Product and Project Updates Sent These Small Cap Stocks Soaring: Should You Join the Party? (XDSL, ELTP & INIS)

On Tuesday, small cap OTC stocks mPhase Technologies (OTC: XDSL), Elite Pharmaceuticals (OTC: ELTP) and International Isotopes (OTC: INIS) provided either product or project updates – causing the stocks to make respectable gains. Specifically, mPhase Technologies (XDSL) has reported that it has received refined prototypes that will soon be unveiled, Elite Pharmaceuticals (ELTP) has made an initial shipment to a customer and International Isotopes (INIS) has updated investors about the lengthy licensing process for one of its projects. However, was all of this news enough to justify the gains made by mPhase Technologies (XDSL), Elite Pharmaceuticals (ELTP) and International Isotopes (INIS)? Here is a closer look at all three small cap OTC stocks to help you decide on a trading or investment strategy:

mPhase Technologies (OTC: XDSL)

mPhase Technologies is introducing a Smart Surface technology enabled by breakthroughs in nanotechnology, MEMS processing and microfluidics. According to mPhase Technologies, this Smart Surface technology has potential applications within drug delivery systems, lab-on-a-chip analytic systems, self-cleaning systems, liquid and chemical sensor systems and filtration systems. On Tuesday, mPhase Technologies announced that it has received refined prototypes for a new automotive and marine product that features advanced battery technology from an automotive engineering group in Europe. Apparently, internal performance and safety testing is now underway and the product will likely be unveiled during the first quarter of 2012. This news caused mPhase Technologies to rise 14.29% to $0.0024 and a market cap of $6.65 million. However, mPhase Technologies has also reported revenues of zero (most recent reporting quarter), $1k and $18k for the first three quarters of 2011 along with net losses of $6,179k (most recent quarter), $435k and $1,324k. As of September 30th, mPhase Technologies had reported having just $2k in cash to cover $5,826k in total liabilities. Nevertheless, mPhase Technologies did report late last year that an independent valuation firm has estimated a minimum valuation of $40 million for the company’s portfolio of patents and intellectual property (IP). Hence, why the company only has $2k in cash on hand needs some explaining.

Elite Pharmaceuticals (OTC: ELTP)

Elite Pharmaceuticals develops oral sustained and controlled release products. On Tuesday, Elite Pharmaceuticals announced the initial shipment of methadone hydrochloride 10 mg tablets to ThePharmaNetwork, LLC, under a commercial Manufacturing and Supply Agreement. It was noted that the methadone hydrochloride tablets are the generic equivalent of the Dolophine(R) hydrochloride 10 mg tablets which had annual sales of approximately $44 million based on September 2011 data. Investors obviously liked what they heard as Elite Pharmaceuticals rose 33.65% to $0.114 (ELTP has a 52 week trading range of $0.04 to $0.26 a share) for a market cap of $29.88 million. However, investors might want to note that Elite Pharmaceuticals has reported revenues of $274k (most recent reporting quarter), $990k and $1,213k for the first three quarters of 2011 along with operating losses of $592k (most recent reporting quarter), $337k and $730k. Nevertheless and at the beginning of the year, Elite Pharmaceuticals did announce that it has a financing agreement in place where it may sell up to $5 million worth of non-convertible Series F Preferred Stock to subsidiary of Socius Capital Group, an investor in emerging life sciences companies, over a two-year period. Hence, there might be a good reason to at least not completely ignore Elite Pharmaceuticals but I am not particularly excited about the stock either.

International Isotopes (OTC: INIS)

International Isotopes manufactures a range of nuclear medicine calibration and reference standards, high purity fluoride gases and a variety of cobalt-60 products. On Tuesday, International Isotopes announced that the licensing for its depleted uranium project remains on course as the Nuclear Regulatory Commission (NRC) has announced the start of the final public comment period on the draft Environmental Impact Statement (EIS) for the Company's planned depleted uranium de-conversion facility. This means that in the coming months, the exact timing of the NRC license issuance will become more clear and International Isotopes can then complete financing and start construction on this project. Investors or traders apparently liked the update because International Isotopes rose 12.5% to $0.180 (INIS has a 52 week trading range of $0.05 to $0.31 a share) for a market cap of $64.30 million. However, investors or traders alike should note that International Isotopes has reported revenues of $2,230k (most recent reporting quarter), $2,615k and $2,413k for the first three quarters of 2011; net losses of $4,871k (most recent reporting quarter), $1,670k and $1,715k; and had $2,518k in cash and $1,171k in receivables to cover $2,508k in payables and $4,567k as of September 30th. Hence, everyone should be asking how International Isotopes intends to finance the construction of this new facility.

The Bottom Line. I would be luke warm to mPhase Technologies (XDSL), Elite Pharmaceuticals (ELTP) and International Isotopes (INIS) but I also would not completely rule them out – especially if one is a trader.