Comparison of VPOR and MCIG

The opinions expressed in this write up are simply my opinions. I am not representing the firm I work for with relation to this write up. I am doing this on my own free time as an investor capacity. I currently hold no position (Long or short in Vapor Group, Inc. or mCig, Inc.) I have not been compensated for this write up and this write up should not be relied on to make trading decisions. Please do your due diligence to confirm my opinions as they are just my opinions. Any statements and analysis herein are preliminary in nature and should not be relied upon until your own further research and analysis is conducted. This write up does not constitute tax advice or advice of any kind.

 

The purpose of this write up is to do a financial statement analysis for the Quarter Ended June 30, 2014 (only 3 months, all analysis is done in comparison to prior year’s quarter ending on the same date) in tandem with a comparison to mCig.

Financial Statements - Balance Sheet

VPOR - Total assets increased year over year just under $2 million, with the majority of the increase being to cash and inventory. Fundamentally, this is amazing progress for just a year.

mCig - total assets increased year over year about $1.6 million, with the majority of the increase being to prepaid expense. Will dig in a later section.

In terms of assets, VPOR has much more inventory than mCig which will be great if their product is actually selling.

VPOR - Total liabilities increased year over year by over $2 million, this is due to the Hanover debt. Discussed in detail in a section below.

mCig – Total liabilities decreased by 133K with liabilities being just under 7K. This is amazing. mCig does not have outstanding debt or much convertible notes. mCig is the clear winner here and better poised.

VPOR - APIC is negative – very odd to me.

mCig – APIC is 4 Million. mCig is the clear winner here.

VPOR - Accumulated Deficit doubled year over year but only 410K in total. As long as trend doesn’t continue, this is not bad for a start up to only lose 200K.

mCig – Accumulated Deficit increased by 1.5 million. Most of the loss is attributable to mCig having very little revenue with large share based payments.

VPOR is the winner here. They do not appear to be overly compensating their executives.

Financial Statements - Income Statement

VPOR - Revenues are $1,025,365 and cost of revenues is 587K a profit margin of just under 50%. These are pretty good results for only one quarter and tremendous increase (1000%) over the prior year’s quarter.

General and Admin costs are relatively high as compared to the gross profit, they need to decrease general and admin expenses or sell a lot more product to become profitable.

mCig – Revenues are just under 200K with Cost of revenue being 97K a profit margin just over 50%. Not impressive sales figures. Additionally, the company is spending too much on compensation; other expenses seem to be under control.

VPOR seems to be the clear winner with higher product demand.

Financial Statements - Statement of Cash flows

This statement represents how the company is utilizing the money they have.

VPOR – sold 700K of inventory, increased accounts receivable by 500K and purchased other assets by 400k. Other noteworthy (VERY IMPORTANT) item is the 2.3 million of convertible debt. Discussed in a later section.

mCig – only noteworthy item is the cash outflow of 1.044 million of common stock issued “for services rendered” explained in detail in a later section.

Notes to the Financial Statements

VPOR Note 1 – Only notable item is that Dror paid only $115K for 165M shares of common and 1M shares of preferred. Also increase in authorized shares to 2 billion.

MCIG Note 1 – On Jan. 23, 2014 Paul Rosenberg cancelled 2.5Million shares owned by him as to cause no dilution to existing shareholders; he will cancel another 2.5Million shares on Jan 23. 2014. Very commendable, shows interest in shareholders.

MCIG purchased Vitacig and will grant its shareholders 1 share per each share of MCIG they own. Technically, by owning MCIG stock and MCIG owns Vitacig, I don’t see the purpose for this.

VPOR - Note 2 – Going Concern – This states that there is substantial doubt that VPOR can continue operations if something does not occur to change the results of operations.

MCIG – Note 2 – Accounting Policies – Nothing important, only noteworthy is that they use stock to pay for services.

VPOR Note 3 – Accounting Policies – nothing noteworthy, inventory and receivables balance is pretty healthy as of June 30, 2014 at 867K and 637K, respectively.

MCIG Note 3 – Business acquisitions -
Important is that the previous Vitacig (Vapolution) shareholders get first dibs up to 110K of earnings before  MCIG does for 10 years. There are only 2 owners; Essentially these two owners will receive 550K each for selling Vitacig to MCIG. This takes into account that they will continue to work day-to-day operations. Depending on their involvement this salary type deal is ok, 55K a year is not too much.
Vitacig along with Mcig is developing a new product expected to be on the market this fall. This could push sales up for MCIG, it could be big. MCIG is attempting to bring Vitacig back to being profitable and successful for which MCIG will benefit as a majority owner.

VPOR Note 4 – Deferred expenses – Nothing noteworthy.
MCIG Note 4 – Investments – more on Vapolution

VPOR Note 5 – Property plant and equipment – nothing important, they don’t have significant assets.

MCIG Note 5 – Stockholders equity -

April 14, 2014 MCIG issued 750K shares valued at $300K

April 30, 2014 Paul Rosenberg cancelled 741K shares and was issued to various employees and consultants for services. Additional 135K shares were issued for valued at 196K. This is interesting, instead of dilution, Paul gives out his own shares to pay employees and consultants. This shows that he is trying to grow MCIG without screwing the shareholders.

April 30, 2014 CEO Paul agreed to forgive debt of $15K; This is what I’m talking about. If you want to grow your company, forgive the debt. MINE would likely have converted into shares and cashed out like 100K from it.

On July 31, 2014 CEO cancelled 5 million shares and issued to his employees and consultants for services. Equaling 2.7 million.

Wow, mCIG CEO really does not screw the shareholders and is trying to grow the company from his current holdings of stock. I am liking the actions of its CEO.

Total shares authorized are 560 Million.

VPOR Note 6 – Notes payable – As of June 30, 2014 VPOR owes $2.644 Million of convertible promissory notes.  Previous conversion rates have been between .0001 - .001. THIS IS A TERRIBLE SET UP. OUTSTANDING PROMISSIORY NOTES WITH LOW CONVERSION RATES.  2.6 Billion Shares needed at .001 conversions.

MCIG Note 6 – Related Party Transactions – This section is just full of more forgiveness of debt and cancellation of stock by MCIG management.

 

I am ending my analysis here. My summary personal observations are as follows:

VPOR has much better revenue, accounts receivable and revenue than MCIG does and products look great. We just have to see whether the sales of this inventory will keep increasing. However, a HUGE drawback is the current outstanding convertible notes (held by investment firms – purportedly unrelated) of $2.6 million. At this rate, if they were converted instead of paid off, the shares needed would be at least 2.6 billion using .001 conversions (the high end of previous conversions). I would hope that VPOR could pay off the debt rather than allowing conversion. However, they are still not profitable and the expenses have not been to pay debt off (at least it does not appear so).

MCIG needs better revenues and is incurring a lot of expenditures. The upside is that the expenditures appear to be to pay employees and consultants possibly for the development of more products that may or may not do well. However, the management is great. They forgive debts and cancel their own stock as to not hurt their employees and shareholders. With more revenues this company could be great.

It is up to each individual investor how they choose to invest. Please do not take any of this as advice, it is simply informational and my opinion on information available to the public.