Good afternoon, Truth. You and I had a respectful exchange of opinions back in August, so let's go for it again.
1. I don't agree with you as regards the dilution angle. The company raised authorized shares primarily to have enough room to satisfy conversion covenants in regard to the November 2014 Typenex tranche-designed loan. In the end (see the recent 10K footnote on this) VHUB stopped using this credit facility after just two take-downs and then took out another couple of loans at much lower principal amounts than what had been left unused in that particular Typenex arrangement. Overall, as of June 30 the company has a little over half a mil. in short-term debt.
2. In fact, the opposite of dilution occurred when VHUB took advantage of a really (positive for the company) bizarre loan covenant in its roughly 600K of loans with Gotama, forcing conversion at 15 cents per share. It isn't dilution when you sell stock at something like four times the market price at the time.
3. None of this should be taken as an argument that the company doesn't have a capital funding challenge. It does - nearly all the debt is short-term at high interest rates, and it needs to be refinanced into long-term debt or into equity. Some dilution would be preferable to what we have here now for the capital structure.
4. As regards your claim of "bad management," there are points to be made on either side of the debate. In its favor, the company has grown from zilch to over $5 million in annual sales very quickly, has been able to secure financing (even if the term and rates are problematic), has seemed to repent from a pump and dump of Spring 2014 (one in which the management team was only hurt as they didn't sell their shares), and according to the experts on this discussion board has developed some very attractive and successful products.
5. In the other direction, supporting your claim, management is "a family affair" with no outside directors holding the strings of caution, has been optimistic on sales projections, has problems with internal controls (see the 10K), and needs to turn a profit pretty fast before sources of financing would dry up on them. Also, given the complexity of the financing challenges, it is unusual that a CFO with just an associates degree would be capable of taking care of business.
Overall, I think a reasonable case can be made for some of the points you have raised, but I think that overall the potential for dilution has been kept very limited so far and that management has done an above average job with the challenges of a startup situation. It also impressed me when looking at the 10K that some of the corporate loans have been secured with personal assets, so the criterion of "putting one's money where one's mouth is" has been met. Of course, in the end it all comes down to how quickly the company can actually sustain a profit and evolve its capital structure away from a preponderance of short-term debt.
In a penny stock world where (pick a number) 60% of the companies fail, a good bet is one where the potential of failure is maybe half that, if the fruits of success would be a (again pick a number) five-fold increase in the share price.
As it was in August, I remain open to listening to the reasoning behind your opinions. Thanks again! Almost forgot, having looked at some of your posts in other threads, I see that you have been a bull at least as often as you are a bear, so it is not fitting to call you some of the names that are used when bears are encountered on this board (you're just honestly calling it as you're seeing it).
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