Electronic Cigarettes Intl Group Ltd (OTCMKTS:ECIG) Stumbles Before The Closing Bell
On April 28 Electronic Cigarettes Intl Group Ltd (OTCMKTS:ECIG) announced the extremely important news that the company was able to secure over $41 million through non-dilutive 36 month senior secured term loans. The PR had an immediate effect on investors’ sentiment and on the day of the announcement ECIG’s stock soared by over 67% closing at $0.635. Alas, the positive momentum quickly dissipated and the ticker suffered corrections during the next two sessions.
On Friday it seemed that the company would at least be able to close the week on a positive note with its stock trading in the green for nearly the entire session. Around an hour before the closing bell ECIG suddenly plunged downwards and after failing to recover finished the session with a loss of 7.69% at $0.519.
Unfortunately, despite the recent capital injection there are still quite a few reasons why investors should approach the company with caution. At the start of April ECIG submitted its annual report for 2014 and it painted a depressing picture:
$2 million cash
$18.6 million total current assets
$164.7 million total current liabilities
$43.4 million annual revenues
$381 million annual net loss
Although it is true that ECIG’s revenues experienced a dramatic growth when compared to the $3.1 million reported at the end of 2013 the losses of the company grew equally as fast – ECIG’s loss from operations of $215 million was 11 times bigger. Not to mention that at the end of 2014 the company had a working capital deficit of over $146 million.
Long-term shareholders of the company also had to endure the crushing dilution of the common stock that followed ECIG’s unsuccessful attempt to uplist to a national exchange. The issuance of shares was so massive that it forced the company to authorize a 15-for-1 reverse stock split that was implemented on March 24. Immediately after the split ECIG had a little less than 20 million outstanding shares. Exactly 1 month and 4 days later however that number had reached 65,4 million shares (found on page 13 of the latest Form 10-K/A). According to the latest PR ECIG managed to repurchase and retire its subordinated convertible notes while also fixing the conversion price of the remaining notes so the printing of new shares should be coming to an end.
Although it has been dealing with much more serious issues lately ECIG needs to update its Board of Directors page to reflect the fact that on March 6 William R. Fields, Marc Hardgrove, Charles L. Jarvie, Howard Lefkowitz and Tim McClure submitted their resignations as directors of the company. On April 8 Mr. Brent Willis stepped down from his position as CEO of the company and eight days later Mr. Daniel J. O’Neil, ECIG’s Executive Chairman was appointed as the new CEO.
The company has been making progress and has improved its capital structure. The latest non-dilutive financing should provide them with sufficient funds for now. Is it enough to keep investors from moving away from the company though? The next financial report should be submitted by the end of next week and it will give investors more up-to-date information about ECIG’s financial state and the recent issuance of shares. If the numbers found in the report disappoint once more the stock could accelerate its downwards slide even further.
