Davie, FL – May 21, 2015 – Vapor Group, Inc. (OTC.QB: “VPOR”), (the “Company” or “Vapor Group”), today released the following letter to its shareholders from its President and CEO, Dror Svorai.
Yesterday afternoon and again this morning, we filed two 8-K’s addressing recent events that have significantly impacted the Company. The following are my comments on each of them:
2014 Financial Statement Restatement: What the 8-K filed yesterday can’t express is the frustration we feel in having to revise the 10-K for calendar 2014 solely to allow for adjustments for “embedded conversion options” inside convertible promissory notes. Previously, such calculation of the future value of conversions to shares was never required; yet our new auditors (replacing our prior auditor who resigned) have required its inclusion under strict public company accounting standards. We are complying with their request and in fact, much of the associated restatement work has already been done. We expect to file the amended 10-K within the week, if not sooner. Immediately after the amended 10-K is filed, we anticipate filing within a day or two of its filing, the Quarterly Report, or 10-Q. The 10-Q had already been written and ready for filing before May 15th, but couldn’t be filed until similar “embedded conversion option” adjustments were made to it. SEC procedure demands that the revised K to be filed first. A company can’t file a subsequent financial report unless the prior one is corrected. All that said, we expect to be current on all our reports within a short period of time.
Increase In Authorized Shares: Our Board of Directors again found itself having to approve an increase in our authorized. This time, however, our feeling was to increase it to such an extent that we won’t have to keep going through increases again and again.
We needed to have adequate shares to conduct daily business while dealing with noteholder demands for increases in their share reserves in order to avoid default under the terms of the promissory notes.
Given the dilution driven by debt conversions which have been pushing the market price of the stock down, and the related, non-stop repeated calls by these same noteholders for increases in share reserves against their future conversions, the Board moved to put enough shares into treasury to cover constant noteholder reserve demands while avoiding the risk of default for not having adequate reserves set aside. Generally, these share reserve requirements are onerous. They put in reserve a quantity of shares that often assumes a share price over time of 15-20% of the market price of the stock. In other words, they assume continued downward pressure on the market price of the stock.
We publicly stated that we would not do a reverse stock split and 2015, and we will honor that commitment. Had the Board decided to reverse the stock, the increase in the authorized wouldn’t have been necessary, but we believe that our shareholders would be penalized by its outcome, and decided not to do it. Part of the effect of not doing the reverse, is having to increase the treasury stock.
We Continue To Grow: The above issues aside, the Company in the first quarter continued to show increases in revenue, and the expansion of our product distribution, now including the bulk shipment of our proprietary e-liquids to a Chinese e-cigarette manufacturer. Domestically, we continue to expand our distribution footprint. It has been this continuous growth, and the requirement that it created for increasing amounts of investment capital, that has driven the above issues. We are here for the long term and committed to growing the company regardless of the periodic challenges that we face from time to time.
Very truly yours,
President and CEO
Vapor Group, Inc.
About Vapor Group, Inc.
Vapor Group, Inc., www.vaporgroup.com, is in the business of designing, developing, manufacturing and marketing high quality, vaporizers and e-cigarette brands which use state-of-the-art electronic technology and specially formulated, “Made in the USA” e-liquids, with and without nicotine. It offers a range of products with unique e-liquid flavors that is unmatched in our industry. Its products are marketed under the Vapor Group, Total Vapor, Vapor 123, and Vapor Products brands. It sells nationwide through distributors, wholesalers and directly to consumers through its own websites and direct response advertising. In addition, Vapor Group owns and operates VGR Media, Inc., www.vgr-media.com, a full service interactive advertising agency, offering customized performance marketing solutions to help marketers of consumer products acquire new customers and maximize their return on investment. VGR Media operates in the U.S. and internationally.
Vapor Group is committed to providing e-cigarettes that are convenient and economical to use, safer and healthier than traditional smoking, and which provide a flavorful, enjoyable smoking experience.
Vapor Group is managed by a highly experienced team of executives committed to responsible business policies and practices, including the marketing of our products only to those eighteen years of age or older, not making or avoiding claims about our product health benefits, and fulfilling the requirements of all applicable laws and regulations.
Safe Harbor Statement:
This release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934. Certain statements set forth in this press release constitute “forward-looking statements.” Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate, or imply future results, performance or achievements, and may contain the words “estimate”, “project”, “intend”, “forecast”, “anticipate”, “plan”, “planning”, “expect”, “believe”, “will likely”, “should”, “could”, “would”, “may” or words or expressions of similar meaning. Such statements are not guarantees of future performance and are subject to risks and uncertainties that could cause the company’s actual results and financial position to differ materially from those included within the forward-looking statements. Forward-looking statements involve risks and uncertainties, including those relating to the Company’s ability to grow its business. Actual results may differ materially from the results predicted and reported results should not be considered as an indication of future performance. The potential risks and uncertainties include, among others, the Company’s limited operating history, the limited financial resources, domestic or global economic conditions — activities of competitors and the presence of new or additional competition and conditions of equity markets.
Vapor Group, Inc. 954-792-8450