UNITED STATES

   SECURITIES AND EXCHANGE COMMISSION

   Washington, D.C. 20549

   Form 10-Q

   (Mark One)

   

   [√] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

   For the quarterly period ended July 31, 2015

   

   [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

   

   For the transition period from _______________ to _______________.

   

   Commission file number: 333-175941

   

   Mcig, Inc.

   (Exact name of registrant as specified in its charter)Nevada

   (State or other jurisdiction of

   incorporation or organization)

   27-4439285

   (I.R.S. Employer

   Identification No.)433 North Camden Drive, 6th Floor,

   Beverly Hills, CA

   (Address of principal executive offices)

   90210

   (Zip Code)(310) 402-6937

   Registrant’s telephone number, including area code(Former name and address, if changed since last report)Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

   Yes [√] No [ ]

   

   Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ ] No [√]

   

   Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.Large accelerated filer

   [  ]

   Accelerated filer

   [  ]Non-accelerated filer

   (Do not check if smaller reporting company)

   [  ]

   Smaller reporting company

   [√]Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [√]

   

   As of September 11, 2015, the Company had 287,185,347 shares of common stock, $0.0001 par value outstanding.

   

   Transitional Small Business Disclosure Format Yes [  ] No[√]


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mCig, Inc.TABLE OF CONTENTSPART I. FINANCIAL INFORMATIONItem 1. Financial Statements

   3Condensed Balance Sheets as of July 31, 2015 (unaudited) and April 30, 2015

   4Condensed Statements of Operations for the three months ended July 31, 2015 and 2014 (unaudited)

   5Condensed Statements of Cash Flows for the three months ended July 31, 2015 and 2014 (unaudited)

   6Notes to Condensed Financial Statements (unaudited)

   7Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

   15Item 3. Quantitative and Qualitative Disclosures about Market Risk

   19Item 4. Controls and Procedures

   19PART II. OTHER INFORMATIONItem 1. Legal Proceedings

   20Item 1A. Risk Factors

   20Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

   20Item 3. Defaults Upon Senior Securities

   20Item 4. Mine Safety Disclosures

   20Item 5. Other Information

   20Item 6. Exhibits

   21SIGNATURES

   222


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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

   

   Interim Condensed Financial Statements and Notes to Interim Financial Statements

   

   General

   

   The accompanying unaudited condensed interim financial statements have been prepared in accordance with the instructions to Form 10-Q. Therefore, they do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, cash flows, and stockholders’ equity in conformity with generally accepted accounting principles. Except as disclosed herein, there has been no material change in the information disclosed in the notes to the financial statements included in the Company’s annual report on Form 10-K for the year ended April 30, 2015. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. Operating results for the three months ended July 31, 2015 are not necessarily indicative of the results that can be expected for the year ending April 30, 2016.

   

   3


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MCIG, INC.Condensed Balance SheetsJuly 31, 2015

   

   April 30, 2015(unaudited)ASSETSCurrent Assets:Cash and cash equivalents

   $

   119 276

   

   $

   102 691Accounts receivable

   

   -

   

   

   22 141Other receivable

   

   5 000

   

   

   15 000Inventory, net of allowance of $5,000 and $5,000, respectively

   

   54 009

   

   

   40 547Prepaid expenses

   

   103 747

   

   

   411 566Total current assets

   

   282 032

   

   

   591 945Property, plant, and equipment, net of accumulateddepreciation of $188 and $22, respectively

   

   1 604

   

   

   1 770Due from related party

   

   94 954

   

   

   100 264Intangible assets, net of accumulated amortization of $16,391 and $14,487, respectively

   

   6 200

   

   

   8 104Total assets

   $

   384 790

   

   $

   702 083LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Accounts payable and accrued expenses

   $

   11 655

   

   $

   14 653Deferred revenue

   

   6 053

   

   

   -Due to related party

   

   2 299

   

   

   -Current liabilities

   

   20 007

   

   

   14 653Total liabilities

   

   20 007

   

   

   14 653COMMITMENTS AND CONTINGENCIES

   

   -

   

   

   -STOCKHOLDERS' EQUITYPreferred stock, $0.0001 par value; 50,000,000 shares authorized;23,000,000 shares outstanding.

   

   2 300

   

   

   2 300Common stock, $0.0001 par value; 560,000,000 shares authorized;284,702,588 and 278,261,617 issued and outstanding atJuly 31, 2015 and April 30, 2015, respectively.

   

   28 470

   

   

   27 826Additional paid in capital

   

   6 264 304

   

   

   5 924 447Accumulated deficit

   

   (5 930 291)

   

   

   (5 267 143)Total Stockholders' Equity

   

   364 783

   

   

   687 430Total Liabilities and Stockholders' Equity

   $

   384 790

   

   $

   702 083The accompanying notes are an integral part of these condensed financial statements.4


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MCIG, INC.Condensed Statements of Operations(unaudited)For the Three Months EndedJuly 31,2015

   

   2014REVENUES

   

   

   $

   369 093

   

   $

   107 446COST OF GOODS SOLD

   

   

   

   242 149

   

   

   49 876GROSS PROFIT

   

   

   

   126 944

   

   

   57 570EXPENSESSelling, general and administrative

   

   

   

   139 112

   

   

   64 728Professional fees

   

   

   

   3 681

   

   

   10 600Stock based compensation

   

   

   

   645 229

   

   

   1 044 956Amortization and depreciation

   

   

   

   2 070

   

   

   1 626Total operating expenses

   

   

   

   790 092

   

   

   1 121 910NET LOSS FROM OPERATIONS

   

   

   

   (663 148)

   

   

   (1 064 340)NET LOSS FROM CONTINUING OPERATIONS

   

   

   

   (663 148)

   

   

   (1 064 340)NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS

   

   

   

   -

   

   

   7 515NET LOSS

   

   

   

   (663 148)

   

   

   (1 056 825)Income (loss) per share, from continuing operations

   

   

   $

   (0,00)

   

   $

   (0,00)Income (loss) per share, from discontinued operations

   

   

   $

   -

   

   $

   0,00Income (loss) per share

   

   

   $

   (0,00)

   

   $

   (0,00)Weighted average shares outstanding - basic and diluted

   

   

   

   280 311 306

   

   

   270 135 000The accompanying notes are an integral part of these condensed financial statements.5


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MCIG, INC.Condensed Statements of Cash Flows(unaudited)For the Three Months EndedJuly 31,2015

   

   2014Operating activities:Net loss

   

   $

   (663 148)

   

   $

   (1 056 825)Adjustments to reconcile net income (loss) to net cashused in operating activities:Depreciation and amortization

   

   

   2 070

   

   

   1 626Common stock issued for services

   

   

   340 501

   

   

   1 044 956Amortization of prepaid stock based compensation

   

   

   304 728

   

   

   -Changes in operating assets and liabilities:Accounts receivable

   

   

   22 141

   

   

   (6 795)Receivable - other

   

   

   10 000

   

   

   -Inventory

   

   

   (11 002)

   

   

   6 797Prepaid expenses

   

   

   3 091

   

   

   (4 835)Accounts payable

   

   

   (2 998)

   

   

   (59 427)Deferred revenue

   

   

   6 053

   

   

   -Net cash used in continuing operating activities

   

   

   11 436

   

   

   (74 503)Net cash used in discontinued operating activities

   

   

   -

   

   

   (55 541)Net cash used in operating activities

   

   

   11 436

   

   

   (130 044)Investing activities:Net cash used in discontinued investing activities

   

   

   -

   

   

   (2 800)Net cash used in investing activities

   

   

   -

   

   

   (2 800)Financing activities:Advances to related party

   

   

   -

   

   

   (78 591)Advances from related parties

   

   

   8 500

   

   

   -Repayments to related parties

   

   

   (6 201)

   

   

   -Proceeds from related party

   

   

   2 850

   

   

   3 000Net cash provided by (used in) financing activities

   

   

   5 149

   

   

   (75 591)Net cash provided by discontinued financing activities

   

   

   -

   

   

   75 591Net cash provided by (used in) financing activities

   

   

   5 149

   

   

   -Net increase (decrease) in cash

   

   

   16 585

   

   

   (132 844)Cash, beginning of period

   

   

   102 691

   

   

   358 839Cash, end of period

   

   $

   119 276

   

   $

   225 995Supplemental Disclosure of Cash Flows Information:Cash paid for interest

   

   $

   -

   

   $

   -Cash paid for income taxes

   

   $

   -

   

   $

   -Non-cash Investing and Financing Activities:Inventory recieved for forgiveness of debt

   

   $

   2 460

   

   $

   -The accompanying notes are an integral part of these condensed financial statements.6


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MCIG, INC.

   Notes to Condensed Financial Statements

   (Unaudited)

   

   

   Note 1 – Organization and Basis of Presentation

   

   The accompanying unaudited financial statements of mCig, Inc., (the “Company”, “we”, “our”), have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”).

   

   The Company prepares its condensed financial statements in accordance with accounting principles generally accepted in the United States of America.  The accompanying interim unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X. In management’s opinion, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included.

   

   Operating results for the three months ended July 31, 2015 are not necessarily indicative of the results that may be expected for the year ending April 30, 2016. Notes to the unaudited interim condensed financial statements that would substantially duplicate the disclosures contained in the audited condensed financial statements for the year ended April 30, 2015 have been omitted; this report should be read in conjunction with the audited condensed financial statements and the footnotes thereto for the fiscal year ended April 30, 2015 included within the Company’s Form 10-K as filed with the Securities and Exchange Commission.

   

   Description of Business

   

   The Companywas incorporated in the State of Nevada on December 30, 2010 originally under the name Lifetech Industries, Inc. Effective August 2, 2013, the name was changed from "Lifetech Industries, Inc." to "mCig, Inc." reflecting the new business model.Since October 2013, mCig, Inc. has positioned itself as atechnology companyfocused on two long-term secular trends:

   

   (1) the decriminalization and legalization of marijuana for medicinal or recreational purposes - legalizing medicinal and recreational marijuana usage is steadily on the rise not only domestically but also internationally. Marijuana has been decriminalized in over twenty countries, in over five continents. Twenty three states and the District of Columbia currently have laws legalizing marijuana in some form.

   

   Management believes that by 2016 it is very likely that many more states, will legalize the use and sale of recreational marijuana the way Washington and Colorado have.

   

   (2) The adoption of electronic vaporizing cigarettes (commonly known as “eCigs”), as smokers move away from traditional cigarettes onto e-cigarettes. Smoking tobacco causes numerous health problems, including disease and death. Smoking becomes very addicting quickly, and the most difficult part is cessation. The Company contends that e-cigarettes offer a safer and healthier alternative to traditional tobacco cigarettes. E-cigarettes operate by heating a mixture of liquid nicotine and flavoring, which is then inhaled and exhaled in the same manner as a cigarette. However, e-cigarettes do not contain any tobacco or other dangerous additives. Scientific research has shown that the leading cause of cancer in smokers comes from the carcinogens in tobacco. As the movement towards personal health grows, smokers are trying to quit their harmful habits. Management believes that e-cigarettes provide a safe transition from harmful traditional cigarettes.

   

   All agreements related to the Lifetech business were terminated and closed as of April 30, 2014. It will not have any impact on the current and future operations because all of these agreements are related to the previous business directions of the Company.

   

   7


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The Company manufactures and retailsthe mCig – aloose-leaf eCig. Designed in the USA – the mCig provides a smoking experience by heating plant material, waxes, and oils delivering a smoother inhalation experience.The Company also maintains an investment in Vapolution, Inc. which manufactures and retails home-use vaporizers such as the Vapolution 2.0.Through its related party, VitaCig, Inc., the Company is engaged in the manufacturing and retailing of a nicotine-free eCig that delivers a water-vapor mixed with vitamins and natural flavors.

   

   On January 23, 2014, the Company signed a Stock Purchase Agreement with Vapolution, Inc. which manufactures and retails home-use vaporizers. In accordance with this agreement mCig, Inc. acquired 100% of Vapolution, Inc.; as part of this transaction mCig, Inc. has agreed to issue 5,000,000 shares to shareholders of Vapolution, Inc.  The shareholders of Vapolution, Inc. retain the right to rescind the transaction, which expired on January 23, 2015 but was extended to May 23, 2015 based on an Amended Stock Purchase Agreement executed on May 23, 2014. Subsequently, on August 25, 2015, the final payment to the shareholders of Vapolution was extended to September 30, 2015 and the right to rescind the transaction was extended to March 31, 2016.

   

   On January 23, 2014, Paul Rosenberg, CEO of mCig, Inc. cancelled an equal amount (2,500,000 shares) of common shares owned by him resulting in a net non-dilutive transaction to existing mCig, Inc. shareholders. The remaining 2,500,000 of common shares owned by Paul Rosenberg will be cancelled to offset the 2,500,000 new shares issued from the treasury to complete the purchase of Vapolution, Inc.

   

   On February 24, 2014 the Company entered into a Contribution Agreement with VitaCig, Inc. In accordance with this agreement VitaCig, Inc. accepted the contribution by mCig, Inc. of specific assets consisting solely of pending trademarks for the term “VitaCig” filed with the USPTO and $500 in cash as contribution in exchange for 500,135,000 shares of common capital stock representing 100% of the shares outstanding of VitaCig, Inc.

   

   On November 28, 2014, the Company distributed to its shareholders 270,135,000 shares of Common Stock of VitaCig, Inc. owned by the Company, a shareholder of VitaCig. The shareholders of the Company received one share of VitaCig common stock for every one share of mCig common stock that they held as of the record date.

   

   

   Note 2 – Summary of Significant Accounting Policies

   

   Principles of Consolidation

   The consolidated financial statements include the accounts of the Company and its former wholly-owned subsidiary for the year ended April 30, 2015. Significant intercompany balances and transactions have been eliminated. The Company had consolidated VitaCig, Inc. through November 28, 2014 at which time VitaCig was spun-off and is no longer consolidated into the Company’s financial statements.

   

   Use of Estimates

   The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The most significant estimates include: revenue recognition; sales returns and other allowances; allowance for doubtful accounts; valuation of inventory; valuation and recoverability of long-lived assets; property and equipment; contingencies; and income taxes.

   

   On a regular basis, management reviews its estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such reviews, and if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates.

   

   8


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Revenue Recognition

   Our revenue recognition policy is in accordance with generally accepted accounting principles, which requires the recognition of sales when there is evidence of a sales agreement, the delivery of goods has occurred, the sales price is fixed or determined and the collectability of revenue is reasonably assured.

   

   The Company recognizes revenue for sales online either direct to consumer or through our Wholesaler, Distributor, Reseller (WDR) program. For online sales, revenue is recognized by the Company at the time of order fulfillment. Since mCig collects payment for each online order at the time of sale, the point of shipping revenue recognition method ensures that the Company recognizes the revenue collected within 24-48 hours after the order is received and the funds are collected.

   

   Stock-Based Compensation

   The Company accounts for share-based awards issued to employees in accordance with FASB ASC 718. Accordingly, employee share-based payment compensation is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the requisite service period.  Additionally, share-based awards to non-employees are expensed over the period in which the related services are rendered at their fair value. The Company applies ASC 505-50, “Equity Based Payments to Non-Employees”, with respect to options and warrants issued to non-employees.

   

   Deferred Revenue

   Payments received by the Company in advance are recorded as deferred revenue until the merchandise has shipped to the customer.

   

   Cost of Goods Sold

   The Company recognizes the direct cost of purchasing product for sale, including freight-in and packaging, as cost of goods sold in the accompanying statement of operations.

   

   Cash and Cash Equivalents

   The Company includes in cash and cash equivalents all short-term, highly liquid investments that mature within three months of their acquisition date. Cash equivalents consist principally of investments in interest-bearing demand deposit accounts and liquidity funds with financial institutions and are stated at cost, which approximates fair value. For cash management purposes the company concentrates its cash holdings in an account at Bank of America. The Company had no cash equivalents at July 31, 2015 or April 30, 2015.

   

   Inventory

   Inventory consists of finished product, mCig products valued at the lower of cost or market valuation under the first-in, first-out method of costing.
  July 31, 2015

   

   April 30, 2015Finished goods

   

   $

   59,009

   

   $

   45,547Allowance for obsolescence

   

   

   (5,000)

   

   

   (5,000)Total inventory

   

   $

   54,009

   

   $

   40,547
  As of July 31, 2015 and April 30, 2015, the Company has recorded an allowance for finished goods obsolescence of $5,000 and $5,000, respectively.

   

   Property and Equipment

   Property and equipment are stated at cost less accumulated depreciation and amortization.  Expenditures for maintenance and repairs are charged to expense as incurred.  Additions, improvements and major replacements that extend the life of the asset are capitalized.

   

   9


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Depreciation and amortization is recorded using the straight-line method over the estimated useful lives of depreciable assets, which are generally three to five years.

   

   Accounts Receivable

   The Company’s accounts receivable is primarily from its vendor tasked with accepting all credit card payments for purchases from its customers, are reported at the amount due from the vendor. Due to the nature of these funds, the Company expects these receivables to be fully collectible and therefore has not estimated an allowance for doubtful accounts for the period. The Company did not report any accounts receivable from any of its retail customers. The Company doesn’t anticipate an accounts receivable balance going forward, since they switched to a new vendor during the next fiscal quarter that no longer requires a withholding on any of the credit card purchases.

   

   Advertising Expenses

   Advertising costs are expensed as incurred. During the three months ended July 31, 2015 and 2014, the advertising expenses were $17,630 and $0, respectively.

   

   Foreign Currency Translation

   The Company’s functional currency and its reporting currency is the United States Dollar.

   

   Intangible Assets

   The Company’s intangible assets consist primarily of certain website development costs and are amortized over its useful life.

   

   Research and Development

   The costs of research and development are expensed as incurred. During the three months ended July 31, 2015 and 2014, the research and development costs were $0 and $0, respectively.

   

   Financial Instruments

   The carrying amounts reflected in the balance sheets for cash, accounts receivable, accounts payable and accrued expenses approximate the respective fair values due to the short maturities of these items. The Company does not hold any investments that are available-for-sale.

   

   As required by the Fair Value Measurements and Disclosures Topic of the FASB ASC, fair value is measured based on a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

   

   The three levels of the fair value hierarchy are described below:

   

   Level 1—Valuations based on quoted prices for identical assets and liabilities in active markets.

   

   Level 2—Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

   

   Level 3—Valuations based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

   

   The Company does not have any assets or liabilities that are required to be measured and recorded at fair value on a recurring basis.

   

   10


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Income Taxes

   Income taxes are accounted for under the assets and liability method.  Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards.  Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.  Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.

   

   Basic and Diluted Net Loss Per Share

   The Company follows ASC Topic 260 to account for earnings per share.  Basic earnings per share (“EPS”) calculations are determined by dividing net loss by the weighted average number of shares of common stock outstanding during the three months.  Diluted earnings per share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding.  During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation.

   

   There is no potential dilutive security as of July 31, 2015 or 2014.

   

   Concentration of Credit Risk

   Financial instruments, which potentially subject us to concentrations of credit risk, consist principally of cash and trade receivables.  Concentrations of credit risk with respect to trade receivables are limited due to the clients that comprise our customer base and their dispersion across different business and geographic areas.  We estimate and maintain an allowance for potentially uncollectible accounts and such estimates have historically been within management's expectations.

   

   We rely almost exclusively on one Chinese factory as our principle supplier, for the manufacturing of mCig’s. Therefore, our ability to maintain operations is dependent on this third-party manufacturer.

   

   Our cash balances are maintained in accounts held by major banks and financial institutions located in the United States.  The Company may occasionally maintain amounts on deposit with a financial institution that are in excess of the federally insured limit of $250,000.  The risk is managed by maintaining all deposits in high quality financial institutions. The Company had no deposits in excess of federally insured limits at July 31, 2015 and April 30, 2015.

   

   Impairment of Long-lived Assets

   The Company accounts for long-lived assets in accordance with the provisions of FASB Topic 360, “Accounting for the Impairment of Long-Lived Assets”. This statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss would be recognized when the estimated future cash flows from the use of the asset are less than the carrying amount of that asset.

   

   Cost-Basis Investments

   The Company’s non-marketable equity investment in Vapolution is recorded using the cost-basis method of accounting, and is classified within other long-term assets on the accompanying balance sheet as permitted by FASB ASC 325, “Cost Method Investments”. During 2015 the Company recorded an impairment loss of $625,000 related to the investment in Vapolution. During 2014 there were no impairment losses.

   

   As of August 25, 2015 and the three months ended July 31, 2015, the fair value of Vapolution is undeterminable and the Company elected to record an impairment in the amount of $625,000 as another than temporary impairment.

   

   Equity-Basis Investments

   The Company accounts for its approximately 46% ownership of VitaCig on the equity method of accounting. As of July 31, 2015, the market value of this investment is approximately $4,140,000.

   

   11


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Warranties

   Warranty reserves include management’s best estimate of the projected costs to repair or to replace any items under warranty, based on actual warranty experience as it becomes available and other known factors that may impact the Company’s evaluation of historical data. Management reviews mCig’s reserves at least quarterly to ensure that its accruals are adequate in meeting expected future warranty obligations, and the Company will adjust its estimates as needed. Initial warranty data can be limited early in the launch of a product and accordingly, the adjustments that are recorded may be material. Because of the nature of its products, customers are made aware that as soon as a mCig is packed with marijuana, they automatically void their warranty, primarily because it is against federal laws to mail a product that has been in proximity of marijuana. As a result, the products that can be returned as a warranty replacement are extremely limited. As a result, due to the Company’s warranty policy, the Company did not have any significant warranty expenses to report for the three months ended July 31, 2015. Based on these actual expenses, the warranty reserve, as estimated by management as of July 31, 2015 was at $0. Any adjustments to warranty reserves are to be recorded in cost of sales.

   

   It is likely that as we start selling higher priced products, that are not affected by federal shipping laws and/or are not single use items (such as eLiquid Juice Vaporizer), we will acquire additional information on the projected costs to service work under warranty and may need to make additional adjustments. Further, a small change in the Company’s warranty estimates may result in a material charge to the Company’s reported financial results.

   

   Recent Accounting Pronouncements

   The Company evaluated all recent accounting pronouncements issued and determined that the adoption of these pronouncements would not have a material effect on the financial position, results of operations, or cash flows of the Company.

   

   In April 2014, the FASB issued ASU 2014-08,Reporting Discontinued Operations and Disclosures of Components of an Entity, which updates the definition of discontinued operations. Going forward, only those disposals of components of an entity that represent a strategic shift that has (or will have) a major effect on an entity's operations and financial results will be reported as discontinued operations in the financial statements. Previously, a component of an entity that is a reportable segment, an operating segment, a reporting unit, a subsidiary, or an asset group was eligible for discontinued operations presentation. Additionally, the condition that the entity not have any significant continuing involvement in the operations of the component after the disposal transaction has been removed. The effective date for the revised standard is for applicable transactions that occur within annual periods beginning on or after December 15, 2014. We do not expect the guidance to have a material impact on the Company.

   

   Reclassifications

   Certain comparative amounts from prior periods have been reclassified to conform to the current period's presentation. These changes did not affect previously reported net loss.

   

   Note 3. Going Concern

   

   The Company's financial statements are prepared using generally accepted accounting principles, which contemplate the realization of assets and liquidation of liabilities in the normal course of business. Because the business is new and has a limited history and relatively few sales, no certainty of continuation can be stated. The accompanying financial statements for the three months ended July 31, 2015 and 2014 have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

   

   The Company has suffered losses from operations and has an accumulated deficit, which raises substantial doubt about its ability to continue as a going concern.

   

   12


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Management is taking steps to raise additional funds to address its operating and financial cash requirements to continue operations in the next twelve months. Management has devoted a significant amount of time in the raising of capital from additional debt and equity financing. However, the Company’s ability to continue as a going concern is dependent upon raising additional funds through debt and equity financing and generating revenue. There are no assurances the Company will receive the necessary funding or generate revenue necessary to fund operations. The financial statements contain no adjustments for the outcome of this uncertainty.

   

   Note 4. Property, Plant and Equipment

   

   The following is a detail of equipment at July 31, 2015 and April 30, 2015:
  July 31, 2015

   April 30, 2015Furniture and fixtures

   $ 1,792

   

   $ 1,792Total property

   1,792

   

   1,792Less: accumulated depreciation

   (188)

   

   (22)Total property, net

   $ 1,604

   

   $ 1,770
  Depreciation expense on property, plant and equipment was $162 and $0 for the three months ended July 31, 2015 and 2014, respectively.

   

   Note 5. Intangible Assets:

   

   Intangible assets, net consisted of the following at July 31, 2015 and April 30, 2015:
  July 31,

   

   April 30,2015

   

   2015Intangible assets

   

   $           22,591

   

   $           22,591Less amortization

   

   (16,391)

   

   (14,487)Net intangible assets

   

   $             6,200

   

   $             8,104
  Amortization expense on intangible assets was $1,904 and $1,626 for the three months ended July 31, 2015 and 2014, respectively. The weighted average remaining useful life on intangible assets at July 31, 2015 is approximately 14 months.

   

   The table below represents the estimated amortization of intangible assets for each of the next five years.
  Year

   

   Amortization2016

   

   $ 5,7182017

   

   4892018

   

   -2019

   

   -2020

   

   -Total

   

   $ 6,200
  13


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Note 6. Related Parties and Related Party Transactions

   

   During the year ended April 30, 2015, the Company advanced to VitaCig $105,264 for professional fees and inventory purchases and VitaCig repaid $5,000 of that advance during the three months ended July 31, 2015.

   

   During the three months ended July 31, 2015 VitaCig repaid $2,850 to the Company, and transferred $2,460 in inventory.

   

   As of July 31, 2015 and April 30, 2015, the balance of the advances to VitaCig was $94,954 and $100,264, respectively, and is recorded as due from related parties.

   

   Note 7. Commitments and Contingencies

   

   None

   

   Note 8. Stockholders’ Equity

   

   Common Stock

   

   In the three months ended July 31, 2015, the Company issued an aggregate total of 6,440,971 shares of common stock valued at $340,501 for services.

   

   Preferred Stock

   

   The Company has authorized 50,000,000 shares of preferred stock, at $0.0001 par value and 23,000,000 are issued and outstanding as of July 31, 2015. Each share of the Preferred Stock has 10 votes on all matters presented to be voted by the holders of the Company’s common stock. All 23,000,000 shares of preferred stock were granted to the Company’s Chief Executive Officer on September 23, 2013, which was valued at $2,300, the price of the common stock of $0.0001 exchanged in the transaction.

   

   Note 9. Basic Loss per Share

   

   Basic Loss Per Share- The computation of basic and diluted loss per common share is based on the weighted average number of shares outstanding during each period.
  July 31,2015

   

   

   2014Net loss from continuing operations

   

   (663,148)

   

   

   (1,064,340)Net income from discontinued operations

   

   -

   

   

   7,515Net loss

   

   (663,148)

   

   

   (1,056,825)Basic loss per common share from continuing operations

   

   $                 (0.00)

   

   

   $               (0.00)Basic income per common share from discontinued operations

   

   $                  0.00

   

   

   $                  0.00Basid income (loss) per share

   

   $ (0.00)

   

   

   $               (0.00)Basic weighted average number of shares outstanding

   

   280,311,306

   

   

   270,135,000
  14


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The computation of basic loss per common share is based on the weighted average number of shares outstanding during the periods.

   

   Note 10. Subsequent Events

   

   On August 31, 2015, the Company issued 2,482,759 shares of common stock for services valued at$138,168.

   

   

   Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

   

   The following discussion should be read in conjunction with our condensed consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on  Form 10-Q and the consolidated financial statements and related notes thereto in our Annual Report on Form 10-K for the year ended April 30, 2015.

   

   Certain statements in this section contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  All statements contained in this report and not clearly historical in nature are forward-looking, and the words “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “intends,” “potential,” and similar expressions (as well as other words or expressions referencing future events, conditions or circumstances) generally are intended to identify forward-looking statements.  Any statements in this report that are not historical facts are forward-looking statements. Actual results may differ materially from those discussed from time to time in the Company's Securities and Exchange Commission filings. The Company undertakes no obligation to update or revise any forward-looking statement for events or circumstances after the date on which such statement is made except as required by law.

   

   Overview

   

   mCig, Inc.(mCig) was incorporated in the State of Nevada on December 30, 2010 originally under the name Lifetech Industries, Inc. Effective August 2, 2013, the name was changed from "Lifetech Industries, Inc." to "mCig, Inc." reflecting the new business model.Since October 2013, we have positioned ourselves as atechnology companyfocused on two long-term secular trends:

   

   (1) The decriminalization and legalization of marijuana for medicinal or recreational purposes - legalizing medicinal and recreational marijuana usage is steadily on the rise not only domestically but also internationally.

   

   Marijuana has been decriminalized in over twenty countries, in over five continents. Twenty three states and the District of Columbia currently have laws legalizing marijuana in some form http://www.governing.com/govdata/safetyjustice/ statemarijuanalawsmapmedicalrecreational.html).  Management believes that by 2016 it is very likely that many more states, including Alaska, California, Arizona, Maine, and Oregon, will legalize the use and sale of recreational marijuana the way Washington and Colorado have; and

   

   (2) The adoption of electronic vaporizing cigarettes (commonly known as “eCigs”), as smokers move away from traditional cigarettes onto e-cigarettes. Smoking tobacco causes numerous health problems, including disease and death. Smoking becomes very addicting quickly, and the most difficult part is cessation. We contend that e-cigarettes offer a safer and healthier alternative to traditional tobacco cigarettes. E-cigarettes operate by heating a mixture of liquid nicotine and flavoring, which is then inhaled and exhaled in the same manner as a cigarette. However, e-cigarettes do not contain any tobacco or other dangerous additives. Scientific research has shown that the leading cause of cancer in smokers comes from the carcinogens in tobacco. As the movement towards personal health grows, smokers are trying to quit their harmful habits. Management believes that e-cigarettes provide a safe transition from harmful traditional cigarettes.

   

   15


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On January 23, 2014, we signed a Stock Purchase Agreement with Vapolution, Inc. which manufactures and retails home-use vaporizers. In accordance with this agreement mCig, Inc. acquired 100% of Vapolution, Inc.; as part of this transaction mCig, Inc. agreed to issue 5,000,000 shares to shareholders of Vapolution, Inc.  The shareholders of Vapolution, Inc. retain the right to rescind the transaction, which expired on January 23, 2015 but was extended to May 23, 2015 based on an Amended Stock Purchase Agreement executed on May 23, 2014. Subsequently, on August 25, 2015, the final payment to the shareholders of Vapolution as extended to September 30, 2015 and the right to rescind the transaction was extended to March 26, 2016.

   

   On January 23, 2014, Paul Rosenberg, CEO of mCig, Inc. cancelled an equal amount (2,500,000 shares) of common shares owned by him resulting in a net non-dilutive transaction to existing mCig, Inc. shareholders. The remaining 2,500,000 of common shares owned by Paul Rosenberg will be cancelled to offset the 2,500,000 new shares issued from the treasury to complete the purchase of Vapolution, Inc.

   

   Critical Accounting Policies and Estimates

   

   Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.  The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses.  On an ongoing basis, we evaluate our estimates, including those related to uncollectible receivables, inventory valuation, deferred compensation and contingencies.

   

   We base our estimates on historical performance and on various other assumptions that we believe to be reasonable under the circumstances.  These estimates allow us to make judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

   

   We believe the following accounting policies are our critical accounting policies because they are important to the portrayal of our financial condition and results of operations and they require critical management judgments and estimates about matters that may be uncertain.  If actual results or events differ materially from those contemplated by us in making these estimates, our reported financial condition and results of operations for future periods could be materially affected.

   

   Revenue Recognition

   

   Revenues are presented net of discounts. In general, we recognize revenue when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered to the customer, (iii) the fee is fixed or determinable, and (iv) collectability is reasonably assured. Where arrangements have multiple elements, revenue is allocated to the elements based on the relative selling price method and revenue is recognized based on our policy for each respective element. We generate revenue primarily from salesof the electronic cigarettes, components for electronic cigarettes and related accessories. We recognize revenue when the product is shipped.

   

   Amounts billed or collected in excess of revenue recognized are recorded as deferred revenue.

   

   16


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Our operating results for the three months ended July 31, 2015 and 2014 are summarized as follows:
  For the Three Months Ended July 31,2015

   

   2014Revenue

   $

   369,093

   

   $

   107,446Cost of Goods Sold

   

   242,149

   

   

   49,876Gross Profit

   

   126,944

   

   

   57,570Expenses

   

   790,092

   

   

   1,121,910Net Loss from operations

   

   (663,148)

   

   

   (1,064,340)Net income from discontinued operations

   

   -

   

   

   7,515Net loss

   $

   (663,148)

   

   $

   (1,056,825)
  Results of Operations

   

   Three Months Ended July 31, 2015 Compared to Three Months Ended July 31, 2014

   

   Revenue

   

   Our revenue from continuing operations for the three months ended July 31, 2015 was $369,093 compared to $107,446, an increase of $261,647 or approximately 244%, for the three months ended July 31, 2014.  This increase is primarily a result of increased sales efforts for our products.Revenues consist primarily of results from the sales of the electronic vaporisers, the components for vaporisers and related accessories.

   

   

   Cost of Goods Sold

   

   Our cost of goods sold for the three months ended July 31, 2015 was $242,149 compared to $49,876 for the three months ended July 31, 2014. The increase is primarily due to an increase in sales and the purchase of better quality products with higher costs.

   

   Gross Profit

   

   Our gross profit for the three months ended July 31, 2015 was $126,944 compared to $57,570 for the three months ended July 31, 2014. The gross profit of $126,944 for the three months ended July 31, 2015 represents approximately 34% as a percentage of total revenue. The gross profit of $57,570 for the three months ended July 31, 2014 represents approximately 54% as a percentage of total revenue. This decrease in the gross profit is primarily attributed to the higher costs of the better quality products.

   

   Operating Expenses

   

   Our operating expenses decreased by $331,818 to $790,092 for the three months ended July 31, 2015, from $1,121,910 for the three months ended July 31, 2014.

   

   The decrease was primarily due to the decrease in stock based compensation of $399,727 a decrease in professional fees of $6,919, offset by an increase in selling, general and administrative expenses of $74,384 and an increase in amortization and depreciation of $444.

   

   Our total operating expenses for the three months ended July 31, 2015 of $790,092 consisted of $645,229 of stock based compensation, $139,112 of selling, general and administrative expenses, $3,681 in professional fees, and $2,070 of amortization and depreciation expenses. Our general and administrative expenses consist of bank charges, telephone expenses, meals and entertainments, computer and internet expenses, postage and delivery, office supplies and other expenses.

   17


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Net Loss

   

   Our net loss decreased by $393,667 to $663,148 for the three months ended July 31, 2015 from $1,056,825 for the three months ending July 31, 2014. The decrease in net loss compared to the prior year is primarily a result of the decrease in operating expenses of $331,818 and the increase in gross profit of $69,374.

   

   Liquidity and Capital Resources

   

   Introduction

   

   During the three months ended July 31, 2015 we generated positive operating cash flows of $11,436. Our cash on hand as of July 31, 2015 was $119,276. At July 31, 2015, the Company had a working capital surplus of $364,783.

   

   Cash Requirements

   

   We had cash available of $119,276 as of July 31, 2015.  Based on our revenues, cash on hand and current monthly burn rate, around $15,000, we believe that our operations are sufficient to fund operations through January 2016.

   

   Sources and Uses of Cash

   

   Operations

   

   We had net cash provided by continuing operating activities of $11,436 for the three months ended July 31, 2015, as compared to cash used of $78,644 for the three months ended July 31, 2014. Cash used in discontinued operating activities was $51,400 for the three months July 31, 2014.

   

   Net cash provided by continuing operations consisted primarily of the net loss of $663,148 offset by non-cash expenses of $342,571 consisting of depreciation and amortization of intangible assets of $2,070 and $340,501 in common stock issued for services. Additionally, changes in assets and liabilities consisted of decreases in accounts receivable of $22,140, other receivables of $10,000, and prepaid expenses of $307,819, these decreases were partially offset by increases in inventory of $11,002, accounts payable of $2,998, and deferred revenue of $6,053.

   

   Investments

   

   We had net cash used in continuing investing activities of $0 for the three months ended July 31, 2015 and July 31, 2014. Cash used in discontinued investing activities was $2,800.

   

   Financing

   

   We had net cash provided by continuing financing activities of $5,149 for the three months ended July 31, 2015, as compared to net cash used of $75,591 for the three months ended July 31, 2014.  Our financing activities consisted primarily of $8,500 in advances from related parties, $2,850 in repayments from related parties, and $6,201 in repayments to related parties. Cash provided by discontinued investing activities was $75,591 for the three months ended July 31, 2014.

   

   

   Off-Balance Sheet Arrangements

   

   We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that we consider material.

   

   

   18


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Going Concern

   

   Our financial statements are prepared using generally accepted accounting principles, which contemplate the realization of assets and liquidation of liabilities in the normal course of business. Because the business is relatively new and has a short history and relatively few sales, no certainty of continuation can be stated. The accompanying financial statements for the three months ended July 31, 2015 and 2014 have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

   

   The Company has suffered losses from operations and has an accumulated deficit, which raises substantial doubt about its ability to continue as a going concern

   

Item 3. Quantitative and Qualitative Disclosures about Market Risk

   

   We are a smaller reporting company and therefore, we are not required to provide information required by this Item of Form 10-Q.

   

Item 4. Controls and Procedures

   

   Evaluation of Disclosure Controls and Procedures

   

   Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to management, including the principal executive officer and principal financial officer, to allow timely decisions regarding required disclosures.

   

   We carried out an evaluation, under the supervision and with the participation of management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of July 31, 2015. In designing and evaluating the disclosure controls and procedures, management recognizes that there are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their desired control objectives. Additionally, in evaluating and implementing possible controls and procedures, management is required to apply its reasonable judgment. Based on the evaluation described above, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report because we did not document our Sarbanes-Oxley Act Section 404 internal controls and procedures.

   

   As funds become available to us, we expect to implement additional measures to improve disclosure controls and procedures such as implementing and documenting our internal controls procedures.

   

   Changes in internal controls over financial reporting

   

   There have been no changes in our internal control over financial reporting during the quarter endedJuly 31, 2015that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

   

   19


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Limitations on the Effectiveness of Controls

   

   A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met.  The Company’s management, including its Principal Executive Officer and its Principal Financial Officer, do not expect that the Company’s disclosure controls will prevent or detect all errors and all fraud. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.  Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls.  The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.  Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with associated policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

   

   

   PART II – OTHER INFORMATION

   

Item 1. Legal Proceedings

   

   From time to time, we may become involved in various lawsuits and legal proceedings that arise in the ordinary course of business. However, litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to time that may harm our business. Except as set forth below we are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.



Item 1A. Risk Factors

   

   As a smaller reporting company, we are not required to provide the information required by this Item.



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

   

   In the three months ended July 31, 2015, we issued 6,440,971 shares of common stock valued at $340,501 for professional services.



Item 3. Defaults Upon Senior Securities

   

   There have been no events that are required to be reported under this Item.



Item 4. Mine Safety Disclosures

   

   There have been no events that are required to be reported under this Item.

   

Item 5. Other Information

   

   There have been no events that are required to be reported under this Item.

   

   

   20


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Item 6. Exhibits
 31.1

   

   Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2

   

   Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1 *

   

   Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2 *

   

   Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002101.INS

   

   XBRL Instance Document101.SCH

   

   XBRL Taxonomy Extension Schema Document101.CAL

   

   XBRL Taxonomy Extension Calculation Linkbase Document101.DEF

   

   XBRL Taxonomy Extension Definition Linkbase Document101.LAB

   

   XBRL Taxonomy Extension Label Linkbase Document101.PRE

   

   XBRL Taxonomy Extension Presentation Linkbase Document* Furnished herewith.
 21


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SIGNATURES

   

   Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
   mCig, Inc.Dated: September 14, 2015

   

   /s/ Paul RosenbergBy:

   Paul RosenbergIts:

   Chief Executive Officer

   (Principal Executive Officer)
  Dated: September 14, 2015

   

   /s/ Charles MathewsBy:

   Charles MathewsIts:

   Chief Financial Officer

   (Principal Financial Officer)
  22