Notes To Financial Statements
(Unaudited)
1
. BUSINESS DESCRIPTION AND BASIS OF PRESENTATION
mCig, Inc. (mCig) (fka Lifetech Industries) was incorporated in the State of Nevada on December 30, 2010 to develop a new day spa business in the affluent area of Montrose, California, surrounded by La Crescenta, La Canada, and Glendale.
On April 30, 2012, the company entered into a Joint Venture Agreement, a Distribution Agreement, and a Technology License Agreement (the Agreements) with Leadwill Corporation, a Japanese corporation (the Manufacturer and the Licensor).
Pursuant to the Joint Venture Agreement, we acquired the global exclusive right (excluding Japan) to make, use, sell and otherwise distribute all of the Manufacturers AWG products and technologies. In addition, we have the exclusive right to assign, sublicense, or otherwise subcontract our distribution and marketing rights to third parties. We were also granted an exclusive license to any and all of the Manufacturers patents, trademarks, and all other intellectual property related to AWG products and have the exclusive right to assign, sublicense, or otherwise transfer these rights to third parties. We will receive the Manufacturers AWG products at the price of twelve percent (12%) above wholesale costs for such products.
Pursuant to the Distribution Agreement, we were appointed as the Manufacturers sole and exclusive Distributor. As such, we were given the exclusive right to: (1) market, promote, sell, and distribute all of the Manufacturers current and future AWG products and technology; and (2) assign, sublicense, or otherwise subcontract these distribution and marketing rights to third parties worldwide (excluding Japan). The Manufacturer will receive ten percent (10%) of the net profits generated from our distribution of the AWG technology, less related costs and expenses.
Pursuant to the Technology License Agreement, we were granted an exclusive, perpetual license to make, manufacture, use, sell or otherwise distribute all of the Licensors AWG related technology. We were also granted the right to sublicense these rights to third parties at our sole discretion. We will pay the Licensor a royalty equal to ten percent (10%) of the Net Sales Revenue received from our sales of the licensed technology on a quarterly basis.
Upon execution of the Agreements, Leadwill Corporation has agreed to (A) file all necessary doing business as (d/b/a) documents in Japan so that Leadwill shall d/b/a Lifetech Japan, (B) change its corporate name from Leadwill Corporation to Lifetech Japan, or (C) transfer or spinoff all and not less than all of its AWG business into a new, separate corporate entity in Japan, to be called Lifetech Japan. All of our rights set forth in the Agreements shall apply equally to the new, separate corporate entity.
On September 1, 2012, the company entered into a Joint Venture Agreement, a Distribution Agreement, and a Technology License Agreement (the New Agreements) with Lifetech Japan Corporation (the New Manufacturer), a Japanese corporation. The New Agreements were executed pursuant to the transfer of the AWG business from Leadwill to Lifetech Japan. The Lifetech AirWell System is a highly advanced air to water generator that produces high quality water by promoting and filtering the condensation of moisture from air. The Air Well System uses an advance triple step gathering system and 12-step purification process to produce water that is free of chemicals, pollutants, contaminants and hormones.
Effective December 2012 the company has signed an exclusive ten-country distribution agreement with SunPlex Limited. Parties have agreed to a 5 year distribution plan which involves three phases. The first phase is to obtain government approvals and endorsements for Airwell products. The second phase of SunPlex's plan is to distribute Airwell products to hospitals, schools and government offices throughout the designated countries in Africa, and work with government agencies to set up water depots in areas where accessing clean and fresh water is extremely difficult. The final phase of SunPlex's proposal aims to partner with commercial and residential developers-incorporating the Airwell machines in their developmental plans-to which early discussions have suggested strong interest.
As of July 31, 2013 no revenue has been realized from the said distribution agreement.
On May 23, 2013, the Company received a resignation notice from Benjamin Chung from all of his positions with the Company, including President, CEO, Principal Executive Officer, CFO, Principal Accounting Officer, Secretary, Treasurer and as Director.
8
mCig, Inc.
(A Development Stage Company)
Notes To Financial Statements
(Unaudited)
1
. BUSINESS DESCRIPTION AND BASIS OF PRESENTATION (CONT.)
On May 23, 2013, the Company appointed Paul Rosenberg as its new President, CEO, Principal Executive Officer, CFO, Principal Accounting Officer, Secretary, Treasurer and as Director.
Effective August 2, 2013, we have changed our name from "Lifetech Industries, Inc." to "mCig, Inc.".
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The Companys accounting policies used in the preparation of the accompanying financial statements conform to accounting principles generally accepted in the United States of America ("US GAAP") and have been consistently applied.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The most significant estimates include: revenue recognition; sales returns and other allowances; allowance for doubtful accounts; valuation of inventory; valuation and recoverability of long-lived assets; property and equipment; contingencies; and income taxes.
On a regular basis, management reviews its estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such reviews, and if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates.
Development Stage Company
The Company is a development stage company as defined in FASB ASC 915 Development Stage Entities. The Company is devoting substantially all of its present efforts to establish a new business and none of its planned principal operations have commenced. All losses accumulated since inception has been considered as part of the Companys development stage activities.
Cash and cash equivalents
The Company includes in cash and cash equivalents all short-term, highly liquid investments that mature within three months of their acquisition date. Cash equivalents consist principally of investments in interest-bearing demand deposit accounts and liquidity funds with financial institutions and are stated at cost, which approximates fair value. For cash management purposes the company concentrates its cash holdings in a new account at Bank of America and an old account at JP Morgan Chase Bank.
Foreign currency translation
The Companys functional currency and its reporting currency is the United States Dollar.
Financial Instruments
Fair Value of Financial Instruments
The carrying amounts reflected in the balance sheets for cash, accounts payable and accrued expenses approximate the respective fair values due to the short maturities of these items. The Company does not hold any investments that are available-for-sale.
9
mCig, Inc.
(A Development Stage Company)
Notes To Financial Statements
(Unaudited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONT.)
As required by the Fair Value Measurements and Disclosures Topic of the FASB ASC, fair value is measured based on a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
The three levels of the fair value hierarchy are described below:
Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2: Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;
Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).
Website development costs
Under the provisions of FASB-ASC Topic 350, the Company previously capitalized costs of design, configuration, coding, installation, and testing of the Companys website up to its initial implementation. Costs will be amortized
to expense over an estimated useful life of three years using the straight-line method. Ongoing website post-
implementation cost of operations, including training and application, are expensed as incurred. The Company evaluates the recoverability of website development costs in accordance with FASB-ASC Topic 350. As of the quarter ended July 31, 2013, management does not believe that there is a need for the impairment of costs incurred toward the development of its website.
|
|
|
|
July, 31
2013
|
April 30,
2013
|
Website development cost
|
$
19,255
|
$
15,522
|
Accumulated amortization
|
(3,450)
|
(2,156)
|
Total intangible assets
|
$
15,805
|
$
13,366
|
Income Taxes
Income taxes are accounted for under the assets and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.
Basic and Diluted Loss per Share
The Company follows ASC Topic 260 to account for earnings per share. Basic earnings per share (EPS) calculations are determined by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding. During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation.
Revenue recognition
Our revenue recognition policy is in accordance with generally accepted accounting principles, which requires the recognition of sales when there is evidence of a sales agreement, the delivery of goods has occurred, the sales price is fixed or determinable and the collectability of revenue is reasonably assured.
10
mCig, Inc.
(A Development Stage Company)
Notes To Financial Statements
(Unaudited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONT.)
In May 2012, we signed an agreement with Epik Investments Limited, a Limited Liability Corporation incorporated under the laws of the Hong Kong Special Administrative Region, assigning them the exclusive rights to sell and distribute all of our products in Hong Kong and the Peoples Republic of China. These exclusive distribution rights are for a period of 2 years. We received consideration of $100,000 under the terms of the agreement.
As of July 31, 2013, the company earned a total of $62,500 in revenue and accrued deferred revenue of $37,500
related to this agreement.
Effective December 2012 LifeTech Industries Inc. has signed an exclusive ten-country distribution agreement with SunPlex Limited. LifeTech and SunPlex have agreed to a 5 year distribution plan which involves three phases. The first phase is to obtain government approvals and endorsements for Airwell products. The second phase of SunPlex's plan is to distribute Airwell products to hospitals, schools and government offices throughout the designated countries in Africa, and work with government agencies to set up water depots in areas where accessing clean and fresh water is extremely difficult. The final phase of SunPlex's proposal aims to partner with commercial and residential developers-incorporating the Airwell machines in their developmental plans-to which early discussions have suggested strong interest.
Under the terms of the agreement, the project has the potential to bring sales of up to $75 Million or more over the course of 5 years. As of July 31, 2013 no revenue has been realized from the said distribution agreement.
Recent accounting pronouncements
The Company evaluated all recent accounting pronouncements issued and determined that the adoption of these pronouncements would not have a material effect on the financial position, results of operations, or cash flows of the Company.
3. GOING CONCERN
As of July 31, 2013, our company has accumulated losses of $267,174 since inception. Our company intends to fund operations through equity financing arrangements, which may be insufficient to fund its capital expenditures, working capital and other cash requirements for the year ending April 30, 2014. In response to these problems, management intends to raise additional funds through public or private placement offerings. These factors, among others, raise substantial doubt about our companys ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.
4. COMMON STOCK
The authorized capital of the Company is 200,000,000 common shares with a par value of $0.0001 per share. On July 13, 2011, the Company authorized the issuance of 25,000,000 shares of common stock at $0.001 per share to Benjamin Chung, the former CEO. The Company relied on Section 4(2) of the Securities Act for this issuance.
In January 2011, the Officer of the Company contributed an amount of $100 for stock which had not yet been issued. This amount was classified as Stock Payable on the balance sheet. On July 13, 2011, when 25,000,000 shares of common stock were issued, this amount was reclassified to additional paid in capital.
On July 13, 2011, the Company issued 25,000,000 shares of common stock at $0.001 per share to Benjamin Chung, the former CEO for services of $5,000 and for cash of $20,000. The Company relied on Section 4(2) of the Securities Act for this issuance.
During the period between January 2011 and February 2011, the Company issued 25,000,000 shares of common stock under private placement agreements to various investors at $0.001 per share. The Company received a total of $24,900, net of proceeds.
11
mCig, Inc.
(A Development Stage Company)
Notes To Financial Statements
(Unaudited)
4. COMMON STOCK (CONT.)
Stock split
Effective July 31, 2013, the company effected a 1 old for 10 new forward stock split of the Companys common stock. As a result, our authorized capital increased from 200,000,000 to 1,000,000,000 shares of common stock and our issued and outstanding increased from 50,000,000 shares of common stock to 500,000,000 shares of common stock, all with a par value of $0.0001.
5. RELATED PARTY TRANSACTIONS
On July 13, 2011, the Officer of the Company contributed an amount of $100 towards additional paid in capital.
As of April 30, 2013 the company was obligated to Mr. Benjamin Chung for an unsecured and non-interest bearing demand loan with a balance of $172,678.
Effective April 19, 2013 Benjamin Chung and Paul Rosenberg signed the Debt Assignment, Consent and Release Agreement, according to which the Assignor (Benjamin Chung) grants, assign, transfer and set over unto the Assignee (Paul Rosenberg) his entire right, title and interest in and to the Debt upon the terms and conditions contained in the Agreement.
On July 30, 2013, Mr. Paul Rosenberg, President and CEO, agreed to forgive all the debts (the sum of $172,678) owed to him by the Company and recorded as Additional Paid in Capital.
As of July 31, 2013, the President of the Company, Mr. Paul Rosenberg loaned the Company in the amount of $24,300 for operating purposes. The amount due to the related party is unsecured and non-interest-bearing and remains outstanding.
6. SUBSEQUENT EVENTS
Effective August 2, 2013, we changed our name from LifeTech Industries, Inc. to mCig, Inc
.
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward Looking Statements
This report on Form 10-Q contains certain forward-looking statements. All statements other than statements of historical fact are forward-looking statements for purposes of these provisions, including any projections of earnings, revenues, or other financial items; any statements of the plans, strategies, and objectives of management for future operation; any statements concerning proposed new products, services, or developments; any statements regarding future economic conditions or performance; statements of belief; and any statement of assumptions underlying any of the foregoing. Such forward-looking statements are subject to inherent risks and uncertainties, and actual results could differ materially from those anticipated by the forward-looking statements.
Business Overview
mCig, Inc. (mCig) was incorporated in the State of Nevada on December 30, 2010 to develop a new day spa business in the affluent area of Montrose, California, surrounded by La Crescenta, La Canada, and Glendale.
On April 30, 2012, the company entered into a Joint Venture Agreement, a Distribution Agreement, and a Technology License Agreement (the Agreements) with Leadwill Corporation, a Japanese corporation (the Manufacturer and the Licensor).
Pursuant to the Joint Venture Agreement, we acquired the global exclusive right (excluding Japan) to make, use, sell and otherwise distribute all of the Manufacturers AWG products and technologies. In addition, we have the exclusive right to assign, sublicense, or otherwise subcontract our distribution and marketing rights to third parties. We were also granted an exclusive license to any and all of the Manufacturers patents, trademarks, and all other
12
intellectual property related to AWG products and have the exclusive right to assign, sublicense, or otherwise transfer these rights to third parties. We will receive the Manufacturers AWG products at the price of twelve percent (12%) above wholesale costs for such products.
Pursuant to the Distribution Agreement, we were appointed as the Manufacturers sole and exclusive Distributor. As such, we were given the exclusive right to: (1) market, promote, sell, and distribute all of the Manufacturers current and future AWG products and technology; and (2) assign, sublicense, or otherwise subcontract these distribution and marketing rights to third parties worldwide (excluding Japan). The Manufacturer will receive ten percent (10%) of the net profits generated from our distribution of the AWG technology, less related costs and expenses.
Pursuant to the Technology License Agreement, we were granted an exclusive, perpetual license to make, manufacture, use, sell or otherwise distribute all of the Licensors AWG related technology. We were also granted the right to sublicense these rights to third parties at our sole discretion. We will pay the Licensor a royalty equal to ten percent (10%) of the Net Sales Revenue received from our sales of the licensed technology on a quarterly basis.
Upon execution of the Agreements, Leadwill Corporation has agreed to (A) file all necessary doing business as (d/b/a) documents in Japan so that Leadwill shall d/b/a Lifetech Japan, (B) change its corporate name from Leadwill Corporation to Lifetech Japan, or (C) transfer or spinoff all and not less than all of its AWG business into a new, separate corporate entity in Japan, to be called Lifetech Japan. All of our rights set forth in the Agreements shall apply equally to the new, separate corporate entity.
On September 1, 2012, the company entered into a Joint Venture Agreement, a Distribution Agreement, and a Technology License Agreement (the New Agreements) with Lifetech Japan Corporation (the New Manufacturer), a Japanese corporation. The New Agreements were executed pursuant to the transfer of the AWG business from Leadwill to Lifetech Japan. The Lifetech AirWell System is a highly advanced air to water generator that produces high quality water by promoting and filtering the condensation of moisture from air. The Air Well System uses an advance triple step gathering system and 12-step purification process to produce water that is free of chemicals, pollutants, contaminants and hormones.
Effective December 2012 the company has signed an exclusive ten-country distribution agreement with SunPlex Limited. Parties have agreed to a 5 year distribution plan which involves three phases. The first phase is to obtain government approvals and endorsements for Airwell products. The second phase of SunPlex's plan is to distribute Airwell products to hospitals, schools and government offices throughout the designated countries in Africa, and work with government agencies to set up water depots in areas where accessing clean and fresh water is extremely difficult. The final phase of SunPlex's proposal aims to partner with commercial and residential developers-incorporating the Airwell machines in their developmental plans-to which early discussions have suggested strong interest.
Under the terms of the agreement, the project has the potential to bring sales of up to $75 Million or more over the course of 5 years. As of July 31, 2013 no revenue has been realized from the said distribution agreement.
Liquidity and Capital Resources