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Good middle-of-the-night, CashByers,
Just to move your point along about no SEC informational filing about the Magnavape settlement conference this past Friday, let me offer a few thoughts:
1. If there were to be an SEC filing, I think it takes maybe a week to get it all together and post it onto the SEC-EDGAR website. The company's SEC lawyer would need to craft/review the draft before it went anywhere.
2. More likely than not, nothing came out of the settlement agreement conference, as the court compelled the parties only to meet, not to reach a settlement.
3. Even if the settlement conference reached "a number," the chances of Magnavape's actually writing a check aren't the best in the world. The option we read upthread here about "in lieu of settlement, just buy the company itself for something more than PLY is offering" actually would make a lot of sense if the company hadn't been ridden into the ground already, even as VHUB's agreement with PLY makes it really hard for another "suitor" to get into the picture.
Overall, there is so much more to the VHUB story than I believe will ever see daylight, pending whatever discovery comes out if/when the shareholders pursue litigation. Not that I'm that sharp anymore, but there are holes in every theory I've pursued in my mind as to how VHUB lost its manufacturing capabilities, failed to notify shareholders as to what was going on even as record first quarter financial results were being reported, and accepted the PLY proposal which does nothing for shareholders (even the three big shareholders - there isn't a salary large enough to make up for what the proceeds of 36 million shares should have brought). Folks with enough interest in the matter, a persistent personality, and good legal assistance (or a friend in the realm of investigative journalism) may figure this out, though figuring it out is not necessarily tantamount to being made whole.
Good morning, H-M, and let's see if we can figure out together what you're seeking, as I will apologize for probably being a step behind you. Here's my rendition of the underlying facts:
1. "Jasper" is the name of the company that once did VHUB's manufacturing, and that company is run by Mr. Li.
2. Jasper dropped out of doing VHUB's manufacturing for whatever reason, and VHUB hooked up with ijoy, and that turned out to be an unmitigated disaster when ijoy started producing VHUB's products for ijoy to claim as its own and to sell.
3. VHUB, as one might expect, got annoyed with ijoy, and ijoy stopped manufacturing anything for VHUB.
4. ...which left VHUB without a company to manufacture its products.
5. At that point, Mr. Li reentered the picture, this time under the banner of PLY (he is the registered agent of the LLC which is PLY's legal structure) and made an offer to acquire the "soul" of VHUB, namely its patents, leaving what would be remaining of VHUB with no proprietary products, nobody to manufacture those products even if they still had products,the $1,000,000 proceeds from PLY (to be offset by the net costs of wrapping up business), and whatever may come from the Magnavape litigation. Additionally, VHUB shareholders may see some money by shaking the trees of VHUB's directors and officers liability policy and VHUB's auditor's professional liability policy.
I fully agree that it's time to look at PLY's website, though you'll find nothing as regards investor relations as PLY is not a publicly traded company. As regards sending them an e-mail, I'm not quite sure what beyond "thank you for taking down a family-owned small business that had fatal moments of naivete in regard to always having a backup roster of suppliers" one could write them. Ironically, it might have been your wish for PLY to do the "reverse merger" thing with VHUB (ironic as that's how VHUB got started via doing a reverse merger into DogInn, and the first thing that happened was the pump and dump), so that you'd be getting/retaining VHUB shares of whatever value instead of minimal cash for your VHUB shares.
H-M, I value your talents in all of these complex matters a whole lot more than I value whatever talents I still have in my old age, so I feel that I've misconstrued your question or have left out or gotten wrong some key piece of the puzzle. Please first forgive me and then enlighten me.
One last item on my mind: as much as the crew on this board is ticked off at Kyle and friends/family and with more than sufficient reason to be so inclined, once upon a time in March 2014 at the height of the pump and dump, the 36 million insider shares were valued by the market at nearly $2 each, so the people you're all angry at haven't been untouched by all that's gone on. Maybe treat them to milk and cookies before you bring them before the firing squad.
Wishing you well, H-M, and wishing all good things to the rest of the crew here as well...
The point Hostastock raised may have mooted the point you're making about a hostile takeover. Meanwhile, I have no clue as to what additional SEC rules come into play if this were to become a hostile takeover down the road.
My bad here, of course you're right - February 16 was the date of record. However, if there is not a majority of the outstanding shares cast in favor of the transaction at the upcoming shareholders meeting, I honestly have no idea if the next set of proxy materials could change the record date for a subsequent ballot.
Here's my guess, Norfolk: PLY may be trying to buy up enough shares to be sure that there'll be a majority of shares voting in favor of the transaction when the vote will be held. If you see an 8k in the next week announcing that VHUB has established a 5% position in the company, even if Mr. Fife has sold some shares there'll still be enough votes to enact the transaction. Again, that was just a guess. Where you may be faced with a challenge is what would you do if the price per share reaches a level at which you'd be OK with exiting.
Thanks, Norfolk, and perhaps this is one more "knowledgeable and unbiased" idea that just jumped into my mind. The outstanding shares increased from around 90 million to around 94 million from the end of the first fiscal quarter to the time of the proxy material. The only way I think that could have happened would be that Mr. Fife/TCA got some more toxic "true-up" shares, so he may have as many as 12 million shares by now (or perhaps he did sell some along the way).
If by some chance he does have 12 million shares, when you add that to the major three stockholders' 36 million shares, that takes you to more than half of the 94 million shares outstanding, which means that the deal will be crammed through. ...presuming that Mr. Fife is on board with the deal.
IMHO, y'all have one hope, and it is really far-fetched, which is to recruit Mr. Fife to your point of view. What have you got to lose - go pick a wise delegate to engage him after you've checked in with Lori Winther to see if it's public domain how many shares he/TCA held as of the record date of February 16.
Norfolk, again thank you - this has been a great place for me to hang out, and I will miss it.
Good morning, all, and I've got a few comments to share:
1. Hostastock, as they used to say in the cowboy movies of my youth, you're "darn tootin'" (meaning absolutely correct) about the company having been strong-armed by a supplier into making a disadvantageous, but perhaps the only remaining, deal.
2. DC Key, thanks for your kindness, and I'll put it on my calendar for Sunday to take a look at what else you're up to. I will look at the discussion board there and see what its "personality" is. On this board, someone like me whose interest was originally that of someone who only was the target of a pump and dump scheme back in Spring 2014, I was still for the most part welcomed by the gang, with only an occasional bully asserting that a stock board should be limited to those with a direct financial interest even if such contributor might vainly imagine that he had something to offer from time to time. Feel free to PM me during Happy Hour on Friday afternoon, if you don't have an advanced membership here, and I'll get back to you with my personal e-mail address. If I determine that I shouldn't really go on the other discussion board, I'll still be happy to give you my impressions privately of the stock in question.
3. For those here who are out for legal blood, there are two more things for you to consider. First, the 10Q for the first quarter of this fiscal year was dated November 21, and although it is unaudited one might wonder if there is a legal mandate to include "subsequent events" such as the end of the manufacturing process, perhaps in the "going concern" section of the financial statements part of the report. Second, the annual 10K had an issuance date of October 13 (I'm working from memory here, so please check this out yourself), and some of what was going on as regards the manufacturing woes was already well underway by that time. You might want to see if the disclosures were sufficient. CPA firms carry liability insurance, as you may all know.
I hope the gang here has a great day and I really do appreciate having been permitted, and often encouraged, to offer my thoughts on this board. You guys all deserve better than the s*&t sandwich which you've been given.
H-M,
1. Hostastock got his MJ-suitor from the following paragraph at the bottom of page 27 of the proxy materials:
On October 5, 2016, a broker acting on behalf of a medical marijuana company (“Company B”) presented an unsolicited letter of intent to acquire the Company. On October 6, 2016, Kyle Winther had a telephone conference with the broker to discuss the letter of intent.
2. I have greatly enjoyed your presence on this board, especially the advanced grammar lesson pertaining to disjuncts. It was amusing, and hopefully to be profitable, for the gang here to learn from the proxy material that any fruits of the Magnavape litigation would be additive to the deal with shareholders.
3. As a total aside, you reminded me of my favorite legal moment during my last career years as a federal health care regulator. As I was being prepped by somebody from the Regional HHS Office of General Counsel about my upcoming one moment of fame on the witness stand where I would testify that Blue Cross of North Dakota is a "financial intermediary" for the Medicare program, I was cautioned not to go into my typical story-telling mode, but rather just to answer very simply the question put to me. I am a literal kind of person, so when I was asked on the stand "can you state your name?" I came much too close to responding "yes."
Good day to all, and I hope that, going with your simile of "like a dog on a bone," through your professional efforts there will a goodly portion of meat added to that bone. Overall, the flavor I am tasting is that company management was out-maneuvered at some key turns of both the manufacturing and purchase-transaction processes, and it's above my pay grade to know what the benchmark is for legal liability to enter the picture. But that's for private discussion among the potential plaintiffs, not for here.
Very good question on your part, Hostastock, and certainly something to be asked of Lori Winther. It would be interesting to learn what was the price per share of that unsolicited offer - and if there indeed is some sort of litigation going forward as has been brought up on this board, one measure of actual damages would be the gap between what shareholders will get from PLY compared to what they would have gotten from the unsolicited offeror.
CashByers, you've picked one reason - the Magnavape lawsuit - out of perhaps maybe three reasons to hold on, with the other two being:
1. PLY might increase their price if a majority of the 94 million shares don't vote yes (not necessarily vote no) as an enticement to move the deal along. The stock's price close at December 30 of .011 (and small change)multiplied by about 94 million shares comes out to about $1.03 million and if that were the final amount that shareholders receive without further adjustment, given that the costs of winding down are estimated to exceed the revenues, that might constitute some sort of legal defense ("the shareholders got what the stock was worth immediately before the original announcement of the transaction was made").
2. There can be some discussion about whether the Directors and Officers Liability Insurance should kick in as regards no information having been provided until today (when the story had been known much earlier) about the manufacturing situation.
I wish you well - it was one of the highlights of my sojourn on this board to make your acquaintance.
Pages 27-30 of the proxy material tell the story of how the proposed transaction came about. What I found very interesting within those pages was the story of the ijoy calamity, and here's that paragraph:
In May of 2016, the Company began to have IJOYGROUP Co. Ltd., a manufacturer based in China (“IJoy”), co-design and manufacture its “Limitless” branded vaping products and the Company received its first shipment of products from IJoy in June of 2016. The Company continued to receive product shipments of its “Limitless” branded products from IJoy until August, 2016. After this time, IJoy failed to supply the Company with products despite the Company’s continued efforts to secure supply, and purportedly manufactured and sold products under the Company’s “Limitless” brand without consent. As a result of not having an adequate supply of its Limitless branded products, the Company’s revenues significantly declined, particularly in the final three months of the calendar year ended December 31, 2016 and its working capital was significantly depleted.
I have no idea what it takes to sue a Chinese company, but that involvement with ijoy was really the beginning of the end for VHUB. It is also interesting to note from the proxy materials that another of Mr. Li's company's namely Jasper was also a manufacturer, and somewhere there is a story as to why that relationship with VHUB didn't continue. The 10K did identify, if I'm remembering correctly, the continuance of having manufacturers in place as one of the stated "risk factors" for VHUB.
...and now we know why the sales tanked in the second fiscal quarter, why the company had no leverage in negotiations for takeover-transactions, and what basis the executives will use for rejecting the claim that they misbehaved:
...the Company’s difficulty in securing product supply from its manufacturers, which resulted in a significant decline in sales in the quarter ended December 31, 2016 and the time required to locate and on-board alternative suppliers acceptable to the Company...
What is fascinating to me is that nothing of this was announced when the 10Q of the first fiscal quarter was released, a quarter which had record earnings. Certainly, roughly halfway into the second fiscal quarter, the company must have been aware that no product was being furnished to them from their manufacturers.
Incidentally, there is no need for anybody to go seeking votes against the transaction, as mere failure to vote is reckoned the same as a no vote. Incidentally, the proxy materials indicate that there now are 94 million outstanding shares, so the 36 million or whatever shares held by "the big three" are a lesser proportion of the total than ever before.
If there's anything else I find interesting, I'll be back. Otherwise, stay tuned for the results of the lawsuit settlement conference in a couple of days, because that's the last hope before this gets nasty. Remember that only shareholders as of February 16 are part of the voting scenario.
For whatever it may be worth, if anything at all, I've started to read the proxy material from cover to cover, and I'll post items I find interesting as I go along. Here's one:
In addition, the Company will retain all rights to recovery in connection with that certain lawsuit filed by the Company on November 4, 2015 in the Superior Court of California, County of Orange, Case Number 30-2015-00818492-CU-BC-CJC against Kevin Crump, an individual, Magnavape, Inc. and Magnavon, Inc. The lawsuit alleges breach of contract, fraud, negligent misrepresentation, intentional interference with economic advantage and negligent interference with economic advantage relating to the production by the defendants of the Company’s AR Mods. The lawsuit prayer is for $3,000,000. This amount includes general damages, lost profits and punitive damages against the defendants. A mandatory settlement conference is scheduled for February 24, 2017 and a jury trial is scheduled for March 27, 2017. Although the Company believes it will be meritorious in the lawsuit, the outcome of the litigation is not guaranteed and even if the Company receives a judgment in its favor, there is no guarantee the Company will be able to collect any cash proceeds awarded as a result of the litigation.
So we've finally figured out whether the lawsuit in which the company is the plaintiff might yield some extra dollars to shareholders, and the answer is yes, but only if the company wins and winds up collecting. As I've written in earlier posts, look for a settlement "on the courthouse steps."
CashByers, I believe that you do the math off of this paragraph of the Proxy materials (it is not a pretty sight):
Q: What will I receive pursuant to the Plan of Liquidation?
A: Under the Plan of Liquidation, the amount of liquidating distributions will depend on the final amount received from the sale of assets (including those sold in the Asset Sale), the amount of our liabilities, and the expenses associated with the Asset Sale and liquidation and winding up of the Company. We currently estimate that we will receive approximately $400,000 as consideration for the sale of our inventory. In addition, we estimate that our costs and expenses (i) in connection with the Asset Sale to be approximately $150,000, (ii) associated with the payoff of our other pre-closing operating liabilities to be approximately $500,000 and (iii) in connection with the liquidation and winding up of the Company to be approximately $150,000.
I think that the math above comes out to MINUS $400,000. If you then consider the $1 million from the patent rights sale that precedes the liquidation, that leaves the shareholders with $600,000, which divided over 90 million shares is something like .0067, which is a long way south from the .011 that the shares closed on Friday, December 30 right before the news was released about PLY entering the picture.
I'd like to offer this post to my board-colleagues who are (wisely, in my opinion) considering litigation against the board/executives/major-shareholders of VHUB. There will come a point, I believe, that you will find it not necessarily in your best interests to use this board to discuss potential claims and strategies. Everything that you post here will find its way into the hands of the defending parties, and that may not serve you well. Perhaps one of you will take the lead using the private e-mail mechanism of the sponsor of this board (available to all via "happy hour" Fridays at 4-5 PM ET) to "gather the troops."
As I'm not a shareholder (mentioned previously any number of times), I have no standing here to be meddling in your business. You have my opinions from my earlier postings as regards the cases, both pro and con, to be made that the Winthers et al. have behaved poorly, but as some posters (and some of these posts have been forcibly deleted because the posts violated policies pertaining to personal attacks) have emphatically stated, I'm not an investor and therefore am deemed to know jacks*&t despite my years as a CFO and the letters CPA after my name. I have no argument with my detractors; I have only the greatest respect for those who put their money on the line.
I sincerely hope that the proxy material will look a whole lot better than the recent exceptionally vague 8K material and that the gang here will ultimately prosper, even before needing the lawyers to get you there.
Amen to that, Hostastock!
I would agree with your point, but the SEC documents speak of VHUB closing up business after the transaction with PLY has been effected. If PLY were buying only intellectual property and VHUB were continuing as just a big virtual vape shop, I'd say you're totally right here. But why do the SEC documents state that VHUB will be out of business when PLY has purchased whatever it is that they'll be purchasing? Again, I don't know enough here to carry on my side of an intelligent debate, so I've just been bringing various opinions and the logic for each into the picture on this board.
I'm only saying that at least I, and probably a bunch others around here, can't honestly figure out what's being bought and what's left over at VHUB, because so much depends on the placement and meaning of a comma in the SEC filing. Hombre Muerto and I had a good exchange about this earlier in the week.
Anyone here who is absolutely certain that he's totally right in interpreting the documents and in assessing what those documents really mean to shareholders has likely overlooked something. That goes for anyone who believes at either extreme - that what's going on is an illegal shafting of the minority shareholders or that what's going on is just the start of a bargaining process that will bring lots more to shareholders than what the current price of the stock would reflect.
I appreciate your calm and well-reasoned response. Your general filter of "does this make any sense?" is invariably a very effective and helpful approach, and it totally made no sense to lots of us on this board, at least initially, as to why Kyle would risk everything to do something that looks patently stupid.
So I respect your analysis of the situation, and really it looks a lot like the part of my analysis where I start off by assuming that Kyle is not a bad actor. Still, the mountain you need to climb in your analysis is how anyone but Kyle can keep a cram-down vote from happening since he has so many votes in the bag before he even starts to make his case, and is he going to do just that at this late point in the proceedings.
Some day we'll know the whole story here, though I've said that about the Kennedy assassination since the time of the Warren Report. Enjoy the weekend!
There are really two separate issues you're referring to, makinezmoney, and I'd like to address each one, if it's OK with you:
1. As regards whether the Winthers will have enough proxy votes to get a majority of the issued and outstanding shares, which means getting around 45 million shares in their favor out of about 90,000,000 (assuming it's a matter where the denominator is all the shares, rather than just the shares being voted):
a. 10K filings indicate that the three major company/family/executive stockholders hold around 36 million shares.
b. Fife/TCA may or may not have any/some/all of his original 8 million shares acquired through debt conversion.
c. I'd be totally shocked if PLY hasn't picked up something just under 5% of the shares (low enough to avoid an 8K filing), so that's around 4.5 million shares.
You can do the math and see that even if all the individual shareholders come out in full force and vote no, it still might not be enough to defeat the resolution to sell out.
2. As regards whether this business would sell for less than a million dollar valuation, right now the most compelling argument in favor of believing that it would is that sales in the second fiscal quarter basically died, i.e. to a level of 250K per month, after the company had been celebrating a few million dollar sales-months. If you buy into the theory that "they're all a bunch of crooks" (and there's actually a good case to be made for that), then it seems to be true that the executives basically took the company down the drain after the transaction was announced on December 30, so that there wouldn't be any company left if the transaction were to be called off.
As I've mentioned in earlier posts, there are also reasons to believe that we've all missed something here and that at least the value of items not included in the Purchased Assets would take the sale of the company to well over a million dollars. My primary reason for thinking there can be some hope along the lines you're raising is that the family/officer group did not dump any of their shares during the Spring 2014 pump and dump, and in fact were greatly economically damaged by the skullduggery. So there's some basis to believe in their uprightness.
Also, Kyle appears to have grown up a lot in these intervening years, e.g. getting married, cleaning up his Facebook page from the shenanigans of his early adulthood, looking professional while doing interviews, etc. I would find it hard to believe that Kyle and friends would lose a whole potential career which would otherwise be ahead of him to strike an employment deal for himself with PLY that actually couldn't possibly be that much more than a fair sale of VHUB shares would have yielded, based upon the enormous growth of sales in these past two years and running a wildly profitable first fiscal quarter of the 2017/2018 fiscal year.
So, I wish you well and hope that you turn out to be correct (though it damages your case somewhat when your write about 25 cents per share as the end result of all this). ...and I hope that I've laid out the situation here in a reasonably balanced way for the rest of the faithfuls around here.
Good evening, Hostastock, and sorry to take so long to get back to you, as my three grandchildren were "grandpa-sitting" for a few hours.
Here's the hyperlink to the SEC filing I have in mind:
VHUB SEC Filing
Just look at the title of the filing, which I now copy over to this post:
CERTIFICATION AND NOTICE OF TERMINATION OF REGISTRATION UNDER SECTION 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR SUSPENSION OF DUTY TO FILE REPORTS UNDER SECTIONS 13 AND 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
As I mentioned in my response to Norfolk, this SEC filing is sufficient to confuse me as to whether or not VHUB [which only voluntarily had been doing 10Q and 10K filing in order to get listed in some higher order of OTC stock exchange or trading system, if I remember correctly] has just told its stockholders that, perhaps since it is going out of business after the PLY transaction anyway, it's not going to do any more voluntary SEC reporting. Of course, the upcoming proxy materials are required by the SEC.
I admit that I can't make any sense out of the entire VHUB picture and that both extreme interpretations (namely that we're all missing something that is favorable to the shareholders at one extreme - this would be Norfolk's stance as he accumulates shares - to the Winthers are behaving very badly at the other extreme) can have lots of holes poked in them. Hopefully, the attorney-experts who are having a look at the whole matter, with thanks to a couple of posters for taking the lead here, can figure this all out. ...or maybe it will take the proxy materials to help us understand what's really going on here.
You're welcome, Norfolk, and I'll use this opportunity to throw one more log into the fire. As much as it's true that the community here is awaiting the proxy material, you'll note that the recent 8K presented only the sales for the fiscal quarter (and the six months period) but not the net loss (I'm assuming a loss, given the dismal second quarter sales). Perhaps there will be a 10Q coming even before the proxy materials that will add some detail to what little we all seem to know around here.
...though there was another VHUB filing (look at the SEC-EDGAR resource if that filing isn't right here on this website) that to me is unclear but may seem to be saying that VHUB is stating that it is withdrawing from the optional aspects of its involvement in SEC filings. People wiser than I can go figure this out, if they'd like.
Finally, welcome to the Investors Hub environment. As you identify posters whom you think are constructive citizens, click on their names to get a list of other posts they have made, some perhaps related to stocks other than VHUB. That may give you some more ideas as to where you might speculate. Again thanks for your kind words.
No, Sir - per the 8K this is the lawsuit:
"...rights to recovery in connection with that certain lawsuit filed by the Company on November 4, 2015 in the Superior Court of California, County of Orange, Case Number 30-2015-00818492-CU-BC-CJC against Kevin Crump, an individual, Magnavape, Inc. and Magnavon, Inc."
CashByers, I'd GUESS that VHUB will gross $750,000, arrived at by GUESSING that their attorney's math would be that they have a 50% chance to win in regard to the matter of patent rights having been violated, and then another 50% discount for what the actual damages would be. Their lawyer will then take his one-third contingency fee, and VHUB will be left with 500K which works out to about half a cent per share. This GUESS is as good as the ink that it's not printed on. Wishing you well...
duplicate - sorry
We've both read the operative paragraph of the 8K documents having to do with Purchased Assets. We know the intellectual property is essentially being "donated" to PLY, given the purchase price. ...which leaves us wondering about the cash, receivables (which will be small since this is a cash and carry business via Internet for the most part), inventory, and that lawsuit which probably will be settled on the courthouse steps for not a lot of money.
It is fascinating how several posters today are echoing the thought that we're all missing something here. One poster thinks we're missing something negative (believing us as a group to be naïve), and other posters think we must be missing something positive. I think that the best wisdom we could find would be that of Mr. Fife, if anyone would like to ask him his thoughts. ...and I still imagine that the proxy materials will be enlightening - those documents couldn't be any more confusing than yesterday morning's 8K materials.
H-M, I would believe that a number of those shareholders of record are brokerage firms which are holding shares in trust for the benefit of investors who prefer to hold their shares in "street name."
I would have believed that as well, Hostastock, but the SEC filing states that VHUB will go out of business after the transaction has closed and final operations have wound down.
Incidentally, for those who contemplate legal action, the closing price of the stock on December 30 was .011382, and that's the last price of the stock before the 8K was issued that announced the PLY transaction. That's reasonably near where the stock is selling these days. The question is how actual damages, revolving around the claim of nonperformance of fiduciary duties by management, would be measured.
The proxy material might hold the key to understanding this story (or it just might be more obfuscation).
BobKS, you may very well be correct, and it certainly is sensible for an attorney to take the initial feasibility steps as regards proceeding with a class-action suit.
I do wonder, if we begin with the premise that Kyle was trying to trash the stock price, why the second fiscal quarter sales figure, which was way below anything imaginable, wasn't released when it had become available in mid to late January. I don't have the answers here, so I can't disagree with your conclusion, and I certainly agree in regard to preliminary legal steps.
Incidentally, I would believe that any attorney performing initial due diligence as regards litigation would begin with calling upon Mr. Fife to see if - presuming he has some of his 8 million shares left and thus is the major minority-shareholder - he too feels that he has been taken for a ride. Or, perhaps you would believe that there has been some side-deal made with Mr. Fife.
Lots of questions, few answers, some proper legal inquiries initiated...
H-M, I had not imagined when going to sleep last night that one of my first activities of the too-early morning would be, with appreciation to you, to brush up on adjuncts and disjuncts (I'm far removed in years from college freshman grammar\syntax gymnastics). Strangely enough, I had devoted a few minutes of the weekend to a mentee's wish to improve his language skills, and the theme of that moment was the subjunctive voice.
Thanks for the affirmation that reassures me that I was not pulling my rendering of the ill-drafted clause out of my ass. I do believe that VHUB via its attorney does owe the shareholder community a clarification, perhaps to be delivered in advance of the proxy materials.
...and if you have written a primer on legal draftsmanship, I will gladly read it. Even a retired CPA can improve the clarity of his expression. It's hard to imagine, I realize, but there are people who have informed me that my writing comes across as stuffy and pompous, punctuated by futile endeavors into shock-humor.
Seriously, I don't think that the shareholders of VHUB are as effed as the wholesale stock-dumping of yesterday would suggest.
I want to thank my colleagues here who have found value in finding either ambiguity or especially an interpretation favorable to shareholders with the paragraph I offered up for the board's consideration. The more I read today about this board's assessment of the Winthers' behavior, the more into the front burner of my mind crept "Hanlon's Razor" which guides us that, per Wikipedia, we should never attribute to malice that which is adequately explained by stupidity. My theory for the moment is that it was stupid to release an 8K which was not explicit to any normal shareholder as to how much to expect per-share from the transaction. Good luck to this community in regard to what the outcome of all this is going to be.
Please see my immediately prior post, the reply to CashByers. I'm not expecting any news out of the company, but I'm imagining that brighter people than I, among the players on this board, will read the various SEC documents and figure out that we've all missed something significant and will be posting between now and tomorrow morning about what they have figured out.
CashByers, have you ever read something written in Legalese and reached the conclusion that the particular sentence carries one of two diametrically opposite meanings, but you can't figure out which of the two meanings has been intended? I present to you this sentence from the Asset Purchase Agreement, and I'll challenge you to tell me whether the intent of the sentence is to say that the inventory and the rights to the Magnavape settlement are included or are not included as part of the million dollars transaction price. Here comes a sentence from Section 1.01:
The Parties hereto acknowledge and agree that Seller is not selling, assigning, transferring, or conveying to Buyer any other assets other than the Purchased Assets, including inventory and further including any rights to recovery in connection with that certain lawsuit filed by the Company on November 4, 2015 in the Superior Court of California, County of Orange, Case Number 30-2015-00818492-CU-BC-CJC against Kevin Crump, an individual, Magnavape, Inc. and Magnavon, Inc.
The "including" clause is intended to modify either the phrase "any other assets" or the phrase "Purchased Assets," and each time I read it, I decide differently. If by some miracle the inventory were not included as part of the million dollars, given how sales slacked off in the second fiscal quarter, there may be a lot of inventory that will be sold in the winding-down process. The reason I think that this may be the intended meaning of the Legalese is that earlier in that paragraph (not shown here) the description of Purchased Assets was focused upon the intellectual property.
As I've written a few times today, very little is making sense. Your construction of the situation, namely that some very unsavory behavior has occurred, may well be right, but it would be so blatant that IMHO there's no way that anybody could imagine that they could get away with it. Kyle is young and he knows he'll be relating to the investing public again sometime, so he's not, again IMHO, going to throw away the rest of his career for what must be relatively small dollars now.
The proxy materials will make for fascinating reading...maybe.
I'm hesitating to respond, decatsmeow, because the answer just isn't making any logical sense to me, but here's what I'm coming up with, which is basically agreement with your calculations that use outstanding shares in the denominator.
Let's begin with this excerpt from the 8K:
The aggregate purchase price for the Purchased Assets is $1,000,000 USD (the “Purchase Price”). The Buyer will pay the Purchase Price to the Company at the closing of the asset sale (the “Asset Sale”) by (i) cancelling all outstanding principal, accrued interest and all other obligations (collectively, the “Outstanding Debt Obligations”) payable to the Buyer by the Company on the closing date of the Asset Sale under that certain Senior Secured Credit Facility Agreement entered into by the Buyer and the Company on December 23, 2016 (the “Loan Agreement”), which amount currently totals approximately $543,110, and (ii) to the extent the Purchase Price exceeds the Outstanding Debt Obligations, paying an amount in cash equal to the difference between the Purchase Price and the Outstanding Debt Obligations.
So if the purchase price is $1,000,000 spread over the roughly 90 million outstanding shares, that's about 1.1 cents per share. If the outstanding debt obligations are a little more than half of that $1,000,000, then the shareholders would be left with about .5 cents per share.
...and those, Sir, are precisely your numbers. Beyond that, I'm not sure what your "RS" means. Perhaps it had to do with shares set aside, something like 60 million, for further conversions of Fife/TCA debt, which I don't believe happened due to PLY entering the picture and paying off that debt via their loan to VHUB.
Yet, none of this makes any effing sense to me. Why would VHUB's main shareholders in their role as executives of the company accept one-quarter of market value (half of a cent versus two cents)? Perhaps this has to do with the company not pushing product out the door in the second fiscal quarter - remember that we were all celebrating million dollar sales months last June and July, and sales for October through December clocked in at $250,000 per month per the 8K. Yet sales for the six months period of this fiscal year were the same as sales for the same period of the prior fiscal year.
The proxy material will make for interesting reading, as somebody in the Winther family will need to explain why they want to enter into this transaction. ...almost forgot, if there is any money to be made in the Magnavape suit, that isn't part of the purchases agreement, so there could be a "net-add" there for VHUB shareholders.
Somebody suggested this morning that the company will evolve from the manufacturing business to just the distribution side, but the 8K is clear that the company will go out of business once the "post-closing" activities of winding down have been completed.
Again, I think we all must be missing something here. I just don't think that the VHUB executives will get such a lucrative package as executives of PLY that they'll gladly basically write off the value of their VHUB shares (for reasons of the potential of the SEC coming down on them for violating fiduciary responsibilities, for reasons of their own ethics, and for consideration of potential shareholder-derivative lawsuits).
Maybe somebody on this board is a better reader/analyst than we've all been today and can make sense of the transaction.
Yes, they'd have to file with the SEC when they get up to 5% ownership, but I believe that in that filing they could in that filing state their intentions (including buying shares at less than the price per share they are paying for the net assets). In other words, I don't believe that the 8K filing would constrain their increased ownership beyond the 5%.
I have some nagging feeling that we're all somehow missing something here. If the three large shareholders were not selling out when the Spring 2014 pump and dump was taking place, then it's a bit of a stretch to believe that they've lost their ethics at this late time. These large stockholders are selling their stock at a price that doesn't reflect any of their intellectual efforts in creating their products and doesn't reflect the value of the brand itself (which would include the intrinsic value of the management that they bring to the company and its brand).
One could argue - and it has been argued on this board - that they're going to get compensation from PLY which will be more than the equivalent of what they could have gotten for their stock, but why would these guys take regular income over capital gains?
Again, there's a lot that I can't figure out (and thanks to Knife for the recent infusion of kind words towards me).
Yes, it would, Nathanial, though we both need to look at today's SEC filing to see if that settlement was already contemplated under the term "net assets" (or whatever was used in the filing).
I would believe that PLY is buying every share they can get at under 1.1 cents per share which appears to be the acquisition price based on 1 million dollars divided into about 90 million shares. Those extra shares plus the 36 million (using memory here) held by the three major shareholders, plus shares still held by Fife/TCA (if any left from the 8 million) should secure the vote in favor of the transaction.
That's very kind of you, CoachMarc, and much appreciated!
I feel like the star of one of those Snickers "want to get away" ads given my earlier post of the day, as I really am amazed that I just read the following sentence from the 8K:
"The aggregate purchase price for the Purchased Assets is $1,000,000..."
If Kyle and family have a stock selling for around two cents per share, why would they be selling out for what looks like barely half of that based upon 90 million outstanding shares? The insiders own about 40% of the outstanding shares, so there's a lot of incentive to negotiate a good deal.
The proxy material is really going to be interesting. Meanwhile, sales growth just flatlined from half-year to half-year, which seems to suggest that management was devoting their energies to the $25,000 consulting agreement with PLY rather than to running the existing business.
Somewhere, somehow there's something I/we have missed along the way during these six weeks from December 30. Cerp, for those who may remember him, got the last laugh after all.
Good morning, Katloose, and I'm with you on the concept that the buyout price is the real driver here. I've been trying to place myself in PLY's shoes to figure out how PLY might want this transaction to go down, so here are a few thoughts:
1. Let's begin with the assumption that the transaction will be "as advertised" earlier in the December 30 8K, and that's an acquisition of assets.
2. So what's the nature of VHUB's assets? The company has a deficit in its retained earnings account, so "the books" would tell us that in theory VHUB would need to pay PLY rather than the other way around.
3. But that of course is total nonsense, as VHUB's greatest assets are not reflected on the books at all, namely the value of the brand, the value of the patents, and the value of the managerial team brought forward into the new arrangement.
4. There were concerns upthread about whether VHUB or the Winthers own the patent rights. I believe it's VHUB, because if the Winthers owned the patents, then there would have been disclosures in the annual 10K reports about the payment of licensing fees to Kyle/Jake Perlingos, etc.
4. So here's what I think could be announced today or tomorrow. PLY will pay VHUB some percentage of their sales of VHUB products over the next, let's say, three years to reflect the value of the patents and the value of the retention of key VHUB executives. VHUB stock will keep on trading based upon the present discounted value of the expected inflows of these payments, and VHUB will pay dividends to its shareholders consisting of those inflows.
5. If I have to make a guess, and I probably can't avoid it, I'd guess the VHUB shareholders would see $10 million over three years. Overall, based on 90 million shares, that comes out to about 11 cents per share, which might lead to a present discounted value (meaning that's what VHUB stock would sell for after the announcement of the deal) of let's say 6 cents per share.
Nothing but wild guesses piled upon wild guesses here... We'll all know soon enough.