Here's what we know about Vaporin Inc. (OTCQB:VAPO):
A. VAPO has implemented national retail distribution channels. During Q2 alone, VAPO established additional distribution into several more states including NJ, CT, PA, MA, OH, WV, NH, and RI. New York alone has 20,000 convenience store businesses in operation so an East Coast expansion into these 8 additional states echoes the overall growth potential for the company's distribution revenue opportunity.
B. One of the largest distribution companies in the US has reported Vaporin products are "their best selling vapor products."
C. VAPO has obtained roughly $3.5million through equity purchases at a per share price of $0.10 and without warrants. This has helped the company increase its inventory and proceed with proper distribution to support the sales growth, and new product development of its vaporizer & e-liquid products.
D. Within its first 2 quarters of operations under the new business model VAPO has already generated $602,000 in revenue.
E. Vaporin has increased quarter over quarter gross profit margin by 40% and plans to up list to a major exchange such as the NASDAQ or NYSE in the near future.
F. Vaporin has entered into additional markets to include the cannabis space through its product distribution agreement with Terra Tech opening yet another revenue channel in a new and growing industry.
It's been noted that a number of retailers across the country have identified the consumer preference of personal vaporizer products compared to e-cigarettes. Convenience stores rank as one of the largest marketplaces for e-cig sales ($530M) but vaporizers are quickly taking up more "real estate" not only from the shelves but from many of the point of sale advertising spots as well.
Analyst Bonnie Herzog is one who thinks that the first quarter of 2014 is where we start to really see the vapor trend take hold and drive the combustible cig decline rate at an accelerated pace,"Bottom line, retailers are starting to either discontinue or take shelf space away from disposable e-cigs to make room for personal vaporizers given their attractive growth & margins."
Over the course of the last 8 months, Vaporin, Inc has not only developed sophisticated distribution channels that span the nation but it has also focused on becoming a market leader through unique revenue drivers. In fact, on September 3 the company announced the closing of the acquisition of The Vape Store (www.thevapestoreonline.com), which operates four vape shops on the west coast of Florida with annualized revenue of approximately $2.6 million. After realizing increased growth quarter over quarter and a gross profit margin of 40% (as of the last filing), the addition of another stream of revenue like the one coming from "The Vape Store" could mean an additional quarterly jump of roughly $650k. marry that with the company's already diversified revenue model that includes vending machine sales and a unique online sales model and VAPO could take on a majority stake in the vape space sooner rather than later.
Let's look at some "leading comps" as well. First, Vape Holdings (OTCPK:VAPE), a company that focuses on designing, marketing, and distributing various vaporization products currently trades around $2 per share. The company offers medical and food grade ceramic products primarily under its "HIVE Ceramics" brand throughout North America, Europe and South America. In the company's most recent filing, VAPE shows to have posted "record" quarterly revenues of $361,781, bringing its 9-month number to a total of $392,540; this pales in comparison to Vaporin's Q1 numbers let alone its 6 months of revenues
"We are extremely pleased with the Q3 2014 financial results that represent our first big push to market since our products began shipping full scale in mid-May," stated Vape CEO and Chairman Kyle Tracey.
At $2.06 (as of Tuesday), this is the highest priced vaporizer company in our report. VAPE trades at roughly 52x revenues with the current market cap of $19.8M and despite its record numbers, was only able to generate a gross margin of a mere 6.8%. The company's third quarter will be a very important time to show the true potential from its operations not only because it has just began shipping product full scale but the company has also recently launched an e-commerce site as well.
Another player in the vape space that has a bit more "flash" as you'll come to read is mCig, Inc. (OTCPK:MCIG). This company focuses on two trends currently gaining obvious attention: (1) The decriminalization and legalization of marijuana for medicinal or recreational purposes; (2) The adoption of electronic vaporizing cigarettes. The company manufactures and retails the mCig and owns Vapolution, Inc., which manufactures and retails home-use vaporizers such as the Vapolution 2.0. Through its wholly owned subsidiary, VitaCig, Inc. the company manufactures and retails the VitaCig, a $5 nicotine-free eCig that delivers a water-vapor mixed with vitamins and natural flavors.
The company's actual filing shows 640% jump in annual revenues from $50,000 in 2013 to $370,077 however if you read through the mCig's annual report, it will show MCIG generated "company wide revs" of %543,000 but management states the figure includes revenues from Vapolution, Inc., which means it does not comply with US GAAP figures that were actually reported in the 10-K. Despite this piece of critical information…, mCig has shown more favorable results from operations. Its gross margin was roughly 57% based on the reported $370k figure and with a market cap of $90M, MCIG is trading at nearly 245 times revenues at the current share price of $0.41 and it should also be noted that the stock has just recently begun to rebound following last Monday's sell-off. The company boasts strong favor from its celebrity spokespeople including Bam Margera and Rick Ross who actively support the mCig and VitaCig brands. We feel that the results from this next quarter should decide the fate of MCIG based on its recent successes from Vapolution and the adoption of its notable celebrity driven marketing strategy.
In the case of Vaporin, Inc., this company could be the most undervalued and highest performing one out of the three. Instead of celebrity spokes people or social media campaigning, Vaporin is using the same strategy that Blu used early in its development for e-cigs to not only gain an early market share in the vape space but also to establish itself as a potential leader in the vaporizer & e-liquids industry. The company has also diversified through both an online sales approach & continuity program in addition to its nationwide convenience store roll-out. Additionally Vaporin has dove into the cannabis market through a product distribution agreement with Terra Tech Inc. (OTCQX:TRTC).
For the 6-months ended June 30 Vaporin shows a total of $602,163 in revenues (the highest of the 3) and a gross margin of 41% coming in only second to mCig.
"I am proud of what we have been able to accomplish thus far in 2014. Based on the compounded growth that we have experienced over these last 6 months, we are confident in our ability to continue this trajectory throughout the remainder of this year. We are also looking at opportunities for product line expansions and the addition of celebrity spokespeople for the next phase of company growth and ongoing campaign to build brand awareness," stated Scott Frohman, CEO of Vaporin in a recent shareholder update.
In keeping all things the same, if Vaporin were to be trading at 50x or even 245x revenues similar to Vape Holdings or mCig, one would think that this could be the highest priced stock amongst the group but at $0.07, this company not only has posted larger revenue numbers to this point but it is also only trading at roughly 20x earnings which makes this possibly the most undervalued stock in the bunch. A similar valuation (even if it were like Vape Holdings) would still show the per share price at around $0.18. In a similar case such as mCig, the pps would be around $1 with the current outstanding share count remaining the same for both scenarios.
Much to its credit, Vaporin has been working a gorilla marketing angle and even as other companies like Vape and mCig are seeing more growth, this next quarter should be the true tale of the tape as to which one of these companies will emerge as a market leader thus giving investors an opportunity to find value in an industry that's already be slated for increased growth over the next several years. At this point the vapor revolution is ripe for investment a right play with a company showing the biggest potential could pay-off in the long run. Looking at it from this angle, early investors in Lorillard previous to its purchase of blu saw great returns and increased value as blu became a leader in the space. Now that vaporizers have taken center stage, this next wave of investment could offer more, especially because the companies within the industry trade at a far lower share price compared to where Lorillard was when it brought on Blu.
Better yet may be the fact that the company's recent financing activities can afford it to build the business and much needed inventories when taking on a national sales strategy. In a recent letter to shareholders, CEO Scott Frohman states that Vaporin's financing activities so far this year include roughly $3.5million through equity purchases at a per share price of $0.10 and without warrants.
"This has helped us increase our inventory in order to proceed with proper distribution to support the sales growth, and new product development of our vaporizer & e-liquid products. Our financing efforts will also allow us to focus on our specific marketing and advertising efforts to position ourselves as a leader in the industry."
Based on the comparative valuation to other comps in the market as well as the company's aggressive sales & marketing strategy, Vaporin looks to be on a path to out-pace its competition within the vaporizer and e-liquids industry. More importantly, the company's diversified approach to revenue generation and the influx of operational capital has allowed Vaporin to achieve its quarterly milestones to realize the company's growth potential. For early investors, this may be an opportunity to see a "real" company in the OTC that's not only posting actual revenue numbers but is also progressing through a value model that could allow it to, in fact, become a market leader.