Electronic Cigarettes International Group Ltd fka ECIGQ

[vlftraders]

Fundamentally, $ECIG still has $156MM in shareholder equity which comes out to about $1.50 per share with O/S at ~100MM. Some will argue that a big portion of $ECIG's assets are goodwill and that the company has considerable debt, but that is not how shareholder equity is to be assessed. Shareholder equity a relative measure of the company's overall capitalization which in this case is the value of equity issued + additional paid in capital - accumulated deficit. To this, you divide O/S.

I've noted that the company booked ~$9MM in impairment charges to goodwill as of last quarter. As long as the company continues to grow revenues and generate positive cash flow, impairment charges should remain minimal or a non-issue. The Company did not necessarily over pay for the acquisitions, they offset goodwill against issuance of common stock at a considerably higher price than where the stock is currently trading.

Another very interesting aspect of $ECIG's financials is the amount of warrants that are out there. All the warrants have been recognized as liabilities in the balance sheet. For 3 month ended September 30, 2014, the company recorded an income of $33 million in warrant and derivative fair value adjustment and another $38.3 million in income on advisory agreement warrants. Due to these adjustments, $ECIG actually recorded $37 million in book income or $0,51 per share for the quarter ended. What we can say about these warrants and derivatives for the 4th quarter is that $ECIG will book an enormous book income on all warrants out there, even bigger than what had been recorded during 3rd quarter due to the decline in the share price of its common stock!

It would not surprise me one bit if $ECIG finished the year with profits at this point.

In the meantime, the company must restructure its debt as a top priority and focus on generating revenues. The rest will take care of itself. As an additional consideration, they might want to buyback stock at this point and return them to treasury.

C/O Sooah

VLF