SOURCE: Vapor Group, Inc.

Vapor Group, Inc.

May 07, 2014 10:45 ET

Vapor Group, Inc., VPOR, Thanks and Responds to "TheStreet.Com"

DAVIE, FL--(Marketwired - May 7, 2014) -

On May 6, 2014, Vapor Group, Inc., (OTCQB: VPOR), (the "Company", "Vapor Group"), announced that Hanover Holdings I, LLC ("Hanover") had purchased over $1.2 million of its 8% Senior Convertible Notes ("Notes") due twelve months from date of issue. On the same day, Vapor Group filed an 8-K with the Securities and Exchange Commission detailing the terms and conditions of the transactions:

In response to the news announcement and 8-K filing, "TheStreet.Com" later that day posted on its website a video by Debra Bochardt, titled, "Vapor Group Takes on Debt to Market It's E-Cigarettes":

Vapor Group's Response
"This release is our response to TheStreet.Com's video wherein we wish to clarify some statements that TheStreet.Com made, and address some concerns that Debra Bochardt raised on-air," stated Dror Svorai, President and CEO of the Vapor Group, Inc.

"First and foremost we want to thank 'TheStreet.Com' for taking the time to think about us and our business. We welcome their coverage and their constructive, thoughtful commentary that helps us build a better company.

That aside, I'd like to address and clarify the following four points from the video:

1. The 'Use of Proceeds' for the $1.2M is for the additional purchase of vaporizers, e-cigarettes, accessories and e-liquids for all of our brands, not just the 'American Smoke' brand from American Vaporizer, but also for our Total Vapor, Vapor 123, and Vapor Products brands as well. In fact, the new inventories have been already ordered to fill accelerating second quarter product orders across all our brands. And 'yes', 'we are taking on debt to market our e-cigarettes'. Yet, the debt is being used judiciously to drive incremental revenue and gross margin across our brands, not to pay expenses or items that don't provide a more immediate return-on-investment. The $1.2M is intended to help springboard and further accelerate an already existing rapid growth.

2. Under terms of the private placement, after 6 months from the Notes' issuance, or October 29, 2014, the Notes may, in whole or in part, be converted by Hanover to common stock at a fixed price of $0.15 per share, and, yes, if the stock isn't trading 6 months from now at $.18, Vapor Group would be in default of this financing. We all know that should Hanover convert, the conversion would be dilutive. But Hanover still has to wait to convert. Needless to say, our management team has a great incentive to drive the business to pay down the Notes to limit such dilution and to drive the business' metrics so that our price per share is solidly above $.18 in 6 months from its current trading range. In fairness, remember that both Vapor Group and Hanover aren't in this deal to have it go into default. They and we believe that in 6 months' time, the $.18 per share default price will be academic and a concern no more.

3. Yes, there are bigger players in the e-cigarette space than we are -- players with considerable mass distribution muscle such as the traditional cigarette companies. But remember that the e-cigarette industry is still in its infancy, and typically market and technological leadership changes frequently and rapidly at this stage of a newborn sector's life. Recall that once industrial giant Eastman Kodak was the leader in photography right up to the point where electronic photography took over and eventually put the device into a cell phone! Knowing business history and what can happen keeps us sharp, alert, nimble and conservatively aggressive. We will do our best to carve out markets that we believe strategically we can develop and defend over a reasonable period of time. We don't think that we are going away soon and think we will get much larger well before that happens.

4. We produce the highest quality e-liquids in the world and can prove it. Our e-liquids are unmatched by any competitor in terms of their purity, high quality, and the steps that we take to protect our customers. All our e-liquids are formulated and mixed exclusively in the U.S. by an FDA registered laboratory by degreed professionals, in accordance with cGMP guidelines (21 CFR part 111). All our e-liquid ingredients are quarantined before use, and must pass an independent, third party laboratory test for purity. All our key ingredients are United States Pharmacopeia ("USP") grade and kosher. We would never use diethylene glycol or toxic substances in any of our formulas. We don't believe that the FDA found any such substance in any of our e-liquids but found it in the e-liquid of one of our competitors who has less rigid standards. Our lab carefully tests each batch of our e-liquid by high pressure liquid chromatograph to verify that we have the right levels of ingredients. None of our competitors, bigger or smaller, go to the extreme of quality testing that we do. Our quality is a fundamental pillar of our competitive advantage. Because of all of this and because we know that we are the established benchmark standard in e-liquid purity and quality, we welcome future FDA jurisdiction over our category and their issuance of quality guidelines to the industry. It can only help to increase the confidence of our customers in our products quality and safety. When the forthcoming FDA standards arrive, we know that we will be able to easily meet or exceed them."

About the Vapor Group
Vapor Group, Inc.,, designs, develops, manufactures and markets high quality, vaporizers and e-cigarette brands which use state-of-the-art electronic technology and specially formulated, "Made in the USA" e-liquids, which may or may not contain 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, American Smoke and Vapor Products brands. It sells nationwide through distributors, wholesalers and directly to consumers through its own websites and direct response advertising.

All of its E-cigarettes consist of a long-life battery, a heating element, a cartridge filled with an "e-liquid" and an atomizer which when heated, vaporizes the e-liquid. Because E-cigarettes are not "lit" like regular cigarettes, they don't create flame, smoke from burning, ash, tar, noxious fumes or leftover "cigarette butts". As a result, they may be used virtually anywhere. 

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, Inc. 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:
Forward-Looking Statements Disclaimer: A number of the matters and subject areas discussed in this news release that are not historical or current facts deal with potential future circumstances and developments, including among others, the timing of the closing of the private placement and the amount of gross proceeds and the use of net proceeds from the private placement. The discussion of such matters and subject areas is qualified by the inherent risks and uncertainties surrounding future expectations generally and also may materially differ from Vapor Group's actual future experience involving any of or more of such matters and subject areas. Such risks and uncertainties include those related to our ability to complete the transactions contemplated by the private placement, our ability to realize the expected benefits of the private placement, the sufficiency of the capital raised in the private placement and the ability of Vapor Group to raise additional capital, the extent of dilution of the holdings of our current stockholders upon conversion or exercise of securities issued in connection with capital raising efforts, the early stage of Vapor Group products in development, the uncertainty of market acceptance of products, the uncertainty of development or effectiveness of distribution channels, the intense competition in the medical device industry, the uncertainty of capital to develop products or continue as a going concern, the uncertainty of regulatory approval of products, dependence on licensed intellectual property, as well as those that are more fully described from time to time under the heading "Risk Factors" in Vapor Group' reports filed with the Securities and Exchange Commission, including Vapor Group's Annual Report on Form 10-K for the fiscal year ended December 31, 2013, and subsequent quarterly reports.

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