Replies to post #33650 on Electronic Cigarettes International Group Ltd fka

[rayinbrooklyn65]

First, thank you for your kind words; I appreciate them.

The tenets of the articles of incorporation require the ECIG Board of Directors (BOD) to issue a proxy statement and call a shareholders' meeting to take a vote whenever their is a material change in the structure or organization of the company. Such is the case with the BOD's current proposal to conduct a reverse split and increase the amount of the company's authorized shares; any change in the share structure is indeed a material change in how the company is organized because it directly affects the structure of power in the company by virtue of altering the voting rights of the shareholders. In addition, changing the amount of shares also impacts the price per share - another substantial concern for shareholders as it affects the value of their investment.

Now I truly believe that the ECIG BOD is sincere in their efforts to effect positive change for shareholders by implementing a reverse split of the company's stock; the increase in the authorized shares is a tool I believe the BOD wants to have at their disposal to utilize, when necessary, to raise capital to grow the business. I do not think they will issue shares irresponsibly for personal gain.

I believe their principal motive for requesting the reverse split is to elevate the company's stock price to meet the initial minimum listing requirements for the NASDAQ; once uplisted to that exchange, the BOD believes the company will gain sufficient visibility and credibility from traditional investment banking firms and lending institutions not presently available to it in its current position as an OTC-listed company, that they will be able to legitimately pursue and obtain better corporate financing to grow their business than the current toxic stock-for-debt conversions currently plaguing the company's balance sheet while simultaneously eroding their stock price.

I, however, like many other shareholders believe that the ECIG BOD, through a slower, more disciplined plan for growth can achieve their objectives WITHOUT resorting to a reverse split or an increase in the authorized shares. If projected revenues of double-digit growth come to fruition, the news will attract sufficent new investors to drive the stock price up substantially from its current close of 0.0515 today. I believe a medium range forecast for the stock price predicated on a sound earnings report, would propel the stock to the $1.30 to $1.60 range without any reverse split. Over the course of the next several quarters, if revenues continue to grow, which I believe is certainly feasible given this globally expanding niche market, consumers addicted to tobacco seeking an alternate, less physically perilous means to attain their required dosage of nicotine, will continue to generate sufficien revenues to push profits for ECIG higher which will result in a continued rise in the price of the company's stock. The NASDAQ has established certain alternative criteria to enable companies that meet certain requirements, such as pre-tax earnings or cash flow, to fulfill the minimum listing requirements for their exchange in lieu of attaining the $4.00 stock price. These alternate listing requirements allow a company that meets these standards to still qualify for listing on the exchange at much lower price per share, namely in the range of $2.00 to $3.00. I believe the revenues generated by ECIG over the course of the next year to 18 months, combined with continued, disciplined growth and market share, will allow the company's stock to attain the alternate listing criteria for the NASDAQ without having to resort to the draconian measures of a reverse split that will destroy current shareholders' percentage of ownership in the company.

I hope this answers your question and provides you with some insight as to why the ECIG BOD must gain the will of the shareholders before they can enact any of the two proposals they proffered in the proxy statement. I also hope that I sufficiently explained why I believe the aforementioned actions are not necessary to achieve the beneficial objectives sought by the ECIG BOD - what is required is a patient, disciplined approach to steady growth and profit generation.

Below, for your information is an article from Investopedia which explains in layman's terms requirements established by the NASDAQ for a company to be listed on their exchange.

Article from Investopedia Concerning Requirements for Initial Listing on the NASDAQ

Major stock exchanges, like the Nasdaq, are exclusive clubs - their reputations rest on the companies they trade. As such, the Nasdaq won't allow just any company to be traded on its exchange. Only companies with a solid history and top-notch management behind them are considered.

The Nasdaq has three sets of listing requirements. Each company must meet at least one of the three requirement sets, as well as the main rules for all companies.

Listing Requirements for All Companies
Each company must have a minimum of 1,250,000 publicly-traded shares upon listing, excluding those held by officers, directors or any beneficial owners of more then 10% of the company. In addition, the regular bid price at time of listing must be $4, and there must be at least three market makers for the stock. However, a company may qualify under a closing price alternative of $3 or $2 if the company meets varying reequirements. Each listing firm is also required to follow Nasdaq corporate governance rules 4350, 4351 and 4360. Companies must also have at least 450 round lot (100 shares) shareholders, 2,200 total shareholders, or 550 total shareholders with 1.1 million average trading volume over the past 12 months.

In addition to these requirements, companies must meet all of the criteria under at least one of the following standards.


Listing Standard No. 1
The company must have aggregate pre-tax earnings in the prior three years of at least $11 million, in the prior two years at least $2.2 million, and no one year in the prior three years can have a net loss.

Listing Standard No. 2
The company must have a minimum aggregate cash flow of at least $27.5 million for the past three fiscal years, with no negative cash flow in any of those three years. In addition, its average market capitalization over the prior 12 months must be at least $550 million, and revenues in the previous fiscal year must be $110 million, minimum.

Listing Standard No. 3
Companies can be removed from the cash flow requirement of Standard No. 2 if the average market capitalization over the past 12 months is at least $850 million, and revenues over the prior fiscal year are at least $90 million.

A company has three ways to get listed on the Nasdaq, depending on the underlying fundamentals of the company. If a company does not meet certain criteria, such as the operating income minimum, it has to make it up with larger minimum amounts in another area like revenue. This helps to improve the quality of companies listed on the exchange.

It doesn't end there. After a company gets listed on the market, it must maintain certain standards to continue trading. Failure to meet the specifications set out by the stock exchange will result in its delisting. Falling below the minimum required share price, or market capitalization, is one of the major factors triggering a delisting. Again, the exact details of delisting depend on the exchange.