According to the 2014 Report on the U.S. E-cigarette Market - Forecast to 2018, published in May, their analysts forecasted the E-cig market in the U.S. will grow at a CAGR, or compound annual growth rate of an astounding 24.22 percent over the period 2013 -2018. Bonnie Herzog, a Wells Fargo Securities analyst, estimated earlier this year, that overall E-cig industry revenue reached $2 Billion in 2013. She projects it will increase to $10 Billion by 2017.
The adoption of vaporizing cigarettes, (commonly known as E-cigs) by the world's 1.2 Billion smokers, continues to gain steam as consumers seek healthier, more cost efficient, alternatives to tobacco smoking. Recent studies led by the renowned Dr. Konstantinos Farsalinos, published in May/June, demonstrated that e-Cigs are much healthier than traditional smoking, which causes delays in myocardial relaxation and severe decline in lung function.
The World's Most Affordable E-Cig Vaporizer
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 purposes (2) the adoption of electronic vaporizing cigarettes (commonly known as E-cigs). mCIG manufactures and retails the mCig, the world's most affordable vaporizer at only $10. Designed in the USA,- mCig provides a superior growing experience by heating plant material (including cannabis where legal), waxes, and oils, delivering a smoother inhalation experience. MCIG has sold the mCIG product line to customers in over twenty-five different countries.
Earlier this year, the company acquired Vapolution, Inc, which manufactures and retails home-use vaporizers, specifically the Vapolution 2.0. The Vapolution 2.0, is the only vaporizer that uses an all glass path. This was a game changer for the industry, because glass is completely non-reactive. By separating the air from the heating element, the taste of vapor is left unaltered. Connoisseurs agree, that the purity and density of vapor through a wholly glass path makes the Vapolution 2.0, one of the best vaporizer's on the market. Vapolution has generated over $2M since their inception in 2010, and can be found in over fourteen countries, and twenty distribution points.
Through it's wholly owned subsidiary, VitaCig, Inc, the company manufactures and retails the VitaCig, a $3 nicotine-free eCig that delivers a water vapor mixed with vitamins natural flavors. VitaCig will be spun off as a separate company and IPO, sometime in 2014. But not without rewarding shareholders on record date of an S-1 approval. The spin off will be effectuated on a 1:1 basis resulting in 1 VitaCig share paid as a dividend to every owner of 1 mCIG share. VItaCig, Inc, filed an S-1 with the sec on 04/20/2014. A revised S-1 was filed on 06/19/2014. Second round of comments were received on 07/02/14. The number of comments received by the sec were down significantly. And a revised S-1 will be filed by 07/20/2014. Following the filing by 07/20, if the last round of comments is any indication, we could receive word from the sec by the end of July, first week in August.
mCIG's latest 10-Q for the period ended January 31, 2014 showed the following:
- Cash - $37 thousand
- Total Current assets - $91 thousand
- Total current liabilities - $22 thousand
- Quarterly revenues - $85 thousand
- Quarterly net income - $10 thousand
Before you write the company off, let me explain the results, or rather, I will let mCIG, CEO, Paul Rosenberg explain,
" 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 "
Let me make this important point. mCIG is the only company in the "cannabis index" to have zero debt, U.S. GAAP profits, and Fully Reporting. Although we were not given any figures in the recent July investor Presentation. The June Presentation stated mCIG had zero debt, $350k cash on hand, and $600k in total capital, between all three product lines. So when comparing their last filings, with the numbers offered in their June Presentation, one can see the tremendous potential for revenue growth here. mCIG has an o/s count of about 270M. And an a/s count of 560M. With a current market cap of about $130M. The company anticipates filing it's fiscal year-end annual report and 10-k with the SEC by the end of July.
Taking into account the rise of the booming Marijuana Industry, and the stock bubble these " cannabis stocks " finds themselves in, valuations typically find themselves on the high side. It's current pps of $.48 is still $.44 shy of it's 52-week high of $.92 this past March, on 14M in volume, following what was a massive run for all pot stocks on the heels of Colorado retail pot stores opening for business. Some speculate, following Washington retail pot stores opening up July 8th, the cannabis sector may get it's "second wave". And that would certainly be welcome, by shareholders, and all those who trade the sector, and miss the glory days of early 2014. Since mCIg is one of the favorite stocks in the sector, and strongest fundamentally in the micro-cap space. If the sector does run hard again, as is expected, mCig will get a lot of attention from traders and investors alike.
That being said, there is no question the high prices on these " cannabis stocks " increases the risks involved. But the potential reward is obviously too tempting for some to pass on. Myself included. Apart from what happens over the next month with Washington legalizing retail sales. This November will once again bring spotlight to the marijuana industry and cannabis trading sector, with both Alaska and Oregon up for recreational marijuana legalization vote. Florida is also up for legalization vote, except for medical use only. So it seems the bubble may stick around for a little while longer. And mCig has plenty of catalysts to keep investors interested in the mean time.
What Makes MCIG Any Different From The Rest
Whenever there is lots of money to be made, there will be competition. Those who see an opportunity, and want in on the action. And that has been no different with the rise of the multi-billion dollar e-Cig/Vape industry. Anyone can go into a smoke shop and see the wide selection of smoking implements that one can choose from. So what separates mCIG from the rest. The answer is, nearly everything.
Starting with their ground breaking product line. Unlike traditional e-cigs, the mCig was purpose built for the consumption of a variety of plant materials, as oppose to being pre-packaged with plant material or vapor. This allows one to consume the plant material of their choice, as not everyone favors nicotine. This is unique among the traditional e-Cig products. mCIG just announced in their recent July Investor Presentation they will be releasing their newest mCig version, code named: mCIG 2.5, next month. And will be releasing mCIG 3.0 in their Quarter Three. The mCIG 3.0 will be harnessing patentable technology. Which is very exciting to hear.
VitaCig is taking the eCig market by storm and continues to receive rave reviews. VitaCig harnesses mobile vaporization technology for medical delivery technology. Unlike a traditional eCig, the VitaCig delivers a water-vapor of flavors, vitamins, and phyto-nutrients. VitaCig currently offers three flavors, Relax, Refresh, and Energize. Also mentioned in their July Presentation, VitaCig will be rolling out new flavor categories next month, Calm and Youth, for stress, and skincare. In less than three months, VitCig has captured a 15% re-ordering rate, which is unheard of for only being on the market for such a short time. Statistics show it typically takes a few years to capture that kind of success.
We have already discussed their Vapolution 2.0., which is the first home-use vaporizer to use an all glass path. In March of this year, the company re-branded the Vapolution.com website with an optimized online sales engine and newly designed logo. Based on the revenue estimates taken off their initial P.R. in January, and the recent July investor Presentation, it seems Vapolution alone, has brought in over $700k to the company in the first six months of 2014. Vapolution 3.0 will be released some time their Fourth Quarter.
The Golden Goose
The Golden Goose for mCIG may be their out of the box, sheer genius, highly anticipated, LiqCiq product. LiqCiq is a wholly owned subsidiary of mCIG. Calorie-free alcoholic consumption, via an eCig. What??? Yes. Disposable and recyclable, pre-packaged eCig's, with licensed alcoholic brands. Initial testing, which began last month, will begin with three spirit categories: Vodka, Rum, and Tequila. mCIG did plenty of consulting and engaged a team of third party scientists to test both efficacy and technical process that would result in the delivery of alcoholic vapor. After being convinced of the technical merits and scientific efficacy, they advanced the project. Management believes this business strategy will result in higher margin profitability over the long term and has great potential to disrupt the Trillion dollar alcoholic beverage industry. I can just imagine LiqCiq's by the register in every liquor store around the world. For all my fans out there, I have to give a hearty Kaboooooooooooooooom, to mCIG and CEO Paul Rosenberg. LiqCiq, if successfully rolled out, will bring masssive revenue potential to the company, hence their own Golden Goose.
Swiv, Bam, and Ross!
So mCIG has some cool products. But the difference maker between other eCig otc companies like Vapor Group(OTCQB: VPOR) or Wee-Cig(OTC: WCIG), and mCIG, is mCIG and CEO Paul Rosenberg are successfully building a brand, not just selling eCig/vape products. mCIG is receiving global recognition thanks to brand Ambassadors like Grammy Award winning producer, mixer, D.J., audio engineer, D.J. Swivel, world famous skateboarder, stuntman, director, actor, television, radio and t.v. personality Bam Margera, and Hip Hop powerhouse Rick Ross. Together, along their social media platforms, they have over 10M followers. Reviewing some of the comments off some of their posts, MCIG seems to have made the right call. You will find comments from followers like, " just made my order, hope these thangs are dope!!! ", and " I just ordered a Vitacig because of this post ". mCIG understands the value and power of social media platforms like Twitter, Facebook, Instagram in promoting brand recognition. But mCIG did not stop there. mCIG contracted with Prince Media, Co. to display over a dozen billboard ads throughout Manhattan, Brooklyn, and San Francisco. Another tip of the hat to mCIG. What is even more impressive is management is putting these deals forward using non-dilutive transactions. And that makes shareholders very happy. This aggressive online and offline campaign has brought in over 20,000 individual customers, from over 25 countries, and even a mystery Forbes 100 celebrity, as indicated, again, in their July Investor Presentation.
MCIG has also recently began to roll out it's products throughout retail store fronts around the country.
Next on mCIG's marketing agenda, will be to initiate an aggressive online campaign that will consist of new-age media, such as display advertising, pay-per click advertising, social media advertising, and re-targeting of customers who visited their website, but elected not to check out.
mCIg continues to impress. From it's management team, and their continued efforts towards shareholder value and transparency. Their product innovation. Successful building out brand recognition and distribution channels. The company's commitment towards avoiding toxic dilutive practices and fiscal responsibility. Consistent revenue growth, (according to their investor presentations). MCIG has a real shot to competitively infiltrate the eCig/vape market, and take their own slice of the multi-billion dollar pie. According to Bonnie Herzog, a top eCig analyst for Wells Fargo, in an article for the Tobacco E-News written in March of this year, the industry is fragmented, and for the next 5-10 years of the eCig industry " you've got less power, in the hands of the few ". Unlike premium cigarettes, there are a lot of independent players in the electronic cigarette segment. MCIG also stands out as a viable buy out candidate. Early this year, Altria acquired Green smoke for $110M. And Lorillard Inc. acquired Skycig, UK, for $50M and Blue E-cigs Inc, for $135M last year.
Is MCIG a buy at .48? Well it certainly was four months ago when it was trading at these same levels, and climbed as high as $.92 only a few weeks later. Will the sector ride " high " again with Washington legalizing or possibly Alaska, Oregon, and Florida in November? Or can mCig achieve new highs alone when their highly anticipated LiqCiq product is unveiled? Who knows. But I can tell you the " cannabis stock bubble " is not bursting any time soon. And if there is one stock you want in your MJ portfolio it should be MCIG. The whole zero debt, profitable, minimal dilution, seems very appealing to me as a potential investment opportunity. And, if mCig is giving away free VitaCig shares for shareholders on the S-1 effective date soon to come, count me in!
Disclosure: The author is long MCIG.
Additional disclosure: I am long MCIG. I wrote this article myself, and it expresses my own opinions. I am not receiving any compensation for it. I have no relationship with any company whose stock is mentioned in this article.