CBIS, EGCT and LPAD Have News But Do They Have Viability?

Cannabis Science (OTC: CBIS), Ecologic Transportation (OTC: EGCT) and LaPolla Industries (OTC: LPAD) are three small cap OTC stocks that recently issued press releases or had news to report to investors. Specifically, CBIS has signed an exclusive distribution agreement with Prescription Vending Machines Inc. (PVM), EGCT provided an update noting that they are looking to buy regional car rental companies and LPAD reported its second quarter results. Of course, there is nothing wrong with small cap OTC stocks issuing press releases or providing investors with other updates about their activities. However, its also important to remember that just one well placed or well written news release from an OTC stock like CBIS, EGCT and LPAD can send shares soaring (and likewise, cause them to sink). Hence, here is a closer look at all three to help you decide whether their recent press releases warrants further due diligence:

Cannabis Science (OTC: CBIS) Signs an Exclusive Distribution Agreement with Prescription Vending Machines (PVM)

Cannabis Science is a development-stage company engaged in the research and development of medical marijuana. At the end of last week, Cannabis Science announced that they have entered into an exclusive distribution agreement with Prescription Vending Machines Inc. (PVM). Specifically, Cannabis Science and PVM have signed a Worldwide Distribution Agreement where CBIS will enjoy certain worldwide rights as PVM's exclusive and non-exclusive distributor of all PVM products – including MedBox, a patented biometric medicine dispensing machine that is designed to dispense medical marijuana to authorized patients. On Friday, Cannabis Science fell 3.03% to $0.0320 (CBIS has a 52 week trading range of $0.03 to $0.26 a share). However, investors may want to note that Cannabis Science had only $11k and $4k in revenues for the past two quarters (and no revenues before that); net losses of $2,790k, $3,532k, $2,407k and $1,592k for each of the last four quarters; and it ended last quarter with $10k in cash on hand (along with $1,688k in current liabilities).

Ecologic Transportation (OTC: EGCT) is Looking to Buy Regional Car Rental Companies

Ecologic Transportation offers environmentally friendly transportation products and services through three operating segments: Ecologic Car Rentals, Ecologic Systems and Ecologic Products. At the end of last week and under a press release entitled “Ecologic Transportation, Inc., moves Forward,” the company announced its recent actions towards executing its business plan (in other words, the company may be on the verge of a promotional campaign). Specifically, Ecologic Transportation noted that they have executed non-disclosure agreements with three regional car rental companies that have revenues that range from $20 million to $100 million plus they have conducted preliminary due diligence on all three. Moreover, EGCT has issued letters of intent to acquire two of these targets and the company further noted that there is significant activity in the car rental industry thanks in part to the Hertz/Dollar Thrifty proposed transaction along with the potential divestiture of of Advantage Rent a Car by Hertz's. On Friday, Ecologic Transportation closed at $0.250 (EGCT has a 52 week trading range of $0.07 to $0.52 a share). However, investors should note that Ecologic Transportation had revenues ranging from $88k to $107k for the past four quarters; net losses of $722k, $416k, $607k and $563k for the past four quarters respectively; and only $2k in cash at the end of the last quarter (along with $967k in current liabilities).

LaPolla Industries (OTC: LPAD) Reports Its Second Quarter Results

LaPolla Industries is a manufacturer of spray foam insulation and cool roof coating products for the commercial, industrial and residential roofing and insulation construction industries. At the end of last week, LaPolla Industries reported that 2Q2011 sales increased 30.1% to $5,006,398 compared to 2Q2010 but segment profits decreased to 48.7% to $737,422. LaPolla Industries indicated that its profit fell primarily due to a gross margin decrease of 7% thanks to a 47.1% increase in freight charges and a 6.9% increase in material costs (However, it was noted that a 8.7% increase in sales prices along with a 91.3% market share softened the blow). On Friday, LaPolla Industries fell 0.85% to $0.58 (LPAD has a 52 week trading range of $0.46 to $0.99 a share).

The Bottom Line. At the end of the day, financials are what companies eventually get graded for and on this front, CBIS and EGCT would receive a failing grade while on the surface, LPAD would pass.