mCig Inc (OTCBB:MCIG) Climbing Slowly but Surely

Back in the summer, mCig Inc (OTCBB:MCIG) was called Lifetech Industries, it was in the business of selling air-to-water generators, and was still suffering the effects of a rather big promotional campaign that took place in December 2012. The name was changed in August and a new ticker symbol was assigned in October. MCIG is now in the business of manufacturing and selling herbal electronic cigarettes and it’s fair to say that things seem to be moving along nicely.

On October 31, the company announced that it has launched their electronic cigarette which costs just $10 and can be shipped worldwide. Apparently, the public’s reaction was explosive since, less than two weeks later, MCIG came on the news again to tell us that they have sold off their initial inventory. Some of the consumers were experiencing problems with the heating element, but according to the press release, MCIG‘s engineers have addressed the issues.

Yesterday, they provided another update – this time concerning the second incarnation of their product. Apparently, it has been tweaked and improved and the first shipments should start in January.

There aren’t many reviews of the mCig on the internet but it would appear that the general public is happy with the quality and the price. The same, by the way, goes for the investors. As you can see from the chart at the beginning of the article, the ticker has been slowly inching up for quite some time. The run is not explosive, but it is relentless and although we saw some corrections in October, the momentum during the last month or so has been much stronger. So strong, in fact, that the last red session was registered more than two weeks ago. So, is there anything to stop MCIG from climbing further up and even breaking through the levels achieved during the initial run from September?

Well, if the press releases get transformed into actual figures in the future financial statements, things should be alright. Especially considering the fact that the management team are trying to keep dilution at bay. The number of authorized shares was recently reduced and the company CEO, Mr. Paul Rosenberg, exchanged some common stock for preferred shares which has undoubtedly made the shareholders happy.

The 10-Q for the quarter ended October 31 got published on Monday and while the balance sheet leaves much to be desired, investors can hope that the herbal electronic cigarette is going to take care of the issue. Yet, there are some things you need to consider.

A risk that is inherent with all the development stage companies is the unknowns around the bottom line. Sales seem to be going well which is definitely a good thing, but we can’t be sure if the proceeds are enough to outweigh the expenses. Additional funding at favorable terms could be hard to come by and, despite the management team’s best efforts, the shareholders might be affected.

Then, we have the uncertainty around regulations. There are still quite a lot of questions around the electronic cigarettes market and it looks like many people are saying that the devices hide potential health risks. The opponents’ influence on the regulatory organs is growing as well and yesterday, New York’s City Council elected to ban the use of e-cigs in indoor public places. We’ll see if this is going to have any significant effect on MCIG‘s stock performance, but even if it doesn’t, keeping it in mind is definitely a good call.

Another thing that is worth considering is the excitement that’s been going on. The PR’s are definitely causing quite a lot of stir and it seems that some contributors on Seeking Alpha are eager to spread the word around even further. As you probably know, many penny stocks fail to withstand the pressure from all the enthusiasm which means that, despite the strong momentum, a correction is not out of the question. And if they really want to draw in some serious investors, MCIG‘s management team might want to think about the address of their company headquarters. As you can see from this link, the current suite is offered as a virtual office which might work well as a cost-cutting measure, but yields little dividend in terms of reputation and credibility.

All in all, at the moment at least, things are looking good for MCIG. As always, however, there are risks well worth considering which means that extensive due diligence is an absolute must.