$MCIG Form 10-Q

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 sales of 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.

Our operating results for the three months ended October 31, 2015 and 2014 are summarized as follows:

                                  For the Three Months Ended October 31,
                                            2015                         2014
Revenue                           $                885,556      $               73,814
Cost of Goods Sold                                 783,880                      35,609
Gross Profit                                       101,676                      38,205
Expenses                                           522,325                     818,833
Net Loss from operations                         (420,649)                   (780,628)
Other income (expense)                                   -                     (2,864)
Net income from discontinued                             -                       4,590
operations
Net loss                                         (420,649)                   (778,902)

Our operating results for the six months ended October 31, 2015 and 2014 are summarized as follows:

                                          For the Six Months Ended October 31,
                                            2015                          2014
Revenue                           $               1,254,649      $              181,261
Cost of Goods Sold                                1,026,029                      85,484
Gross Profit                                        228,620                      95,777
Expenses                                          1,312,417                   1,940,743
Net Loss from operations                        (1,083,797)                 (1,844,966)
Other income (expense)                                    -                     (2,864)
Net income from discontinued                              -                      12,105
operations
Net loss                                        (1,083,797)                 (1,835,725)

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

Revenue

Our revenue from continuing operations for the three months ended October 31, 2015 was $885,556 compared to $73,814, an increase of $811,742 or approximately 1100%, for the three months ended October 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 October 31, 2015 was $783,880 compared to $35,609 for the three months ended October 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 October 31, 2015 was $101,676 compared to $38,205 for the three months ended October 31, 2014. The gross profit of $101,676 for the three months ended October 31, 2015 represents approximately 11% as a percentage of total revenue. The gross profit of $38,205 for the three months ended October 31, 2014 represents approximately 52% 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 $296,508 to $522,325 for the three months ended October 31, 2015, from $818,833 for the three months ended October 31, 2014.

The decrease was primarily due to the decrease in professional fees of $719,114, offset by an increase in selling, general and administrative expenses of $422,238 and an increase in amortization and depreciation of $368.

Our total operating expenses for the three months ended October 31, 2015 of $522,325 consisted of $504,331 of selling, general and administrative expenses, $16,000 of professional fees, and $1,994 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.

Net Loss

Our net loss decreased by $358,253 to $420,649 for the three months ended October 31, 2015 from $778,902 for the three months ending October 31, 2014. The decrease in net loss compared to the prior period is primarily a result of the decrease in operating expenses of $296,508 and the increase in gross profit of $63,471.

Six Months Ended October 31, 2015 Compared to Sic Months Ended October 31, 2014

Revenue

Our revenue from continuing operations for the six months ended October 31, 2015 was $1,254,649 compared to $181,261, an increase of $1,073,388 or approximately 592%, for the six months ended October 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 six months ended October 31, 2015 was $1,026,029 compared to $85,484 for the six months ended October 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 six months ended October 31, 2015 was $228,620 compared to $95,777 for the six months ended October 31, 2014. The gross profit of $228,620 for the six months ended October 31, 2015 represents approximately 18% as a percentage of total revenue. The gross profit of $95,777 for the six months ended October 31, 2014 represents approximately 53% 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 $628,326 to $1,312,417 for the six months ended October 31, 2015, from $1,940,743 for the six months ended October 31, 2014.

The decrease was primarily due to the decrease in professional fees of $1,755,573, offset by an increase in selling, general and administrative expenses of $1,126,435 and an increase in amortization and depreciation of $812.

Our total operating expenses for the six months ended October 31, 2015 of $1,312,417 consisted of $1,288,672 of selling, general and administrative expenses, $19,681 of professional fees, and $4,064 of amortization and depreciation expenses. Our general and administrative expenses consist of professional fees, bank charges, telephone expenses, meals and entertainments, computer and internet expenses, postage and delivery, office supplies and other expenses.

Net LossOur net loss decreased by $751,928 to $1,083,797 for the six months ended October 31, 2015 from $1,835,725 for the six months ending October 31, 2014. The decrease in net loss compared to the prior period is primarily a result of the decrease in operating expenses of $628,326 and the increase in gross profit of $132,843.

Liquidity and Capital Resources

Introduction

During the six months ended October 31, 2015 we used $10,395 in operating cash flows. Our cash on hand as of October 31, 2015 was $126,095. At October 31, 2015, the Company had a working capital surplus of $342,599.

Cash Requirements

We had cash available of $126,095 as of October 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 April 2016.

Sources and Uses of Cash

Operations

We had net cash used in continuing operating activities of $10,395 for the six months ended October 31, 2015, as compared to cash used of $107,975 for the six months ended October 31, 2014. Cash provided by discontinued operating activities was $39,761 for the six months October 31, 2014.

Net cash provided by continuing operations consisted primarily of the net loss of $1,083,797 offset by non-cash expenses of $1,053,105 consisting of depreciation and amortization of intangible assets of $4,064, $686,466 in common stock issued for services, and $362,575 in amortization of prepaid compensation. Additionally, changes in assets and liabilities consisted of decreases in accounts receivable of $22,141, these decreases were partially offset by increases in other receivables of $1,000, inventory of $11,037, accounts payable of $246, and deferred revenue of $9,947.

Investments

We had net cash used in continuing investing activities of $0 for the six months ended October 31, 2015 and October 31, 2014. Cash used in discontinued investing activities was $4,400 for the six months ended October 31, 2014.

Financing

We had net cash provided by continuing financing activities of $33,799 for the six months ended October 31, 2015, as compared to net cash provided of $10,000 for the six months ended October 31, 2014. Our financing activities consisted primarily of $28,803 in advances from related parties and $4,996 in repayments from related parties. Cash provided by discontinued investing activities was $94,910 for the six months ended October 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.

Going ConcernOur 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 and six months ended October 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