Electronic Cigarettes International Group Ltd (OTCMKTS:ECIG) has emerged as one of the brightest turnaround stories on the OTC Markets. A number of factors are driving shares of ECIG higher, but most importantly is the improving fundamentals for the company. The turnaround picture for ECIG is indeed real and is being driven by CEO Dan O’Neill.
ECIG’s prior management made a series of strategic blunders that hurt the company and decimated the share price. The first thing Dan O’Neill had to do was repair the balance sheet. He was able to secure a $9.0 million term loan financing with one of the company’s long-term existing investors. The principal use of the proceeds was to fund the recently announced settlement agreement with Fontem Ventures and to satisfy prior debt obligations. The Company issued 45.2 million warrants as a component of the financing, with an exercise price of $0.25 per share. CEO Dan O’Neill said at the time:
“This latest round of financing once again reflects strong investor support for ECIG and further right sizes the Company’s financial position. The new capital enhances the Company’s flexibility to pursue various growth opportunities both domestically and internationally, including the expansion of essential marketing and distribution capabilities. With a stronger balance sheet, the Company continues to make progress against the six strategic pillars and is now better positioned to achieve long term profitable growth.”
Resolving the issues with Fontem Ventures was important for ECIG. Management can now focus on growing the business. Under the terms of the settlement, Fontem Ventures granted Electronic Cigarettes International Group, Ltd., a non-exclusive royalty-bearing global license under the patents asserted in the litigation and certain other e-vapor technology related patents.
Helping to drive ECIG’s business is the fact that e-cigarettes have overtaken more traditional methods as the most widely used support for smokers wanting to quit. As a result, ECIG has been posting impressive results. In the third quarter, net sales increased 28% sequentially from $12.0 million to $15.4 million reflecting the impact of the company’s turnaround program. Gross profit increased 49% sequentially from $6.2 million to $9.3 million, reflecting an increase in gross margin of 8%. Net income for the third quarter of 2015 was $9.2 million, or $0.09 per diluted share. As CEO Dan O’Neill said:
“The results of the overall business continue to improve, driven by the relentless focus and commitment of the new management team to enhance the base fundamentals of the company. At this time I do not foresee any reason that this improvement should not continue in the near future. Additionally, following the previously announced strategic review, the company has identified numerous opportunities and remains well-positioned to grow profitability.”
The reality is that the e-cigarette market has tremendous growth potential. They remain a small part of the overall tobacco market and Well Fargo is expecting the sector to grow to $10 billion by 2018. The companies that will benefit the most are the ones with a distribution network. This is where ECIG beats its competition. In January, ECIG opened its first VIP kiosk in the USA at the FlatIron Crossing Mall in Broomfield, Colorado. FlatIron Crossing has more than 200 shops and restaurants, and generates average monthly foot traffic of one million people. This USA VIP kiosk capitalizes on the experience, infrastructure and success of ECIG’s rapidly expanding network of over 175 owned and franchised kiosks across Europe. The company plans to open at least two additional VIP kiosks in the USA prior to the end of the third quarter of 2016.
ecig 3.15
Overall, ECIG could not be in a better position for growth. The company has re-established its relationship with I.D.T. and is set to launch the Vapestick into a 250 store test starting in April. With a strengthened balance sheet lead by the former CEO of Molson Inc, we see much better days ahead for ECIG and a turnaround that is not only working, but is just getting started. We will be updating Insider Financial as soon as we know more. For continuing coverage on ECIG and our other hot stock picks, sign up for our free newsletter today and get our next hot stock pick!
ECIG’s prior management made a series of strategic blunders that hurt the company and decimated the share price. The first thing Dan O’Neill had to do was repair the balance sheet. He was able to secure a $9.0 million term loan financing with one of the company’s long-term existing investors. The principal use of the proceeds was to fund the recently announced settlement agreement with Fontem Ventures and to satisfy prior debt obligations. The Company issued 45.2 million warrants as a component of the financing, with an exercise price of $0.25 per share. CEO Dan O’Neill said at the time:
“This latest round of financing once again reflects strong investor support for ECIG and further right sizes the Company’s financial position. The new capital enhances the Company’s flexibility to pursue various growth opportunities both domestically and internationally, including the expansion of essential marketing and distribution capabilities. With a stronger balance sheet, the Company continues to make progress against the six strategic pillars and is now better positioned to achieve long term profitable growth.”
Resolving the issues with Fontem Ventures was important for ECIG. Management can now focus on growing the business. Under the terms of the settlement, Fontem Ventures granted Electronic Cigarettes International Group, Ltd., a non-exclusive royalty-bearing global license under the patents asserted in the litigation and certain other e-vapor technology related patents.
Helping to drive ECIG’s business is the fact that e-cigarettes have overtaken more traditional methods as the most widely used support for smokers wanting to quit. As a result, ECIG has been posting impressive results. In the third quarter, net sales increased 28% sequentially from $12.0 million to $15.4 million reflecting the impact of the company’s turnaround program. Gross profit increased 49% sequentially from $6.2 million to $9.3 million, reflecting an increase in gross margin of 8%. Net income for the third quarter of 2015 was $9.2 million, or $0.09 per diluted share. As CEO Dan O’Neill said:
“The results of the overall business continue to improve, driven by the relentless focus and commitment of the new management team to enhance the base fundamentals of the company. At this time I do not foresee any reason that this improvement should not continue in the near future. Additionally, following the previously announced strategic review, the company has identified numerous opportunities and remains well-positioned to grow profitability.”
The reality is that the e-cigarette market has tremendous growth potential. They remain a small part of the overall tobacco market and Well Fargo is expecting the sector to grow to $10 billion by 2018. The companies that will benefit the most are the ones with a distribution network. This is where ECIG beats its competition. In January, ECIG opened its first VIP kiosk in the USA at the FlatIron Crossing Mall in Broomfield, Colorado. FlatIron Crossing has more than 200 shops and restaurants, and generates average monthly foot traffic of one million people. This USA VIP kiosk capitalizes on the experience, infrastructure and success of ECIG’s rapidly expanding network of over 175 owned and franchised kiosks across Europe. The company plans to open at least two additional VIP kiosks in the USA prior to the end of the third quarter of 2016.
ecig 3.15
Overall, ECIG could not be in a better position for growth. The company has re-established its relationship with I.D.T. and is set to launch the Vapestick into a 250 store test starting in April. With a strengthened balance sheet lead by the former CEO of Molson Inc, we see much better days ahead for ECIG and a turnaround that is not only working, but is just getting started. We will be updating Insider Financial as soon as we know more. For continuing coverage on ECIG and our other hot stock picks, sign up for our free newsletter today and get our next hot stock pick!
