ews out: MCIG: High On Smoke
Mar. 2, 2016 11:51 AM ET| About: mCig, Inc. (MCIG), Includes: VTCQ
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Summary
No assets, operating income, or business plan; yet a $25 million valuation.
Hidden shares, fake partnerships, and a history of other shenanigans.
Company facing cash squeeze.
MCIG: HIGH ON SMOKE
mCig Inc. (OTCQB:MCIG) is a failed e-cigarette company surviving on a cloud of smoke. mCig started as a simple e-cig brand that audaciously described itself as a "Technology Company;" now the company calls itself a "Cannabis Product Distributor," despite having no distribution assets. With no cash or gross profits to speak of, the company has been using its inflated stock as a currency to cover an unexplainably massive overhead: five of the six million dollars of overhead expense the company spent over the past 2.5 years was paid in shares! But with the stock price collapsing, capital has become scarce: last quarter, the company was too cash-strapped to even pay for its inventories. The company has no credible business plan, is riddled with all sorts of shenanigans, and at the current $25 million market capitalization, is set for a sober crash.
No Buzz
MCIG still sells its e-cigarette, the mCig 4.0, but nearly three years after its launch, the product is an obvious flop. In a 2013 interview, mCig's CEO Paul Rosenberg said that "intellectual property protection for these devices is important but secondary to being a first mover and developing brand recognition." Fast forward three years later, mCig has neither intellectual property nor brand recognition. Among the countless pages of e-cigs on amazon.com, the mCig is nowhere to be found. Maybe they sell the product directly through their website? A simple Google search for MCIG yields a barrage of websites hocking the stock, but none selling the product; telling. Google trends says that MCIG's homepage has too little traffic to even track! Searches for the mCig product correlate almost exactly with the stock price - now on a precipitous decline. The lack of web traffic is especially ironic given the company is now marketing itself as an expert in SEO and SEM services.
Revenue has grown; but the outrageously hyped growth (a) was off of a stupidly low base; (b) came with a big gross margin decline, and (c) is suspicious given accounting irregularities. While conveniently obfuscated by the pointless VitaCig (OTCPK:VTCQ) spinoff, a simple cleanup of mCig's standalone financials reveals oddities including massively negative Q4 2015 gross margins (same pattern at VitaCig - see discussion below). A theory: since MCIG aggressively reserves $0 for obsolescence and warranty reserves (see MCIG 10-q), management may have been stuffing write-offs, product returns, or warranty claims in Q4. The accounting policies haven't changed, so this year's revenues could also be overstated. Also worth noting, last quarter the company switched auditors - from a Salt Lake City firm to a China focused firm, which is odd.
shorts blowing steam engines cranking steams puffin trains leaving.. shorts already burned now there nervous...
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