Colorado Gold Mines, Inc. (OTC:CGLD) Sold Off in Fresh Promotion

Finally, Colorado Gold Mines, Inc. (OTC:CGLD) discovered a vein of gold, only it happened to be limited just to the OTC markets. The depressed stock, sliding down on low-level selling in the past weeks, jumped a net 10% on the day on a paid promotion. Intra-trade, the ticker went as far up as 70%.

The ticker was actively promoted at the beginning of March, but instead of trust the pumps caused fast net selling. Then the emails went silent for a month and reappeared on April 8th, courtesy of SquawkBoxStocks. It seems the gold mining claims have not impressed investors as trustworthy enough. Let’s see how the company is doing financially and if it can realistically create value outside the OTC market hype:

• $25 cash, down from $3298 for same quarter of previous year

• $160,830 total liabilities

• Zero revenues

• $14 million loss since inception

As seem from the results for the last quarter of 2012, the company has undergone a long exploration stage and feels the pressure of debt and mounting losses. The latest press release from the company, coinciding with the promotional email, speaks of the debt problem. CGLD announced it arranged a 30-day payment extension for the lease of the Keeno Strike gold and silver plot.

How this payment would be made is unclear, given that CGLD has stated in its 10-Q form a going concern for the future of its business, stating that its future existence depends on finding financing or revenues. Since revenues may not be seen any time soon, debt and equity financing may be in the books, causing dilution. The company has issued 67 million shares, currently is capped just above $2 million.

But it seems CGLD has a way out of this conundrum- change names. The company traded as Cascade Springs Ltd until the summer of last year, and spiked into action only at the beginning of 2013, quickly sliding down from 80 cents to 4 cents. Now we have to wait and see what valley buying does and if a new pump will lift CGLD higher, but so far the company has shown too many red flags, a potential to correct suddenly, not to mention an inability to do long-term business.

And if those red flags are not enough, look at the record for SquawkBoxStocks, which only selects a stock for its short-term potential, leaving it to flounder once the promotion stops. The pumper participated in the Red Giant Inc. (OTC:REDG) hype, sending the stock up disproportionately, only to have the ticker wipe out most of its value. In the case of tickers making a dramatic move, think if you could afford the losses once the initial enthusiasm wanes.