HENDERSON, NV--(Marketwired - Mar 28, 2016) - mCig Inc. (
Dear Fellow Shareholders:
I would first like to thank all of the shareholders for their continued support of mCig Inc. I want this letter to be different in nature from previous ones, because I receive a lot of questions from our shareholders and I would like to take this opportunity to answer those questions.
In my view, the most important place to start is the company identity. In the past few years, we made a series of transitions in the Cannabis Sector which I felt would benefit the company in meaningful ways. We were a company that started selling affordable vaporizers in the rising Cannabis industry, and then we evolved to a distributor of different brands for this new sector. When you enter a new market in a new industry, it's always a learning process. Some things seem obvious in the beginning, but don't always turn out the way you envision them at the end.
I read all the comments, letters, and reports about mCig. Most have excellent ideas for improvements and really understand our company. Some use good points but their conclusions couldn't be more wrong.
Let's talk about the latest Grow Services, CBD, and THC news that have been misrepresented:
CannaPods Group broke the contract because they were impatient about the sales cycle. Building contracts require local presence and excellent building skills plus good sales people. mCig brought all three of those aspects to the table, and we believed in the future of construction, so we decided to proceed with our own vision and to believe in our skills and team. There is nothing proprietary about SIP panel construction, since it has been used for ages from simple construction to high rises but our processes can now be called our own. We are now seeing the success of staying the course and working hard, and wish all of our competitors well in the industry. Construction in the MMJ space is unlike others, because the industry is growing so rapidly. One construction project can have many phases and lead to many opportunities. For example, what may start out as a $500,000 project can turn out to have 4 or more $500,000 phases. What starts as purchasing many sodium lights from one company may turn the next phase into buying LED lights from another company and hearing about another project that needs experienced builders. What starts as a building project may turn into a partnership for branding or even an investment in cultivation and ownership of a stable revenue line. Forging these relations and finding the best value for our investors is paramount, while at the same time we must generate significant cash flow and profits. Being an established company in the space, we must dominate others now and this is an excellent strategy to keep us ahead of all the other groups in the space.
The Distribution Model for different cannabis brands is great and is needed in the Cannabis market. We learned quickly that there are 2 categories of potential partners: established brands who were looking for mCig to sell their products by either buying inventory or white labeling their product or those who were new to the market and wanted MCIG to not only sell their brands, but also to invest in marketing, advertising, and sale of their products for a percentage of revenues.
We chose to start our venture with a new brand, Just Chill, for our entry into the CBD market. Our model was attractive enough to them that they signed an exclusive marketing/sales agreement with us from the start. This was successful for both groups and Chill is officially a top 20 brand. But going through the process we learned that as these brands grow sales and be successful, other distributors enter and start compressing margins as we all strive to sell to a small, yet growing consumer base. We witnessed compression of margins and didn't have the control we liked or are used to when it came to price structures. By starting our own lines, we keep control of our marketing and margins. Our experience with Chill gave us the confidence to expand and we are in control of our own margins and well positioned in the future to make our own top brand with no outside distributors to force down pricing. Branding will continue to be important in the space and with the new products we have now, our experience and market penetration will be a significant factor in our success.
When you look at the last quarter financial numbers, you see a drop in revenues. Our online sales numbers were good, but wholesale numbers were not so strong. The other setback that we had last quarter was a problem with our merchant bank's terms for processing payments associated with selling CBD products. The process behind sale of CBD products is very challenging: companies in this sector are paying a very high percentage of sales to accept credit cards (up to 12%) due to the nature of the product and very often funds are not available to the company right away. mCig did find a solution to keep selling their product online and on a wholesale level, but some of the revenues were lost.
For me, our cash position is very important. Last Quarter mCig invested into VitaCig Inc. That brought our cash position down, but this quarter, VitaCig Inc. has already repaid the funds they needed to launch a new product line back to mCig. One of my goals is to keep no less than $100,000 cash available at all times (mCig cash position is more than $100,000 today). Although this may seem like a small amount, our cash position will improve considerably due to the increased profitability of construction and our THC/CBD divisions.
Our sales strategy was also undergoing changes. As you may know, a former sales executive built a team of 90 reps in the first quarter. However, we didn't find this to be a successful approach. The reason, apart from it being difficult to manage, was we could not supply sales people with an inventory of products without putting our shareholders at risk by taking on financing for inventory. You must understand that there are not many funding resources available to small companies in this sector and I feel it's best to stay away from bad debt. When we shopped for inventory financing, even with the proven sales record that mCig has, interest rates that financial companies were offering to us, were between 30-50% per year. Bringing in equity investors would not be a problem, but, at those lower price levels where our stock was trading, it would be a disaster for our shareholders. We were smart to change course and create a central call Facility with 5-10 sales personnel. This model is much more successful and currently is in place and pushing mCig/VitaCig brands. It's not only successful, but it's economical.
mCig, as a major shareholder of VitaCig Inc, (47% stock holder), understands the importance to shareholders for its investment to finally start bringing results. We are glad to see that finally a new strong executive team was put in charge of VitaCig operations. The VitaCig brand is strong and we are already seeing the growth in revenues.
I take full responsibility for past managerial mistakes by believing in people more than I should have. I believe I have corrected this and I was right to do so. The compensation program for former employees was very rich and attracting talent for shares rather than a cash salary was a mistake. We started changing it two quarters ago by tying compensation to performance. Our expenses went down tremendously, and we are very close to being one of the only profitable public marijuana companies. You can be assured this is my goal, as I cannot afford to not make this a successful company because my entire net worth is wrapped up in it. So I am here to stay, however I may bring in a talented CEO to oversee day to day operations as I see clearly that we are in a very strong position now and can afford to do this. More importantly, we will need to do this to carry all of our shareholders to the next level.
Last year, when I projected revenue of $7-$10 million, I knew that the main revenue would come from construction and consulting services, but what I didn't foresee was the delays caused in the industry by regulation and how long it took some companies to get financing for their projects. For investors that aren't familiar with our space, Nevada for example, has a May 3 deadline to show "forward progress" for completion of a Facility. This is why you are seeing a rush to start Phase 1 construction but, until recently, everyone was talking but not signing. I was premature on my prediction but look at the deals on the calendar we have now. These projects will expand and we expect there will be more business spinning off from these projects and possibly additional phases. You only need to understand the fact that as they make money, they will invest to expand like in any industry. We should see real stable year over year growth, and you can already estimate a good deal of our Grow Services revenue from the guidance I provided recently. I apologize to everyone when I made premature predictions, but watch for more signed construction contracts in the weeks and months to come.
We are an established company that has undergone a lot of changes and I feel I made the appropriate decisions to best benefit mCig Inc. In our space, we have a great deal of respect as an industry leader and additional deals are coming that will make sense going forward. Our path is fixed with a solid foundation. Construction will give us entry into many new areas and cash is no longer our biggest issue. I am sure we will make appropriate future investments as we increase our cash position. CBD sales will continue to be a stable source of income and with the lessons we learned from our CBD experience, the THC brands will be done properly. VitaCig is also now on a new course for success. I believe we will be long-term players with opportunities to thrive, and mCig will be in an excellent position to continue to grow revenues and profits and work hard to bring shareholder value.
About mCig, Inc.
Headquartered in Henderson, NV, mCig, Inc. (
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Any statements contained in this press release that do not describe historical facts may constitute forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Any forward-looking statements contained herein are based on current expectations, but are subject to a number of risks and uncertainties. The factors that could cause actual future results to differ materially from current expectations include, but are not limited to, risks and uncertainties relating to the Company's ability to develop, market and sell products based on its technology; the expected benefits and efficacy of the Company's products and technology; the availability of substantial additional funding for the Company to continue its operations and to conduct research and development, and future product commercialization; and the Company's business, research, product development, regulatory approval, marketing and distribution plans and strategies.
Contact Information:
mCig, Inc.
Paul Rosenberg
CEO
paul@mcig.org