VPR Brands LP (VPRB)

[Potfolio]

My VPRB Update

This is my opinion.

Monday the annual report is due out and we will get the first look into the company since Q3-2017 results. I am hoping that it will accompany a shareholder letter or further color for investors. Here are some of my thoughts, apologize for any typo's just going to type quick here...

1. During Q4 we saw an acceleration of product reviews on secondary sites. HOWEVER, it did seem that we saw a LOT of "out of stock" which was likely due to managing their working capital. It was both good in the sense demand was there but also I have a feeling it tampered sales growth in Q4-2017.

2. New product launches of the phantom, ELF, VPOD, MINI Max Pro all were released during Q4 or Q1. However, I don't expect MAJOR revenue growth in Q4 from these new products due to they were more geared towards ending Q4 and early Q1.

3. Checking in with the TA regularly I noticed that it seems the O/S count stopped around 75 million shares. This is what I'm most looking forward to in the release tomorrow - SUBSEQUENT EVENTS. In this section we will get visibility to the dilutive note transactions during Q1-2018 (although report financially is only thru ending 2017). My estimation is that we will find the note is > 90% complete.


Overall, here are my key investment themes that happened recently on top of my prior notes...

1) COMPANY ESTABLISHED 400K OF WORKING CAPITAL (4 8K's) AND NO FURTHER DILUTION
The loans were all done at a rate of 24% and paid back in one year. The company will have hardly any long term debt as of end of Q1-2018. If you look at all the signs of the TONS of new product launches, the demand for those new products that it has to be for GROWTH to fund initial inventory loads. This is a growing business. It will be a hit on the P&L but to me that is irrelevant at this stage. The stock went from $.50 to $0.01 because of common share supply of the convertible note. It has given investors a chance to become very wealthy purchasing stock under $.20

2) VAPOR STORE DIRECT STORE GROWING
My thesis here is simple. Just last month according to their EBAY reviews that store had 71 reviews compared to the month prior, and their 6 month was up as well. That 25% M/M growth leads to 4,800 reviews over next 12 months compared to the 300 the prior. This is just the sales through EBAY, but to me, point at stronger growth --- also instagram followers are growing rapidly. Could all this mean it's not growing? Sure...but I like my chances.

3) NEW PRODUCTS ARE HITS
This is clear by the amount of product reviews on secondary websites along with those who do sell the product on EBAY. Significant sales trends. Plus, having tried the products, they are awesome and the HONEYSTICK brand is growing!

4) CBD GOLD LINE AND CANNABIS SPACE TO DRIVE REVENUE IN Q2-Q4 2018 and BEYOND...
Up until the past month the cannabis space strategy was not at the front IMO. They had a few products that were geared towards dry herb, and they won an award in the early spring of the CANNABIS CUP...but for most of 2017 nothing. However, now, over the past few weeks the following has happened

A. CBD GOLD LINE WEBSITE...and mentions on social media are happening. The company is clearly gearing around creating their own product line.

http://www.cbdgoldline.com/cbd-products/

(I found this website, it is no where near completion, and company yet to communicate...work in progress it appears)

"GOLDLINE CBD are striving to fill the chasm between the demand and production by bringing together the best CBD and top of the line technology to the market."

This is key to me. They are looking to carve out their niche in the market here where a consumer can get both TOP CBD OIL AND TECHNOLOGY --- ALL IN ONE. If you look at that website, IMO, there is opportunity here to place those type of displays in convenience stores and other chain areas across the U.S. If you are aware of the CEO history, the KRAVE brand was in family dollars across the US which allowed the brand to grow.

The entire CBD Gold Line line will have NO revenue in Q4 or Q1-2018. This is all upside to a company that is already going to be at a $4-5M annual rate.

ALSO, check on OGKID FROST On instagram. He has over 1K likes on a post holding up the GOLD LINE product...hm....interesting.

B. HRB PRODUCT
In addition to CBD Gold Line the company recently came out with the first DRY herb product they offered w/Honeystick. Again, positioning for the cannabis space and market. Margins on this product should be solid at a price point of $100+

5) VALUATION
The business TODAY could easily be 4-5x revenues and still be cheap compared to other cannabis companies (just look at NXTTF). 5x revenues would put valuation around $0.33.
HOWEVER..
The company will be launching CBD Gold Line. Lot's of upside here.

6) CEO REMAINS FOCUSED ON LONG TERM AND IS ALIGNED WITH SHAREHOLDERS.
Kevin has done this before. He has helped take a company to NASDAQ. He took VAPOR from $1M in sales to $30M+. He has great relationships in industry. He OWNS 20-30M SHARES!! The guy wants to see a higher share price...IN THE LONG RUN. I do think we will see a little more investor friendliness (awareness...news releases..) in the coming weeks, months then the past 6 months. Why? Because they are finishing that dillutive note..and CASH WAS KING. He knew...build the new products, the business, and everything will take care of itself here over next 12-24 months. IMO


MY PREDICTION FOR Q4 ANNUAL REPORT
1) Revenues show high single digit growth of 4% at 950K (between 925-975K) A disappointment! Yep. BUT, because of what I think I saw..working capital issues during the quarter due to DEMAND. Long term great....demand for products....which they fixed with 400K working capital in Q1...short term...slower growth

2) IN SUBSEQUENT EVENTS...we see that the dillutive note is 90%+ complete at end of Q1-2018. THIS IS THE MOST IMPORTANT FOR SHARE PRICE...even if revenues fall flat temporarily...the stock should still be worth $.30 today and w/no dilution IMO it will get there over next 90 days.

3) GROSS MARGINS contract slightly to 38% from 40% after expanding a few quarters in a row. Looking for them to stay in the 35-40% area moving forward.

4) NET LOSS of $100K


All in all....I have lower expectations financially for Q4 but expect Q1 net sales to grow to $1.2-$1.3M and Q2 to be better yet $1.5M+ ($6M rate w/out any benefit from CBD Gold Line)

Excited about the future here.