: $61 thousand
• current assets: $72 thousand
• current liabilities: $172 thousand
• revenue: $0
• quarterly net loss: $22 thousand

In addition to these, they also have $492 thousand in oil and gas properties and we’re quite sure that they worked hard to acquire these wells. Speaking of working hard, they have also been quite busy with the share issuance. In June 2012 they increased the number of authorized shares and exercised a split. They have also established a line of credit for up to $1 million. On the bright side, this means that they will finally have some money to work with, but the downside is that all the debt is convertible into shares of common stock. This means that IDNG‘s shareholders could get crushed by dilution, especially if there’s no cash flow.

In other words, IDNG‘s management have worked hard during the last year (or so it would seem), but they still have a lot of sleepless nights ahead of them.

Speaking of sleepless nights, we should mention that IDNG‘s CEO, Mr. Gregory Rotelli is quite a busy man. As we mentioned in one of our previous articles, he works for another two publicly traded companies – Rostock Ventures Corp (PINK:ROSV) and Razor Resources Inc (PINK:RZOR). We pointed out that both companies have some spectacular promotional failures, under their belt and we would like to draw your attention to one in particular – the one for RZOR that took place in March 2011. The campaign was almost as big as the current one for IDNG, but the chart on the right reveals how horribly wrong it ended.

The possibility of the same thing happening to IDNG is real, which is why we would advise you to weight the risks carefully before jumping in on the hype created by emails and press-releases.