Adolescents' e-cigarette use drops for first time Chat with us in Facebook Messenger.Find out what's happening in the world as it unfolds.Story highlightsHigh school and middle school students decreased their use of e-cigarettes from 2015 to 2016 Exposure to nicotine in e-cigarettes can have more of an effect on developing brains "This is a big deal.It's important news," said Giovino, who helped develop and administer a similar survey that looked at tobacco use among adults and youth around the world.He was not involved in the new report."Now, the big question is, will it persist over time?But, at least for now, it's going in the right direction."The health consequences associated with tobacco products -- and most recently e-cigarettes -- remain clear.In December, then-US Surgeon General Dr. Vivek Murthy issued a report that detailed the adverse health effects of using e-cigarettes.See the latest news and share your comments with CNN Health on Facebook and Twitter."Whilethe latest numbers from the 2016 National Youth Tobacco Survey are encouraging, it is critical that we work to ensure this downward trend continues over the long term across all tobacco products," FDA Commissioner Dr. Scott Gottlieb said in a statement Thursday.

"Every day in the U.S., more than 2,500 youth under the age of 18 smoke their first cigarette and more than 400 youth become daily cigarette smokers."SummaryI warned investors about this company when I first looked at it in July at $5.03 per share.Since then it has fallen 70% and I have become a speculative shareholder.Though I have taken significant losses, I've decided that I would buy again at current levels.So I intend to hold until more news/earnings are released.At the beginning of July I took a close look at the booming eCigarette industry and the various ways investors can gain exposure.At the time, I recommended investors steer clear of Vapor Corp (NASDAQ:VPCO), a small-cap, pure-play, high-risk eCigarette investment.Since writing that article VPCO has fallen from $5.03 per share to around $1.50 per share, a loss of more than 70%.I actually took a speculative stab at the stock, buying shares at several points along the way down.I broke the classic rule: "Don't try to catch the falling knife."

I was reminded that there's a good reason that's a rule.With such a significant loss from a stock in an industry that is supposed to be booming, it makes sense to take a fresh look at this hated eCigarette stock.Is this company broken or is the market missing a major opportunity?Special note: In the interest of full disclosure, I sent an early version of this article to the investor relations contact at Vapor Corp in case they wanted to comment or point out areas in which they believe I am mistaken.I did not hear back from them in the window I allotted (and then some) so I have proceeded with submission to Seeking Alpha for publication.Vapor Corp - specifically, Harlan Press - if you're reading this, I welcome and encourage your response.Vapor Corp produces, markets and distributes several brands of eCigarettes.Its brands include Krave, VaporX, Alternacig and more.Because it is solely involved with the eCigarette industry, it is reasonable to speculate that larger tobacco companies may buy it either to reduce eCigarette competition or to enter the eCigarette industry.

But the fact that it hasn't already been purchased makes me think the large tobacco companies - all of which have now entered the eCigarette marketplace - don't view it as a threat...or as an opportunity.e cigarette hudson wiThe company declared disappointing earnings in the middle of August.e cigarette eroll pas cherThe Chairman, President & CEO had this to say: During the second quarter, we were affected by certain one-time internal and external events that impacted Vapor Corp.'se zigarette erlaubtability to achieve its quarterly sales objectives.This included an inventory overhang from our rebranding efforts for Krave®, the conclusion of our Alternacig electronic cigarette infomercial offering and the redirection of our direct marketing campaign towards Vaporizers.

Also, similar to our industry peers, competition continues to intensify in the electronic cigarette market, which is further amplified by the market shift towards vaporizers.As a result, total revenue for the second quarter decreased slightly by 1.7% to $6.1 million compared to the prior year quarter.I've bolded the points above that seem most important to me.The numbers don't look great here.Second quarter net sales were $6.1 million versus $6.2 million in the second quarter of last year in an industry that is booming around them.Meanwhile, the cost of goods sold rose 22.1%!!The cause of this, Vapor Corp says, is a higher mix of wholesaler and distributor sales at lower margins and sales incentives put in place to move out old inventory of products the company has since rebranded.Not surprisingly, gross margins fell sharply.Margins fell to 25.3% from the 39.8% margins in the previous year's second quarter.Selling, general & administrative expenses rose by 57.2%!The company attributes this to consulting fees and other costs associated with its uplisting to the Nasdaq and the planned acquisition of International Vapor Group (IVG).

The operating loss for the quarter was $1.7 million compared to a gain of around $27,000 achieved in the second quarter of last year.Vapor Corp stock fell 18% the day it released this earnings report, August 14.But the most alarming number is this: At the start of 2014, the company had $6.6 million in the bank.Six months later, the company only has $3.3 million.Where is the cash going?Less than two weeks after the dismal earnings report Vapor Corp and IVG, the company Vapor Corp was in the process of acquiring, announced that they had mutually terminated the purchase agreement.Considering that much of the acquisition was to be paid for in stock and Vapor Corp's stock had fallen around 32% since its earnings report and more than 55% since the deal was announced in May, it isn't altogether surprising that the deal was terminated.Still, I viewed the IVG deal as hugely positive for Vapor Corp, as IVG seems to have successful distribution channels.Namely, IVG had net sales in 2013 of $15 million, up 50% from its net sales in 2012.

The company has a strong online sales presence and several brick-and-mortar retail stores.And apparently I'm not the only one who viewed this deal as positive.The market sent Vapor Corp shares lower by more than 9% after the company announced the deal had fallen through.A look at the balance sheet shows these key facts: Accounts receivable and accounts payable essentially cancel out, so I'll ignore them.Inventories are rising, up 7.5% in the first six months of the year.Cash sits right around $3.3 million and the company burned exactly that much in the first six months of 2014.Of the authorized 50,000,000 shares, there are only 16,756,911 shares outstanding.And with the kind of cash burn I mentioned above, it seems only a matter of time before this company has to do a secondary offering - diluting current shareholders - or borrow money...unless it starts generating new revenue hand-over-fist.Considering the company's dismal recent performance, I doubt the terms of a loan would be anywhere near favorable so I expect a secondary offering.

You guessed it, that's bad too.If the company continues to lose money at a rate of $1.7 million per quarter, it will have to raise cash sometime between the third and fourth quarter of this year.The Good (Also, the weird...)This past Friday Vapor Corp posted a job description.Apparently they're hiring a "National Sales Director."Interestingly, the job posting can only be found here, as opposed to ANYWHERE on its own website.The "weird" isn't just that the company doesn't have it posted on its own website.The weird is that, through this job description, we have gained the clearest insight available to the market regarding the company's sales and growth strategy.Here are cherry-picked highlights from the job description with particularly interesting bits bolded (kudos to Drew for bringing this to me via some curious Googling): Vapor Corp currently has around 50 employees with expectations to grow to 100+ employees by the end of the year due to the number of retail stores they are opening nationwide.

* Build relationships at the HQ level with key wholesale retailer accounts (Rite Aid, Wal-Mart, The Pantry, Family Dollar, Dollar General, Hess etc)OVERALL SALES VISION: The sales strategy for Vapor Corp is growing and this role is crucial as we continue to penetrate new markets and focus on our retail growth; starting with 9 stores and looking to have 100+ stores at the end of 2015.This role is critical in the following areas: * Wholesale * Brokers and Distribution * Direct to Consumer * Online Stores * Infomercial - direct response ads * Company owned Retail Kiosk locations (currently being built) If you remember back to the discussion of the failed acquisition of IVG, the two potential highlights in that merger would've been IVG's successful online presence and physical retail presence.From this, it seems that Vapor Corp is proceeding with that strategy without IVG.This isn't altogether surprising; however, it is the first of anything specific we've heard from Vapor Corp about it.

There are also some interesting numbers here... namely that Vapor Corp, a company of 50 employees, expects to have 100+ employees by the end of the year.And more than 100 "stores" by the end of the year.The term "stores" is deceptive, as the job description clearly references "company owned Retail Kiosk locations," which are apparently "currently being built."This suggests that the company could be eyeing in-store kiosks and partnerships with large retailers or stand-alone kiosks like you'd see in the walkways of a mall.It's also unclear whether or not the company is planning stand-alone retail stores or how they would be branded ("Vapor Corp?"What is clear is that the company has identified some sort of growth strategy and is beginning to execute on it, which is good.I can only hope we won't have to wait for this person to be found, accept the job and move to Florida before Vapor Corp starts executing this strategy.I put this article together as part of my process for deciding whether to pull the plug and cut my (deep) losses, stay the course or add to my position.

The dilemma is that the stock is so depressed right now that it wouldn't take much to send it much higher.The price action this Tuesday (August 23) is a great example, with the stock shooting higher by almost 14%.With a market cap of around $25 million one of the big tobacco companies could pay a 100% premium for Vapor Corp and still only pay $50 million.For comparison purposes, consider that Altria (NYSE:MO) paid out $955 million in dividends last quarter.Buying Vapor Corp would be chump change.The big question is why.I first became interested in Vapor Corp because I viewed it as a potential acquisition target for the large tobacco companies.But I no longer see any reason for one of these companies to pick up Vapor Corp.Altria has its MarkTen brand, Reynolds (NYSE:RAI) has its Vuse brand and Imperial Tobacco (ITYBY) is buying Lorillard's (NYSE:LO) Blu e-cigs brand.Though Vapor Corp's vaporizers are not the same as the eCigarettes sold by the major tobacco companies, I see no reason for the big tobacco companies to enter a market where they sell hardware that can be filled by anybody's eCigarette liquid (e-liquid) when they are already dominating the market for hardware that must be refilled with that company's proprietary cartridges.

Also, staying out of the market for refillable vaporizers and eCigarettes means that the big tobacco companies can avoid the gray area of consumers using their products to consume marijuana and THC-based oils and waxes.I can't imagine the Chairmen of these companies like the idea of some 'punks' in Colorado legally getting high on a vaporizer with their name and brand on it.This is one of those moments where, as an investor in a losing position, I must decide how to proceed.Many would've already been stopped out of their position.From here I can cut my losses and chalk the whole experience up as the cost of tuition to learn the lesson, "don't try to catch the falling knife."I could also use the "cheap" share price to significantly add to my position, assuming I believe my original investment thesis to be intact and the market to be poorly valuing this company.Instead, I have decided to more or less stay the course.In trying to objectively ignore my losses and view the investment opportunity as it exists today, I've considered whether I'd want to own the company at current levels.

At around $1.50 per share the company has a market capitalization of $25 million, an easy acquisition for the right buyer.Though Vapor Corp's cash burn and earnings have been poor, there are significant expenses associated with the company's uplisting to Nasdaq and surrounding the IVG deal that fell apart.I'm also willing to believe some of the company's story about how its inventory issues and drop in margins are related to slashing prices of old-branded inventory to move it through the channel ahead of rebranded inventory.The company doesn't receive meaningful analyst or media coverage and doesn't actively publish news besides required SEC filings.Thus, there is little information in the market between quarterly earnings reports.The fact that I learned details of the company's strategy from a job description is evidence of this absence of material information.At the moment the only information for the market to consider is the dismal earnings and cash flow outlook I discussed above as well as the collapse of the IVG deal.

And considering that at least some of the dismal earnings and news can be explained by true one-time events (rebranding resulting in inventory overhang, supply issues, collapse of favorable M&A activity) I don't think it would take much news to send this company higher.Plus the potential for an acquisition is always there.At this point, I think an acquisition by a holding company or a private equity group looking to enter the vaporizer/eCigarette space is just as likely if not more likely than an acquisition by big tobacco.My plan is to hold the stock until the next quarterly earnings report is released, around the middle of November.I added a small amount to my position on Monday and am settling in to wait for this company to turn it around.Disclosure: The author is long VPCO.The author wrote this article themselves, and it expresses their own opinions.The author is not receiving compensation for it (other than from Seeking Alpha).The author has no business relationship with any company whose stock is mentioned in this article.