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I've done some more reading and some more calculating, and let me share three conclusions and then an overall assessment:
1. It looks like sales for the current fiscal year's third quarter are about $1.2 million compared to $1.1 million for last fiscal year's third quarter. So while there is solid, nearly 30%, growth in the nine month's comparison of sales, there is not that much growth in the third quarter over last year. In other words, the rate of sales growth has slowed, which is unfortunate after all the hype that had been given to the Wells-Fargo industry report that was emphasizing the phenomenal growth rate of the industry.
2. I've been focusing too much on Typenex/Iliad loans and not enough on this 18% loan from the TCA Global Credit Master Fund. See the following excerpt from the second quarter 10Q...
On December 24, 2015, we entered into a Senior Secured Credit Facility Agreement with TCA Global Credit Master Fund, LP (“TCA”). At the initial closing on December 24, 2015, we received gross proceeds of $750,000 and issued to TCA a Convertible Promissory Note in the principal amount of $750,000 (the “TCA Note”). The TCA Note is scheduled to mature on June 24, 2017 (the “Maturity Date”). At any time prior to the Maturity Date or the earlier termination of the Loan Agreement, we can request up to $9,250,000 of additional loans, which additional loans may be made in the sole discretion of TCA. We may prepay borrowings at any time, in whole or in part, without penalty.
The loan will accrue interest on the unpaid principal balance at an annual rate of 18%. We will make interest only payments of $11,250 on each of January 24, February 24 and March 24, 2016, and thereafter, will make payments of approximately $56,208 of principal and interest per month until the Maturity Date. In the event we are in default under the loan agreement with TCA or any related transaction document, including as a result of a default in our payment obligations, any amount due to TCA under the facility will, at TCA’s option, bear interest from the date due until such past due amount is paid in full at an annual rate of 22%. In addition, upon the occurrence and during the continuance of an event of default under the transaction documents, TCA may terminate its commitments to us and declare all of our obligations to TCA to be immediately due and payable.
3. It was actually a pretty serious negative event that the company didn't mention contemporaneously, rather than wait until earlier this week, to discuss the debt into equity conversion as of April 15 related to the Typenex/Iliad loan. Even if it took awhile to negotiate everything out, the fact that there was no cash repayment on April 15 should have been disclosed right away.
The overall assessment that I reach, which really hasn't been changed from some earlier posting, is that the company really needs to improve its capital structure (less debt - or at least "friendlier" debt - and more equity), and that all the activity in China, in Indonesia, and wherever else needs to be translated from merely a lot of process to actual results.
The capital needs are going to increase in order to be compliant with the new FDA regulations, even if there is some softening or some corrective legislation passed. The FDA will likely put a few competitors out of business, I would guess, and VHUB needs to be positioned to take advantage of the situation.
As the products the company makes are excellent per our vape-shop contingent on this board, my best guess is that the company will be sold, or that the equity infusion will be so large that it will require so many new shares to be issued that the company might just as well have been sold. This needs to happen in the next six months or the stock will get totally creamed by tax loss selling in the last two months of the calendar year.
Let's see if the 10Q when released (soon, I'd guess, as I'd believe that that it was held up so that the 8K could be released first) contains any narrative (or if a shortly subsequent press release contains any narrative) that resembles anything I've written this morning. This is a very legitimate company with some very real and immediate challenges, and I would believe that the overall market valuation of under a million dollars, based upon a stock price of a penny, already reflects the situation at hand. (But even if I'm right, I'm no great stock-picker, since I was bullish at twice the current price.)
Thanks, I appreciate your response. Your estimate of scam situations is at the 99% level, and my estimate has been at about the 60% level, with another 20% of the sub-penny market companies being just plain unsuccessful, with no overt attempt to defraud anybody. We'd agree that, even in scam and "unsuccessful company" situations, money can be made via trading, whether done on technical factors, a good "guess" that a pump and dump is about to take place, being a market-maker, or just luck.
I've seen VHUB as being a legitimate company, having had no attempt to defraud in roughly the past two years, after the pump and dump when, I'm guessing, the Dog-Inn owners were trying to get out quickly, profitably, and illegally. I've also believed that the conversion prices until now have been set sufficiently high that there would be more money made by seeing the company be successful than by just getting rid of the shares ASAP after acquiring them via conversion.
The company has been trying to get more equity-centered than debt-centered for nearly a year now, based upon press releases of nearly exactly a year ago. ...and they have not been providing progress reports, which I would find to be disconcerting. Not providing information often tips the scales from the unsuccessful category to the scam category. Nonetheless, presuming the integrity of our vape-shop posters (and there seems to be convincing evidence of their integrity), there are real products of high quality being produced and sold, so I would believe that the company will either find the equity infusion or be outright-sold before too long.
In either case, you've provided your underlying logic rather than just going with the mantra of "scam," and since you've been right from the time of your having turned bearish, your opinions are to be respected (whether or not anyone might agree or disagree with them).
Cerp, if there are three "dominant" shareholders, each holding more than 12 million shares (forgive me for not going back to the 10K and being precise here), they would have every reason to want to grow the share price, taking the rest of the VHUB-shareholder community with them along for the ride. Taking money from shareholders or taking money from the lender Typenex would get them nowhere near as much money as having the company do well and the share-price grow accordingly.
I do realize that you're the one person here who has been correct in calling for the stock to tank (after you switched from being the bull-in-charge - I'd hope you might share with the rest of us what triggered you to change your point of view). ...and your recent track record of being correct regarding this stock is precisely why I'd like to hear your logic in stating that the primary shareholders are intentionally screwing over the rest of the shareholders in the stock.
Thanks, whether you respond or not.
I just quickly read through the newest 8K. Given that the company didn't run profitably in the third fiscal quarter (especially after considering interest expense), it's no surprise that the Typenex/Iliad loan was restructured again. At some point in some loan document, there was a clause regarding how the lender could not wind up owning more than 5% of VHUB's issued common shares, and at the moment I'm not figuring out how the conversion of some debt into common stock didn't take Typenex over the limit. ...unless they unloaded a bunch of the 916,000 shares they had picked up earlier, which is altogether possible.
I'm not saying that it's dreadful that Typenex is getting more of a vested interest to see VHUB succeed via Typenex's share-ownership, but when I read the clause in the 8K about how the next conversion will be done using pricing at 70% of the lowest three days in the past month of trading in the stock, I think that it's not unfair to use the term "dilution."
I'm looking forward to seeing the commentaries of wiser analysts who frequent this board. But just going back to basics, perhaps the company will explain how the sales forecasts of around a year ago for some conference - showing explosive sales growth - have turned out so far to be way too optimistic.
It's a mixed bag here. The roughly 30% growth in revenues from three quarters of the last fiscal year to three quarters of this fiscal year is OK, especially as the product mix shifts to higher margin products. But note that the company reported on net loss from operations, leaving out the negative impact of interest expenses. Meanwhile, let's see how many issued shares there will be reported as of March 31, 2016, as I'm just not sure what happened with the loan payoff due in April.
I'd believe that the delay in releasing the 10Q is likely all about how the footnote will read in regard to the FDA regulations. Given the action of the stock recently, I'd guess that the not-so-great financial results and the uncertain to negative regulatory environment have already been factored into the stock price, but it's really hard to keep an analytical frame of mind when the stock seems to bounce all over the place from trade to trade.
Overall, I think that this company is ripe for sale, as the products seem to be leading edge but the finances are holding the company back from fully capitalizing on its competitive advantages.
Maybe I'll add to this when the 10Q appears, but these are the moments when I miss folks like Sgreg on this board who are better at analysis than I am.
For the third fiscal quarter of the prior fiscal year, VHUB's 10Q was made available on May 20 which was five days after the "we'll be delayed" form was filed on May 15. Accordingly, I'd guess that we'll see the quarterly financials this week.
I recently believed that we could logically have expected a prolonged delay due to the need to assess the impact of the new regulations - however, I now believe that since the legal team needed to review the blurb that was just sent to vape-shop owners, a variant of that note would become a footnote in the quarterly financial statements (and would not take much more time to be drafted and reviewed).
Hostastock, thanks for sharing the VHUB's vape-shop blurb. It was very well crafted, and it was correct of the company to address its business needs before addressing shareholder information needs. Vapor Hub clearly is a legitimate company, actually in the forefront of its industry (proven further by its suggestion to vape-shop owners to be supportive of legislative initiatives). While no one can be certain that the company will do well in the long term, or frankly even survive, it would appear to me that if any small company in this industry is going to "make it," it will be VHUB.
Meanwhile, to be "fair and balanced" here, it is, as ever, a curiosity to see last moment of the trading day "painting" of the stock price. If I do my multiplication right and my memory is correct on the number of outstanding common shares, it seems as if somebody spent something like $17 to add roughly $400,000 to the company's market valuation. And yet, how many times have we seen end-of-day painting going in the other direction?
Overall, it sure seems to me like a current market valuation of something like $1.4 million at the Friday close is really on the low side. The forthcoming 10Q is going to make for a fascinating analysis.
I wonder - and am too ignorant to know the answer - if both you and Ray could be correct. Indeed there was a pump and dump (as you've documented) but the recent "good tidings" of Mexican transactions (as Ray has pointed out) may not have been fashioned out of thin air, given some of the new consultants involved with the company. Personally, I'd be too chickens*&t to invest in a stock with a history of bad behavior, but I could picture some folks believing that the current price has already more than taken that into account. It will be interesting to me as a spectator to see what will happen here in the next few weeks.
Almost forgot, thank you, U/E, for your private response of yesterday!
Ray, my apologies but it seems like linking "You Can't Touch This" to a particular stock is an expression of a bearish outlook on that stock. Coupled with MC Hammer having gone bankrupt in 1996, your metaphor selection is a bit curious.
All this poor attempt at humor aside, I've got a lot of respect for your hanging in there with BHGI, and I hope that you'll be rewarded for it. In general, I believe that there are three stars that need to align for success in the penny stock market (and I'll admit that I'm just a spectator here) - the company must be doing better than built into the current stock price, the stock should not be concentrated in so few hands that someone could defeat fundamental or technical analysis by their own need to sell for whatever reason, and the stock must have either honest market-makers or predictable manipulation (which probably would make one a party to an illegal activity).
Again, good luck here - your resilience is admirable.
So the long-awaited regulations are finally out, and at the moment of my writing this post, the stock is down by 20% on high volume. I don't think that the regulations are either a big surprise (VHUB's 10K has been anticipating this for a couple of years) or that big a disappointment to VHUB itself (though more so to the vaping industry as a whole), as VHUB has been on the ball in regard to reduced "bad stuff" in their products.
My only major surprise here is that Investor Relations, meaning Paul Knopick, hasn't yet put out a press release indicating that VHUB is well-positioned vis-à-vis its competition to not only ride out this storm but actually to benefit from it.
I am experiencing a lesser surprise which is that our vape shop entrepreneurs haven't already commented here, though I can certainly understand that they're so busy trying to figure out what's going on across all their product lines, not just VHUB, that they don't have the time at the moment to be posting to this board.
VHUB's real question still remains, which is whether existing debt will be taken out via cash (if sales results have begun to reflect all the actions that have been taken to boost sales) or via newly issued stock.
regulations
Here you go, Knife. I'll comment about this in a few minutes.
Ms. Sandra, as someone who actually doesn't invest in the penny market but who is fascinated by it nonetheless (and reads a few of the discussion boards on this website), I've got to compliment you on your post from April 7 in which you were looking for .0051 on April 8. At this moment of my typing on April 12, the stock is sitting at .0052, and the odds would seem to favor that you'll soon be in for one more round trip in this stock.
It amazes me that common folks with uncommon courage are eager to participate in these four levels of uncertainty: is the company any good, is the stock undervalued as measured by any fundamental or technical analysis, are the market makers doing a good job (or any job) in maintaining an orderly market, and is anyone out there manipulating the stock price via misinformation.
It seems that the "mountain to climb" in speculating in any penny stock is fairly challenging, but all the more so in a stock like Novint which seems to have challenges in at least several of the four factors I mentioned a moment ago. Good luck, once again apparently, in trading Novint.
It's been an interesting nearly four weeks for VHUB since March 11 when Cerp referred to the company/stock as a "dead cow." The price then exploded to the upside to as high as nearly 5 cents and today closed at around 2.6 cents, which is really close to the closing price on March 11 which was around 2.7 cents. So, with all the volatility, we're back where we started. VHUB wasn't a dead cow, but one which showed some life, and good people can have differing opinions on whether we have one kind of cow here or "an-udder" (sorry).
But all the regular posters on this board know about the recent stock performance. Let me share with the group what's intriguing me at the moment. Folks are waiting for the mid-May reporting of the Q3 financial results, centering around the gross revenues number which was not that impressive in the prior quarter. I believe that there is an earlier event to pay some attention to...
Take another look at the February 25 8K which you can access from here, and you'll find this sentence about the restructuring of the Typenex/Iliad debt:
(c) a payment equal to the remaining aggregate outstanding balance of the Notes on or before April 15, 2016, which payment must be made in cash (collectively, the “Note Payments”).
April 15 is a week from Friday, and I would expect that there'd be some kind of press release celebrating that Typenex has been taken out pursuant to the covenants of the restructuring, other than in its role of shareholder due to prior conversions. If there is last-second restructuring rather than payoff in cash, I'd be concerned that the sales numbers for this quarter aren't shaping up.
However, given the reporting on this board about how product is racing off the shelves and is being backordered, I'd lean toward optimism here. The facts will speak for themselves soon enough, and I wish the gang here good luck!
Hostastock, your view of what happened yesterday makes a lot of sense. This "new investor" would likely "dip his toes into the water" by purchasing any number of existing shares in the open market, then - after more research and discussion with the Winthers - would become the "for-real new investor" VHUB stated that they were looking for last spring by buying newly-issued shares, presumably enough so that the company could substantially pay down its debt burden.
The wild card at the moment is the 916,000 Typenex shares which have roughly doubled from their conversion price of just above 16 cents per share (plus the prospect of additional conversions down the road). That load of shares does constitute an overhang on the market.
...and as ever, the wait continues for the next reporting of actual quarterly gross revenues, as all the "process things" (new products, new distributors, etc.) need to translate into a resumption of the upward trend in sales as shown in a 10Q. With some increase in sales and a sharp reduction in interest expense via issuance of new common shares (hopefully at prices more than Typenex just paid), VHUB should do very well for its stockholders.
Have a great weekend!
I've got two answers in this note:
1. I'm not a premium member of this site, so I'll need a private message containing an e-mail address as a springboard for me to send my own e-mail address. I'm honestly flattered that my opinion would be sought, so whatever the question, I'll give it my best shot - but please do remember that I was a nonprofit organization CFO for nearly 18 years and a federal healthcare regulator for 15 years after that, so I may not be the right source of wisdom.
2. As regards the substantive question about the "new investor," if this is a matter of VHUB's beginning to seek new capital sources last May, then there'd be an issuance of new shares by the company as contrasted to the selling of shares by existing holders to those people who are either establishing holdings in the company or adding to existing holdings. Normal trading doesn't add or subtract from the issuing company's capital. (There's a chance I may have totally misconstrued the question, so forgive me if that's what I did.)
Anyway, I'm happy for the "winners" today, though I do remember the couple of days a while ago when the stock first spiked to 6 cents and then plunged to 2 cents, before rebounding back to its trading range before all the excitement. Let's see how the week closes, and I hope that it will close on a strong note.
I guess you might say that the "dead cow" is "moo-ving" today after the long dormant period. Let me pose two questions for the group to consider:
1. Here's a copy of what's on Stockwatch this morning for five V-HUB trades spanning a minute and a half:
TIME PRICE INCREASE VOLUME
10:37:51 0.0495 0.0195 500
10:36:53 0.035 0.005 300
10:36:43 0.035 0.005 1,760
10:36:25 0.0495 0.0195 4,300
10:36:23 0.0368 0.0068 10,700
How the heck does a stock gain 40% in a minute?
2. Imagine that you're Typenex and you've recently gotten 916,000 shares at .016333 per share. Would you be holding and letting profits run, would you be unloading as gently as you could, or would you be running for the exit as fast as you can to cash in? What complicates the picture is that Typenex may wind up with some more shares as more debt is unwound in coming months.
In any event, I'm happy for the folks who've been patient here, and I hope that the test of three cents as support, rather than as resistance will hold, and - to quote the Knife - there will be good times ahead.
I've been enjoying the exchanges of recent days. Cerp has been equally entertaining as a bear as he was when he was a bull. The RPH and Hostastock (and other) responses have been reasonably well restrained despite all the temptations to just blow up.
I think that the truth is somewhere in the middle, though leaning towards the bulls as having the better arguments, at least for now. I really do understand the "bear case," which hinges upon the reduced growth in sales (despite all the company's activities with distributorships in various countries), the family nature of executive management, the beginning of paying back debt with common shares (i.e. dilution), sometimes low volume of trading, and failure to live up so far to projections of sales and bottom line made last spring at a micro-investor conference.
The bull case is stronger, I believe, because the company has established itself as an industry leader (e.g. getting ahead of the diacetyl issue)in an industry having explosive growth, annual sales of even $6 million represents good growth from start-up, it appears logical that all the distributing arrangements will have at least some level of success, and the Typenex folks do not appear so far to have rushed for the exits after getting their cheapies upon conversion (and may ultimately influence the family/majority owners to sell to the highest bidder).
What's really strongest though is the case for everyone being respectful of others' opinions, though anyone expressing an opinion has a responsibility to provide their reasoning if they want to try to influence the opinions of others.
There will be enough time down the road for any of us to look back at this point in VHUB's history and see who actually turned out to be correct. It may be CERP, or it may be just about everyone else who posts here (bulls tend to frequent these forums in order to find kindred believers, and bears tend more to stay away especially when the bulls see them as trolls). Hopefully nobody's betting their child's college tuition fund on penny stocks (other than the distributors here who are in the vaping business themselves to make a living).
Have a great weekend, everybody.
Yes, actually I did sing with you; it is not just manners on my part but sincerity that I wish the folks well who take the risks and follow their own analyses and judgments. The question - and for my own entertainment in my old age, I'll be following this Board - is whether you'll reappear should the stock test its recent lows (which I'm not predicting one way or the other).
Harsco has been fascinating to look at, going way back almost to when it was Harrisburg Steel Company, and it should remain interesting as it tries to dig itself out of its funk.
Have an equally great week ahead!
1. Thanks to you, I can't get the song "My Girl" out of my consciousness, though my chorus has new lyrics honoring you:
I guess, you're best, in seeing how to invest, Harsco (talking about Harsco), etc.
2. As regards my first two initials, what was really cruel on my wife's and my part is that we named our first born son Brian Scott, thus perpetuating the opportunities for such fun.
3. I really have no intentions of buying or selling (short or long) any stock, as I'm old, retired, and have no need nor desire to speculate since the wife and I can live OK on what's coming in every month. But I enjoy following the markets and interacting with people who actually "have a pair" (not just of stocks), as I was a nonprofit CFO in my career and analyzing SEC filings and company press releases is a lot of fun for me, much like following the NFL.
4. I really do wish you well, as you've brought some laughter into my day. Your question as to whether anyone is in the stock for the long haul rather than playing for the bounce is fascinating - if you've got a well-placed sell order and stick to your discipline, you may do very well here.
You actually have one more item going favorably for you, namely that there's an SEC filing linked on this very website that shows that the CEO just picked up on Monday 50K shares at $3.855 each. That's a lot of faith put in the company by someone who knows everything there is to know. ...and I think that might partly explain why the stock price has begun to rebound. Overall, the SEC filing says the CEO owns 175K shares.
For whatever little my opinion is worth, I would believe that the real money to be made in this stock will happen if and when the company can divest itself of its Metals and Minerals division. The Seeking Alpha report was not optimistic in that regard, but I think that the investment banker retained by the company is pretty damn good and likely will find a buyer.
Again, I wish you well, and I'm just here to put info onto this board so that people interested in the stock can have more data that they can use to make up their own minds as to where the stock is headed. My own strongest belief is that the current holders are fortunate that it's early in the calendar year, as tax loss selling could be depressing in November and December.
I'm sorry to add more rain to the parade:
Seeking Alpha analysis
I believe I owned a little of this stock a number of decades ago, and it's a little sad to see that split-adjusted it's where it was decades ago, maybe even a little lower.
Let me with the bulls good luck here, and again please pardon me for not marching in your parade right now.
Here's a VHUB press release from nearly two years ago concerning another marketing initiative in Texas:
Texas Distribution Deal
This initiative had an initial term of 12 months, and it would be interesting to know whether this arrangement was renewed or not at the end of its initial term, plus what the company learned from this 2014 marketing deal that helped them with their negotiations of the new Texas marketing initiative that was just announced.
The company does a lot of "process" things (e.g. the trip to China to get distribution going there), and it would be really helpful if they'd report on the connection between processes and results.
Have a good evening, folks!
Good morning, Marchio,
Your question reminded me of the TV detective Columbo whose "dumb questions" always went right to the point of the case. If anyone says they "know" what's going to happen with any stock, they're either lying or blessed with inside information that they probably shouldn't have gotten and definitely shouldn't be sharing.
On Friday, the stock at first reacted negatively to the dilution of 900+ thousand shares being issued way down from the prior close, then bounced all the way back (and a little more) when folks realized that less debt is what the company really needs, even if there will be more shares dividing up eventual profits.
What tips the scales, in my opinion for whatever it may be worth, in the bullish direction is that VHUB appears to be a legitimate company in a rapidly growing industry, and in fact appears to be a leader in that industry as regards quality products that have been conceived with an eye on health/safety (see the Diacetyl discussion on this Board a while back).
So, to conclude, if the typical penny-stock company has a (pick a number) 20% chance of turning out to be something better than garbage, I'd think that VHUB has maybe a 40% chance. So why would anyone invest in a company where the chances of success are less than half? ...because the success of the company would likely translate to the stock growing in multiples of the current price. Accordingly, one would fashion a portfolio of these stocks such that the expected failure of a bunch of them would be more than offset to the plus-side by the successes that will happen.
Again, I'm not an investor at all in stocks, given that I am averse to risks in my retirement, so you can choose to accept what I'm writing as being impartial or you can discount my commentary as coming from someone whose money isn't where his mouth is. In either case, I wish you well!
Hostastock, your 15 cents number for buyout of the company's stock presents as much of a coincidence as the $1.6 million debt number you and I were just clarifying. 15 cents is Gotama's basis for their roughly 4 million shares acquired through forced conversion by VHUB. I'm sure that the Gotama folks would like to escape this adventure in investing at a breakeven outcome.
While 15 cents per share for something like 175 million shares - a roughly $26 million valuation for the company - looks a bit on the ambitious side at the moment, "you just never know" what happens when a skilled investment banker orchestrates the sale of a company.
But let's first see what happens as regards sales in the current third quarter of this fiscal year and as regards what happens with the upcoming additional conversions to equity that are likely to happen (and given that Typenex is for the moment very happy to see its 900,000-plus shares trading more than a penny over their cost, they might actively want shares more than cash return of loan principal).
Have a good week for yourself!
Following up on my immediately prior note, here are the numbers from the balance sheet on the 10Q which when added up round to about $1.6 million:
Notes payable - short term 326,902
Current portion of, convertible notes payable, net of unamortized debt discount 231,496
Derivative liabilities 560,890
Notes payable - long term 26,193
Convertible notes payable, net of current portion and unamortized debt discount 88,409
Derivative liabilities 398,120
The total of these figures is roughly $1.6 million as referenced in my prior e-mail, and it's just coincidence that the full Typenex credit facility was around the same amount.
Good Saturday evening, Hostastck,
Yes, you misunderstood my post, but only because I wasn't clear, so thanks for giving me another chance here.
The $1.6 million of "full credit availability from Typenex" (for lack of a better terms) is indeed history, and you and I agree on that. The $1.6 million number that I had in my mind is the sum - turn to the 10Q balance sheet - of all the short term and long term loans including the derivatives balances (I probably should go back and present the numbers here line by line, and may do a second post to see if I come up with the same number today that I came up with yesterday afternoon in a bit of a rush).
I'm just saying that if all that debt converted into common stock at about 1.5 cents per share, VHUB would be a loan-free company that would be very viable for the long haul presuming that sales growth would resume at a level that the whole industry is expected to experience per the Wells-Fargo report of some months back. Such a company would be exceptionally attractive for acquisition, and the new majority of shareholders (who used to own the debt) would likely force the company to be made available to the highest bidder.
Am I doing better here in explaining why I'm as positive on the company fundamentally as you are technically? Thanks for your patience with me!
RPH, while it would make for a more interesting Board if I were to disagree with you, instead I'm going to offer an assenting opinion from the fundamental side. Let's assume that all roughly $1.6 million of the debt were to be converted into common stock at the approx. 1.5 cents per share that Typenex just accepted. So that would mean there'd be issued about 100 million more shares (just doing rough approximations, as I need to run along). ...and then the company would be pretty much breaking even, even if there were not an increase in gross revenues.
The company would merit maybe a $5 million total valuation, if indeed there were promise/signs of growth and profitability, given its leadership in the industry. ...and that would take its market value to around the 3 cents per share mark, and all those new shareholders who used to be debt-holders would insist on selling the company out to the highest bidder. ...and remember that those new shareholders would own a majority of the common stock, so they can impose their will.
Have a great weekend!
The 8K that was just posted on this Board continues the path of the company stretching out its debt repayments. But there is one new aspect here, namely the lender accepting $15,000 of debt repayment in stock - let me copy here from the 8K:
(a) a cash payment in the amount of $35,000.00 payable upon execution of the Settlement Agreement Amendment together with 918,386 shares of the Company’s common stock (subject to adjustment as described in the Settlement Agreement Amendment) based on a note conversion amount of $15,000.00 and a conversion price of $0.016333, which shares are to be issued and delivered pursuant to the terms of the Settlement Agreement Amendment and (b) a cash payment on or before March 15, 2016 in the amount of $35,000.00 together with shares of the Company’s common stock based on a note conversion amount of $15,000.00 and a conversion price to be determined in accordance with the Notes, which shares are to be issued and delivered pursuant to the terms of the Settlement Agreement Amendment....
That stock conversion price of 1.6+ cents is the company's first real dilution (given the stock price having been in the 2.5 cents to 3.0 cents range recently). This certainly differs a lot from the enforced conversion that the company did as regards its Gotama debt where the conversion price per terms of the loan was 15 cents per share (again kudos to management for having negotiated thus).
The company really ought to explain what's going on with sales volume and report on what level of sales will be required to break even (including interest expenses) and what the projection is of the time frame to get there. For the current holders of the stock, you can hope that Typenex will not create disorder in the market by trying to sell their shares is large lots.
I do want to share with the group one concern I do have about VHUB, as in the past the group has provided reasons to be less concerned, primarily involving how the penny stock market is a different kind of animal.
When I noticed the relatively small quarter-over-last-year growth in gross revenues for the second fiscal quarter, I semi-remembered that the company had made a multi-year sales (and even bottom line) forecast last spring for some conference. I put this out of my mind for awhile, and then this morning I went digging and found the following excerpt in an 8K release in June 2015, having to do with the company's presentation at the LD Micro Conference.
Three Year Growth Rate The chart with that name is a few pages into the presentation.
If you take a look at the sales numbers forecast for 2015 and 2016 (as we can't be sure that the years referenced in the forecast refer to fiscal years beginning in the particular year, fiscal years ending in the particular year, or calendar years), you'll see that VHUB does not seem to be on its way this fiscal year, with half the year already gone, towards even an $8 million year in revenues.
I can understand how back-of-the-envelope forecasts are not commitments (I made a lot of those forecasts during my career) and I really do understand the cautionary language that goes with all forecasts. But what I don't understand is how a company lets something that's way off target just "sit out there" without being updated. Credibility does count, especially as this company is looking into finding input of new equity, per the recent 10Q.
I guess this is sort of a plea that the company share with its shareholders (and again I admit that I'm not invested here, as contrasted to just being interested for reasons I provided a few times in my posting history) whatever forecasts it's using with potential investors, as the current group of investors deserves to be treated no less well than potential investors.
...and of course the context of all this is that the earnings release didn't do anything, one way or the other, for the share price this week (despite some wild intra-day volatility), so one can conclude the issue I'm raising really doesn't matter in the least.
Have a good weekend!
Knife, you and I are "in the same place" here, namely being underwhelmed by the quarterly results, yet still on fundamental factors remaining bullish long term on the stock. What's fascinating to me is that the market has so far been favorably impressed with the quarter, though I'm not sure if it's more a matter of having read the investor relations version of the story rather than having plodded through the numbers themselves.
I think that there's a story to be told as regards the "smallish" growth in the quarter's sales over the same quarter last year when we had been seeing larger increases previously - the most benign explanation, which would fit with the improved gross margin percentage, is that they're selling relatively more of the high-margin goods and de-emphasizing the smaller-margin products.
As you frequently have written, I also do think that there will be "good times ahead."
First, thanks to Hostastock for posting the first few sentences of Paul Knopick's press release regarding the 10Q. For the benefit of anyone not on the mailing list, here's the whole thing, except for the disclaimer wording:
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SIMI VALLEY, Calif., Feb. 17, 2016 /PRNewswire/ -- Vapor Hub International Inc. (OTC: VHUB) (www.vapor-hub.com) today announced in a 10-Q filing with the Securities and Exchange Commission that its revenues for the six months ended December 31, 2015 totaled $3.257 million, up from $2.499 million in the comparable period in 2014. Gross profit and gross margins also increased in the six month period ended December 31, 2015.
Gross profit was $1.454 million for the first six months of the fiscal year, up from $1.086 million from the comparable period last year. Gross margins increased to 54% in the three months ended December 31, 2015, up from 41% from the comparable prior year period.
The Company reported revenues for the three month period ended December 31, 2015 of $1.295 million compared to $1.127 million in the same period in 2014. Sales increases were the result of increased wholesale distribution of VHUB products and direct distribution to retail stores.
"We are very pleased by our growing success as a public company in a short period of time," said Kyle Winther, VHUB CEO.
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I'll now add to my earlier commentary. VHUB is breaking even on operations - the first fiscal quarter was a little to the black, and the second quarter was a little to the red. Some of the interest expenses are accounting entries of a one-time nature, but there is a "real" interest expense which is still driving the company towards not (yet) being profitable overall.
At this point, let me copy into this posting an excerpt from P. 34 of the most recent annual 10K report:
"Our operating results and operating cash flows historically have not been subject to seasonal variations and we do not anticipate this changing."
What this means to me is that not only can meaning be found in comparing the same quarter of two fiscal years (e.g. the second quarter of this fiscal year to the second quarter of the prior fiscal year), but also meaning can be found in comparing successive calendar quarters (the second quarter of this fiscal year to the first quarter of this fiscal year, to the last quarter of the prior fiscal year). So let me make that "successive quarter" comparison...
I'd be more bullish if quarterly sales were not showing a flat to downward trend when looking at successive quarters - about $1.3 million in sales in the second quarter of the current fiscal year, about $2 million in sales for the first fiscal quarter of the current fiscal year, and about $1.8 million for the fourth quarter of the prior fiscal year.
This is a company, IMHO, that needs to convert some of its debt to equity, or alternatively to be sold. There won't be a tender offer from a hostile bidder, as management/board owns so much of the stock, but I think the clump of substantial owners will soon be listening, maybe seeking, for a larger company to make VHUB their vaping products subsidiary.
Time will tell...
I'm wondering if any of the gang here can find something positive about the 10Q, as all I am seeing is on the negative side:
1. While sales in the first quarter were roughly 50% above the prior year's first quarter, sales in the second quarter are only about 15% above last year's second quarter.
2. The going concern footnote is on the emphatic side about how management does not believe that the latest round of financing will get them through the next 12 months.
3. Their interest expense, including the accounting entries related thereto, is what's really damaging the bottom line.
I think this company is going to be put up for sale, and given their leadership in their growing industry, I think there should be sufficient interest in the company such that it won't be a "distress sale." If not put up for sale, look for issuance of new stock - and I don't think some dilution would be any more damaging than these large interest expenses.
I'm curious what the investor relations letter is going to say, in other words what have I missed in my quick review of the 10Q. ...and of course I'm interested in the interpretations others on this board will offer.
Good new week Knife, Hosta, and RPH,
Just to put matters into time and numerical perspectives, the December quarter 10Q last year was filed on February 17, so I'd be looking at later on in the week for the 10Q we're all eager to be seeing.
Also, sales for the second fiscal quarter last year were $1,127,473 per the 10Q. If I were a bettor, I could picture this year's similar-quarter coming in at $1.6-$1.8 million. $1.7 mil would be a little over a 50% increase. The China initiative should be starting to bear some fruit.
While I respect my wiser colleagues' opinions that penny stocks are more about revenues than the bottom line, I do think it's time for this company to show a quarterly profit as you can't go on borrowing forever (though the enhanced credit line the company secured at the end of the calendar year may disprove that in the short run). For reference sake, the first fiscal quarter came it with sales just under $2 mil and a loss just under $75K, and that quarter showed an increase of sales of just under 50% from the same quarter in the prior year.
Overall, I think there's good news ahead this week that's not yet reflected in the stock price. ...and just to complete the picture, this company as a leader in its emerging industry must be a target-acquisition for some larger company (it couldn't be a hostile takeover, given the percentage of shares owned by insiders) who'd be willing to pay more than the roughly $2 1/2 million current market value of the company.
We'll see soon enough.
Boersi, I was wondering when somebody was going to appear in this discussion board after a week and a half hiatus. The posture by Kyle to have VHUB become an aggregator/promulgator of industry knowledge through publicizing all accomplishments (e.g. in the diacetyl minimization arena)is, I think, a great strategy in an embryonic industry such as vaping. Kyle wants VHUB to be recognized as the industry-leader, and he might just get there.
The challenge of becoming the source and promulgator of industry knowledge includes being able to respond to the negative stuff that's out there. The diacetyl challenge was deftly handled by creating products free of the chemical. Now it seems that today there's another challenge out there, namely that found on the MSN home website a few minutes ago:
http://www.msn.com/en-us/health/medical/e-cigarettes-dont-help-smokers-quit-tobacco-study/ar-BBocx6V?li=BBnb7Kz
I wonder if Kyle will be able to aggregate studies by vaping product within selling companies that will show that particular vaping products are more helpful than others in weaning folks off traditional cigarettes. (Or maybe RPH and/or Hostastock will return to posting here and show where the MSN article has already been debunked.)
In any event, nothing has moved VHUB stock out of its trading range for quite awhile, which actually represents good stock performance compared to the market as a whole in the new year and especially compared to VHUB's competitors over the past year as demonstrated so ably in your own post #5033 from Christmas Day.
Have a good day, Sir!
I've gone back and read the 8K again, and I'd like to offer one more comment in regard to dilution. The $750K principal is convertible into common shares, under certain conditions which would be reflective of problems, at 85% of the market price of the stock (slight oversimplification).
So if the market price were 3 cents (which is roughly where we are now), 85% of that would be 2.55 cents. Dividing that into $750K comes out to around 29.4 million shares. As of the end of the fiscal year, per the 10K the company had around 72.5 million shares outstanding. Adding the 3.8 million shares issued to pay the "advisory fee" to the new lender, that takes us to about 76.3 million shares outstanding. Accordingly, another 29.4 million shares would be just less than a 40% increase in outstanding common shares.
Is that a lot of potential dilution - and the fact that conversion would be spurred by distress, there'd probably be even more dilution occurring due to the lower stock price at the time? I would believe that if the company were debt-free and running a positive cash flow, then it would be valued a lot more than the roughly $2.3 million that it's valued now (though that valuation would be spread over more outstanding shares).
In the end, it all comes down to whether the company - with the help of the additional financing - can grow itself into profitability. My initial belief is that it can, especially given the dialogue on this board a few days ago which showed that the company is ahead of the curve on the diacetyl issue.
Valid points can be made on either side of the argument as to whether the company will endure, and I'll be interested in (and I'll respect) anyone's comments. Thanks!
I'll play lead-off hitter (unless someone else beats me to the punch in the next few minutes) as regards the 8K of December 31 that has just been placed on this website. Hopefully, there's a clean-up hitter in our group who will add a lot more to my initial comments.
1. The 18% stated rate is a lot better than VHUB has done previously, as long as the Advisory Fee represents a legitimate consulting service rather than a veiled cost of the capital.
2. So I'd wonder what VHUB was advised to do beyond borrowing from this lender.
3. The 3,810,000 newly issued shares used to pay the advisory fee reflects a value placed on the common shares of about 3.3 cents. As this is above the market price at the last close, I would not view this as being dilutive...at the moment.
4. However, the fact that the company is essentially guaranteeing that the sale of those shares will at least yield that advisory fee does represent a risk of dilution going forward.
5. The net new funds to the company, after paying off the BofI loan remnant would appear to mean that the company won't be in the capital markets again for awhile.
6. I wonder how much, if any, of my commentary will be reflected in a press release, if Paul indeed will issue one.
Have a healthy and prosperous new year, everybody, and I'll be appreciative for how any of you will amplify/correct any of what I am putting on the board now.
RPH, let me add meat to the skeleton you've provided this board. I thought I'd go searching for proof of your assertion that the Harvard School of Public Health study has been debunked, and it took me all of two minutes to find it...
http://dailycaller.com/2015/12/14/media-bias-exposed-popcorn-lung-chemical-750-times-greater-in-tobacco-vs-e-cigarettes/
It's interesting how the Harvard study was published on December 8 and it took less than a week for Boston University to respond.
Now I'm not sure if it's better for VHUB that the Diacetyl claims are not true/problematic or if Boersi's citation of how VHUB is on top of the issue by having products that are free of the chemical. But in either case, there is a strong bullish event going on for this stock which is showing how VHUB is an enlightened industry leader.
Beyond that, I guess I'll chime in on the recent debt refinancing. First, this is all about relatively small amounts of debt in relation to the market value of the company. Second, the 15% charge for refinancing may be a lot in relative terms, but not a lot in absolute dollar terms. Third, this refinancing completes the picture that was begun by the incremental 60K in new borrowing a few weeks ago - and that picture looks like that of a breakeven, maybe better, fiscal quarter for the company, with the extra borrowing utilized for working capital purposes as inventory needs to expand to meet increased sales.
Wishing you and the rest of the "faithfuls" here the best for the new year!
I'd say, Sir, that you've done a good job of reading between the lines of Paul's response. The company had put a lot of effort into showcasing Kyle and Perlingos on the Baillargeon (sorry to be lazy as regards spell-checking)infomercial-website, and nothing tangible seems to have come about as a result. Still, I know I'd like to hear about how Kyle's China trip evolved into whatever number of new distributors are selling product on an international basis.
All that aside, this is a company that is looking at $8 million in sales for this fiscal year, and somebody out there will take notice of that sooner or later.
There is one final item - and maybe you or RPH, given how you both are active in the industry, might have an answer here - that I'm curious about. Do we know who owns Limitless Mod? I read, but it has slipped my mind as to where I read it, that all its production is going to VHUB. Yet it is not owned by VHUB. My Google etc. skills have not been sufficient to get the answer. On the one hand, I wouldn't be surprised if the Winthers have some financial interest, but on the other hand I would have imagined that it would have required 10K disclosure for VHUB. Just curious here...
Good morning, Hostastock,
May I offer an alternative reading of the news blackout for your consideration:
1. The fact that there has not been news of any further borrowing after the small net borrowing the last time is something to be encouraged about. This may actually be a profitable quarter going on right now (though being given a clue about sales would be nice).
2. The "painting" activity on both the low and high side towards the end of many trading days makes it look to me like the manipulation is purposed to keep the stock within a defined range (roughly 2.5 cents to 3.5 cents). That might be consistent with the likelihood that the company is seriously negotiating for an equity infusion, which is what they said they were doing last May (then the best equity infusion imaginable, albeit on a small scale, came with the forced conversion of the Gotama loan at the rate of 15 cents per share). I would think that negotiations with an equity investor would be less complicated when the stock is being stabilized.
3. Last year around this time the stock was being beaten into a pulp by tax-loss selling, presumably by the unfortunate folks who had been caught in the pump and dump of Spring 2014. This year has nothing like that going on. The silver lining last year was that the stock rose by 75% during the afternoon of December 31 when there was no selling pressure left. I wonder what will happen at the end of this year. It would not shock me if some of the folks who are "taking their medicine" with many/most marijuana stocks would reinvest their proceeds into a non-marijuana play like VHUB.
Anyway, best wishes for the season and good fortune in your business and investing activities!
Boersi, you've been asking some great questions recently, and I'd like to venture some answers, but with the hope that those more qualified than I will chime in and give you improvements over what I'll offer as sort of leadoff hitter here.
1. While VHUB owns the Tac Mods company via VHUB's Delite subsidiary, I do think that Limitless is a privately held company which markets through VHUB and others. I do believe that VHUB puts the finishing touches on some Limitless products in order to make them uniquely VHUB products. RPH and Hostastock likely can confirm or correct what I've just written. This does not fully answer your question about cloning Limitless products, but maybe it's a good start to an answer.
2. As regards large spreads between bid and asked stock prices for VHUB, I'd believe that a stock like VHUB which ran up to 6 cents on one day then quickly plunged down to 2 cents either the next day or the day after (I've forgotten, sorry) actually does merit a pretty large spread so that market-makers can be viable.
3. ...that being said, the story that some of our colleagues on this board have encountered, namely having bid prices move right after putting in their bids as contrasted to transactions being effected, does not put those market-makers into a good light.
4. I guess that's why companies regarding which their shareholders would have minimal concerns about subsequent dilution occasionally do reverse splits so as to get the stock price up to where more legitimate market-makers become involved.
5. There remains some reason (though I believe it to be not such a big deal) to be concerned about dilution in VHUB, namely that since May the company has been searching around for more permanent capital sources to take out short-term debt. Those sources could be either longer-term debt or issuance of new shares which could take place, at least in theory, at a sufficiently low price so as to constitute dilution.
6. So overall I think that VHUB stock will run up when the first of these two events transpire - the financing arrangements have been completed on a minimally-dilutive basis at worst OR there's a profitable quarter. I'm not quite the optimist that some of our friends are in believing that continuing rapid growth in the top line is sufficient to drive the stock upward (I guess the first fiscal quarter just reported upon tends to testify to that).
Again, I'm just trying to lead off the process of answering your questions, and those wiser than I will do better for you than I have.
Wishing you the continuation of a great holiday weekend...