$MCIG FORM 10/K

Management’s Discussion and Analysis contains various “forward looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, regarding future events or the future financial performance of the Company that involve risks and uncertainties. Certain statements included in this Form 10-Q, including, without limitation, statements related to anticipated cash flow sources and uses, and words including but not limited to “anticipates”, “believes”, “plans”, “expects”, “future” and similar statements or expressions, identify forward looking statements. Any forward-looking statements herein are subject to certain risks and uncertainties in the Company’s business, including but not limited to, reliance on key customers and competition in its markets, market demand, delayed payments of accounts receivables, technological developments, maintenance of relationships with key suppliers, changes to e-cigarette regulation or marijuana regulations, difficulties of hiring or retaining key personnel and any changes in current accounting rules, all of which may be beyond the control of the Company. Management will elect additional changes to revenue recognition to comply with the most conservative SEC recognition on a forward going accrual basis as the model is replicated with other similar markets (i.e. SBDC). The Company’s actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth therein.

Forward-looking statements involve risks, uncertainties and other factors, which may cause our actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements. Factors and risks that could affect our results and achievements and cause them to materially differ from those contained in the forward-looking statements include those identified in the section titled “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended April 30, 2014, as well as other factors that we are currently unable to identify or quantify, but that may exist in the future.

In addition, the foregoing factors may affect generally our business, results of operations and financial position. Forward-looking statements speak only as of the date the statement was made. We do not undertake and specifically decline any obligation to update any forward-looking statements.

Our Business

We were incorporated as mCig, Inc. (mCig) in the State of Nevada on December 30, 2010 originally under the name Lifetech Industries, Inc. Effective August 2, 2013, the name was changed from “Lifetech Industries, Inc.” to “mCig, Inc.” reflecting the new business model. Since October 2013, mCig, Inc. has positioned itself as a technology company focused on two products marijuana and electronic vaporizing cigarettes: (1) The decriminalization and legalization of marijuana for medicinal or recreational purposes – legalizing medicinal and recreational marijuana usage is steadily on the rise not only domestically but also internationally. Marijuana has been decriminalized in over twenty countries, in over five continents. Twenty three states and the District of Columbia currently have laws legalizing marijuana in some form https://www.governing.com/govdata/safetyjustice/statemarijuanalawsmapmedicalrecreational.html). Management believes that by 2016 it is very likely that many more states, including Alaska, California, Arizona, Maine, and Oregon, will legalize the use and sale of recreational marijuana the way Washington and Colorado have. (2) The adoption of electronic vaporizing cigarettes (commonly known as “eCigs”) by the world’s smokers. The FDA has indicated that e-cigarettes and their potential risks have not been fully studied. Since e-cigarettes are new, their long-term effects are not well known, including the potential risks of e-cigarettes when used as intended and how many potentially harmful chemicals are being inhaled during use. However, even with the limited research that we have now, it is well known that e-cigarettes are still much safer and healthier than traditional cigarettes. The largest health benefit of e-cigarettes is when used as a smoking cessation tool. The leading cause of disease from smokers is caused by the tar found in cigarettes, which e-cigarettes do not have.

We do not rely on one or a few major customers but rely on general sales to numerous customers online.

On January 23, 2014, through a Stock Purchase Agreement with Vapolution, Inc., we made a down payment towards the acquisition of Vapolution, Inc. Upon closing of this transaction on January 23, 2015 we can acquire all of Vapolution, Inc.’s issued and outstanding shares in exchange for an aggregate of 5,000,000 shares of our common stock at a market value of $0.25 per share on the date of the closing of the acquisition. Upon closing the acquisition January 23, 2015, Vapolution will become a wholly owned subsidiary. The shareholders of Vapolution, Inc. retain the right to rescind the transaction on or before January 23, 2015.

On January 23, 2014, Paul Rosenberg, our Chief Executive Officer, cancelled an equal amount (2,500,000 shares) of common shares owned by him resulting in a net non-dilutive transaction to our existing shareholders. The remaining 2,500,000 of common shares owned by Paul Rosenberg will be cancelled on the one year anniversary of the agreement on January 23, 2015, to offset the 2,500,000 new shares to be issued from the treasury for the completion of the acquisition of Vapolution. Since only half of the agreed upon shares had been paid out by us to the previous owners of Vapolution, Inc. as on July 31, 2014 as part of the agreed upon purchase price, only half of the purchase price ($625,000) was reported on our balance sheet as Investment in Vapolution, Inc. at the quarter end date. The remaining purchase price of 2,500,000 shares of our common stock will be recognized in the amount of $625,000 on our balance sheet on the commencement date of January 23, 2015. At that time, we intend to satisfy all requirements necessary to consolidate Vapolution audited year-end results as part of our financials. On May 23, 2014, the parties to the agreement agreed to amend the original Stock Purchase Agreement. Per the amended Stock Purchase Agreement executed as of May 23, 2014, a clarification was made to the agreement that more appropriately expresses the spirit of the transaction as agreed upon by us g and the previous owners of Vapolution, Inc.

SIGNIFICANT ACCOUNTING POLICIES

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. Significant accounting policies are as follows:

Use of Estimates and Assumptions

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities known to exist as of the date the consolidated financial statements are published, and (iii) the reported amount of net revenues and expenses recognized during the periods presented. Adjustments made with respect to the use of estimates often relate to improved information not previously available. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of consolidated financial statements; accordingly, actual results could differ from these estimates. Our most significant estimates relate to the valuation of its proprietary technology and its valuation of its common stock.

Share-Based Compensation

We measure the cost of services received in exchange for an award of an equity instrument based on the grant-date fair value of the award. Compensation cost is recognized over the vesting or requisite service period.

Basic and Diluted Net Income (Loss) per Common Share

Basic income (loss) per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of our common shares outstanding during the reporting period. The weighted average number of shares is calculated by taking the number of shares outstanding and weighting them by the amount of time that they were outstanding. Diluted earnings per share reflects the potential dilution that could occur if stock options, warrants, and other commitments to issue common stock were exercised or equity awards vest resulting in the issuance of common stock that could share in the earnings of the Company. We have 23,000,000 preferred shares that can be converted subject to the limitation of our authorized shares at 1 preferred share for 10 common shares. The conversion can only take place after April 15, 2015.

Diluted loss per share is the same as basic loss per share during periods where net losses are incurred since the inclusion of the potential common stock equivalents would be anti-dilutive as a result of the net loss.

Revenue Recognition

Our revenue recognition policy is in accordance with generally accepted accounting principles, which requires the recognition of sales when there is evidence of a sales agreement, the delivery of goods has occurred, the sales price is fixed or determinable and the collectability of revenue is reasonably assured.

Financial results and trends

Results of Operations for the Three Months Ended July 31, 2014 and 2013



Our operating results for the three months ended July 31, 2014 and 2013 are
summarized as follows:



                    For the three months ended   For the three months ended
                          July 31, 2014                July 31, 2013

Revenue              $                  195,565    $                  12,500
Cost of Goods Sold                       97,434                            0
Gross Profit                             98,131                       12,500
Expenses                              1,154,956                       19,587
Net Loss             $              (1,056,825)    $                 (7,087)

Our revenues increased to $195,565 for the three months ended July 31, 2014 compared to $12,500 for the three months ended July 31, 2013, and for an increase of $183,065. The increase in revenue is attributed to the launch of our primary product the mCig 2.0 in January 2014. Revenues consist primarily of results

from the sales of the electronic cigarettes, components for electronic cigarettes and related accessories.

Sales of the electronic cigarettes of mCig for the three months ended July 31, 2014 and 2013 were $107,446 and $0, respectively. Significant increase in sales is mainly due to the launch of the new mCig’s products.

Sales of the VitaCig electronic vaporizing cigarettes for the three months ended July 31, 2014 and 2013 were $88,119 and $0, respectively. The Company was incorporated on January 22, 2014 and has launched its product in April.

These sales do not include any sales for Vapolution, Inc. which is being held as an investment.

Our revenue recognition policy is in accordance with generally accepted accounting principles, which requires the recognition of sales when there is evidence of a sales agreement, the delivery of goods has occurred, the sales price is fixed or determinable and the collectability of revenue is reasonably assured.

Cost of goods sold for the three months ended July 31, 2014 and 2013 were $97,435 and $0 respectively. The increase is primarily due to the launch of our new business and sales of the mCig’s and VitaCig’s electronic cigarettes.

Cost of goods sold for mCig, Inc. for the three months ended July 31, 2014 and 2013 were $49,876 and $0, respectively. And cost of goods sold for VitaCig, Inc. for the three months ended July 31, 2014 and 2013 were $47,558 and $0, respectively.

Operating Expenses

Our total operating expenses for the three months ended July 31, 2014 and 2013 were $1,154,956 and $19,587, respectively, an increase of $1,135,369, or approximately 98%. The increase is primarily due to the increase of the professional fees, stock-based compensation and general and administrative expenses.

Our total operating expenses for the three months ended July 31, 2014 consisted of $15,416 of professional fees, $1,624 of travel expenses, $1,859 of amortization, $91,101 of general and administrative expenses and $1,044,956 of share-based compensation. Our general and administrative expenses consist of bank

charges, advertising and promotion, rent, computer and internet expenses, postage and delivery and other expenses. For the three months ended July 31, 2013 our incurred total operation expenses consisted of $9,225 of professional fees, $1,294 of amortization, and $9,068 of general and administrative expenses.

Total operating expenses for mCig, Inc. for the three months ended July 31, 2014 were $1,121,910 and consisted of $10,600 of professional fees, $1,626 of amortization, $1,624 of travel, $63,104 of general and administrative expenses and $1,044,956 of stock based compensation. Total operating expenses for VitaCig, Inc. for the three months ended July 31, 2014 were $33,046 and consisted of $4,816 of professional fees, $233 of amortization and $27,997 of general and administrative expenses. The general and administrative expenses consist of bank charges, computer and internet expenses, postage and delivery and telephone expenses.

Net loss for the three months ended July 31, 2014 and 2013 was $1,056,825 and $7,087, respectively, an increase of $1,049,738 as a result of the items discussed above.

Liquidity and Financial Condition

We expect to incur substantial expenses and generate significant operating losses as we continue to grow our operations, as well as incur expenses related to operating as a public company and compliance with regulatory requirements. At July 31, 2014, we had cash of $225,995.

Working Capital
                        As at      As at      Change
                      July 31,    July 31,
                        2014        2013
Current Assets      $ 2,162,672 $ 3,874    $ 2,158,798
Current Liabilities $     6,943 $ 64,175   $ (57,232)
Working Capital     $ 2,155,729 $ (60,301) $ 2,216,030




Cash Flows

                                          For the three           For the three
                                           months ended           months ended
                                          July 31, 2014           July 31, 2013
Net Cash Used in Operating         $             (130,044) $        (20,293)
Activities
Net Cash Used by Investing         $               (2,800) $         (3,733)
Activities
Net Cash Provided by (Used In)     $                     - $         24,300
Financing Activities
Net Increase (Decrease) in Cash    $             (132,844) $           274
During the Period

As of July 31, 2014, we had no off balance sheet transactions that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.