I've done my first reading of the 10K. I do believe that the CPA firm has done a terrific job here. As regards "how the results look," it's quite a mixed bag, and in the end I think that how the overload in short-term debt evolves into some mixture of equity and long-term debt will go a long way in determining what will happen to the stock price. Echoing/paraphrasing some comments by Sgreg some months back, some dilution here wouldn't be the worst thing in the world for VHUB.
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What I liked most about the annual report was this section which strangely enough has nothing to do with dollars:
Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities.
This means to me that the company is embarrassed about Spring 2014's pump and dump, and "it ain't gonna happen again."
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What at first scared me most about the report was this section:
In the absence of a majority of independent directors, our executive officers, most of whom are also principal stockholders and directors, could establish policies and enter into transactions without independent review and approval. This could present the potential for a conflict of interest between us and our shareholders generally and the controlling officers, shareholders or directors. Although we anticipate seeking independent directors in the future, there can be no assurance as to whether or when we will be successful in appointing any new directors.
Later on in the report, mention is made of a code of conduct. In fact, the code is an exhibit to the report. If I can find the time, I'll read it.
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The net loss for the year was 614K. The net loss for nine months was 401K. That means that the loss for the final quarter was 213K. I do realize that the last quarter can contain various year-end closing and audit adjustments that can go either way, but I really would have liked to see that the company could run profitably in a quarter that had such high sales. To the company's credit, the layoff of some folks which happened later on, showed that the company is committed to creating a positive bottom line.
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Beyond commitment to creating a positive line, one can read the strategic approach towards getting it done:
We expect our gross profit and profit margins to increase in subsequent periods as we sell more of our proprietary products, including, without limitation our Limitless Mods and Binary Premium e-Liquids and our newly launched Limitless Atomizer, which have higher margins than products we purchase for resale.
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You'll see that executive salaries have doubled from last year. I think that the salaries are reasonable, probably even low, for the positions involved. Still, with the company still having doubts in the going-concern arena, it's "not a good look."
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Overall, I think that Vapor Hub is an intriguing acquisition candidate. 72 million issued shares at roughly 3 1/2 cents market price multiplies out to a current market value of about
$2 1/2 mil. Circling back to earlier commentaries by Sgreg, that's not a lot of money for a company with great products (relying upon Hostastock and RPH here). Some larger, more established company, whether in traditional tobacco or in the new e-cigarette world, probably would find this the cheapest, best way to expand its product offerings.
I'm going to "coward out" on guessing how the stock is going to react tomorrow morning. However, I do predict that if the stock is headed downward in the morning, there'll be a press release from Paul in the afternoon about how great sales were in the first quarter of the new fiscal year.
Thanks to anyone who read all of this "giant economy size" post!
