Investors Cashing In On Smokeless Nicotine Debate

If you haven’t yet noticed, new “E-cigarette” products are popping up on websites and on vending carts at local malls across America.

By most accounts, retailers who carry them have trouble keeping them in stock, but it’s not a phenomenon exclusive to the U.S. In China, the U.K. and Australia these E-Cigarettes are off the charts hits that offer users the chance to enjoy a puff without the 4,000 chemicals and toxins found in your typical death stick.

Electronic cigarettes use vapor comprised of propylene glycol, water, glycerin, flavoring, and nicotine to help soothe the urge for a smoke. In a country where 53,000 non-smokers die each year from second hand smoke, these electronic versions of cigarettes seem to be more readily accepted in public- especially given the fact that the devices don’t produce actual smoke. They produce only vapor and users are given the freedom to enjoy their habit in even the most smoker unfriendly surroundings.

Meanwhile, the FDA, big tobacco and pharmaceutical companies all seem to have taken aim at the technology, but smokers say none of them have presented solid scientific evidence that second hand vapor is harmful to bystanders. At least not yet.

Investors and speculators on Wall Street are obviously jonesing for a piece of the E-cigarette action too.

During the last few sessions, shares of Mobile Media Unlimited Holdings Inc. (OTC: MMUH.PK) have shot up from sub-penny level to nearly a nickle. All this after the London based company announced the acquisition of TzuFuma Inc.- a wholesale distributor business of Electronic Cigarettes.

Suddenly, Mobil Media Unlimited Holdings, formerly Veridigm, Inc., a development-stage company which has focused mostly on providing merchant banking type services to small, private and micro cap public companies has become the only profitable and publicly traded E-cigarette play in the market. The company announced that it had acquired TzuFuma on December 17th, but the acquisition became official only hours ago.

Robert Paterson, President of TzuFuma Inc. stated in a telephone interview: “We have ironed out all of the remaining details regarding financing and the integration of the acquisition and I am pleased to announce that no significant material changes were made to the original MOI. The Company and its associates bring a wide talent pool to the table with skill sets we believe will immediately enhance marketing and accelerate our clients into mass distribution here in the United States but more importantly Internationally.”

Several items make this story notable. The first is that the mad scramble for shares is taking place during the winter holidays- one of the most lightly traded periods of the year. And while the rocketing share price is definitely fueled by the fact that the company has an extremely low float (under 25 million shares), it’s telling that speculators who had been looking for a profitable E-cig play have finally found one.

Another company, Ruyan Group (Holdings) Limited trades only on Hong Kong exchange (HKG:0329) and while the company and its subsidiaries are principally engaged in production and sales of a series of health care products, they do produce RUYAN atomizing cigarettes, only not yet profitably.

Same for Smokefree Innotec, Inc. (OTC: SFIO.PK). That company has had no revenue and is still operating in debt, but that didn’t keep shares from running to $.55 last year. It trades today at under $.03.

By comparison, MMUH filings show that year to date, TzuFuma Inc. has generated just under $5,000,000 (Five Million) in gross sales and Paterson seems to feel that figure will increase in the coming year. “We anticipate gross revenues from domestic sales to be in the region of 12-14% of our total gross revenue for fiscal 2010,” says Paterson. “We fully anticipate 2010 to be a bumper year.”

The parent company is now doing its part to make sure they are under full compliance and casting the best image going forward.

Gary Freeman, CEO of MMUH, stated: “Our timely production of unaudited financials for MMUH and our bringing Pink Sheets filings towards full compliance is key to the Company’s future plans. We will publish TzuFuma’s unaudited financial statements for the period of 2nd Qtr-4th Qtr 2009 in early 2010.

Don’t be surprised to see investors cash in profits from this novel approach to the old habit, even as the debate on these devices has intensified in recent months. Front page stories in USA Today and editorials in other major newspapers such as the New York Times and Los Angeles Times have all taken on the subject.

Even California Governor Schwarzenegger recently vetoed a bill that would have denied California citizens the right to purchase electronic cigarettes.

“Unfortunately, many of the arguments we`ve seen recently against electronic cigarettes have been driven by fear of the unknown, insufficient evidence, political agendas, and ignorance about our members` products,” said former U.S. Congressman and Electronic Cigarette Association (ECA) President Matt Salmon. “As in the case of California Governor Schwarzenegger, we’ve found that reasonable people, when willing to honestly and intellectually evaluate the information about electronic cigarettes, find that these products provide smokers a viable alternative to combustible tobacco cigarettes.”

A recent warning by the Food and Drug Administration (FDA), which proponents of electronic cigarettes insist was based on a flawed, narrow study, have also contributed to the growing debate.

Salmon says the FDA study was extremely narrow in scope and failed to follow established scientific protocols. The Electronic Cigarette Association has called on the FDA to take a more scientific approach and to work with ECA members before making any hasty decision to ban electronic cigarettes altogether.

“We understand that to protect the public, some form of regulation may be necessary, and we welcome that,” said Salmon. At the same time, Salmons and his organization believe a ban would leave smokers without an alternative to combustible cigarettes, whose toxic substances and life-threatening health effects are clearly documented and which the FDA has no intention of banning.

All known e-cigarettes are imported to the U.S. and according to a report in the Wall Street Journal, the FDA considers them illegal because the agency feels they are either “unapproved drugs or medical devices.” So far, however, only 50 shipments have been blocked at the border. The agency is considering other enforcement actions against importers of these products and the domestic distributors. But, it is also facing litigation questioning whether the FDA has any jurisdiction at all over e-cigarettes.
The American Cancer Society has also joined the debate against the electronic devices, but as one anonymous supporter of electronic cigarettes points out on a popular website, “In criticizing e-cigarettes, the American Cancer Society has a blatant conflict of interest that it fails to acknowledge: a secretive multimillion dollar exclusive endorsement contract with GlaxoSmithKline (NYSE:GSK) to promote Nicoderm, Nicorette and Commit (which is why the ACS name and logo appear on all of these GSK products sold in the US), which almost certainly contains a non compete clause prohibiting the ACS from endorsing any competitor nicotine or tobacco product.”
Douglas Bettcher, the director of the World Health Organization’s Tobacco Free Initiative, told the Associated Press that “there’s no experience in pharmacology yet of nicotine replacement therapies which actually inhale nicotine in the lungs.” Replacement therapies such as skin patches and gum have undergone thorough clinical testing, Bettcher said. For these reasons, “the WHO does not consider the electronic cigarette to be a legitimate nicotine replacement therapy.”

This debate may continue to get more interesting for everyone involved, especially now that Wall Street appears to be taking sides.