Third quarter financial results for the quarter ended
January 31, 2014
Successful Launch and Rollout of mCig 2.0 – World's Most
Affordable Portable Vaporizer AKA (Herbal eCig)
First Profitable Quarter in Corporate History – Adjusted
Non-GAAP Net Income of $30,256*
Sales of $85,109 Reflect Only 24 Inventory Days Due to
Chinese New Year and Overwhelming Demand
Significant Balance Sheet Improvement
Shareholder Equity Increase to $1,321,736 compared to
negative ($210,087) for the quarter ended January 31,
2013
Debt, Financial Debt, and Interrelated Party Loans
Reduced to Zero
Completion of Vapolution, Inc. Acquisitions Marking
Entrance to Traditional Home-Use Vaporizers
mCig, Inc. (OTCQB:MCIG) is pleased to report the results of its
first operational quarter since launching the mCig 1.0 in November
15, 2013 and the mCig 2.0 on January 14, 2014. Due to a combination
of factors including: Overwhelming demand for the mCig 1.0, the
subsequent decision by management mid-quarter to halt 1.0
production in favor of fast-tracking production and launch of mCig
2.0, and the Chinese New Year affecting resupply of the mCig 2.0
following launch, management would like to qualify that all sales
and income figures reported for the period ended January 31, 2014
reflect a total of just 24 inventory days:
10 Inventory Days for the mCig 1.0
14 Inventory Days for the mCig 2.0
Financial Results
Notwithstanding these supply issues, the company is pleased to
report over $85,000 in revenue reflecting an increase of over 580%
over the same quarter in 2013. Gross Profit was $54,474 reflecting
a gross profit margin of 64%. Due to disciplined cost controls the
company is pleased to report US GAAP Net Income of $10,804
reflecting a net income margin of 12.7%. *Non-GAAP Adjusted Net
Income calculated by excluding non-cash items such as share-based
compensation and amortization was $30,256 or 35.6% of revenues.
Significant Balance Sheet Improvement
Total Shareholder Equity rose to $1,321,736 from a shareholder
deficiency of ($210,087) during the same quarter in 2013. Total
debt has been retired with mCig carrying zero debt as January 31,
2014 down from $196,000 during the same quarter last year.
Management Commentary
Paul Rosenberg, Chairman and Chief Executive Officer:
"We are extremely happy to be reporting our first profitable
quarter since inception. This historic profit was achieved only 10
days following the launch of the mCig 2.0. While the numbers
reported today are modest in comparison to our current valuation,
we wish to remind investors that all figures reported today for the
90 day period ending January 31, 2014 reflect only 24 inventory
days with only 14 inventory days for the mCig 2.0 due to the
combination of factors described above."
"Even with these slight setbacks, achieving US GAAP net income
is an impressive accomplishment that eludes many great companies
for years after their business has begun to monetize. I believe our
ability to achieve profitability so early highlights both the
secular growth in our sector as well as our disciplined approach in
managing our inventory and selling, general, and administrative
expenses (SG&A). This discipline we hope will make clear that
we are focused on profitability and have no intention in running an
unprofitable business. Moreover, it is my personal view that
today's results highlight both the soundness and financial
attractiveness of our 'asset-light' brand-focused business model
with nearly 65% gross margins and over 35% adjusted net income
margins."
"We believe that these figures are sustainable with little
erosion as the business continues to scale in both Sales and
SG&A. In fact, our internal modeling suggests that there exists
room for margin improvement as we pre-purchase raw-materials for
the production of the mCig over longer lead times. As our sales
figures somewhat normalize, and we are able to best project
long-term demand, we will be implementing such measures."
"With respect to margins, we are finding that our operating
margin on each mCig sold amounts to roughly 49.9% due to a spread
earned on shipping and handling (s&h). This spread ranges from
10% to as high as 20% of additional operating margin on single unit
orders which represent over 50% of our total orders."
"As we prepare the business to be scaled up further and for
retail/c-store distribution, we anticipate our operating margin
will decline to roughly 30% per unit sold at an MSRP of $13-15 for
the mCig at point of sale. This margin reduction is acceptable to
management when weighed against the potential sales growth that may
be achieved via these channels. The ability to reach customers
immediately vs. a lead time via online orders will further
strengthen our brand and increase awareness for our other business
lines."
"In my view the single most important development this quarter
was the continued strengthening of our balance sheet. By reducing
debt to zero and increasing shareholder equity to $1,321,736, we
find ourselves in the rare position amongst our peers of being
profitable, and having no financial debt. This also means that we
are uniquely positioned to capitalize from the upcoming VitaCig,
Inc. dividend and listing with over 249,000,000 shares of VitaCig,
Inc. to be included on our balance sheet in future financial
quarters."
Mark Linkhorst, Chief Operating Officer
"I am very satisfied with our results this quarter. Clearly, our
brand is achieving viral growth as we field orders from over 20
Countries and grow our client base into the thousands. For the
upcoming quarter, our primary focus will be to improve our
inventory supply management and reduce the time to delivery for
online orders which is currently at an unacceptable 7-10 days. We
thank all our patient customers for being loyal and supportive
while we improve our ability to serve you and satisfy your demand
for mCig products."
Vapolution, Inc. Acquisition Completed
This quarter saw the successful acquisition and consolidation of
Vapolution, Inc. The two companies have already made significant
progress in streamlining operations and capitalizing on
synergies:
mCig Design Team has completed a total revamp and design of the
Vapolution brand. This included a new logo and new website. We
encourage investors and customers to view the new website here:
www.Vapolution.com
The Vapolution payment and online cart systems have been
upgraded allowing for higher optimization, reporting, and
consolidation of results in future quarters.
VitaCig, Inc. Launch and S1 Filing On Track For
April
We continue to advance VitaCig towards an initial product launch
in mid April 2014. We are also confident that the VitaCig, Inc. S1
will be filed with the Securities & Exchange Commission no
later than April 20, 2014.
CNBC Interview at Oaksterdam University March 26,
2014
mCig, Inc. is pleased to report that management along with Dale
Sky Jones, Chancellor of Oaksterdam University are scheduled to be
conducting an interview with Jane Wells of the financial news
channel CNBC at the Oaksterdam Campus in Oakland, CA at 12:00 PM
PDT on March 26, 2014. Management will be discussing the industry
and demonstrating the mCig line of products including the mCig 2.0,
Vapolution 2.0, and the VitaCig. mCig invites shareholders and
customers to attend the interview and bring their mCig products for
an on-air vaping session.
mCig C-Store and Retail Distribution
The company has received interest from several groups to
initiate a retail/c-store distribution test for mCig. This test
would be separate from the current WDR (Wholesaler Distributor
Retailer) program which continues to grow independently and achieve
new sales records and WDR relationships. Management intends to
conduct a test run in 100-200 C-Stores following several weeks of
successful inventory management and online fulfillment.
Guidance and Conference Call
We have received many enquiries from investors, independent
sell-side research organizations, and institutional investors to
incorporate the technology industry practice of issuing sales and
unit guidance as well as quarterly conference calls. Management
intends to initiate both sales and unit guidance as well as
quarterly conference calls once the business trajectory achieves
normalization. This policy may change and may be re-evaluated in
future financial quarters.
About mCig, Inc. mCig, Inc. (OTCQB:MCIG) is a technology company
focused on two long-term secular trends sweeping the globe: (1) The
decriminalization and legalization of marijuana for medicinal or
recreational purposes (2) The adoption of electronic vaporizing
cigarettes (commonly known as "eCigs") by the world's 1.2 Billion
smokers. The company manufactures and retails the mCig – the
world's most affordable vaporizer priced at only $10. Designed in
the USA – the mCig provides a superior smoking experience by
heating plant material, waxes, and oils delivering a smoother
inhalation experience. The company also 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
is preparing to launch the VitaCig, a $2 nicotine-free eCig that
delivers a water-vapor mixed with vitamins and organic flavors. See
more at: http://www.mCig.org/, www.Vapolution.com, and
www.VitaCig.org The Company believes that a well regulated
marijuana industry is emerging as more states follow the lead of
Washington and Colorado in legalizing marijuana. A similar trend is
developing within the eCig industry following the first acquisition
of an electronic cigarette brand (Blucigs) by a traditional tobacco
company Lorillard Inc. for $135 million followed by another
acquisition in February 2014 by Altria Group Inc. of Green Smoke
for $150 million. Wells Fargo analyst Bonnie Herzog estimates that
eCig sales may rise from $1 Billion in 2013 to $10 billion over the
next three years. mCig, Inc. (OTCQB:MCIG) has positioned itself as
a first mover at the intersection of these two trends and hopes to
create shareholder value by making the mCig one of the leading
choices for electronic consumption of plant material. - See more
at: http://www.mcig.org/investors/investor-opportunity-subpage/
Safe Harbor Statement Any statements contained in this press
release that do not describe historical facts may constitute
forward-looking statements as that term is defined in the Private
Securities Litigation Reform Act of 1995. Any forward-looking
statements contained herein are based on current expectations, but
are subject to a number of risks and uncertainties. The factors
that could cause actual future results to differ materially from
current expectations include, but are not limited to, risks and
uncertainties relating to the Company's ability to develop, market
and sell products based on its technology; the expected benefits
and efficacy of the Company's products and technology; the
availability of substantial additional funding for the Company to
continue its operations and to conduct research and development,
and future product commercialization; and the Company's business,
research, product development, regulatory approval, marketing and
distribution plans and strategies.
CONTACT: Paul Rosenberg
CEO
(425)462-4219