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News Release 11/18/2013

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

About Victory

Victory Electronic Cigarettes is dedicated to providing a cleaner and healthier alternative to smoking for all and intends to empower smokers to regain their freedom. Victory is one of the leading companies in this rapidly emerging and fast-growing market. The Company began online sales in 2012 and expanded to retail early in 2013. Victory 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. Recently public, Victory’s experienced, new management team is positioned to leverage its clearly differentiated and well-recognized brand, established online presence, and low-cost infrastructure to accelerate growth and drive significant value for its shareholders.

For investor inquiries please contact:
James Palczynski
Partner, ICR, Inc.
Tel: 203.682.8229
Email: jp@icrinc.com
www.victoryecigs.com

Safe Harbor Language

This press release contains forward-looking statements reflecting management's current expectations regarding future results of operations, economic performance, financial condition and achievements of Victory, including statements regarding Victory’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: Victory’s reliance on additional financing, as Victory has not achieve profitability; risks associated with Victory’s products, including that they may pose a health risk; governmental regulations may impact Victory’s business; the market or consumers may not accept Victory’s products; Victory relies on a single class of products; existing or pending patents may affect Victory’s business; and other factors disclosed in the Company's filings with the Securities and Exchange Commission. Unless required by applicable law, Victory undertakes no obligation to update or revise any forward-looking statements.