Electronic Cigarettes Intl Group Ltd (OTCMKTS:ECIG) Goes Down

Electronic Cigarettes Intl Group Ltd (OTCMKTS:ECIG)’s chart performance continued to disappoint during yesterday’s session when the company corrected by nearly 6% and closed at $0.367. In addition to the ticker’s inability to move in the right direction investors also seem to be losing interest as the daily volume of 716 thousand traded shares was less than half of the 30-day average of 1.57 million.

Although the recently filed quarterly report for the first three months of the year did show that ECIG are making progress with their operations it failed to push the stock upwards. Still, let’s see what the company had in terms of financials at the end of March:

• $1 million cash
• $12.7 million total current assets
• $183 million total current liabilities
• $11.1 million revenues
• $67.5 million net loss

Compared to the same period last year the reported revenues increased by nearly 3 times while the cost of goods sold were only 50% higher. It should be noted that the majority of the net loss was incurred as non-cash charges in the value of certain notes and warrants.

In April ECIG further boosted their balance sheet by entering into a term loan agreement for over $41 million. The company intends to use $35.7 million of the proceeds to repay some of the outstanding debt and thus avoid issuing more shares through the conversion of notes. As we warned you in our previous articles the long-term shareholders of the company had to endure a crushing amount of shares issued at discounted prices during the past several months.

The massive issuance of shares forced ECIG to implement a 1-for-15 reverse split on March 24 that left them with around 20 million outstanding shares. Although the quarterly report showed that the company managed to prepay some of the notes before they could be converted the O/S still surpassed 70 million shares as of May 12. 

Despite the positive steps taken by ECIG they remains a risky choice. If they continue to expand their sales and grow their revenues even more investors could decide to jump right back in. It should be noted though that as part of the $41 million financing the company issued warrants for the purchase of 176 million shares with an exercise price of $0.45. This means that ECIG might find it hard surging pass that mark.