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
BELLEVUE, Wash., March 17, 2014 (GLOBE NEWSWIRE) -- 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.
Paul Rosenberg CEO (425)462-4219
