Vapor Group Inc (OTCMKTS:VPOR) Crashes Back Down
On Tuesday Vapor Group Inc (OTCMKTS:VPOR) published a PR informing investors that the boards of Directors of the company has decided that there won’t be a reverse split of the common stock for the rest of the year. Now the earliest time a reverse split may be implemented is stated to be January 2016. On the day of the announcement VPOR’s stock closed with a gain of 13% but its performance showed signs of hesitation with the closing price of $0.0017 being lower than the opening price of $0.00195.
Yesterday there was no hesitation whatsoever – VPOR began dropping down the chart from the get-go and six and a half hours later had wiped 17.6% closing at $0.0014. Investors shifted over 246 million shares throughout the day surpassing the monthly average for the stock by more than two times. There are a couple of very serious reasons for the depressing chart performance.
At the end of March VPOR submitted its annual report for 2014 and it showed that at the end of last year the company had:
• $413 thousand cash
• $3.1 million total current assets
• $3.55 million total current liabilities
• $4.48 million annual revenues
• $804 thousand annual net loss
With respectable revenues, manageable net loss and working capital deficit of less than $500 thousand the balance sheet is among the better ones that could be found in the world of pennystocks. If you take a more in-depth look however you will find that over $3.1 million of the reported liabilities consisted of convertible notes payable with another $250 thousand in accrued interest.
If you have been dealing with pennystocks even for a while you might already know what this usually means – a crushing dilution of the common stock. Between January 1, 2015, and March 30, 2015, the owners of around $1.7 million of these notes decided to convert them into common shares. As a result the outstanding shares ballooned from 928 million to over 2.65 BILLION in the span of just three months. By prepaying two convertible notes VPOR did their part in reducing their outstanding convertible debt. This, however, still leaves the company with approximately $1.4 million in convertible notes payable and accrued interest.
In its letter to the shareholders VPOR stated that they remain determined to eliminate all such debt by the end of June. Even if a couple more notes are paid before they can be turned into common shares it is more than likely that the majority of the notes will be converted. With the recently increased authorized amount of 4.5 billion shares at least for now the dilution doesn’t seem to be coming to an end.
If the company manages to deal with its bloating outstanding shares count the stock could be able to move to higher price ranges. Especially if the company’s operations are growing and according to their preliminary results revenue for the first quarter of 2015 is going to be bigger than the same period last year.
In a new PR issued early in the morning today Mr. Drod Svorai, the CEO of the company and Mr. Yaniv Nahon, COO and Secretary, announced that they have agreed to not convert any of their preferred B shares until after January 2016. It remains to be seen if this will be enough to prevent the stock from sliding further down the chart during today’s trading.
