Are Small Cap Electronic Cigarette Stocks a Healthy Investment? HPNN, SFIO, VPCO & ECIG

While there is a new "study" out claiming that electronic cigarettes, or so-called e-cigarettes or e-cigs, may contain a comparable level of carcinogens to regular cigarettes, speculative investors might still want to take a look at small cap electronic cigarette stocks like Hop-on, Inc (OTCMKTS: HPNN), Smokefree Innotec (OTCMKTS: SFIO), Vapor Corp (OTCMKTS: VPCO) and Victory Electronic Cigarettes Corp (OTCMKTS: ECIG) as these appear to be the major publicly traded small cap stocks left in the sector. I should note that all of the major big tobacco stocks have entered the electronic cigarette market (see Who Are the Big Tobacco Electronic Cigarette Stocks? MO, LO & RAI) through acquisitions or their own R&D initiatives, which might mean that an acquisition by big tobacco is off the table as an exit strategy for investors.  Moreover and as I previously noted, there are concerns about the safety of electronic cigarettes as their popularity grows while the Wall Street Journal recently reported that the FDA has been in discussions with the e-cigarette industry about a possible online-sales ban of the product.

With that in mind, here is a brief look at small cap  electronic cigarette stocks:

Hop-on, Inc. An international leader in the development and manufacture of electronics, distributed software and telecommunications services, small cap Hop-on, Inc is focused on high-volume, low-cost wholesale distribution, technology licensing, white-label solutions, and development of ancillary revenue streams in markets worldwide. Back in March, Hop-on, Inc's USAcig division announced a line of newly designed, "highly effective" electronic cigarettes and cigars had begun shipping to distributors and retailers. However, Hop-on, Inc hasn't traded since August 19th when it closed at $0.0001 and the stock is down 97.5% over the past five years. Smokefree Innotec. In the business of designing, developing, manufacturing and marketing hi-tech, nicotine and non-nicotine cigarette-like delivery devices which are completely smoke and vapor-free and tobacco-free, small cap Smokefree Innotec offers two distinguished flavors for its REAL Smokefree product: 1) VIRGINIA BLEND, a tobacco like flavor with a slight fruity after taste; and 2) COOL MINT, is a strong menthol flavor giving you a fresh mentholated after taste. According to Smokefree Innotec's website, the company plans to add several other flavors to its range of filters in the near future. However, there is no news on the usual financial sites about Smokefree Innotec and trading has been intermittent. On Tuesday, Smokefree Innotec closed at $0.0005 on August 23rd for a market cap of $316,700 plus the stock is down 75% over the past year.

Vapor Corp. Calling itself the only fully reporting, publicly traded electronic cigarette company in the United States, small cap Vapor Corp's is also the first electronic cigarette company to successfully employ a multiple brand business model as its products are available online, on television and at retail locations across all levels/channels of retail throughout the United States. In addition, Vapor Corp has private label electronic cigarette programs for regional and national retail chains and distributors while its own brands include include Fifty-One®, Krave®, VaporX®, EZ Smoker®, Alternacig®, Green Puffer®, Americig®, Fumare™, Hookah Stix™ and Smoke Star®. At the end of July, Vapor Corp reported that net sales fell 24% to approximately $6.2 million with the decrease in sales primarily attributable to decreased sales to a distributor (net of increased sales to new and other existing distributors, wholesale customers and increased direct to consumer sales) plus the company reported a net loss of $54,650 verses $193,735 for the same period last year. At the end of the quarter, Vapor Corp had unfilled orders of approximately $1.5 million from wholesale and distributor customers and its CEO noted: "Consumer demand for our products remains strong and interest in our diverse line of products is growing." On Tuesday, Vapor Corp fell 1.85% to $1.06 (VPCO has a 52 week trading range of $0.17 to $1.50 a share) for a market cap of $63.99 million plus the stock is up 404.8% since the start of the year, up 457.9% over the past year and up 4,140% over the past five years.

Victory Electronic Cigarettes Corp. In the business of designing, marketing and distributing electronic cigarettes, small cap Victory Electronic Cigarettes Corp was formerly known as Teckmine Industries and apparently acquired Victory Electronic Cigarettes LLC in April 2013 by doing a reverse merger. Victory Electronic Cigarettes Corp has filed a Form 10-Q for the period ending on June 30th, but that form is probably not going to be much help given the recent reverse merger (the company does have a slick website here). Otherwise, Victory Electronic Cigarettes Corp closed at $1.01 when it last traded on Monday for a market cap of $53.88 million and it hasn't traded much before that.

As you can see, only small cap Vapor Corp comes close to being possibly investment grade material for an investor with an appetite for risk while the other three are definitely more speculative or just to lightly traded at this time - meaning small cap electronic cigarettes may not be the healthiest investment.