ORGANIZATION AND NATURE OF BUSINESS (Policy)

6 Months Ended

Jun. 30, 2013

ORGANIZATION AND NATURE OF BUSINESS [Abstract]

Basis of Financial Statement Presentation

The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America. The accompanying interim unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information in accordance with Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the Company's opinion, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six-month period ended June 30, 2013 are not necessarily indicative of the results for the full year. While management of the Company believes that the disclosures presented herein are adequate and not misleading, these interim financial statements should be read in conjunction with the audited combined financial statements and the footnotes thereto for the period ended December 31, 2012.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ.

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments and other short-term investments with maturity of three months or less, when purchased, to be cash equivalents. The Company maintains cash and cash equivalent balances at one financial institution that is insured by the FDIC.

Inventory

The Company capitalizes new drill bit inventory at manufacturing costs plus refurbishment costs. These costs are amortized using industry standards of total average runs per bit. The inventory balance is stated net of amortization expense. Amortization is provided using the straight-line method over the estimated three refurbishment runs. Amortization expense is charged to Cost of Sales.

Accounts Receivable

Accounts receivable are stated at the amount billed to customers. Accounts receivable are due and payable upon receipt. Accounts are considered past due beyond the standard payment terms. The Company considers accounts receivable to be fully collectible; accordingly, no allowance for doubtful accounts is required.

Intangible Assets

The Company's policy is to capitalize intellectual property related to the filing and acquisition of internally developed patents. The patent related expenses, such as legal fees and filing fees related to preparation, defense and filing of patent, are eligible for capitalization. The Company's intangible assets are stated at cost, less accumulated amortization.

The Company reviews the recoverability of its long-lived assets on a periodic basis whenever events and changes in circumstances have occurred which may indicate a possible impairment. The assessment for potential impairment will be based primarily on the Company's ability to recover the carrying value of its long-lived assets from expected future cash flows from its operations on an undiscounted basis. If such assets are determined to be impaired, the impairment recognized is the amount by which the carrying value of the assets exceeds the fair value of the assets.

Fair Value of Financial Instruments

The carrying amount reported in the balance sheets for cash and cash equivalents, accounts payable, and accrued expenses approximate fair value because of the immediate or short-term maturity of these financial instruments. The Company does not utilize derivative instruments.

Income Taxes

Deferred tax assets and liabilities are included in the financial statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled as prescribed in FASB ASC 740, Accounting for Income Taxes. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. A valuation allowance is established to reduce deferred tax assets if it is more likely than not that a deferred tax asset will not be realized.

The Company applies the authoritative guidance in accounting for uncertainty in income taxes recognized in the financial statements. This guidance prescribes a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination. If the tax position is deemed "more-likely-than-not" to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement.

Revenue Recognition

The Company recognizes revenue from the sale, lease, and refurbishment of drill bits. The criteria for recognition are as follows:

·	Revenue from sale - recorded at cost when the drill bits have been shipped. The Company had made an agreement with the purchaser to sell bits at cost.

·	Revenue from lease - recorded based upon the number of feet drilled. Revenue is recorded only after the product is used by the customer for the specific job booked. Upon completion of the job, the customer is billed based upon the agreed rates on a per footage basis.

·	Revenue from refurbishment - recorded when the refurbished item is shipped to the customers.

Basic and Diluted Net Loss Per Common Share

Basic and diluted net loss per share calculations are calculated on the basis of the weighted average number of common shares outstanding during the periods presented. The per share amounts include the dilutive effect of common stock equivalents in years with net income. Basic and diluted loss per share is the same due to the anti-dilutive nature of potential common stock equivalents.

Stock Based Compensation

The Company accounts for stock-based employee compensation arrangements using the fair value method in accordance with the accounting provisions relating to share-based payments ("Codification Topic 718"). The company accounts for the stock options issued to non-employees in accordance with these provisions.

Recent Accounting Pronouncements

Recent accounting pronouncements issued by the FASB (including its EITF), the AICPA, and the SEC did not or are not believed by management to have a material impact on the Company's present or future financial statements.

BlueFire, LLC

On March 16, 2011 we entered into a joint venture agreement with two non-affiliates (the "JV Partners") to form BlueFire LLC ("BFLLC") in Oklahoma. On December 31, 2012, the members of BFLLC unanimously agreed to dissolve the joint venture to pursue other business interests. We owned 60% of BFLLC and acted as the managing member. The JV Partners owned the remaining 40% (20% each) and were responsible for the sales and marketing activities of BFLLC. The Company loaned $60,100 to BFLLC for its initial capitalization and the JV Partners funded an additional $40,000 to BFLLC during 2011.

As part of the dissolution of BFLLC, the cash then remaining in its bank accounts was distributed pro rata to the members of BFLLC, and the Company received a total of $52,600 in connection with the dissolution. BFLLC was dissolved as of December 31, 2012. Therefore, the accounts of BFLLC have been shown as discontinued operations in the financial statements.

Bluefire Equipment Corp 10-Q