Coates International Ltd (OTCMKTS:COTE)’s Remarkable Surge Continues
The people behind Coates International Ltd (OTCMKTS:COTE) have been in the business for a while now and they seem to be proud of developing what they call “the most advanced green internal combustion engine technology in the world”. On May 20, they said that they’re now ready to enter the production phase and on Tuesday, they announced that they have confirmed orders totaling over $50 million. So, we’ve got an OTC company that wants to revolutionize the way we travel, and it’s about to start generating a lot of revenues. What could possibly go wrong?
According to investors, nothing. On Tuesday, they generated over $1 million in volume and they pushed the stock from less than $0.002 all the way to just under $0.01. After another trading frenzy yesterday, COTE gained 44% more and it reached a close of over $0.014 for the first time in over six months.
Investors appear to be absolutely certain that at these prices, they are buying the bargain of the century. But aren’t they overlooking something?
Well, COTE themselves place a statement (in bold) under their press releases which says: “There can be no assurance that the Company will be successful in any of its endeavors”. People don’t seem to be paying too much attention to it, but we reckon that it’s worth considering.
Also, you mustn’t forget that COTE, the company with the world’s “most advanced green internal combustion engine”, has been in some serious financial trouble for a while now. The figures in the Q1 report look like this:
- cash: $72,622
- current assets: $190,023
- current liabilities: $7,149,211
- quarterly revenues (coming from a sub-licensing agreement): $4,800
- quarterly net loss: $2,814,769
COTE, the company with the world’s “most advanced green internal combustion engine”, also has a $1.4 million mortgage loan which matures in July. The 10-Q says that they are trying to renegotiate the terms and extend the maturity date, but they’re not sure if they’ll manage to do it.
Of course, the $50 million purchase orders, if they are completed quickly enough, should solve most of these problems. You really have to trust the management team, however, and if you do some research, you’ll see that some people aren’t ready to do that.
In 1994, the SEC filed a complaint against George G. Coates, COTE‘s CEO, according to which he misled quite a lot of investors and then walked away with their hard-earned cash. Indeed, that happened more than twenty years ago, but if you check out New York Times’ article covering the scandal, you’ll notice that Mr. Coates’ claims back then were just as bombastic as they are right now. And you can see from the figures above that they didn’t come to any fruition.
Even if you reckon that this is not that much of a big deal, you should probably check out the 10-Q more closely. If you do, you’ll see that during Q1, COTE converted $426 thousand worth of debt and interest into 142,831,226 shares of common stock bringing the average rate down to just under $0.003 per share. At the end of March, the books contained $319 thousand worth of convertible notes and during April and May, COTE issued some more. As we mentioned yesterday, the discounts range from 30% to 40% which means that between April 1 and May 13, a further 101,573,462 shares saw the light of day at an average rate of $0.001 a pop.
So, it’s fair to say that while you’re waiting for the tens of millions of dollars to come rushing into COTE‘s bank account, some people might be taking their tasty profits.
