VICTORY REPORTS THIRD QUARTER FINANCIAL RESULTS AND PROVIDES CORPORATE UPDATE

News Release 11/18/2013

VICTORY REPORTS THIRD QUARTER FINANCIAL RESULTS AND PROVIDES CORPORATE UPDATE

 

Revenues Increase 160% on Strong Growth in all Divisions
Achieves Major Strategic Expansion of International and Domestic Retail Presence
Expects Further Acceleration in Fourth Quarter from Shipments to New Partners

SPRING LAKE, MICHIGAN, November 18, 2013 – Victory
Electronic Cigarettes Corporation
(OTCQB:ECIG)
(“Victory” or “the Company”), an emerging leader in the electronic cigarette industry, today reported strong results for its third quarter ended September 30, 2013.

Brent Willis, Chairman and Chief Executive Officer of Victory, commented, “We continue to drive rapid growth in our online, US retail, and international businesses. We believe that we have established a competitive advantaged platform to capture a unique opportunity to build a strong brand and attain significant global share of the rapidly emerging electronic cigarette market.”

Third quarter revenue increased by 160% compared to the prior year, with excellent growth coming from all Divisions. Total revenue for the third quarter and for the nine months ended September 30, 2013 was $0.83 million and $2.5 million, respectively, prior to shipments to newly gained international or US national accounts. The Company expects to continue rapid growth through new retail distributors in the US, expanded international distribution, and continued increases in its online business.

Gross margin in the quarter remained strong at approximately 44% of revenues. The Company noted that it continued to significantly expand its capabilities during the third quarter and made investments across the business, including in the areas of sales, marketing, sourcing and finance. SG&A spending in the third quarter increased to $1.1 million from $0.3 million in the same quarter of the prior year, when Victory was still a private company. This increase also reflects investments in permanent merchandising racks, sampling, marketing and distribution with new customers. As planned, the pace of investment spending resulted in a net loss per share of $0.01 for the third quarter.

The Company entered into several key customer and distribution agreements during and after the close of the third quarter and is well positioned for continued success in its retail distribution strategy. In particular, the Company expects strong fourth quarter revenue from substantial initial shipments to new distribution partners in both the United States and abroad.

In the United States, the Company has begun to distribute product through CST Brands, a leading national convenience retailer with over 1,900 locations, primarily under the Corner Store and Valero brand names. The Company also entered into a comprehensive distribution agreement with one of the largest distributors to the convenience store industry in the United States. This distributor is one of the leading suppliers of packaged consumer products in North America and serves nearly 30,000 retail stores including traditional convenience retailers, grocers, mass merchandisers, drug, liquor and speciality stores. Internationally, Victory executed a distribution agreement with Quipo S.A. de C.V to become the first major brand of electronic cigarettes to be distributed throughout Central America. This agreement covers El Salvador, Guatemala, Honduras, Nicaragua, Panama, and Costa Rica.

Mr. Willis commented, “We are simultaneously executing our development strategy in the United States and in a variety of international markets, where the electronic cigarette category remains virtually untapped. Almost 90% of the global tobacco market is outside the United States, so this balanced approach to growth will create strong opportunities both in the short-term and, more importantly, long into the future.”

The Company also noted that, as disclosed on November 7, 2013, it successfully completed a private placement financing of $2,475,000 to fund growth-related working capital needs and for general corporate purposes.

Mr. Willis concluded, “We believe Victory’s investments in its cost-advantaged infrastructure will pay off in the long run. The vast majority of the electronic cigarette category opportunity is in front of us and we are confident that we are increasingly well positioned to capture a leading share of the growth. We believe we have the right business model, a strong brand, a preferred product and an excellent team to emerge as a global leader in this new and truly disruptive category. We believe that this very large emerging market holds an excellent opportunity to create value for our consumers, retailers, business partners and shareholders.”

Consolidated Balance Sheets

September 30,

December 31,

2013

2012

(Unaudited)

Assets

Current assets:

Cash

590,017

$

17,438


Accounts receivable

16,239

157,295


Inventory

281,713

287,373


Prepaid inventory

54,346

141,995


Other prepaid expenses

30,000

8,676


Employee advances

6,750


Total current assets

979,065

612,777

Furniture
and equipment, net

28,067


Total
assets

1,007,132

$

612,777

Liabilities
and Stockholders’ Equity (Deficit)

Current
liabilities:


Accounts payable and accrued expenses

138,843

$

37,853


Deferred revenue

17,699



Revolving credit line

20,641


Deferred compensation

350,003



Due to related party

448,166

703,870



Convertible related party promissary notes

200,000


Total current liabilities

787,009

1,130,066


Total liabilities

787,009

1,130,066

Commitments
and contingencies

Stockholders’
equity (deficit)

Common
stock, $.001 par value; 100,000,000 shares authorized; 51,744,000 and
32,500,000 shares issued and outstanding at September 30, 2013 and
December 31, 2012, respectively

51,744

32,500


Additional paid-in capital

2,244,289

36,811


Accumulated deficit

(2,075,910

)

(586,600

)


Total stockholders’ equtiy (deficit)

220,123

(517,289

)

Total
liabilities and stockholders’ equity (deficit)

1,007,132

$

612,777

Consolidated Income Statements

Nine Months

Three Months

Ended September 30,

Ended September 30,

2013

2012

2013

2012

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Revenues


Total revenues

2,458,243

832,610

833,257

321,010

Cost of Goods
Sold

1,118,609

278,116

468,290

111,217


Gross profit

1,339,634

554,494

364,967

209,793

Operating
expenses

Advertising
and promotion

938,795

235,053

351,810

36,933

Personnel
costs

852,453

420,781

411,395

167,085

Professional
fees

244,078

5,337

70,162

4,087

Selling
expenses

227,803

56,191

76,619

2,250

General and
administrative

246,555

81,491

114,984

34,126

Merchant
account fees

141,981

9,186

34,123

6,826

Research and
development

78,317


Total operating costs

2,651,666

886,356

1,059,094

251,307


Loss from operations

(1,312,032

)

(331,862

)

(694,127

)

(41,514

)

Other income
(expense)

Interest
expense

(114,280

)

(38,447

)


Net loss

$

(1,426,312

)

(331,862

)

$

(732,574

)

$

(41,514

)

Net loss per
common share:


Basic

$

(0.036

)

$

(0.010

)

$

(0.014

)

$

(0.001

)


Diluted

$

(0.036

)

$

(0.010

)

$

(0.014

)

$

(0.001

)

Weighted
average number of shares outstanding


Basic

39,615,067

32,500,000

52,224,000

32,500,000


Diluted

39,615,067

32,500,000

52,224,000

32,500,000

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About Electronic Cigarettes International Group, Ltd. (ECIG)

The Electronic Cigarettes International Group, Ltd. (ECIG) is dedicated to empowering smokers to choose an alternative to traditional cigarettes.  ECIG is one of the leading electronic cigarette companies in the world, and owns the trademarks VAPESTICK®, FIN®, Victory®, GreenStix®, VIP® and others.  The Company owns multiple subsidiary companies and has operations in North America, Latin America, Western Europe, and Asia.  ECIG offers consumers a full product portfolio that incorporates the highest quality and latest technology, and has been rated as superior in real tobacco taste amongst major brands.   The Company’s website is www.ecig.co

Safe Harbor Disclosure

This press release contains forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are any statement reflecting management’s current expectations regarding future results of operations, economic performance, financial condition and achievements of ECIG, including statements regarding ECIG’s expectation to see continued growth.  The forward-looking statements are based on the assumption that operating performance and results will continue to materialize consistent with recent trends.  Management believes these assumptions to be reasonable but there is no assurance that they will prove to be accurate. Forward-looking statements, specifically those concerning future performance are subject to certain risks and uncertainties, and actual results may differ materially. These risks and uncertainties include: ECIG’s reliance on additional financing, ECIG’s profitability and financial health, risks associated with ECIG’s products, including that they may pose a health risk; governmental regulations may impact ECIG’s business; the market or consumers may not accept ECIG’s products; ECIG relies on a single class of products; existing or pending patents may affect ECIG’s business; and other factors disclosed in the Company’s filings with the Securities and Exchange Commission. Unless required by applicable law, ECIG undertakes no obligation to update or revise any forward-looking statements.

For investor inquiries please contact:

Joan Lauer
Investor Relations
Electronic Cigarettes International Group, Ltd.
Tel: 616-384-3496