UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

[√] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January 31, 2016

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________.

Commission file number: 333-195397

vitacig, Inc.

(Exact name of registrant as specified in its charter)

Nevada

(State or other jurisdiction of

incorporation or organization)

46-4597341

(I.R.S. Employer

Identification No.)

433 North Camden Drive, 6^th Floor,

Beverly Hills, CA

(Address of principal executive offices)

90210

(Zip Code)

(310) 402-6937

Registrant’s telephone number, including area code

(Former name and address, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [√] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ ] No [√]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

[  ]

Accelerated filer

[  ]

Non-accelerated filer

(Do not check if smaller reporting company)

[  ]

Smaller reporting company

[√]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [√]

As of March 14, 2016, the Company had 509,540,022 shares of common stock, $0.0001 par value outstanding.

Transitional Small Business Disclosure Format Yes [  ] No [√]

VitaCig, Inc.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION 

Item 1. Financial Statements

  3

Condensed Balance Sheets as of January 31, 2016 (unaudited) and April 30, 2015

  4

Condensed Statements of Operations for the three and nine months ended January 31, 2016 and 2015 (Unaudited)

  5

Condensed Statements of Cash Flows for the nine months ended January 31, 2016 and 2015 (Unaudited)

  6

Notes to Condensed Financial Statements (Unaudited)

  7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

  13

Item 3. Quantitative and Qualitative Disclosures about Market Risk

  18

Item 4. Controls and Procedures

  18

PART II. OTHER INFORMATION 

Item 1. Legal Proceedings

  19

Item 1A. Risk Factors

  19

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

  20

Item 3. Defaults Upon Senior Securities

  20

Item 4. Mine Safety Disclosures

  20

Item 5. Other Information

  20

Item 6. Exhibits

  20

SIGNATURES 

  21

2

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Interim Condensed Financial Statements and Notes to Interim Financial Statements

General

The accompanying unaudited condensed interim financial statements have been prepared in accordance with the instructions to Form 10-Q. Therefore, they do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, cash flows, and stockholders’ deficit in conformity with generally accepted accounting principles. Except as disclosed herein, there has been no material change in the information disclosed in the notes to the financial statements included in the Company’s annual report on Form 10-K for the year ended April 30, 2015. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. Operating results for the three and nine months ended January 31, 2016 are not necessarily indicative of the results that can be expected for the year ending April 30, 2016.

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VITACIG, INC.

Condensed Balance Sheets

January 31, 2016

April 30, 2015

(unaudited)

ASSETS

Current Assets:

Cash and cash equivalents

$

50,965

$

70,516

  Accounts receivable

25,215  

- 

Inventory

17,232

27,316

Total current assets

93,412

97,832

Intangible assets, net of amortization of $2,433 and $1,333,

respectively

1,967

3,067

Total assets

$

95,379

$

100,899

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:

Accounts payable and accrued expenses

$

-

$

1,500

Deferred revenue

-

35,700

Due to related parties

188,496

103,264

  Total current liabilities

188,496  

103,264  

Total liabilities

188,496

140,464

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIT

Common stock, $0.0001 par value; 560,000,000 shares authorized;

509,540,022 and 500,135,000 shares issued and outstanding

January 31, 2016 and April 30, 2015, respectively

50,955

50,014

Shares issued at spin off, discount from par value.

(49,514)

(49,514)

  Additional paid-in capital

56,164  

-  

Accumulated deficit

(150,722)

(40,065)

Total Stockholders' Deficit

(93,117)

(39,565)

Total Liabilities and Stockholders' Deficit

$

95,379

$

100,899

The accompanying notes are an integral part of these unaudited condensed financial statements.

4

VITACIG, INC.

Condensed Statements of Operations

(unaudited)

For the Three Months Ended

For the Nine Months Ended

January 31,

January 31,

January 31,

January 31,

2016

2015

2016

2015

REVENUES

$

39,110

$

159,387

$

117,853

$

337,006

COST OF GOODS SOLD

37,473

77,053

85,555

158,202

GROSS PROFIT

1,637

82,334

32,298

178,804

EXPENSES

Professional fees

5,000

12,479

18,750

32,948

General and administrative

20,310

56,541

123,105

119,838

Amortization

367

367

1,100

967 

Total expenses

25,677

69,387

142,955

153,753

NET INCOME (LOSS) FROM OPERATIONS

(24,040)

12,947

(110,657)

25,051

NET INCOME (LOSS)

(24,040)

12,947

(110,657)

25,051

Basic and diluted income (loss) per share

$

(0.00)

$

0.00

$

(0.00)

$

0.00

Weighted average shares outstanding - basic and diluted

509,247,798

500,135,000

504,205,208

500,135,000

The accompanying notes are an integral part of these unaudited condensed financial statements.

5

VITACIG, INC.

Notes to Condensed Financial Statements

(Unaudited)

Note 1 – Organization and Basis of Presentation

The accompanying unaudited condensed financial statements of VitaCig, Inc., (the “Company”, “we”, “our”), have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”).

The Company prepares its condensed financial statements in accordance with accounting principles generally accepted in the United States of America.  The accompanying interim unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X. In management’s opinion, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included.

Operating results for the three and nine months ended January 31, 2016 are not necessarily indicative of the results that may be expected for the year ending April 30, 2016. Notes to the unaudited interim condensed financial statements that would substantially duplicate the disclosures contained in the audited condensed financial statements for the year ended April 30, 2015 have been omitted; this report should be read in conjunction with the audited condensed financial statements and the footnotes thereto for the fiscal year ended April 30, 2015 included within the Company’s Form 10-K as filed with the Securities and Exchange Commission.

Description of Business

The Company was incorporated under the laws of the state of Nevada on January 22, 2014. The Company is a technology company that is engaged in the manufacturing and retailing of nicotine-free Electronic Cigarettes (“eCigs”) that are pre-packaged with vitamins, nutrients, and generic pharmaceuticals.  The Company has established its fiscal year end as April 30.

The Company was originally formed as a wholly-owned subsidiary of mCig, Inc. On February 24, 2014, the Company entered into a Contribution Agreement with mCig, Inc. In accordance with this agreement VitaCig, Inc. accepted the contribution by mCig, Inc. of specific assets consisting solely of pending trademarks for the term “VitaCig” filed with the USPTO and $500 in cash as contribution in exchange for 500,135,000 shares of common capital stock representing 100% of the shares outstanding of the Company.

On November 28, 2014, mCig completed the spin-off of 54.1% of VitaCig, Inc. (the “Spin-off”).

The Company currently maintains its corporate office in Beverly Hills, California. 

Note 2 – Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

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The most significant estimates include: revenue recognition; sales returns and other allowances; allowance for doubtful accounts; valuation of inventory; valuation and recoverability of long-lived assets; property and equipment; contingencies; and income taxes.

On a regular basis, management reviews its estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such reviews, and if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates.

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 determined and the collectability of revenue is reasonably assured.

The Company recognizes revenue for sales online either direct to consumer or through our Wholesaler, Distributor, Reseller (WDR) program. For online sales, revenue is recognized by the Company at the time of order fulfillment. Since VitaCig collects payment for each online order at the time of sale, the point of shipping revenue recognition method ensures that the Company recognizes the revenue collected within 24-48 hours after the order is received and the funds are collected. Based on the metrics associated with having the actual sales almost equal the revenue collected and recognized, this short lag time between the time when the order is received from the consumer and when the revenue is actually recognized on the Company’s books allows Management to have a better grasp over its inventory and the overall Company progress on a daily basis.

Deferred Revenue

Payments received by the Company in advance are recorded as deferred revenue until the merchandise has shipped to the customer.

Cost of Goods Sold

The Company recognizes the direct cost of purchasing product for sale, including freight-in and packaging, as cost of goods sold in the accompanying statement of operations.

Cash and Cash Equivalents

The Company includes in cash and cash equivalents all short-term, highly liquid investments that mature within three months of their acquisition date. Cash equivalents consist principally of investments in interest-bearing demand deposit accounts and liquidity funds with financial institutions and are stated at cost, which approximates fair value. For cash management purposes the company concentrates its cash holdings in an account at Bank of America. The Company had no cash equivalents at January 31, 2016 or April 30, 2015.

Inventory

Inventory consists of finished product, VitaCig electronic vaporizing cigarettes valued at the lower of cost or market valuation under the first-in, first-out method of costing.

January 31, 2016

April 30, 2015

Finished goods

$

17,232

$

27,316

Total inventory

$

17,232

$

27,316

Accounts Receivable

The Company’s accounts receivable is primarily from its vendor tasked with accepting all credit card payments for purchases from its customers, are reported at the amount due from the vendor. Due to the nature of these funds, the Company expects these receivables to be fully collectible and therefore has not estimated an allowance for doubtful accounts for the period.

8

Advertising Expenses

Advertising costs are expensed as incurred. During the three months ended January 31, 2016 and 2015, the advertising expenses were $1,950 and $0, respectively. During the nine months ended January 31, 2016 and 2015, the advertising expenses were $2,576 and $0, respectively.

Intangible Assets

The Company’s intangible assets consist primarily of certain website development costs and are amortized over its estimated useful life of three years.

Financial Instruments

The carrying amounts reflected in the balance sheets for cash and due to related parties approximate the respective fair values due to the short maturities of these items. The Company does not hold any investments that are available-for-sale.

As required by the Fair Value Measurements and Disclosures Topic of the FASB ASC, fair value is measured based on a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The three levels of the fair value hierarchy are described below:

Level 1—Valuations based on quoted prices for identical assets and liabilities in active markets.

Level 2—Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3—Valuations based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

The Company does not have any assets or liabilities that are required to be measured and recorded at fair value on a recurring basis.

Income Taxes

Income taxes are accounted for under the assets and liability method.  Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards.  Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.  Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. 

Basic and Diluted Net (Loss) Per Share

The Company follows ASC Topic 260 to account for earnings (loss) per share.  Basic earnings (loss) per share (“EPS”) calculations are determined by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the three months.  Diluted earnings per share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding.  During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation. 

9

There is no potential dilutive security as of January 31, 2016 or 2015.

Concentration of Credit Risk 

Financial instruments, which potentially subject us to concentrations of credit risk, consist principally of cash and trade receivables.  Concentrations of credit risk with respect to trade receivables are limited due to the clients that comprise our customer base and their dispersion across different business and geographic areas.  We estimate and maintain an allowance for potentially uncollectible accounts and such estimates have historically been within management's expectations.  

We rely almost exclusively on one Chinese factory as our principle supplier, for the manufacturing of eCig’s. Therefore, our ability to maintain operations is dependent on this third-party manufacturer.

Our cash balances are maintained in accounts held by major banks and financial institutions located in the United States.  The Company may occasionally maintain amounts on deposit with a financial institution that are in excess of the federally insured limit of $250,000.  The risk is managed by maintaining all deposits in high quality financial institutions. The Company had no deposits in excess of federally insured limits at January 31, 2016 and April 30, 2015.

Impairment of Long-lived Assets

The Company accounts for long-lived assets in accordance with the provisions of FASB Topic 360, “Accounting for the Impairment of Long-Lived Assets”. This statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss would be recognized when the estimated future cash flows from the use of the asset are less than the carrying amount of that asset. No impairments were recorded during the periods ended January 31, 2016 and 2015.  

Warranties

Warranty reserves include management’s best estimate of the projected costs to repair or to replace any items under warranty, based on actual warranty experience as it becomes available and other known factors that may impact the Company’s evaluation of historical data. Management reviews VitaCig’s reserves at least quarterly to ensure that its accruals are adequate in meeting expected future warranty obligations, and the Company will adjust its estimates as needed. Initial warranty data can be limited early in the launch of a product and accordingly, the adjustments that are recorded may be material. Because of the nature of its products, customers are made aware that as soon as an eCig is packed with marijuana, they automatically void their warranty, primarily because it is against federal laws to mail a product that has been in proximity of marijuana. As a result, the products that can be returned as a warranty replacement are extremely limited. As a result, due to the Company’s warranty policy, the Company did not have any significant warranty expenses to report for the three months ended January 31, 2016. Based on these actual expenses, the warranty reserve, as estimated by management as of January 31, 2016 was at $0. Any adjustments to warranty reserves are to be recorded in cost of sales.

It is likely that as we start selling higher priced products, that are not affected by federal shipping laws and/or are not single use items (such as eLiquid Juice Vaporizer), we will acquire additional information on the projected costs to service work under warranty and may need to make additional adjustments. Further, a small change in the Company’s warranty estimates may result in a material charge to the Company’s reported financial results.

Recent Accounting Pronouncements

The Company evaluated all recent accounting pronouncements issued and determined that the adoption of these pronouncements would not have a material effect on the financial position, results of operations, or cash flows of the Company. 

10

Note 3. Going Concern

The Company's 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 new and has a limited history and relatively few sales, no certainty of continuation can be stated. The accompanying financial statements for the nine months ended January 31, 2016 and 2015 have been prepared assuming that the Company 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 a working capital deficit, which raises substantial doubt about its ability to continue as a going concern.

Management is taking steps to raise additional funds to address its operating and financial cash requirements to continue operations in the next twelve months. Management has devoted a significant amount of time in the raising of capital from additional debt and equity financing. However, the Company’s ability to continue as a going concern is dependent upon raising additional funds through debt and equity financing and generating revenue. There are no assurances the Company will receive the necessary funding or generate revenue necessary to fund operations. The financial statements contain no adjustments for the outcome of this uncertainty.

Note 4. Intangible Assets:

Intangible assets, net consisted of the following:

January 31,

April 30,

2016

2015

Intangible assets

$ 4,400

$ 4,400

Less amortization

(2,433)

(1,333)

Net intangible assets

$ 1,967

$ 3,067

Amortization expense on intangible assets was $367 and $367 for the three months ended January 31, 2016 and 2015, respectively. Amortization expense on intangible assets was $1,100 and $1,100 for the nine months ended January 31, 2016 and 2015, respectively. The weighted average remaining useful life on intangible assets at January 31, 2016 is approximately 15 months.

The table below represents the estimated amortization of intangible assets for each of the next five years.

Year

Amortization

2016

$                367

2017

 1,467

2018

133

2019

-

2020

-

Total

$             1,967

Note 5. Deferred Revenue

Deferred revenue was $0 and $35,700 as of January 31, 2016 and April 30, 2015, respectively. Amounts billed or collected in excess of revenue recognized are recorded as deferred revenue.

11

Note 6. Related Parties and Related Party Transactions

As of April 30, 2015, mCig, Inc. advanced the Company the amount of $100,264 for professional fees and inventory purchase, and it was recorded as due to related party. During the nine months ended January 31, 2016 mCig advanced the Company an aggregate of $92,689 of which $4,996 of this advance was repaid and $2,460 of inventory was transferred to mCig. The remaining balance of the advance is $185,496 as of January 31, 2016.

As of April 30, 2015, Paul Rosenberg advanced the Company the amount of $3,000 for accounting fees. It was recorded as due to related party.

Note 7. Commitments and Contingencies

None

Note 8. Stockholders’ Equity (Deficit)

Common Stock

In the nine months ended January 31, 2016, there were 9,405,022 shares of common stock valued at $57,104 issued for professional services. 

Note 9. Basic Loss per Share

Basic Income (Loss) Per Share - The computation of basic and diluted loss per common share is based on the weighted average number of shares outstanding during each period.

The computation of basic income (loss) per common share is based on the weighted average number of shares outstanding during the periods.  

12

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Unless otherwise indicated, references in this Quarterly Report on Form 10-Q to “we,” “us,” and “our” are to the Company, unless the context requires otherwise. The following discussion and analysis by our management of our financial condition and results of operations should be read in conjunction with our unaudited condensed interim financial statements and the accompanying related notes included in this quarterly report and our audited financial statements and related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended April 30, 2015 filed with the Securities and Exchange Commission.

Cautionary Statement Regarding Forward-Looking Statements

This report may contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act, and we intend that such forward-looking statements be subject to the safe harbors created thereby. These forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. Any such forward-looking statements would be contained principally in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors.” Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities and the effects of regulation. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “hopes,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” or similar expressions.

Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We discuss many of these risks in greater detail in “Risk Factors.” Given these uncertainties, you should not place undue reliance on these forward-looking statements.

Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this report. You should read this report and the documents that we reference in this report and have filed as exhibits to the report completely and with the understanding that our actual future results may be materially different from what we expect. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

Additional information concerning these and other risks and uncertainties is contained in our filings with the Securities and Exchange Commission, including the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended April 30, 2015.

Unless otherwise indicated or the context otherwise requires, all references in this Form 10-Q to “we,” “us,” “our,” “our company,” “VitaCig” or the “Company” refer to VitaCig, Inc.

Our Ability to Continue as a Going Concern

Our independent registered public accounting firm has issued its report dated August 28, 2015, in connection with the audit of our annual financial statements as of April 30, 2015, that included an explanatory paragraph describing the existence of conditions that raise substantial doubt about our ability to continue as a going concern and Note 3 to the unaudited financial statements for the period ended January 31, 2016 also describes the existence of conditions that raise substantial doubt about our ability to continue as a going concern.

13

Overview

VitaCig, Inc. (the “Company”) was incorporated under the laws of the state of Nevada on January 22, 2014. We serve as a technology company which manufactures and retail nicotine-free cigarettes that are pre-packaged with vitamins, nutrients, and generic pharmaceuticals. We established our fiscal year end as April 30.

We were originally a wholly-owned subsidiary of mCig, Inc. On February 24, 2014, we entered into a Contribution Agreement with mCig, Inc. In accordance with this agreement we accepted the contribution by mCig, Inc. of specific assets consisting solely of pending trademarks for the term “VitaCig” filed with the USPTO and $500 in cash as contribution in exchange for 500,135,000 shares of common capital stock representing 100% of the issued and outstanding shares of our company.

On November 28, 2014, mCig completed the spin-off of 54.1% of our company (the “Spin-off”).

Plan of Operations

On April 15, 2014, we officially launched our flagship product the “VitaCig”. Over the next twelve months, our management has the following plan of operation:

1.    Raise Prices – On June 10^th, 2014, we raised the price of the VitaCig from $2 each to $3 each and saw an increase in demand. We will consider additional price increases over the course of 2015 and 2016.

2.    Billboard Marketing – Over the next six months, we will have several billboards advertising our products deployed in Manhattan, Brooklyn, and San Francisco. We believe, but cannot provide assurances, that these billboards will drive traffic to our website and social media increasing brand awareness and contributing to sales growth.

3.   Celebrity Endorsements – Our company’s largest shareholder, mCig, Inc. is in active negotiations with several celebrities for the endorsements of our products. These endorsements are invaluable to our company and we believe, but cannot provide assurances, that these endorsements will drive traffic and sales growth. There are however no guarantees that we will be able to obtain celebrity endorsements.

4.    Retail Store Distribution – Our management is preparing for the deployment of a retail marketing strategy. To that end, we have designed retail stands and boxes to be distributed to stores that show interests in our products. We have also acquired an exclusive global UPC barcode for our product in anticipation of this foray.

5.   Chain of Custody Standards – We have implemented Chain of Custody standards with our third-party manufacturing facilities. Specifically, each batch of our ingredients is marked, tested, and disclosed on each individual packaging with an expiration date as well as a batch number.

6.    Independent Lab Testing – In May 2014, we engaged Intertek Group, PLC for the purpose of independently testing our ingredients and products for any potential hazardous compounds.

7.    Supplemental Nutritional Labeling – Based on the independent testing of our products, we have been able to implement supplemental nutritional labeling outlining the ingredients and potency of our vitamins and nutrients as well as their daily values.

8.    New Product Flavors and Categories – We are preparing to launch several new VitaCig flavors and categories targeting additional nutritional applications such as stress-reduction and skin-improvement.

14

Management has estimated that the costs associated with implementation of its business plan over the next twelve months include, but are not limited to, $100,000 in value for Billboards, $250,000 in value for Endorsements (both of which expenses will be satisfied by means other than available cash expenditure, such as, but not limited to, equity or profit sharing arrangements), $100,000 for Retail Stock Distribution, and $25,000 for Lab Testing. Management estimates that funding of $475,000 will be needed to implement the business plan. In the event funding is not realized, the business plan may need to be reduced or curtailed. However, in anticipation of implementing our business plan, we are currently implementing small pilot-scale store distribution in Vermont, Virginia, and North Dakota. We are currently development two new flavors with the intent, although we cannot guarantee, to release those flavors in 2015 and 2016.

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 and nine months ended January 31, 2016 and 2015 are summarized as follows:

15

Results of Operations

Three Months Ended January 31, 2016 Compared to Three Months Ended January 31, 2015

Revenue

Our revenue from operations for the three months ended January 31, 2016 was $39,110 compared to $159,387, a decrease of $120,277, for the three months ended January 31, 2015.  This decrease is primarily due to a decrease in sales based on a change in the products available for sale. Revenues consist primarily of results from the sales of the electronic cigarettes, components for electronic cigarettes and related accessories.

Cost of Goods Sold

Our cost of goods sold for the three months ended January 31, 2016 was $37,473 compared to $77,053 for the three months ended January 31, 2015. This decrease is primarily due to the change in the products available for sale.

Gross Profit

Our gross profit for the three months ended January 31, 2016 was $1,637 compared to $82,334 for the three months ended January 31, 2015. This decrease in the gross profit percentage is primarily attributed to the higher costs of the better quality products.

Operating Expenses

Our operating expenses decreased by $43,710 to $25,677 for the three months ended January 31, 2016, from $69,387 for the three months ended January 31, 2015.

The decrease was primarily due to the decrease in selling, general and administrative expenses of $36,231 and a decrease in professional fees of $7,479.

Our total operating expenses for the three months ended January 31, 2016 of $25,677 consisted of $20,310 of selling, general and administrative expenses, $5,000 of professional fees, and $367 of amortization expenses. Our general and administrative expenses consist of salaries, stock based compensation, bank charges, telephone expenses, meals and entertainments, computer and internet expenses, postage and delivery, office supplies and other expenses.

Net Loss

Our net loss was $24,040 for the three months ended January 31, 2016 compared to a net income of $12,947 for the three months ending January 31, 2015. The increase in net loss compared to the prior period is primarily a result of the decrease in gross profit of $80,697 offset by decreases in operating expenses of $43,710.

Nine Months Ended January 31, 2016 Compared to Nine Months Ended January 31, 2015

Revenue

Our revenue from operations for the nine months ended January 31, 2016 was $117,853 compared to $337,006, a decrease of $219,153, for the nine months ended January 31, 2015.  This decrease is primarily due to a decrease in sales based on a change in the products available for sale. Revenues consist primarily of results from the sales of the electronic cigarettes, components for electronic cigarettes and related accessories.

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Cost of Goods Sold

Our cost of goods sold for the nine months ended January 31, 2016 was $85,555 compared to $158,202 for the nine months ended January 31, 2015. This decrease is primarily due to the change in the products available for sale.

Gross Profit

Our gross profit for the nine months ended January 31, 2016 was $32,298 compared to $178,804 for the nine months ended January 31, 2015. This decrease in the gross profit percentage is primarily attributed to the higher costs of the better quality products.

Operating Expenses

Our operating expenses decreased by $10,798 to $142,955 for the nine months ended January 31, 2016, from $153,753 for the nine months ended January 31, 2015.

The decrease was primarily due to the decrease in professional fees of $14,198 offset by an increase in selling, general and administrative expenses of $3,267 and an increase in amortization and depreciation of $133.

Our total operating expenses for the nine months ended January 31, 2016 of $142,955 consisted of $123,105 of selling, general and administrative expenses, $18,750 of professional fees, and $1,100 of amortization expenses. Our general and administrative expenses consist of salaries, stock based compensation, bank charges, telephone expenses, meals and entertainments, computer and internet expenses, postage and delivery, office supplies and other expenses.

Net Loss

Our net loss was $110,657 for the nine months ended January 31, 2016 compared to a net income of $25,051 for the nine months ending January 31, 2015. The increase in net loss compared to the prior period is primarily a result of the decrease in gross profit of $146,506 offset by the decrease in operating expenses of $10,798.

Liquidity and Capital Resources

Introduction

During the nine months ended January 31, 2016 because of our operating losses, we did not generate positive operating cash flows.  Our cash on hand as of January 31, 2016 was $50,965.

Cash Requirements

We had cash available of $50,965 as of January 31, 2016.  Based on our revenues, cash on hand and current monthly burn rate, around $10,000, we believe that our operations are sufficient to fund operations through January 2017.

Sources and Uses of Cash

Operations

We had net cash used in operating activities of $107,244 for the nine months ended January 31, 2016, as compared to cash used in operating activities of $12,888 for the nine months ended January 31, 2015.

Net cash used in operations consisted primarily of the net loss of $110,657 offset by non-cash expenses of $58,204 consisting of amortization of intangible assets of $1,100 and stock based compensation of $57,104. Additionally, changes in assets and liabilities consisted of an increase in accounts receivable of $25,215, a decrease in inventory of $7,624, and decreases in accounts payable of $1,500 and a decrease in deferred revenue of $35,700.

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Investments

We had net cash used in investing activities of $0 for the nine months ended January 31, 2016 and $4,400 in cash used in investing activities for the nine months ended January 31, 2015.

Financing

We had net cash provided by financing activities of $87,693 for the nine months ended January 31, 2016, as compared to net cash provided of $89,910 for the nine months ended January 31, 2015.  Our financing activities for the nine months ended January 31, 2016 consisted primary of borrowings of $92,689 and $4,996 in repayments to related party.

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 Concern

Our 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 nine months ended January 31, 2016 and 2015 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 incurred losses from operations and has a working capital deficit, which raises substantial doubt about its ability to continue as a going concern

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are a smaller reporting company and therefore, we are not required to provide information required by this Item of Form 10-Q.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to management, including the principal executive officer and principal financial officer, to allow timely decisions regarding required disclosures.

We carried out an evaluation, under the supervision and with the participation of management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of January 31, 2016.

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In designing and evaluating the disclosure controls and procedures, management recognizes that there are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their desired control objectives. Additionally, in evaluating and implementing possible controls and procedures, management is required to apply its reasonable judgment. Based on the evaluation described above, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report because we did not document our Sarbanes-Oxley Act Section 404 internal controls and procedures.

As funds become available to us, we expect to implement additional measures to improve disclosure controls and procedures such as implementing and documenting our internal controls procedures.

Changes in internal controls over financial reporting

There have been no changes in our internal control over financial reporting during the quarter ended January 31, 2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Controls  

A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met.  The Company’s management, including its Principal Executive Officer and its Principal Financial Officer, do not expect that the Company’s disclosure controls will prevent or detect all errors and all fraud. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.  Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls.  The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.  Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with associated policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may become involved in various lawsuits and legal proceedings that arise in the ordinary course of business. However, litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to time that may harm our business. Except as set forth below we are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.

Item 1A. Risk Factors

As a smaller reporting company, we are not required to provide the information required by this Item.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

In the three months ended January 31, 2016, we issued 405,022 shares of common stock valued at $2,804 for professional services.

Item 3. Defaults Upon Senior Securities

There have been no events that are required to be reported under this Item.

Item 4. Mine Safety Disclosures

There have been no events that are required to be reported under this Item.

Item 5. Other Information

There have been no events that are required to be reported under this Item.

Item 6.  Exhibits

31.1

Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1 *

Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2 *

Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS 

XBRL Instance Document

101.SCH 

XBRL Taxonomy Extension Schema Document

101.CAL 

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF 

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB 

XBRL Taxonomy Extension Label Linkbase Document

101.PRE 

XBRL Taxonomy Extension Presentation Linkbase Document

* Furnished herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

VitaCig, Inc.

Dated: March 21, 2016

/s/ Glenn Kassel

By:

Glenn Kassel

Its:

Chief Executive Officer

(Principal Executive Officer)

Dated: March 21, 2016

/s/ Charles Mathews

By:

Charles Mathews

Its:

Chief Financial Officer

(Principal Financial Officer)

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