Vapor Group Inc (VPOR)

[Sooah]

WHY $VPOR IS EXCITING: EXPONENTIAL REVENUE GROWTH

It is important to understand three main things about $VPOR:

1. Revenue Growth

As of the 9 month ended 2014, $VPOR not only posted record revenues, but it increased year over year revenues by 286%. This is very impressive but not as impressive as the consistent quarter to quarter growth this year in revenues and gross profits.

Revenues
1Q $966,411
2Q $1,023,365
3Q $1,307,524

Gross profits
1Q $645,806
2Q $508,271
3Q $877,537

From 2Q to 3Q, we are looking at a growth rate of 27.7% which cannot be ignored. If I took a rate of 27.7% and applied it to every quarter in 2015, we are looking at revenue projections that look like this:

2015 Revenue projections
1Q $2.1 million
2Q $2.6 million
3Q $3.32 million
4Q $4.21 million
=================
$12.23 million in revenues for 2015

This is absolutely feasible for $VPOR and probably a very conservative projection because they are gaining ground quickly in this highly fragmented sector and their prospect for rapid growth will be aided due to their entry into the MMJ market evidenced by their private label business recently secured for CO and in the future WA. The market and demand is there for $VPOR to secure additional business in their core business as well as further expansion into other states for MJ!

Depending on how quickly they penetrate other states for MJ, we could very well see $VPOR do $20 million in revenues next year which makes them a prime acquisition target by bigger E-cig players looking to add to their portfolio. IF $VPOR were to generate $20 million in revenues for 2015 or even $12 million, they will get 3x revenues upon acquisition hence we are looking at a company that has the potential to demand $36 million to $60 million for their business which is not out of the question.

2. Debt structure

The price of common stock took a beating due to two reasons. Increase in A/S to 2.5 billion and dilution that started between August 19th to date. The two are related to the amount of convertible debt $VPOR took in 2014 to fund growth.

Looking at the O/S increase from 8/19/2014 to 11/13/2014, we see an increase of 86,290,641 shares. I took a look at VPOR's chart and was able to get an average conversion price of 1.5c. What this means is that $VPOR was able to eliminate about $1,29 million in toxic debt with these issuance. Looking from 11/14 to date, we can project an addition of another 200 million shares to the O/S at an average conversion price of 0,005 which is elimination of another $1 million in debt.

What is exciting--not depressing--about conversion of debt since 8/19/2014 to date is this: $VPOR looks to have cleared at least half of its convertible debt if not more. I will remain on the conservative side and go with half for now but my quick review is giving me elimination of $2.2 million in debt.

Expect $VPOR to give an update and announce significant elimination of convertible debt!

3. Magna - VPOR's principle lender

Magna and VPOR revised the April convertible notes--conversion price is no longer fixed at 15c (makes no sense for Magna) but is 30% discount lowest market with a 5 day look back. Compare this to the typical 60% discount to market with a 15 day look back and you will see that Magna's notes are not as toxic as people think and this lender to $VPOR is more friendly than it usually is to other issuers.

Also on the date that the April notes were revised, $VPOR also prepaid a part of a note. I expect this pattern to continue and more lenders will give financing to $VPOR based on the revenue growth it will have and the fact that we're looking at sustainable growth.

With new loans that $VPOR obtains, cash from operations and controlled dilution, we can expect this issuer to become toxic debt free in no time and not too long into 2015, it should generate enough revenues to be self-funding, if not qualify for traditional financing should it opt to do so.

The A/S relative to the debt level is adequate to not worry about stock splits. O/S (estimated 650MM shares) is still small for what the company will be doing.

Plenty to be excited about here on $VPOR.