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Good morning, BobKS, and I commend you on your "catch" via cross-referencing data sources. I would agree that the departure of the guy responsible for product development would be a serious negative development, and I would add that any delay in the company's furnishing an 8K, as contrasted to their prompt issuance in regard to Justin Moreno, would be an even more serious development.
But maybe the most negative development would be the instant overhang of the shares owned by Perlingos (just under 13 million per page 75 of the 2015 10K). I quickly hasten to add that I'm not familiar with SEC rules on departing executives needing, or not needing, to register their shares or in any way being compelled to contribute towards maintaining an orderly market.
As always there will be (at least) two sides to the story, and I look forward to the company's side of the story. Leaping to conclusions is a longstanding weakness of mine which I'm trying to address in my old age. I bet you're keeping an eye out on the ijoy website (I haven't looked to see if there is one) to see if they've added a new executive...
Again, my compliments and wishes for a good Labor Day weekend.
Gustavo, FWIW I think the nature of the beast as regards VHUB is that it's got a (my guess) 40% shot of becoming profitable and getting its debt taken care of, a 35% shot of just keeping itself as a going concern but being so stock-bloated by toxic debt conversions that the stock price will just bump along, and a 25% chance of being destroyed by a combination of toxic debt, the FDA, and the limitations inherent in family-management of a company.
If the first scenario comes to pass, let's say that the stock will be worth 10 cents per share, if the second scenario comes to pass the stock will be worth 2 cents per share, and if the third scenario comes to pass the stock will be worth zilch. So, on a weighted average probability calculation, the stock would be worth 4.7 cents versus around a penny these days.
Everybody gets to figure out their own possible scenarios and the probability they'd attach to each scenario, coupled with their mind-set on taking risks (somebody with my aversion to risk would just not invest in the penny stock market at all - I just sort of have an academic interest in it).
Overall, as this company has crossed the million dollars in sales per month benchmark, I would find it hard to believe that they haven't turned the corner in becoming profitable. ...with the question being the number of issued common shares that will have a stake in that profit.
BobKS, I just checked the SEC-EDGAR website to see if there was a new 8K not yet on the ihub website, plus I just checked my e-mail to see if Paul Knopick had issued a press release, and I'm not finding anything that would corroborate your assertion that Jake Perlingos has gone the way of Justin Moreno. I'm not saying you're wrong, only that I'd be interested in your sharing the source/documentation of what really would be a highly negative event for the company. Thanks!
Welcome to the VHUB discussion - before you are treated more critically in regard to your belief about timing of the 10Q,let me quietly remind you that the company is on a June 30 fiscal year. The company tends to report about a month late via the 10K on its annual results and related reporting, so perhaps expect this year's 10K to be released in mid to late October.
Until that document reaches us, perhaps we will learn of August and even September sales, and continuing the trend of sales in excess of $1 million per month may be at least as impactful as learning from the 10K how much dilution has occurred via debt conversions into equity.
Good luck as regards VHUB and have a good day!
Go to Page 72 of the most recent 10K SEC submission (last October) and you'll see that Justin Moreno's comp was 132K annually.
Deagle, please take a look at this SEC filing from early June:
Fife's Shares
And so, you'll see that the overhang began at 8.1 million shares. What proportion of these have been sold when VHUB has issued their positive reports on sales these past two months, I don't know.
If a shareholder would like to call the stock's transfer agent to see if the issued shares have climbed beyond 81 million due to additional conversions, that might not be a bad idea.
Very impressive indeed! It took only until roughly mid-month this time rather than near the end of the month last time to report the million-dollar sales month. ...which proves that the June sales figure was not a fluke at all.
Now don't be surprised if the company still needs more financing, as receivables and inventories tend to grow as sales grow. ...BUT,financing should be relatively easy to come by, given that the sales are really taking off and that the emphasis is on international sales where the FDA doesn't pose the same issues as in domestic sales.
Typenex/Fife got around 8 million shares at roughly 1.6 cents in the spring via debt-conversion. The stock will "run pretty good" (my opinion anyway) if Fife unloads and the next big overhang is Gotama's forced-conversion shares (roughly 4 million) at 15 cents.
Have a good day, everyone!
Good morning, BobKS (and I still get a kick out of the pun inherent in your screen-name!),
Last year, the 10-K was issued on October 13, so we've still got nearly two months to wait until we learn whether the great June sales also led to the best quarter's sales in VHUB's history. On the way to October, we still might learn on or around August 28 whether July sales were in the general neighborhood of the sales in June (July 28 was when the word came out about June sales exceeding $1 mil). ...and at any time we might learn something about the company's progress in securing non-toxic financing.
Have a good day for yourself.
The thanks belong more to Hostastock, and I do agree with you that management has positioned VHUB as an (perhaps "the") industry leader in an industry having such explosive growth, as Hostastock pointed out a moment ago per Wells Fargo's projection.
If this company survives, it will thrive. The "survival" question will in part be answered by if/what the company tells us about July sales in about three weeks (in other words, were the June sales the new normal or a spike). Further, the survival question might be answered definitively if the company were to report that it has secured non-toxic financing (whether debt or equity) that would take Typenex and related entities out of the picture. In the short term, I believe that Typenex has a high degree of influence on how the stock will perform.
You're absolutely right, Maddstacker, about the applicability of the new regulations. Meanwhile, giving due credit to Hostastock for his post #5270 of mid-May, here's what VHUB told its dealers:
To Our Valued Customers,
With the recent FDA regulations, there is a lot of uncertainty and a lot of questions that we are being asked. We have been researching the new FDA regulations internally as well as with our team of lawyers. I would like to summarize what intermediate conclusions we have asserted internally as well as with our lawyers. We will continue to research and come up with a more detailed assessment of what the FDA regulations entail. We assure you that we will do everything in our power to continue our longevity approach in the vaping industry. We want to give you peace of mind that you can continue operating your vapor store for years to come. We will help guide you on some of the major regulations that you must abide by in order to continue operating your business. There are some things you can do to help with the current FDA regulations and we will detail them below.
From our assessment there are some key takeaways that we have assessed from reading the full FDA documents in conjunction with our lawyers. In the FDA documents there is a regulation that vapor stores will be prohibited from mixing eliquid in their stores. We highly recommend that you cease from doing in store mixing, and start bringing in certified lab produced eliquid. Retail vapor stores will no longer be allowed to give out “free samples” which means, no free tasting bar. One suggestion that we have come up with internally is to have customers purchase a tasting membership at your price discretion to allow them to continue sampling eliquid lines in your retail location. You could also charge a customer a fee upfront for your tasting bar, and give them a credit at purchase. The FDA has required that all eliquid has a full warning description on the label. An eliquid label should have the warning label- “WARNING: This product contains nicotine. Nicotine is an addictive chemical” as well as “This product is made from tobacco.” If your eliquid brands do not have these, we highly suggest brining in an eliquid line that has these warning labels. In other regulations, California has increased the legal smoking age to 21. We highly suggest that you make sure to do age verification with a government issued document if you have not been doing so already.
There are some regulations that are for importing, exporting, and manufacturing. We are working with some of the best experts in the industry to make sure that we are compliant with our manufacturing processes and abide by all FDA regulations. This will ensure that you can get quality products from Vapor Hub International, Inc. that will be in compliance with these FDA regulations. We assure you that we are here for the long term and will do everything in our power to save our industry, and provide you with products that can continue to sell in your vapor store. There is already one ecig company that has filed a lawsuit against the FDA, and we can only assume more companies will follow suit. I will continue to update you with any more relevant information in the future in regards to the RDA regulations.
What you can do to help: Send an email to support HR 2058 which could save our industry- http://cqrcengage.com/casaa/app/write-a-letter?0&engagementId=153933 Send a letter to your Attorney General to save our industry Sign the petition to overturn the RDA’s ruling - https://petitions.whitehouse.gov//petition/overturn-fdas-ruling-ecigarette-classification-tobacco-product ; Key Takeaways: Vapor stores must cease from mixing eliquid on site Eliquid bottles must have warning labels Legal smoking age in California is 21 No free tasting bars
Kyle Winther
Chief Executive Officer
Both you and Chance are correct, I believe. Let's copy into this posting a paragraph from the source you referenced:
The U.S. Food and Drug Administration, which announced the regulations in May, will allow e-cigarette devices introduced before the regulations came into force to be sold for up to three years while companies apply and await regulatory review.
So, on the one hand, there truly is grandfathering of products introduced within a time-window, but, on the other hand, that grandfathering will be for only a limited period ("up to three years").
You would argue that three years might as well be a lifetime in terms of penny stock horizons.
Incidentally, this was all covered by guidance that the company issued to its dealership community, and I believe that Hostastock shared this guidance with this board several months ago. If I can find a few minutes, I'll go looking for it and bring it back up here for everyone to mull through.
Maddstacker, welcome to this board; your enthusiasm is a gift.
Regarding your comment about VHUB's debt load, let me copy into this post some relevant pieces of the liabilities section of the balance sheet as of March 31 per the 10Q:
Notes payable - short term 291,723
Current portion of convertible notes payable, net of unamortized debt discount 154,628
Notes payable- long term 24,673
Convertible notes payable, net of current portion and unamortized debt discount 190,161
While all that totals up to nearly 600K more than the 87K of debt per your post, that's still not a whole lot of debt for a company that has the revenues VHUB is running (even if the $1 million for June were a one-time good time).
The real questions for right now are how many, if any, additional common shares were issued related to debt due for repayment on June 15 (i.e. have the common shares grown beyond 81 million per the last SEC filing?) and what are Mr. Fife's intentions (i.e. Typenex, Iliad, etc. which are his companies) regarding his most recently reported 8 million shares held. The other questions, to be answered later, namely is the June revenue the new normal and why didn't the company tell us about all of the fourth fiscal quarter sales instead of just the last month of the quarter, will determine the direction of the stock in the autumn.
Again, welcome to this board.
Good morning, Hostastock,
Per the most recent 10Q filing covering nine months ended March 31, revenues totaled $4,456,933, which comes to around $500,000 per month. If indeed the June revenues number is characteristic of "the new normal" of, say per your note, $900,000 per month, then I'd be every bit as bullish as some of the newer and most enthusiastic posters on this board. You and RPH certainly would have a better intuitive sense of the situation than I do, given your ongoing direct relationship with the company, and I accordingly respect your opinions more than my own.
Let's see if we can agree on what we're looking to happen in the coming three months:
1. Hopefully before the end of August, there will be another positive PR, this time relating to July sales, that will confirm that $900,000 in monthly revenues has become the new normal.
2. It would be very positive for the company and its stock if the sales growth will convince whomever the company is trying to involve in non-toxic financing to go forward and invest.
3. When we do see the 10K sometime in October, here's what I'll be doing:
a. Doing my subtraction of the nine months bottom line from the full year bottom line to see if the fourth quarter by itself was profitable.
b. Doing the same subtraction as regards gross revenues to see if indeed the fourth quarter sales were at least $2.7 million.
c. Looking at executive compensation. If the three top dogs didn't increase their individual annual salaries of 150K which was last year's number, that would be helpful.
d. Reviewing the capital structure to see how much dilution has actually occurred and what the fiscal year-end debt actually turned out to be.
e. Perusing the footnotes carefully for "subsequent events."
f. Looking for commentary as to the breakdown between domestic and international sales.
In a much tighter time frame, namely this week, I'll be fascinated to see if Friday's intraday high will be surpassed. That .016 level which was Mr. Fife's conversion point for 8 million shares really could be a challenging resistance to overcome.
Overall, I have the same impression which you have been conveying in a reasoned and reasonable manner, namely that if there are 81 million (or not that much higher by now) issued shares out there, and if the company is doing $10 million in annual sales (and, giving proper respect to Gustavo's recent post) and is at breakeven or at least damn close, then the stock is already worth multiple pennies - just rounding, 80 million shares at 5 cents per share would make the company worth $4 million which seems to me to be a very modest valuation.
Have a good week!
Gustavo, your question is actually a valid one, and we'll learn the answer in mid October, given historical date-patterns of VHUB's fiscal year-end reporting.
Skepticism aside, the posters who are making the case about how the push in international sales is insulating the company from the FDA are making a powerful point about not only the "resilience" of sales but also about the quality of management's strategic thinking.
Putting my skeptical hat back on for another moment, surely the company knew what their April and May sales were when they recently reported their June sales. If April and May had been good months for them, I would believe that the company also would have had something to say about the fourth fiscal quarter as a whole, rather than just concentrating upon how wonderful June sales were. There's a temptation, with Mr. Fife's units owning a bunch of shares, to be selective in a positive direction in matters of events-reporting. But to be fair, the very last thing that the Winthers would want would be a pump and dump, as there's every reason to believe that they are keeping their shareholdings intact.
Overall, there's an intriguing "mixed bag" here, centering on the question whether the new almost religious fanaticism in the stock will attract sufficient followers such that the overhang of shares owned by a lender who'd probably like to be made whole will be overcome. (Yeah, I know that's a long, clumsy sentence, but you get my point.) If the company can springboard the news of the June sales into obtaining new debt or equity on a non-toxic basis OR if the litigation going on against the FDA has any success at all OR if the current quarter will be reported as going well (i.e. June didn't "borrow" from July sales), all the fanaticism about the stock will be proven to have been correct.
For the moment, let's see if the Friday intra-day high will be broken early in the new week.
I would wonder why - if it took until 28 days in July to report June sales volume - you'd believe that we'd hear about July's sales so much more quickly.
I'd agree, though, with your general theme which is that, if the company has something good to report as regards sales, then they'd have every incentive to issue such a report as early as possible for three reasons:
1. to facilitate their attempts to secure non-toxic financing.
2. to reassure the accountants among us that the strong June sales weren't partially a matter of deferring May sales into June and/or accelerating July sales into June. The last month of a fiscal year is a challenging month in which to report record sales, as that does invite increased scrutiny.
3. to please their shareholder community, whether longer-term holders or those "new to the game" such as the holders of stock upon debt-conversion.
Incidentally - and this supports MADDSTACKER's post 5466 - the real resistance might be at around .016 which is around the spot where I do believe a little over 8 million issued shares came into existence through debt-conversion according to a couple of SEC filings. That would leave a lot of room for the stock to run from current levels.
Have a good weekend!
Thanks, Tripletail, your explanation makes perfect sense. The intriguing question then becomes who's buying the dumped shares, presumably those who actually do believe that the company has a reasonable shot of turning the corner via increased volume, or might be able somehow to refinance the remaining debt in some non-toxic fashion, or the overall outlook of the entire industry would improve if the FDA regulations get pulled back.
I do remain surprised that the Winthers don't just repay the debt personally, as the amount of the debt is likely less than the decline in the value of their shares via the toxic dilution process.
...and of course welcome to this board, as a bunch of good questions, interesting exchanges of opinions, and words from the front lines of selling vaping products are found here just about all the time (more than either cheerleading or trolling).
Good morning, board-colleagues,
I keep on getting back to the debt covenant about how the lender can't convert into so many shares that their ownership of the company would get up to even 10%. But I'm not being successful in figuring out what happens when debt principal is not being repaid at a time when the company doesn't have the funds and there is impermissibility to convert into enough shares. I submit for the group's consideration that perhaps the concept of toxic debt is not in play when there is a hard limit on conversions.
...which leads me to resurrecting an idea that has appeared on this board some months back and which I've seen brought up on other boards, namely for a shareholder to call the transfer agent to see how many ISSUED shares there are at that particular moment.
Here's an excerpt from the most recent 10-K and one of you who happens to be a shareholder (I'm not) can give them a call if you'd like:
As of September 25, 2015, an aggregate of 72,455,606 shares of our common stock were issued and outstanding and were owned by 6 stockholders of record. Island Stock Transfer Inc., Roosevelt Office Center, 15500 Roosevelt Boulevard, Suite 301, Clearwater, Florida 33760 (Telephone: 727.289.0010) is the registrar and transfer agent for our common shares.
If I'm remembering correctly, the issued number of shares went up to something like 81 million during one conversion in this fiscal year, and reference was made in the SEC document that via this conversion the debtor had reached its 9.99% limit of ownership.
May we all live and be well until the release of the 10-K, presumably in October if there is no delay, and you all may see a significant buying opportunity between mid-November and mid-December when tax-loss sales are taking place. ...though it's always possible that new financing, success on the legal front in regard to FDA, or a strong report on overall sales (not just a fragment having to do with some new product) could happen at any moment. Finally, the first item I'll look at when the 10-K appears is executive salaries (if the three top folks have increased beyond 150K each from the last 10-K, then I'd reach a higher level of suspicion).
Gustavo, brevity was never my gift, and I concur with your summary.
There are three (that I can think of) events that could turn the stock around:
1. Some definitive word from the company that sales really are growing fast (as contrasted to the periodic PR's that speak of this new product or that new product doing well right after launching) and that the bottom line has turned positive as expenses have been restrained while revenue has been growing.
2. Victory on the regulatory front as regards the ominous clouds the FDA has provided.
3. Refinancing of remaining debt in a non-toxic manner.
I see that there's a new 8K available for viewing in springboard fashion from this website. I'm not sure that I'm as analytically literate as I was pre-retirement, but let me take a shot at describing what I see in the 8K...
First, it's not good news that there wasn't a simple statement that the 81K in Iliad debt had been paid off, especially as we've seen pieces of good PR from VHUB about how quickly new products are selling.
Second, the increasing toxicity of the convertible debt is really beating down on the company now. Here's the conversion formula, abstracted from the 8K:
As used herein, “Conversion Price” means a price per share equal to 70% of the average of the three lowest closing bid prices of the Company’s common stock in the twenty trading days immediately preceding the applicable conversion.
It's not good that it's the closing bid prices, rather than just the closing prices, of the stock that are the centerpiece of the formula. So, just rounding off a bit and making some guesses, if you've got an average closing-bid price of, say, .003 at some point in time, then 70% of that will be .0021. So how many shares do you get when you divide, say, $80,000 in debt by $.002 per share in conversion rate (forgive me for being so lazy by rounding off): 40,000,000 shares.
So that's a matter of increasing the issued shares by something like 50%. BUT, there's a provision in the documents that prohibits conversion if it will take Iliad to owning 10% or more of the issued stock.
So frankly I just don't know what happens next, and maybe one of you guys can figure it out. Strangely enough, as has been noted in a prior set of conversations on this discussion board, it wouldn't be the worst thing in the world if the company became debt-free at the "cost" of its issued shares increasing by even something like 400,000,000 shares, presuming that the company will actually become profitable if there's no interest to be paid. Getting back to RPH's comment awhile ago, modified by Gustavo's comment, if this company is just plain viable at let's say $10 million of annual sales volume, the stock's got to be worth more than it's selling for these days.
Wishing all a good weekend...
Good morning, Gustavo,
I believe you've offered a great question, and I'll give my answer to it - but please keep in mind that I'm no expert in penny stocks, just an old CFO (and a nonprofit organization CFO at that) who follows VHUB just because it's an interesting situation in a number of ways.
As I looked at the bid and ask this morning, I found the numbers to be .0039 and .0065. It seems to me that the market-makers would be thrilled to have such a high spread; that .0026 spread is two-thirds of the bid price. What I think it all means is that if somebody wants to unload in a hurry, they'll get clobbered, and if someone wants to buy right away, they'll pay through the nose. And so what happens is that right after somebody unloads low, there's somebody who jumps right in - and buys high.
Also, and in a more sinister line of thought, there seems to have been a lot of "painting" going on in this stock over the two-plus years that I've followed it. ...and right now there is a lot of motivation to paint, actually in both extremes. If Typenex believes that the company will run the profitable fourth fiscal quarter that at least I think it may run, then they wouldn't mind in the least if the stock goes down in the short run so that they might "toxically convert" and have more shares ready to spring upward this autumn. If the Winthers would like to retain control of the company in the midst of conversion, then they could have somebody buy a hundred shares at the end of the day at the ask-price, as the conversion formula involves average closing prices for a number of days.
Anyway, that's my attempt to give you an honest response this morning. Some of the real experts on this board (one tentative measure of an expert is to see if a poster moderates any boards on this website) will likely give a better answer.
Have a good day, Sir!
Good morning, Gustavo, you've got your "crystal ball thing" going this morning, as my last look at VHUB shows:
0.0034 ? -0.0012 (-26.09%)
Your middle-of-the-night post predicted a 24% drop, and nobody will quibble over the 2% difference at the moment.
I'm not sure who's left to sell other than Typenex trying to temporarily drive the price down so that the next conversion of debt to equity will require more shares (and then word of a high sales volume quarter with a positive bottom line will come in mid-October and drive the stock higher so that Typenex can recoup its loan proceeds).
Anyway, if you feel like doing any more prophesy, go right ahead and please share.
Have a good day for yourself!
You are absolutely correct, RPH. Not needing a couple of million dollars (my guess) for FDA approval processes two years down the road would indeed create a launching pad for the stock (and I guess for the vaping industry as a whole).
Gustav, first, the "crickets" of a week and a half ago sure departed today all of a sudden, and we even have a new moderator on this board.
Second, I'd like to expand on the comment you offered about the need for a profitable quarter. This is a company with a June 30 fiscal year, so we will see fourth quarter and full fiscal year numbers in mid-October rather than in mid-August. This also infers that the results of the first quarter of FY2016/2017 (which technically is the "current" quarter) will be seen just a month after we have seen year-end results. Accordingly, the company will need both bottom lines - the last quarter of the full year and the first fiscal quarter of the new year - to be positive.
...because then we enter into the tax-loss selling season which tends to run from mid-November to mid-December, and virtually everyone who's in the stock is under water right now which means more downward pressure on the stock unless it substantially recovers to the prior trading range of 2 cents to 3 cents.
Given the trend of improving gross margin percentage coupled with press releases that surely give the impression of increasing sales volume, I'd actually be optimistic as regards the results for two quarters from April 1 through September 30.
But what would really be perhaps even more meaningful would be for the company to speak about capital financing plans - whether at the one extreme it will just capitulate to conversions from debt to stock at low stock prices or whether at the other extreme the primary owners would almost take the stock private by loaning funds to the company to take out Typenex and others.
We'll see soon enough, I guess....
Just to add perspective, Hostastock, to your commentary about this being perhaps VHUB's best quarter ever in regard to sales, I took a quick, not necessarily thorough, look through SEC filings and the most successful sales-quarter I found was for the three months ended September 30, 2015, in which reported sales were $1,962,345. The company should be profitable at this level of sales volume, especially - strangely enough - if there's been some more dilution, as interest expense would then be taking less of a bite out of the bottom line.
I remain curious as to how the debt due on June 15 was handled, remembering that it took around a month to learn how the May 15 debt-due turned into newly issued stock. I guess we'll know soon enough.
Beyond that, it's refreshing to see some new faces on this board, and I think that you and RPH will be really helpful to them as you continue to contribute real-life perspectives about VHUB from your vantage point of dealing in the product line.
I probably shouldn't try to imagine myself as a "voice of reason," because I'll, likely deservedly, get taken apart by both sides. But what the heck, it's a peaceful Sunday morning, so here goes...
1. VHUB as an operating company, having products reported by knowledgeable people as being excellent, is not a scam.
2. Debt, which started out as not necessarily being toxic, has become toxic, because the greatly reduced stock price figures into the formula with which debt gets converted into issued common shares.
3. The FDA regulatory threat is very real, not because the products won't be compliant, but because it will be expensive to prove that compliance.
4. As long as the majority of the common shares are owned by Winther family and friends, executive salaries can be raised (from 50K annually to 150K annually, if you look at 10K reporting), consulting contracts can be let out to related parties (like the contracts to the Winther CPA firm), and intra-family leases of property can take place. I'm not saying that any of the contracts are outlandish, but there is that risk.
5. Soon, perhaps already, the Winthers won't own a majority of the stock - Typenex will.
6. VHUB's SEC reporting may be behind as regards June 15 debt conversions to equity, just like it took a month for the May 15 conversions to be reported (in fairness, it might have taken that long to renegotiate the deals).
7. Way back in spring 2014, there was the pump and dump that actually got me interested in this story. The P&D only hurt the Winthers, as to the best of my capacity to read reports, they held onto their shares from all the way up to all the way down.
8. Like the rest of us, Cerp has the right to switch his posture on the company and on its stock, though it would have made a more complete picture if he had let us know when he actually switched posture and why he did (beyond informing us that the whole thing is a scam).
9. Going forward, it's especially hard to take out the crystal ball and predict what the stock will do. On the one hand, Typenex can cash out (albeit at bargain bottom)and drive the price down, or can sell enough shares to keep the price down so that upcoming conversions will be more toxic in expectation that the stock price will later increase. Or, Typenex could do all it can to boost the company and its stock price when they'll be holding a majority position in the company. Without interest expense, this is very likely to be a profitable company.
10. Given what the price of the stock is these days, and therefore the total market value of the company (maybe 90 million shares by now multiplied by about $.0045 per share comes out to a little over $400,000), I could see the Winthers trying to take VHUB private or Typenex buying out the Winthers, which would create the same result, just with a different owner.
Bottom line of this restrained-rant:
1. The company itself is decent.
2. The stock has had its misadventures from Pump and Dump to press releases that try to make sales look larger than they are (quarterly sales always seem that they should be larger, given the hype about how quickly new products are moving out the door or how there are new distribution modalities particularly in foreign countries), to not knowing where we are this moment in outstanding shares due to June 15 having passed and we don't yet have a clue as to how the debt then due was paid off.
3. I have no idea whether it's better for minority shareholders to have the Winthers in control or Typenex in control.
4. This is just a message board, and everyone's entitled to an opinion, even entitled to a change of opinion, but it's better for the quality of this board to present reasoning for opinions and changes of opinion, as it takes no particular wisdom to predict that any penny stock will go nowhere, because that's exactly where most of them eventually go, whether or not they're "scams."
Have a good week, everyone!
Let me wish you well, SportyNorty, in this new WOOF endeavor. I had been somewhere between curious and concerned when your prior board, TSR, suddenly became inactive a few days ago, and it took me awhile to use my minimal sleuthing skills (such as clicking on your ID and seeing whether and where you had posted in recent days)to confirm that you are still "alive and kicking."
I'm sure there is a reason, sufficient to you, that you didn't post a farewell note on your old board so that your fans could, with less effort than I exerted, keep up with you. It is not my role to pry, only to wish you continued success. You appear to be one of the ethical folks in this morally ambiguous penny stock environment, and folks like you merit having a following.
Best wishes to you and to the Board community here!
You remembered absolutely correctly, Hostastock, as regards the general theory I suggested that VHUB could wind up with 500 million shares issued, be debt-free, be running profitably, and have its shares selling at something like 4 cents based on a price-earnings multiple of 20 applied to a million dollars of net income. I had pictured at that time that there would be something like 400 million new shares issued at a conversion value of $.005, but now that the stock is already down to that level, it surely would appear that there'd be more dilution, a reduction in eventual EPS, and a lesser target price than 4 cents.
I had believed that Typenex would hold rather than dump its newly-issued shares, because they could come up with the same logic I did, namely that they'd do better by holding onto shares of a profitable company than dumping them at rock-bottom. But I'm starting to think that they've been dumping, given how low the VHUB stock price has gone today.
What's missing right now is the transmission of the message by VHUB to the SEC EDGAR database of a filing as to what happened with debt due on June 15. Either the debt was paid from strong quarterly earnings, was paid via conversion into shares, or may even have been paid by the Winthers loaning more dollars to the company. That we don't know what happened is part of the reason that the stock has been declining further, as the market hates uncertainty.
Yes, Hostastock, that second paragraph is saying a lot, and let's try together to see what it is saying. Just to have the main thrust of the paragraph in front of us both, here it is again:
"VHUB has developed a unique design that allows consumers to receive the best flavor of vapor for $35. We introduced this product on one of our two recent marketing trips to the United Kingdom and we have sold more than 60,000 units around the world already..."
1. If the definition of "recent" is anything after April 1, then all of those sales would fit within the current fiscal quarter.
2. Now here's where your own personal experience as a shop owner comes into the picture: If the consumer is paying $35, for how much is VHUB selling you the product? ...and that's the figure we'd multiply by 60,000 units to get the boost to VHUB sales in presumably the fourth quarter. If that wholesale price is say $25, that's $1.5 million in sales, minus whatever sales of old products were cannibalized in the process. Meanwhile, VHUB has been selling other "stuff" all along.
So I think they're going to have a strong fourth quarter, but we won't really know until October unless press releases become more explicit. Current market situation of the stock notwithstanding, it does puzzle me why the company hasn't yet turned the profit-corner and isn't using sales-generated cash to repay loans which have become toxic. There's something going on here that we, or at least I, can't figure out what it may be.
Good morning, Gustav Fring,
Yes of course the stock has been hammered, to the extent that, if there are now 90 million issued common shares (allowing for some recent dilution that we haven't even read about yet, given how we didn't read until June about the dilution in May), the company is being valued at something like only $540,000. To me, that sounds a lot like the end has actually arrived.
It wouldn't be too much longer until Typenex would own more shares than the Winther extended family circle - in other words, Typenex would have working control over VHUB. I'm assuming for the moment that it wouldn't make a lot of sense for Typenex just to be selling cheap shares into the market, as the company would actually be profitable, or damn near close, without the burden of interest costs. ...meaning that Typenex will recoup more of its loans to VHUB if VHUB either actually remains a functioning enterprise or alternatively if it can be sold in a bidding process, assuming that its products really are unique in the marketplace.
As another scenario, what's to keep the Winthers from substituting their own additional loans to the company to take the place of Typenex debt, presuming that they think that the company is actually a viable commercial enterprise?
I just think that there's more to the VHUB story than we know right now - not that I'm "arguing with the ticker," which is always a failing proposition.
Hi Hostastock, did you read my Post #5304 before doing your post? If not, don't worry, and I hope I did a good job in explaining. If you did read it and found it lacking, I'm sorry - tell me what needs more clarification, and I'll give it another shot if you'll let me.
Bottles, I was fascinated by the dichotomy/binary outcome that you have for VHUB ("Either VHUB pulls a rabbit out of the hat or current shareholders suffer massive dilution"), and I'd like to walk through that second scenario with you.
Just for sh*ts and giggles, as they say, let's assume that the company will need $2 million to pay off current debt, provide additional working capital, and comply with FDA regulations. Let's then assume that they can issue stock (whether for toxic conversions or for new capital funds) at .005. If I have my decimal places correct, that would be 400 million shares added on to the 82 million or so shares currently issued.
Given that the company has been experiencing improved gross margins and given that lots of its competition will "go under" due to the FDA intervention, let me throw out a $1 million net income number, remembering that the $2 million in new capital will have extinguished all the existing debt.
Just to make the math simpler, let's divide that $1 million of net income among the rounded 500 million shares. The division comes out to earnings of $.002 per share. If we give the stock a price/earnings multiple of 20X, that would get the value of the stock up to 4 cents, which would represent a quintupling of the current .8 cent level.
And so my conclusion would be that the massive dilution scenario may not be as dreadful as one might first think. Of course, your "pull the rabbit out of a hat scenario" (which equates to my scenario of a Trump election creating a softening of the FDA stance) would yield a better outcome.
I'm still leaning towards the scenario of the company being sold being the most likely to actually transpire, but there's no reason for anyone to believe that any analysis or prognosis of mine has any validity (given my bullishness of the past number of months).
I'll be lead-off hitter as regards today's SEC filing relating to events of May 23. John M. Fife owns JFV Holdings which owns Red Cliffs which owns Typenex which owns just under 10% of VHUB shares, as 10% has been the contractual limit to Typenex's ownership stake in VHUB. Meanwhile, there's more Typenex debt due in about a week, if I am remembering correctly, so we'll have to go back to other SEC filings to figure out what happens when debt falls due, there isn't (for all we know right now) cash to pay up, and Typenex is at its limit in regard to owning VHUB shares.
Meanwhile, VHUB has a credit facility with TCA Global, and there's lots of room within that facility to borrow money to pay off Typenex, but there's a caveat...TCA can just say no.
So, there are various ways that this can all shake out, and I'll list them from worst to best for the company:
1. The plug could be pulled on the company, and proper homage would be paid to Cerp.
2. Typenex and VHUB renegotiate, and Typenex winds up holding lots more of VHUB, as the 10% limit would be rescinded. The conversion price would be in the sub-pennies, and this would be a textbook case of dilution (and proper homage would again be paid to Cerp).
3. VHUB refinances its Typenex debt coming due through TCA, which would kick the can down the field.
4. At long last the search for equity financing, first mentioned around thirteen months ago, could bear fruit. But, given that the current market value of the approx. 81 million shares outstanding is only around $650,000 and the capital need would be in excess of that to comply with the new FDA regulations, this too would dilute the positions of current shareholders.
Good news on the sales/earnings front, which would help right around now, can't reasonably be expected until mid-October, as we're now in the company's fourth fiscal quarter. The annual reporting has come about ten weeks after year-end as contrasted to six weeks during the first three fiscal quarters.
Overall, I'd be really pessimistic, except for the fact that Typenex and Gotama own a lot of stock in VHUB, and their cost bases are a lot higher than what the stock is going for these days. So there would seem to be an incentive to get the company straightened out rather than dissolved. If I were more cynical, I'd write that there's an incentive to "pump and dump," but the company has its code of ethics and, beyond that, I just don't think that an investing public could be faked into believing the pump, given all the publicity swirling around the FDA's new regulations.
My guess? I think that this company is going to be sold into the hands of deeper pockets which can afford the FDA compliance measures. If I were Typenex, that's what I'd be pushing for.
I guess this is a good time to repeat what I've mentioned occasionally during my presence here. I've never been a shareholder in VHUB, nor do I intend to be a shareholder in anything during my retirement. I first started following the stock when it was being pumped in Spring 2014; the e-mails I was getting were sufficiently annoying that I just wanted to track how long it would take for VHUB to crash and burn. Ultimately, I reached a conclusion (which doesn't necessarily mean that I'm right) that the owners of the shell into which VHUB inserted itself were doing the P&D and that the family-ownership is more victim than perp (they didn't sell during the P&D, and the stock dropped from a $1.87 intraday high to subpennies during the last six or seven months of 2014).
I wish the Winthers well, and I wish the crew on this board well. IF the company can hold on until the election, then look for the FDA's grip on the vaping industry to loosen IF Trump should win, and look for the stock to recover substantially. All the "if's" seem to be long-shots at the moment, and that's why the stock is sitting where it is sitting.
You're of course right here, Hostastock, as no company exists as an entity totally apart from its own industry. VHUB had actually stayed up, or at least in its 2-3 cent trading range, for a long time while other vaping-related stocks were already going downhill. What fascinated me a few Fridays ago is how when the new regs came out, VHUB, after immediately going from 2.3 cents to 1.4 cents, if I'm remembering correctly, semi-bounced back to 2 cents by the end of the day. I thought at that time that VHUB would remain in its 2-3 cents trading range until the wait for the quarterly sales information would have passed.
CoachMarc, thanks for the kind words. This particular sub-site within the I-Hub complex really is a good space, with folks from many vantage points chiming in and generally playing well with each other in this sandbox.
Congratulations on figuring out a valid exit-point from the stock. A stock which can have high of six cents and a low of two cents in back-to-back days is the definition of a timing challenge in an overall penny stock market where lots of folks trust in momentum.
As regards the thought of initiating a new position, I would believe:
1. The fourth fiscal quarter drawing to a close in about four weeks is going to show strong sales, as the recent quarterly reporting moved away from saying that the company has no seasonal differentiations to saying that the third fiscal quarter is the low quarter.
2. The rush to market of new products ahead of the initial regulatory guideline should yield a flock of good product reviews and reinforce the prospect of good sales volume in the short run.
3. If there is even a whisper that the proposed legislation to address the FDA matters has a chance of passing, that could fuel a strong rally, as the market right now seems to be anticipating the worst.
4. So why then is the stock in the dumper? It's the capital access problem, compounded by the fact that any debt-conversions will be dilutive, given where the stock is sitting these days. ...coupled with nobody having a sense whether the Gotama folks, the Typenex folks, or the most recent bunch (forgive my laziness in not looking up the name of the 750K lender) want to bet on the company or just realize any proceeds of sale while there are proceeds to be realized.
5. Overall, the challenge with trying to take advantage of a perceived trading opportunity is that it's hard not to be burned by order-execution when bid-ask spreads are high. As regards a more long-term investment opportunity, if you see Trump getting elected, look for restraint upon FDA powers (or any government agency, for that matter), I can see a pathway for VHUB being more likely than not of succeeding in a more constructively regulated marketplace.
6. Almost forgot, you're right about the family-intensive management. The capacity to self-deal, not to mention the risk of not listening to outside advice, presents a real challenge.
Have a good weekend!
FWIW, CoachMarc, I'll take a stab at answering your question. The company - as admitted by press releases, SEC documents, and participation at a major venture capital conference a year ago - has been looking for an equity infusion, which they've needed because the company hadn't yet found the way to make itself profitable at roughly $6 million in annual sales. When the FDA regulations came out a couple of weeks ago, I wouldn't be all that surprised if venture capital has dried up for this industry as a whole. Accordingly, the stock has tanked, even in the midst of remarkable improvement in gross margin and restraint in expenses in recent months.
From more of a technical view - though not technical as in reading charts, as contrasted to looking at stock ownership - the recent conversions of debt into equity have left an overhang on the stock, and it may be the case that the newer shareholders via conversion are heading for the exits. I'm just throwing crap against the wall here and have no way of confirming if I'm even remotely correct.
Others on the board here may have different/better answers, but since some hours had gone by without anyone else taking a shot at answering you, I thought it would be OK for me to be batting leadoff here.
FWIW, this PR was one of Paul's best, as he walked the tightrope really well in regard to:
a. the reduction in the growth rate of sales is balanced off by the growth in gross margin percentage; and
b. the company is doing all it can to live as well as it can with the new FDA regs for these initial two years while waiting for the FDA to relent in ceding the vaping field to Big Tobacco.
My personal opinion is that a Trump election will bring the FDA to the bargaining table with industry representatives.
As an aside, the introduction of Kelly Winther as a force within the company is a good move in my opinion, and I wonder if there's a connection between her arrival and the reduction in expenses mentioned in the PR. Let's see whether an 8K will be devoted to her stock ownership.
Have a good week, Hostastock!
I've leafed through the 10Q, and I wonder whether TCA might like to buy the company, as it looks to me that they're going to be owning a bunch of shares (the calculations that go with this are beyond my pay grade) as the company's debt to them gets paid down. ...and yes, it is time to use the term "dilution," since VHUB stock has been marked down recently.
The story isn't all bad, though. The company sales, while not booming, have been focused more on higher-margin products in the nine month period. The third fiscal quarter operated almost at breakeven. Cash flow for the nine months would have been reasonably good if the company hadn't been paying its accounts payable more promptly than they had been doing before.
It would have concerned me more that inventory is up, but deferred revenue is also up, meaning that the increased inventory is needed to fulfill purchases in which they've gotten the cash upfront but haven't yet delivered product.
The transactions with the family are somewhat more extensive than I'd like to see. Besides the loans to the company, there are also site-leasing and accounting services relationships. That's a lot of self-dealing when the majority of the shares are held within the family.
It would be a better situation if the company didn't feel compelled to report that they'll probably still be needing more new-money over the coming twelve months. You'd think that since they've gotten really close to breakeven over these most recent three months, they'd be able to generate cash going forward if sales would keep on growing.
As I've written a few times, my overall conclusion is that the company needs to find "friendlier" lenders or find a capital infusion (though at this point, an equity investment would "cost" enough shares so as to create control of the company by the investor). The real question in my mind is why haven't sales been zooming in accordance with the Wells-Fargo industry projection and the company's own guesstimates of a year ago prepared for what I believe was a venture capital conference in San Diego.
By no means is this company a scam, but I think that there is nothing to lose and maybe a lot to gain by the company bringing more of whatever's going on out into the open, e.g. the development of markets in China and Indonesia seems to be doing everything but making reported sales grow rapidly.
I'll look at the 10Q right after I respond to your note herewith. But let me preface my response with the comment that going private is really a wild guess as to what could happen to VHUB. To make it work, there would need to be hidden value in the company, most likely in the form of any patents on liquids or mods. The pricing would need to be high enough to get the second tier of shareholders believing that this is their best way out - here I'm talking about Typenex and Gotama (in Gotama's case, they must have given up on their 15 cents per share acquisition price, and they'd want to take as little a loss as they can). But the pricing would also need to be low enough that either the Winthers could pay the price or could interest a venture capital firm in becoming their co-owners.
Here's an article that might explain things:
http://budgeting.thenest.com/happens-stock-price-public-company-goes-private-31594.html
...and now on to reading the 10Q...
Yes, they (presumably the Winthers plus maybe Justin Moreno plus whoever else they'd add to their ownership group) would take out all (or maybe it's just most - enough taken out so that SEC reporting drops out)the other shareholders via a solicitation/tender offer.
In the case of Dell...
- and here's the story
http://www.forbes.com/sites/connieguglielmo/2013/10/30/you-wont-have-michael-dell-to-kick-around-anymore/#7465fa394fd2
...Michael Dell used his own money and that of a venture capital firm to buy out the other Dell shareholders.
The question is whether the Winthers have either a spare million dollars or two lying around and/or whether they've got a venture capital firm ready to put up what they don't have. The overall theme is that SEC compliance is costing the company a lot of money, I would think, and that the company would be profitable faster if it weren't burdened with public shareholders.
I'm sure others on this board could give better/simpler responses to your question, as my entire career was in the not-for-profit sector. But I think I've got the general theme here correct.
Good Monday morning, Hostastock,
I'd believe that there is a variety of "end-game" possibilities for VHUB.
1. Your idea of their buying out other companies perhaps had more going for it when VHUB stock was selling at about three times what it's selling for now. VHUB doesn't have the cash for acquisitions, and purchase via stock would require lots of stock when the stock is in the dumper, as is the current situation. Still, it's a possibility.
2. I could see the primary shareholders taking the company private, given that they already have more than half the stock and the stock is cheap these days.
3. As I've mentioned earlier, I definitely could see Big Tobacco or another vape company buying VHUB in order to get product line and product development skills.
4. ...and the sleeper in all of this is that the company finally could get financing from a non-vulture kind of source.
Overall, the stock would appear to me to be at least as good a buy right now as it was in the tax loss selling season of late 2014 when it touched .006 on an intra-day basis. I think the closing low in that season might have been .008.
The full 10Q when released should make for interesting reading.