10SB12G: Registration of securities for small business [Section 12(g)]
Published on March 11, 1999
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS COMPANYS UNDER SECTION 12(B)
OR 12(G) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file no. 0001074828
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CIGAR KING CORPORATION
(NAME OF SMALL BUSINESS COMPANY IN ITS CHARTER)
Nevada 91-1948357 012609
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
Suite 825-1200 West 73rd Avenue
Vancouver, British Columbia
Canada V6P 6G5
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(Address of Principal Executive Officer) (Zip Code)
(604) 688-3931
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(Company's Telephone Number)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $0.001 per share
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(Title of Class)
TABLE OF CONTENTS
ITEM PAGE
- ---- ----
PART 1
Item 1 Description of Business 3
Item 2 Management's Discussion and Analysis or Plan
of Operation 11
Item 3 Description of Property 12
Item 4 Security Ownership of Certain Beneficial
Ownership and Management 13
Item 5 Directors, Executive Officers, Promoters and
Control Persons 14
Item 6 Executive Compensation 15
Item 7 Certain Relationships and Related Transactions 16
Item 8 Description of Securities 17
PART 11
Item 1 Market Price of and Dividends on the Registrant's
Common Equity and Other Stockholders Matters 19
Item 2 Legal Proceedings 19
Item 3 Disagreement With Accountants and Financial Disclosure 19
Item 4 Recent Sales of Unregistered Securities 19
Item 5 Indemnification of Directors and Officers 20
PART F/S
Financial Statements 22
PART 111
Item 1 Index to Exhibits 31
Item 2 Description of Exhibits 31
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DOCUMENTS INCORPORATED BY REFERENCE
Documents incorporated by reference: None
2
PART 1
ITEM 1. DESCRIPTION OF BUSINESS
HISTORICAL OVERVIEW OF THE COMPANY
Cigar King Corporation., a Nevada corporation (the "Company"), was
incorporated on October 8, 1998. The Company has no subsidiaries and no
affiliated companies. The Company's executive offices are located at Suite 825 -
1200 West 73rd Avenue, Vancouver, British Columbia, Canada, V6P 6G5
The Company is engaged in the development of a kiosk system for the
distribution and sale of cigars and cigar related accessories. (see Part 1,
"Develop of the Cigar King Concept").
The Company is in the development stage and is seeking a quotation on
the NASD OTC Bulletin Board. To date no filing has been made with the NASD
Regulations but the Company expects to made the appropriate filing once it has
been deemed a reporting issuer.
The Company has no revenue to date from the development of its kiosk
concept, and its ability to effect its plans for the future will depend on the
availability of financing. Such financing will be required to develop the
Company's kiosk system to a stage where a decision can be made by management as
to whether or not the consuming public is interested in this form of retail
selling. The Company anticipates obtaining such funds from its directors and
officers, financial institutions or by way of the sale of its capital stock in
the future (see Part 1, Item 1 - "Plan of Operations"), but there can be no
assurance that the Company will be successful in obtaining additional capital
for exploration activities from the sale of its capital stock or in otherwise
raising substantial capital.
PLANNED BUSINESS
The Company is a start-up company founded for the purpose of building a
retail premium cigar business that purchases premium cigars and sells them,
along with premium cigar accessories, through Company-owned and operated Cigar
King retail kiosks. Management in the Company includes a senior-level manager
with entrepreneurial start-up and growth company management experience. The
Company's objective is to establish Cigar King as the leading purveyor of
premium cigars in the Greater Vancouver Area, Canada.
In addition to developing its initial market in the distribution of
premium cigars in the Greater Vancouver Area, the Company will consider
expansion to other cities in Western Canada, such as Calgary, Edmonton, Victoria
and Regina. Expansion will only occur when adequate funds are available and the
Company can foresee a positive return on its investment. (See Part 1, Item 2
Management's Discussion and Analysis or Plan of Operation").
Much of the discussion contained in this section is "forward looking",
as the term is identified in, or contemplated by, Section 21E of the Exchange
Act. Actual results may materially differ from the Company's plans as currently
contemplated. Information concerning all the factors associated with the
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Company is set forth in this Item 1 and in Items 2 and 3 below. FOR A COMPLETE
UNDERSTANDING OF SUCH FACTORS, THIS ENTIRE DOCUMENT, INCLUDING THE FINANCIAL
STATEMENTS AND THEIR ACCOMPANYING NOTES, SHOULD BE READ IN ITS ENTIRETY.
DEVELOPMENT OF THE CIGAR KING CONCEPT
a. Industry Overview
According to the Cigar Association of America ("Cigar Association"),
approximately 280,000,000 premium cigars were sold in the United States alone in
1996, reflecting sales of $550,000,000 to $600,000,000, or $1.96 to $2.14 per
cigar. The number of premium cigars sold in 1996 increased 67% over 1995. In
units, premium cigars accounted for 6.4% of all cigars sold, but over 40% of the
total retail dollars ($1,300,000,000) spent on cigars.
Growth in the retail market for premium cigars has been aided by
several factors, including the emergence of cigar evenings, the publication of
the magazine "Cigar Aficionado", the recapture of the cigar's traditional image
as a symbol of success, celebration and achievement, and the rise in
self-indulgence.
The availability of premium cigars is increasingly constrained by
accelerating demand in the face of a worldwide shortage of premium cigar leaf
tobacco.
The retail market for premium cigars is highly fragmented. The market
is characterized by hundreds of small, independent operators and small retail
chains. No single chain in North America has a significant share of the retail
market for premium cigars. The Company anticipates the retail market will become
consolidated, with the emergence of a small number of larger companies in clear
leadership positions.
b. Cigar Smokers
Smokers of premium cigars tend to be more highly educated and more
affluent than the population at large. The magazine Cigar Aficionado ran an
advertisement in the magazine "Direct" in February 1996 which reported that the
average household income for its 150,000 readers was $148,000; the median income
was $109,000; the average net worth was $ 1,100,000. Seventy-nine percent (79%)
graduated from college and forty-nine percent (49%) took post-graduate courses.
As for occupation, sixty-five percent (65%) were described as
managerial/professional; seventeen percent (I 7%) were owner/president;
twenty-four percent (24%) were either Chief Executive Officers, Chief Operating
Officers or Chief Financial Officers. They smoked an average of eight cigars per
week and spent an average of $4.10 per cigar. The average usually spent on
premium cigars per week was $35.50. Seventy-three percent (73%) reportedly
bought by the box.
The Cigar Association estimates that there are more than 10,000,000
cigar smokers in the United States alone, many of them being occasional smokers.
Less than four percent (4%) of all cigar smokers are women and they tend to
smoke the premium cigars. The Cigar Association estimates that the regular cigar
smoker smokes six to eight cigars per week, or about one per day. Many are
occasional smokers who smoke about two or three premium cigars per month.
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Tinder Box International ("Tinder Box"), a franchiser, is the largest
retailer of premium cigars, tobacco products, gifts and accessory products in
North America with 108 franchised stores operating in 31 states, as at September
10, 1997. Tinder Box describes its core customer as:
an adult male, twenty-five to fifty-five years old; college graduate;
professional or business executive; income level of $75,000 to
$300,000; drives a $35,000+ luxury car.
Further, Tinder Box states more than half its customers purchase their
cigars by the box, smoke three to five cigars per day and spend more than $3 per
cigar.
According to Tinder Box, the Dominican Republic claims the top rank as
the origin for most of its customers' everyday cigar - fifty-two percent (52%).
Honduras is second at twenty-four percent (24%) and Jamaica is third at
seventeen percent (17%). Surprisingly fourteen percent (l4%) of the survey group
acknowledged that their everyday cigar was Cuban, in spite of the trade
embargos. Cigars from the Canary Islands and Mexico rank next in order of
popularity with ten percent (10%) and seven percent (7%) respectively.
According to Tinder Box, the most important single attribute when
buying a cigar, listed by fifty-one percent (51 %) of the survey respondents, is
its size. The most popular size is a corona at five and one-half inches in
length by a forty-two ring gauge, followed by a Lonsdale at six and one-half
inches in length by a forty-two ring gauge. The third most popular is a double
corona at six and one-half inches in length by a forty-eight ring gauge. The
fourth is a Churchill at seven and one-half inches in length by a fifty ring
gauge. The fifth is a Rothschild at four and one-quarter inches in length by a
fifty ring gauge.
Again, as mentioned above, the most important single attribute when
buying a cigar, listed by fifty-one percent (51 %) of the Tinder Box survey
respondents, is its size. Freshness is cited in forty-seven percent (47%) of the
answers, and smoothness of taste is checked in thirty-eight percent (38%) of the
questionnaires. Quality of construction is considered by thirty-eight percent
(38%) of buyers and rich taste by thirty-four percent (34%). Other factors that
between twenty percent (20%) and twenty-two percent (22%) of all buyers look for
include brand name, full-bodied flavor and mildness. Price is only a
consideration with fourteen percent (14%) of the respondents in the survey.
c. Plan of Operations
The Company's plan is to locate twenty-five Company-owned and operated
Cigar King retail kiosks in the Greater Vancouver Area in a period of two years.
The twenty-five kiosks will be centrally located and clustered in close
proximity to achieve operating and marketing efficiencies and to enhance
awareness of the Cigar King brand. The Company will locate the twenty-five
kiosks in high-foot traffic, high-visibility, key intercept market locations.
The Company intends to supplement its retail kiosk operations with direct mail
and, in select settings, Cigar King humidified vending machines.
The Company's start-up and expansion plan involves three phases:
Phase I - the design, development, and test of the Cigar King kiosk
prototype;
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Phase 11 - the opening of a further fourteen Cigar King kiosks; and,
Phase III - the opening of a further ten, bringing the total number of
Cigar King kiosks to twenty-five
To complete Phase 1, the design, development, and test of the Cigar
King kiosk prototype, the Company will require $150,000 (refer to "Liquidity and
Capital Resources"). These funds will have to be either loaned from the
directors, obtained through financing from a lending institutions or else
obtained through the sale of the Company's capital stock.
d. Product
The Company will offer only the highest-quality cigars, stocking and
displaying them in the Company's climate-controlled (King Climate Control - as
more fully described below) kiosk merchandise display cases. Thirty types of
premium cigars will be offered, along with a limited selection of premier cigar
cutters, ashtrays, lighters, travel and pocket humidors, and cigar-related
publications. The design of the Cigar King kiosk will be upscale, with emphasis
on Cigar King branding and on maximizing cigar display. The kiosk design will
reflect Cigar King's principal position, that of an expert and knowledgeable
purveyor of premium cigars.
The Cigar Association uses three criteria to define a premium cigar:
(i) made by hand;
(ii) consisting of all natural, long-filler tobacco; and,
(iii) retailing anywhere from $1.25 to more than $25 each.
The Company will offer only premium cigars rated 80 or higher by Cigar
Aficionado. Cigar Aficionado maintains a comprehensive Internet database of
nearly 1,300 cigar ratings - every cigar the magazine has rated since the
magazine's launch in September, 1992. All cigars in the database are scored on a
100-point scale: 95 to 100 - classic; 90 to 94 - outstanding; 80 to 89 very good
to excellent; 70 to 79 - average to good commercial quality; and below 70 - not
worth considering. Further, the database enables the user to profile cigars
based not only on rating, but also: size; origin; brand; and price.
Of the cigars rated 80 or higher, the Company will focus its efforts on
procuring a selection of premium cigars based on size:
Corona (thirty-five percent [35%] of mix);
Lonsdale (twenty-five percent [25%] of mix);
Double Corona (twenty percent [20%] of mix);
Churchill (ten percent [10%] of mix); and,
Rothschild (ten percent [10%] of mix).
Within each size category, the Company will focus its efforts on
procuring a selection of premium cigars based on origin:
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Dominican Republic (fifty percent [50%] of mix);
Honduras (twenty-five percent [25%] of mix);
Jamaica (fifteen percent [15%] of mix);
Canary Islands (ten percent [I0%] of mix); and,
Mexico (ten percent [10%) of mix).
The Company will price its cigars at the medium to high-end of the
market. Half of the cigars offered will be priced between $2 to $5 per cigar;
one-quarter will be priced between $5 to $10 per cigar; and one-quarter will be
priced at $10 and over per cigar. In respect of each cigar type, the Company
will sell the cigars individually, as well as by the box. Each type will be
displayed by open box, and supported with professional signs describing the
cigar's origin and flavor characteristics, as well as the Cigar Aficionado
rating. Further, the kiosk merchandise display case climate will be controlled
to ensure the cigars are perfectly maintained at 70 degrees Fahrenheit and 70%
humidity (King Climate Control).
The Company estimates approximately 600 types of premium cigars meet
the Company's cigar selection criteria. The Company will offer a selection of
approximately thirty.
Although the availability of premium cigars is increasingly constrained
by accelerating demand in the face of a worldwide shortage of premium cigar leaf
tobacco, the Company believes there are adequate sources of supply of premium
cigars to meet its expansion plans. Because the Company will offer a selection
of approximately thirty cigar types, and that the Company estimates
approximately 600 types of premium cigars meet the Company's cigar selection
criteria, and that the Company is not committed to any one type in particular,
if one were to become unavailable or prohibitively expensive, the Company could
introduce another type with no significant impact.
e. Cigar Accessories
In addition to premium cigars, the Company will offer a limited
selection of premium cigar cutters, ashtrays, lighters, travel and pocket
humidors, and cigar-related publications.
f. Retail Kiosks
The Company will retail its premium cigars and premium cigar
accessories through Company-owned and operated Cigar King kiosks. The Company
estimates the kiosks will vary in size from approximately 50 to 75 square feet.
Depending on the location, the kiosks will either be self-standing or built-out.
The kiosk design will be upscale, with emphasis on Cigar King branding and on
maximizing cigar display. The kiosk design will reflect Cigar King's principal
position, that of an expert and knowledgeable purveyor of premium cigars.
Retail kiosks located within downtown buildings will likely be open
from 8 a.m. till 6 p.m., six days per week. Other kiosks, those located in
shopping centers or airports, for example, will likely be open till 9 p.m. or
later, seven days per week. The typical staff for one retail kiosk will consist
of one full-time kiosk manager and two to three part-time employees. Each
employee will be trained to be knowledgeable about premium cigars. Retail kiosk
operations will be sales-driven, with training emphasis on customer service and
on merchandising policy and procedure.
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The Company anticipates the retail kiosk, open a minimum of three
months, will achieve annual sales of approximately $283,476, generating a
kiosk-level operating contribution (profit) of approximately $42,627 (Refer to
Page 75). The kiosk annual sales projection is equal to one-half (50%) of Tinder
Box's 1996 average store sales of $5,669,500 (refer to Page 80).
g. Direct Mail
The Company intends to test and try direct mail, but only after the
Cigar King kiosk prototype is proven (Phase 1). Direct mail sales are not
reflected in the Company's forecasts or projections.
h. Humidified Vending Machines
The Company intends to test and try Cigar King humidified vending
machines in select settings, but only after a minimum of ten Cigar King kiosks
are opened and operating in downtown Vancouver. Humidified vending machine sales
are not reflected in the Company's forecasts or projections.
STRATEGY
Each element of the Company's strategy is designed to differentiate and
reinforce the Cigar King brand and to engender a high degree of loyalty among
Cigar King customers. The bases of the Company's strategy include:
Highest-Quality Cigars
The Company will offer only premium cigars rated 80 or higher by Cigar
Aficionado. Further, the kiosk merchandise display case climate will be
controlled to ensure the cigars are perfectly maintained at 70 degrees
Fahrenheit and 70% humidity (King Climate Control).
Cigars and Cigar Accessories Only
To reinforce the Company's association with cigars, the Company will
sell premium cigars and premium cigar accessories only.
Retail Kiosks
The Company will retail its cigars through Company-owned and operated
Cigar King kiosks. The small size of the kiosk, approximately 50 to 75
square feet, enables the kiosk to be located in non-traditional, key
intercept market locations. Further, the small size translates into
low-cost. Another benefit is the short time period required to open new
sites. Lastly, if free-standing, the kiosk can be relocated if
necessary.
Retail Kiosk Design
The Cigar King kiosk design will be upscale, with emphasis on Cigar
King branding and on maximizing cigar display. The kiosk design will
reflect Cigar King's principal position, that of an expert and
knowledgeable purveyor of premium cigars.
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Retail Kiosk Merchandising
The Company will display each cigar type by open box and support each
with professional signs describing the cigar's origin and flavor
characteristics, as well as the Cigar Aficionado rating. Packaging will
display the Cigar King logo. The Company will aggressively promote King
Climate Control, the Company's merchandise display case climate
control. In addition, the Company will promote its cigar expertise and
knowledge through kiosk signs and free-of-charge Cigar King brochures.
Retail Kiosk Operations
Retail kiosk operations will be sales-driven, with emphasis on customer
service and on merchandising policy and procedure.
Retail Kiosk Clustering
The Company will centrally locate and cluster in close proximity the
Cigar King kiosks to achieve operating and marketing efficiencies and
to enhance awareness of the Cigar King brand.
Investment in Key Locations
The Company allocates $20,000 per Cigar King kiosk for key intercept
market location acquisition. The $20,000 is comprised of $5,000 for the
production of the property manager proposal, which includes
site-specific kiosk renderings, and $15,000 to incite the property
manager to agree to the kiosk install and the terms of the tenancy
agreement.
LOCATIONS
The Company will identify the highest-visibility, highest-foot traffic
key market intercept locations and acquire them where possible. The small size
of the kiosk and its free-standing nature enables the kiosk to be installed in
non-traditional locations. In many cases, the locations sought by the Company
are build-outs, anchored by vacant nooks, crannies, or comers; and, as a result,
the locations are not presently occupied, nor do retailers regard them as
location opportunities in general.
The Company's initial focus will be key market intercept locations
within the retail malls that anchor the commercial high-rises in the downtown
Vancouver core. The Company allocates $20,000 per kiosk for key location
acquisition. The $20,000 is comprised of $5,000 for the production of the
property manager proposal, which includes site-specific kiosk renderings, and
$15,000 to incite the property manager to agree to the kiosk install and the
terms of the tenancy agreement. The Company will pay a revenue royalty equal to
5% of the kiosk's sales, guaranteeing a minimum monthly royalty of $1,000.
The twenty-five kiosks will be central and in close proximity (Greater Vancouver
Area) to achieve operating and marketing efficiencies and to enhance awareness
of the Cigar King brand.
9
COMPETITION
Competition in the retail market for premium cigars is highly
fragmented. In the North America, the market is characterized by hundreds of
small, independent operators and small retail chains. Tinder Box, a franchiser,
is the largest retailer of premium cigars, tobacco products, gifts and accessory
products in North America with 108 franchised stores operating in 31 states.
According to the Internet Cigar Group, the largest cigar-related
Internet organization, there are eleven cigar outlets in Vancouver such as
Havana Land of Cigars Ltd., Sheffield & Sons Tobacconists, Churchill Fine Cigars
and many more. The list does not include retailers that offer cigars for sale on
a limited basis; which would add another 55 outlets to the number given above.
Each retailer listed is a single store, with the exception of for the ones noted
above. None of the retailers operate kiosks. All of the retailers operate
in-line stores. The list is derived from the Cigar, Cigarette & Tobacco - Retail
directory in the Vancouver Yellow Pages, issued in August 1998.
In addition to premium cigar retailers, the Company competes directly
against all stores, restaurants, and clubs that sell premium cigars.
PROJECTED INCOME
The projected yearly income statements for the three phases, reflecting
kiosk sales at 50% Tinder Box 1996 average store sales, are as follows:
(000'S)
PHASE 1 PHASE 11 PHASE 111
Revenue $283 $4,252 $7,087
Operating Profit 43 639 1,066
Corporate SG&A - 213 354
Pre-Tax Profit - 427 711
Number of Kiosks 1 15 25
Phase Financing 150 750 500
RISK FACTORS
There are certain inherent risks with the Cigar King concept from the
point of view of the Company and its shareholders as follows:
o The premium cigar industry is highly competitive and has relatively few
barriers to entry.
o The availability of premium cigars is increasingly constrained by
accelerating demand in the face of a world-wide shortage of premium
cigar leaf tobacco. The success of the Company's business plan is
dependent in part on management's ability to procure high-quality
premium cigars.
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o The success of the Company's business plan is dependent in part on
management's ability to identify and acquire suitable locations.
o The success of the Company's business plan is dependent in part on
management's ability to secure adequate financing to fund Phases 11 and
111.
OTHER CONCEPTS
The Company has not identified any other concepts and will concentrate
its entire attention to the development of the Cigar King concept.
EMPLOYEES
As at January 31, 1999, the Company did not have any employees either
part time or full time. At this time the directors and officers do not devote
full time to the activities of the Company.
The Company is not a party to any employment contracts or collective
bargaining agreements. The Company is considering the employment of a general
manager whose duties will comprise the development and refining of the corporate
strategies, the overall administration of the business including all aspects of
location negotiations. In addition, the general manager will design and develop
the Company's promotion and merchandising programs. Within a short time period
subsequent to the Company receiving additional funding, the general manager will
hire a site manager who will be responsible for setting standards for cigar
handling, cigar merchandising, customer service, cleanliness and presentation as
well as responsibilities for establishing a system of controlling cash, supplies
and payroll. The responsibility for hiring, training and management of all staff
associated with the kiosks will be under the control of the site manager.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
The discussion contained in this Item 2 is "forward looking" as that
term is contemplated by Section 21E of the Securities Exchange Act. Actual
establishment of kiosks and the projected revenues derived therefrom may differ
from the amounts shown in this report. Factors that could cause the development
of the Company's concept to differ are described throughout this report.
PLAN OF OPERATION
The Company plans to commence opening its kiosks in the Greater
Vancouver Area. It is presently identifying suitable locations which comprise
high traffic areas and a cigar-orientated clientele.
LIQUIDITY AND CAPITAL RESOURCES
As at January 31, 1999, the Company had $64,957 of assets, and $4,000
of liabilities including cash or cash equivalents amounting to $14,957.
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The Company has no contractual obligations for either lease premises,
employment agreements or commitments to acquire any asset of any nature.
Design, development, inventory, operational and administrative
estimated expenses of the Company for 1999 are projected to be approximately
$150,000 allocated as follows:
Legal $ 5,000
Kiosk design 15,000
Kiosk manufacture and installations 25,000
Property manager proposal 5,000
Property manager signing 15,000
Management fees 32,000
Promotion 5,000
Merchandising 10,000
Inventory 20,000
Operating working capital 18,000
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Total estimated expenses $ 150,000
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Management does not believe the Company's operations have been
materially affected by inflation.
ITEM 3. DESCRIPTION OF PROPERTY
The Company's kiosk concept is its main property. A kiosk will either
be a free standing vending humidor which will require no employees present or an
employee-manned kiosk.
If the kiosk is a free standing humidor it will be approximately 76
inches in height, 31 inches in width and 32 inches in depth. It will weigh
approximately 500 pounds and be purified deionized water cooled to maintain the
freshness of the cigars. In addition, it is anticipated the free standing
humidor will have a digital readout, a $5, $10 and $20 bill validation system
and credit card validation system - Mastercard, Visa and American Express. The
selection of cigars will be displayed at the front of the kiosk and a number
coding system will allow for selection.
The employee-manned kiosk will be larger in design than that of the
free standing humidor since it will have a larger selection of cigars and offer
for sale various cigar accessories. This type of kiosk will be designed in such
a way as to create a pleasant looking effect upon the surrounding area and can
be located in areas not normally large enough for regular retail space.
OFFICES
The Company's executive offices are located at Suite 825-1200 West 73rd
Avenue, Vancouver, British Columbia, Canada, V6P 6G5. The office is located in
premises which are used by the President of the Company for other business
interests. There is no charge to the Company for using this office.
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OTHER PROPERTY
The Company does not own any other property other than the rights to the Cigar
King concept.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERSHIP AND MANAGEMENT
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information with respect to the
beneficial ownership of each person who is known to the Company to be the
beneficial owner of more than 5% of the Company's Common Stock as of January 31,
1999.
(1) As of January 31, 1999, there were 10,535,000 common shares
outstanding. Unless otherwise noted, the security ownership disclosed
in this table is of record and beneficial.
(2) Under Rule 13-d under the Exchange Act, shares not outstanding but
subject to options, warrants, rights, conversion privileges pursuant to
which such shares may be acquired in the next 60 days are deemed to be
outstanding for the purpose of computing the percentage of outstanding
shares owned by the persons having such rights, but are not deemed
outstanding for the purpose of computing the percentage for such other
persons.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of each officer and director, and of all directors and
executive officers as a group as of January 31, 1999.
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(1) As of January 31, 1999, there were 10,535,000 common shares
outstanding. Unless otherwise noted, the security ownership disclosed
in this table is of record and beneficial.
8 Under Rule 13-d under the Exchange Act, shares not outstanding but
subject to options, warrants, rights, conversion privileges pursuant to
which such shares may be acquired in the next 60 days are deemed to be
outstanding for the purpose of computing the percentage of outstanding
shares owned by the persons having such rights, but are not deemed
outstanding for the purpose of computing the percentage for such other
persons.
(3) Mr. Bruce is President of the Company and one of the controlling
shareholders. This stock is restricted since it was issued in
compliance with the exemption from registration provided by Section 4
(2) of the Securities Act of 1933, as amended. After this stock has
been held for one (1) year, Mr. Bruce could sell a percentage of his
shares every three months based on 1% of the outstanding stock.
Therefore, this stock cannot be sold except in compliance with the
provisions of Rule 144.
Mr. Wolf is a Director and Secretary Treasurer of the Company and one
of the controlling shareholders. This stock is restricted since it was
issued in compliance with the exemption from registration provided by
Section 4 (2) of the Securities Act of 1933, as amended. After this
stock has been held for one (1) year, Mr. Wolf could sell a percentage
of his shares every three months based on 1% of the outstanding stock.
Therefore, this stock cannot be sold except in compliance with the
provisions of Rule 144.
Mr. Kennaugh is a Director of the Company. This stock is restricted
since it was issued in compliance with the exemption from registration
provided by Section 4 (2) of the Securities Act of 1933, as amended.
After this stock has been held for one (1) year, Mr. Kennaugh could
sell a percentage of his shares every three months based on 1% of the
outstanding stock. Therefore, this stock cannot be sold except in
compliance with the provisions of Rule 144.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
DIRECTORS AND EXECUTIVE OFFICERS
The following table identifies the Company's directors and executive
officers as of January 31, 1999. Directors are elected at the Company's annual
meeting of stockholders and hold office until their successors are elected and
qualified. The Company's officers are appointed annually by the Board of
Directors and serve at the pleasure of the Board.
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Term as
Director
Name Position Held Expires
---- ------------- -------
Stephan Bruce President and Director October 1999
Michael Wolf Secretary Treasurer and October 1999
Director
Michael J. Kennaugh Director October 1999
STEVEN BRUCE, 41, graduated from Simon Fraser University in 1981 with a
Bachelor of Commerce degree in Economics. Since graduation he has been employed
with New Generation Power Corp. as Vice-President and Chief Operational Officer.
While employed with New Generation Power his duties included power contract
negotiation, project financing and administration over all aspects of the
accounting and financial functions. Subsequently Mr. Bruce became Vice-President
and Chief Financial officer of Newgen Environmental Systems Inc., a company
listed on the Alberta Stock Exchange ("Exchange") in Calgary, Alberta, Canada,
and specialized in all aspects of the development of the company and in
compliance reporting with the Exchange.
MICHAEL WOLF, 40, graduated from High School and worked as a
salesperson selling used cars for a number of years. For five years after Mr.
Wolf left the used car business, he sold tax shelters for the movie industry.
Recently he incorporated and became president of a company specializing in
selling equipment to various law enforcement agencies in United States and
Canada. This equipment comprised a type of gun which ejects a net out to control
a party the police are pursuing.
MICHAEL J. KENNAUGH, 57, graduated from the University of British
Columbia with a degree in real estate appraisal. Subsequent to graduation he was
employed by various real estate companies before starting his own real estate
appraisal firm.
None of the Directors or Executive Officers work full time for the
Company, but intend to devote such time as their responsibilities require. None
of the Company's Directors are currently directors of other companies registered
under the Securities Act of 1934 although Mr. Wolf was formerly a director of
Mandalay Capital Corp. and Mr. Kennaugh a director of Sweetbrier Resources Inc.,
both companies that are presently quoted on the OTC Bulletin Board under the
names of Save the World Inc. and Dippy Foods Inc. respectively.
There are no family relationships between the directors, executive
officers or with any person under consideration for nomination as a director or
appointment as an executive officer of the Company.
ITEM 6. EXECUTIVE COMPENSATION
None of the Company's executive officers have received compensation
since the Company's inception.
The following table sets forth compensation paid or accrued by the
Company during the period ended January 31, 1999 to the Company's President and
shows compensation paid to any other officers or directors.
15
SUMMARY COMPENSATION TABLE (1999)
There has been no compensation given to any of the Directors or
Officers during 1998 and 1999. There are no stock options outstanding as at
January 31, 1999 and no options have been granted in 1999, but it is
contemplated that the Company may issue stock options in the future to officers,
directors, advisers and future employees.
COMPENSATION OF DIRECTORS
Members of the Board of Directors do not receive cash compensation for
their services as Directors. Directors are not presently reimbursed for expenses
incurred in attending Board meetings.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has never before filed a prospectus specified under Section
10(a) of the Securities Act of 1933 at this time. The Company raised funds as
more fully described below.
Shares issued to Directors and Officers
The directors and officers of the Company subscribed for 4,500,000
shares at $0.002 per share for a total consideration of $9,000. The breakdown of
the shares are as follows:
Steven Bruce 2,500,000 common shares
Michael Wolf 1,500,000 common shares
Michael J. Kennaugh 500,000 common shares
This stock is restricted since it was issued in compliance with the
exemption from registration provided by Section 4(2) of the Securities Act of
1933, as amended. After this stock has been held for one year, the holders of
these shares of the Company could sell a percentage of their shares every three
months based on 1% of the outstanding stock in the Company. Therefore, this
stock can be sold after
16
the expiration of one year in compliance with the provisions of Rule 144. There
are "stop transfer" instructions placed against this stock and a legend is
imprinted on each stock certificate.
Shares issued to various corporate shareholders at $0.01 per share
The Company accepted subscriptions from various corporate investors in
the amount of 6,000,000 shares at a price of $0.01 per share for a total
consideration of $60,000. None of these shareholders hold in excess of 5% of the
shares of the Company. Rule 504 exemption was claimed for the 6,000,000 shares.
Form D was filed with the United States Securities and Exchange Commission. This
stock can be traded without restrictions. All these shareholders are resident
outside of the United States and none are US corporations or affiliates thereto.
Offering Memorandum dated December 4, 1998
Under the Offering Memorandum dated December 4, 1998 (refer to Exhibit
99(b)), the Company offered a maximum of 100,000 common shares at a price of
$0.25 per share. The Company accepted subscriptions and subsequently issued
share certificates to 27 individual shareholders who purchased 35,000 common
shares at a price of $0.25 per share. This Offering Memorandum was not subject
to any minimum subscription level. All shareholders are either friends,
relatives or business associates of one or more of the directors.
Rule 504 exemption was claimed and a Form D was filed with the United
States Securities and Exchange Commission. This stock can be traded without
restrictions provided persons owing less than 5% of the outstanding stock do so.
All shareholders subscribing under the Offering Memorandum hold less than 5% of
the issued and outstanding shares of the Company.
All investors contacted decided to acquire shares in the stock of the
Company. None refused.
Certain parties interested in the Company's success have contributed
and continue to contribute time, office space, telephone, and other expenses,
without compensation or reimbursement.
The directors of the Company are directors, officers, stockholders and
employees of other companies but are not directors or officers of any companies
presently in the cigar industry. Nevertheless, conflicts of interest may arise
between their duties as directors of the Company and as directors and officers
of other companies.
ITEM 8. DESCRIPTION OF SECURITIES
The Company's articles of incorporation currently provide that the
Company is authorized to issue 200,000,000 shares of common stock, par value
$0.001 per share. As at January 31, 1999, 10,535,000 shares were outstanding.
COMMON STOCK
Each holder of record of the Company's common stock is entitled to one
vote per share in the election of the Company's directors and all other matters
submitted to the Company's stockholders for a vote. Holders of the Company's
common stock are also entitled to share ratably in all dividends when,
17
as, and if declared by the Company's Board of Directors from funds legally
available therefor, and to share ratably in all assets available for
distribution to the Company's stockholders upon liquidation or dissolution,
subject in both cases to any preference that may be applicable to any
outstanding preferred stock. There are no preemptive rights to subscribe to any
of the Company's securities, and no conversion rights or sinking fund provisions
applicable to the common stock.
Neither the Company's articles of incorporation nor its bylaws provide
for cumulative voting. Accordingly, persons who own or control a majority of the
shares outstanding may elect all of the Board of Directors, and persons owning
less than a majority could be foreclosed from electing any.
OPTIONS OUTSTANDING
There are no outstanding options. It is the intention of the Board of
Directors to grant stock options to directors, officers and future employees at
some time in the future. At the present time no consideration has been given to
the granting of stock options.
18
PART 11
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND OTHER STOCKHOLDER MATTERS
MARKET INFORMATION
The Company's stock is not presently traded or listed on any public
market. It is the Company's intention to seek a quotation on the NASD OTC
Bulletin Board upon receipt of confirmation from the United States Securities
and Exchange Commission that it is a reporting Company. To date no documents
have been filed with the NASD Regulations Inc.
HOLDERS
The number of record holders of the Company's common stock as at
January 31, 1999 is 43.
DIVIDENDS
The Company has never paid cash dividends on its common stock and does
not intend to do so in the foreseeable future. The Company currently intends to
retain any earnings for the operation and expansion of its business.
TRANSFER AGENT
The Company's transfer agent is Nevada Agency & Trust Co., 50 West
Liberty Street, Suite 880, Reno, Nevada, 89501.
ITEM 2. LEGAL PROCEEDINGS
There are no legal proceedings to which the Company is a party or to
which its business is subject, nor to the best of management's knowledge are any
material legal proceedings contemplated.
ITEM 3. DISAGREEMENT WITH ACCOUNTANTS AND
FINANCIAL DISCLOSURE
From inception to date, the Company's principal accountant is Andersen
Andersen & Strong, L.C. of Salt Lake City, Utah. The firm's report for the
period from inception to January 31, 1999 did not contain any adverse opinion or
disclaimer, nor were there any disagreements between management and the
Company's accountants.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
From inception through to January 31, 1999, the Company has issued and
sold the following unregistered shares of its common stock (the aggregated value
of all such offerings did not exceed US$1,000,000):
19
(i) Subscription of 4,500,000 shares by the Directors and Officers of the
Company
On November 20, 1998 the Company approved the issuance to its
President, Steven Bruce, 2,500,000 common shares, to its Secretary Treasurer and
Director, Michael Wolf 1,500,000 common shares and to its third director,
Michael Kennaugh, 500,000 common shares, all at a price of $0.002 per share.
This stock is restricted since it was issued in compliance with the exemption
from registration provided by Section 4(2) of the Securities Act of 1933, as
amended. After this stock has been held for one year, the Directors could sell
within a three month period a percentage of their shares based on 1% of the
outstanding stock in the Company. Therefore, this stock can be sold after the
expiration of one year in compliance with the provisions of Rule 144. There are
"stop transfer" instructions placed against this certificate and a legend has
been imprinted on the stock certificate itself.
(ii) Subscription for 6,000,000 shares at $0.01 per share
On November 25, 1998, the Company accepted subscriptions from seven
investors in the amount of 6,000,000 shares at a price of $0.01 per share. Rule
504 exemption was claimed for the 6,000,000 shares. Forms D was filed with the
United States Securities and Exchange Commission. This stock can be traded
without restrictions. None are related to the directors or officers or each
other. All the shareholders live outside the United States and none are US
citizens.
Subsequent to the issuance of these shares the Company was advised by
the six of the seven shareholders, noted above, that they had sold part of their
shares to other shareholders in order to reduce their share position below 5%.
(iii) Subscription for 35,000 shares at $0.25 per share
The Company accepted subscriptions from 27 individual shareholders who
purchased 35,000 common shares at a price of $0.25 per share under an Offering
Memorandum dated December 4, 1998. Rule 504 exemption was claimed and Forms D
was filed with the United States Securities and Exchange Commission. This stock
can be traded without restrictions provided persons owing less than 5% of the
outstanding stock do so.
All the shareholders subscribing for shares under the Offering Memorandum dated
December 4, 1998 are located outside of the United States and none are US
citizens. None hold in excess of 5% of the issued and outstanding shares of the
Company.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 78.751 of the Nevada General Corporation Law allows the Company
to indemnify any person who was or is threatened to be made a party to any
threatened, pending, or completed action, suit, or proceeding, by reason of the
fact that he or she is or was a director, officer, employee or agent of the
Company, or is or was serving at the request of the Company as a director,
officer, employee, or agent of any corporation, partnership, joint venture,
trust, or other enterprise. The Company's bylaws provide that such person shall
be indemnified and held harmless to the fullest extent permitted by Nevada law.
20
Nevada law permits the Company to advance expenses in connection with
defending any such proceedings, provided that the indemnitee undertakes to repay
any such advances if it is later determined that such person was not entitled to
be indemnified by the Company. The Company's by laws require that the Company
advance such funds upon receipt of such an undertaking with respect to
repayment.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
Company pursuant to the foregoing provisions or otherwise, the Company has been
advised that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in such act, and is
therefore unenforceable.
21
PART F/S
FINANCIAL STATEMENTS
The following financial statements are filed with this Form 10-SB:
22
Board of Directors
Cigar King Corporation
Vancouver B. C. Canada
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have audited the accompanying balance sheet of Cigar King Corporation (a
development stage company) at January 31, 1999, and the statement of operations,
stockholders' equity, and cash flows for the period from October 8, 1998 (date
of inception) to January 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Cigar King Corporation at
January 31, 1999, and the results of operations, and cash flows for the period
from October 8, 1998 (date of inception) to January 31, 1999, in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company is in the development
stage and will need additional working capital for its planned activity, which
raises substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are described in Note 5 . These
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Salt Lake City, Utah /s/ "Andersen Andersen & Strong"
February 26, 1999
A member of ACF International with affiliated offices worldwide
23
CIGAR KING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
JANUARY 31, 1999
================================================================================
ASSETS
CURRENT ASSETS
Cash $ 14,957
------
Total Current Assets 14,957
OTHER ASSETS
Rights to Cigar King concept- Note 3 50,000
-------
$ 64,957
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 4,000
-----
Total Current Liabilities 4,000
-----
STOCKHOLDERS' EQUITY
Common stock
200,000,000 shares authorized, at $0.001 par
value; 10,535,000 shares issued and outstanding 10,535
Capital in excess of par value 67,215
Deficit accumulated during the development stage (16,793)
-------
Total Stockholders' Equity 60,957
-------
$ 64,957
======
The accompanying notes are an integral part of these financial statements.
24
CIGAR KING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM OCTOBER 8, 1998 (DATE OF INCEPTION) TO JANUARY 31, 1999
================================================================================
SALES $ -
EXPENSES 16,793
NET LOSS $ (16,793)
=======
NET LOSS PER COMMON SHARE
Basic $ (.002)
=======
AVERAGE OUTSTANDING SHARES
Basic 10,535,000
==========
The accompanying notes are an integral part of these financial statements.
25
CIGAR KING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM OCTOBER 8,1998 (DATE OF INCEPTION)
TO JANUARY 31, 1999
================================================================================
The accompanying notes are an integral part of these financial statements.
26
CIGAR KING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM OCTOBER 8, 1998 (DATE OF INCEPTION) TO JANUARY 31, 1999
================================================================================
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net loss $ (16,793)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Changes in current assets and liabilities
Accounts payable 4,000
--------
Net Cash From Operations (12,793)
========
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of Rights to Cigar King concept (50,000)
--------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from issuance of common stock 77,750
------
Net Increase in Cash 14,957
Cash at Beginning of Period -
------
Cash at End of Period $ 14,957
======
The accompanying notes are an integral part of these financial statements.
27
CIGAR KING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCLAL STATEMENTS
================================================================================
1. ORGANIZATION
The Company was incorporated under the laws of the State of Nevada on
October 8, 1998 with authorized common stock of 200,000,000 shares at
$0.001 par value.
The Company was organized for the purpose of engaging in the premium retail
cigar sales. At the report date a cigar king concept has been acquired.
(see Note 3).
Since its inception the company has completed two Regulation D offerings of
6,035,000 shares of its common capital stock for cash.
The Company is in the development stage.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICILES
Accounting Methods
------------------
The Company recognizes income and expenses based on the accrual method of
accounting.
Dividend Policy
---------------
The Company has not yet adopted a policy regarding payment of dividends.
Income Taxes
-------------
The Company has elected a fiscal year ending September 30 and has not
completed an operating period and therefore has not filed any income tax
returns.
Earning (Loss) Per Share
-------------------------
Earnings (loss) per share amounts are computed based on the weighted
average number of shares actually outstanding using the treasury stock
method in accordance with FASB statement No. 128.
Cash and Cash Equivalents
--------------------------
The Company considers all highly liquid instruments purchased with a
maturity, at the time of purchase, of less than three months, to be cash
equivalents.
28
CIGAR KING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
Foreign Currency Translation
- -----------------------------
The transactions of the Company completed in Canadian dollars have been
translated to US dollars. Assets and liabilities are translated at the year end
exchange rates and the income and expenses at the average rates of exchange
prevailing during the period reported on.
Financial Instruments
- ----------------------
The carrying amounts of financial instruments, including cash, mineral leases,
and accounts payable, are considered by management to be their estimated fair
values. These values are not necessarily indicative of the amounts that the
Company could realize in a current market exchange.
Estimates and Assumptions
- --------------------------
Management uses estimates and assumptions in preparing financial statements in
accordance with generally accepted accounting principles. Those estimates and
assumptions affect the reported amounts of the assets and liabilities, the
disclosure of contingent assets and liabilities, and the reported revenues and
expenses. Actual results could vary from the estimates that were assumed in
preparing these financial statements.
3. PURCHASE OF RIGHTS TO CIGAR KING CONCEPT
On November 24, 1998 the company acquired the exclusive rights to market high
quality cigars though a climate controlled kiosk merchandise display case, known
as King Climate Control, by the payment of $50,000.
4. RELATED PARTY TRANSACTIONS
Related parties have acquired 43% of the common stock issued for cash.
The officers and directors of the Company are involved in other business
activities and they may, in the future, become involved in additional business
ventures which also may require their attention. If a specific business
opportunity becomes available, such persons may face a conflict in selecting
between the Company and their other business interests. The Company has
formulated no policy for the resolution of such conflicts.
29
CIGAR KING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCLAL STATEMENTS (CONTINUED)
================================================================================
5. GOING CONCERN
Continuation of the Company as a going concern is dependent upon obtaining
additional working capital and the management of the Company has developed a
strategy, which it believes will accomplish this objective through additional
equity funding, and long term financing, which will enable the Company to
operate in the future.
Management recognizes that, if it is unable to raise additional capital, the
Company cannot operate in the future.
30
PART 111
ITEM 1. INDEX TO EXHIBITS
EXHIBIT
NO.
(2) Charter and By-Laws
(a) Articles of Incorporation of CIGAR KING CORPORATION filed
October 8, 1998 (filed herewith, page 33)
(b) Bylaws (filed herewith, page 37)
(3) Instruments Defining Rights of Securities Holders
(a) Text of stock certificates for common stock (filed herewith,
page 48)
(5) Voting Trust Agreements
None
(6) Material Contracts
(a) Not made in the ordinary course of business
(i) Transfer Agent and Registrar Agreement between
Registrant and Nevada Agency & Trust Co., dated
October 22, 1998 (filed herewith, page 49)
(ii) Agreement to Acquire 100% Interest in the Concept
from Archer Investments dated November 24, 1998
(files herewith, page 52)
(10) Consent of experts and counsel
(i) Consent of Andersen Andersen & Strong, L.C., independent
certified public accountants (filed herewith, page 59)
(11) Statement re computation of per share earnings
Not applicable
(16) Letter of change in certifying accountant
Not applicable
(21) Subsidiaries of the Registrant
Not applicable
(24) Power of Attorney
Note
(99) Addition Exhibits
(a) Business Plan (filed herewith, page 60)
(b) Offering Memorandum dated December 4, 1998 (filed
herewith, page 83)
ITEM 2. DESCRIPTIONS OF EXHIBITS
[Attached, pages 33 through 110]
31
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant has caused this registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized.
CIGAR KING CORPORATION
(Registrant)
by /s/ STEVEN BRUCE
-----------------------------
Steven Bruce
President and Director
Dated: March 8, 1999
32
ARTICLES OF INCORORATION
EXHIBIT NO. 2 (A)
OF
CIGAR KING CORPORATION
* * * * *
The undersigned, acting as incorporator, pursuant to the
provisions of the laws of the State of Nevada relating to private corporations,
hereby adopts the following Articles of Incorporation:
ARTICLE ONE. [NAME]. The name of the corporation is:
CIGAR KING CORPORATION
ARTICLE TWO. [RESIDENT AGENT]. The initial agent for service
of process is Nevada Agency and Trust Company, 50 West Liberty Street, Suite
880, City of Reno, County of Washoe, State of Nevada 89501.
ARTICLE THREE. [PURPOSES]. The purposes for which the
corporation is organized are to engage in any activity or business not in
conflict with the laws of the State of Nevada or of the United States of
America, and without limiting the generality of the foregoing, specifically:
1. [OMNIBUS] . To have to exercise all the powers now or hereafter
conferred by the laws of the State of Nevada upon corporations
organized pursuant to the laws under which the corporation is organized
and any and all acts amendatory thereof and supplemental thereto.
11. [CARRYING ON BUSINESS OUTSIDE STATE). To conduct and carry on its
business or any branch thereof in any state or territory of the United
States or in any foreign country in conformity with the laws of such
state, territory, or foreign country, and to have and maintain in any
state, territory, or foreign country a business office, plant, store or
other facility.
111. [PURPOSES TO BE CONSTRUED AS POWERS] . The purposes specified
herein shall be construed both as purposes and powers and shall be in
no wise limited or restricted by reference to, or inference from, the
terms of any other clause in this or any other article, but the
purposes and powers specified in each of the clauses herein shall be
regarded as independent purposes and powers, and the enumeration of
specific purposes and powers shall not be construed to limit or
restrict in any manner the meaning of general terms or of the general
powers of the corporation; nor shall the
33
expression of one thing be deemed to exclude another, although it be of
like nature not expressed.
ARTICLE FOUR. [CAPITAL STOCK]. The corporation shall have
authority to issue an aggregate of TWO HUNDRED MILLION (200,000,000) Common
Capital Shares, PAR VALUE ONE MILL ($0.001) per share for a total capitalization
OF TWO HUNDRED THOUSAND DOLLARS ($200,000).
The holders of shares of capital stock of the corporation
shall not be entitled to pre-emptive or preferential rights to subscribe to any
unissued stock or any other securities which the corporation may now or
hereafter be authorized to issue.
The corporation's capital stock may be issued and sold from
time to time for such consideration as may be fixed by the Board of Directors,
provided that the consideration so fixed is not less than par value.
The stockholders shall not possess cumulative voting rights
at all shareholders meetings called for the purpose of electing a Board of
Directors.
ARTICLE FIVE. [DIRECTORS]. The affairs of the corporation
shall be governed by a Board of Directors of no more than eight (8) nor less
than one (1) person. The names and addresses of the first Board of Director are:
NAME ADDRESS
---- -------
Michael Kennaugh 42 - 2951 Panorama Drive
Coquitlam, British Columbia
Canada, V3E 2W3
ARTICLE SIX. [ASSESSMENT OF STOCK]. The capital stock of the
corporation, after the amount of the subscription price or par value has been
paid in, shall not be subject to pay debts of the corporation, and no paid up
stock and no stock issued as fully paid up shall ever be assessable or assessed.
ARTICLE SEVEN. [INCORPORATOR]. The name and address of the
incorporator of the corporation is as follows:
NAME ADDRESS
---- -------
Amanda Cardinalli 50 West Liberty Street, Suite 880
Reno, Nevada 89501
ARTICLE EIGHT. [PERIOD OF EXISTENCE]. The period of existence
of the corporation shall be perpetual.
34
ARTICLE NINE. [BY-LAWS]. The initial By-laws of the
corporation shall be adopted by its Board of Directors. The power to alter,
amend, or repeal the By-laws, or to adopt new By-laws, shall be vested in the
Board of Directors, except as otherwise may be specifically provided in the
By-laws.
ARTICLE TEN. [STOCKHOLDERS' MEETINGS]. Meeting of
stockholders shall be held at such place within or without the State of Nevada
as may be provided by the By-laws of the corporation. Special meetings of the
stockholders may be called by the President or any other executive officer of
the corporation, the Board of Directors, or any member thereof, or by the record
holder or holders of at least ten percent (10%) of all shares entitled to vote
at the meeting. Any action otherwise required to be taken at a meeting of the
stockholders, except election of directors, may be taken without a meeting if a
consent in writing, setting forth the action so taken, shall be signed by
stockholders having at least a majority of the voting power.
ARTICLE ELEVEN . [CONTRACTS OF CORPORATION]. No contract or
other transaction between the corporation and any other corporation, whether or
not a majority of the shares of the capital stock of such other corporation is
owned by this corporation, and no act of this corporation shall in any way be
affected or invalidated by the fact that any of the directors of this
corporation are pecuniarily or otherwise interested in, or are directors or
officers of such other corporation. Any director of this corporation,
individually, or any firm of which such director may be a member, may be a party
to, or may be pecuniarily or otherwise interested in any contract or transaction
of the corporation; provided, however, that the fact that he or such firm is so
interested shall be disclosed or shall have been known to the Board of Directors
of this corporation, or a majority thereof; and any director of this corporation
who is also a director or officer of such other corporation, or who is so
interested, may be counted in determining the existence of a quorum at any
meeting of the Board of Directors of this corporation that shall authorize such
contract or transaction, and may vote thereat to authorize such contract or
transaction, with like force and effect as if he were not such director or
officer of such other corporation or not so interested.
ARTICLE.TWELVE. [LIABILITY OF DIRECTORS AND OFFICERS]. No
director or officer shall have any personal liability to the corporation or its
stockholders for damages for breach of fiduciary duty as a director or officer,
except that this Article Twelve shall not eliminate or limit the liability of a
director or officer for (i) acts or omissions which involve intentional
misconduct, fraud or a knowing violation of law, or (ii) the payment of
dividends in violation of the Nevada Revised Statutes.
IN WITNESS WHEREOF, the undersigned incorporator has hereunto
affixed her signature at Reno, Nevada this 7th day of October, 1998.
by /s/ "Amanda Cardinalli"
---------------------------
AMANDA CARDINALLI
STATE OF NEVADA }
: SS.
COUNTY OF WASHOE }
35
On the 7th day of October, 1998, before me, the undersigned,
a NOTARY PUBLIC in and for the State of Nevada, personally appeared AMANDA
CARDINALLI, known to me to be the person described in and who executed the
foregoing instrument, and who acknowledged to me that she executed the same
freely and voluntarily for the uses and purposes therein mentioned.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed
my official seal the day and year first above written.
by /s/ "Margaret Oliver"
--------------------------------
NOTARY PUBLIC
Residing in Reno, Nevada
My Commission Expires:
October 10, 1998
36
BY LAWS
EXHIBIT NO. 2 (B)
OF
CIGAR KING CORPORATION
A NEVADA CORPORATION
ARTICLE I
---------
OFFICES
SECTION 1. The registered office of this corporation shall be in the City of
Reno, State of Nevada.
SECTION 2. The Corporation may also have offices at such other places both
within and without the State of Nevada as the Board of Directors may from time
to time determine or the business of the corporation may require.
ARTICLE 2
---------
MEETINGS OF STOCKHOLDERS
SECTION 1. All annual meetings of the stockholders shall be held at the
registered office of the corporation or at such other place within or without
the State of Nevada as the Directors shall determine. Special meetings of the
stockholders may be held at such time and place within or without the State of
Nevada as shall be stated in the notice of the meeting, or in a duly executed
waiver of notice thereof.
SECTION 2. Annual meetings of the stockholders shall be held on the anniversary
date of incorporation each year if not a legal holiday and, and if a legal
holiday, then on the next secular day following, or at such other time as may be
set by the Board of Directors from time to time, at which the stockholders shall
elect by vote a Board of Directors and transact such other business as may
properly be brought before the meeting.
SECTION 3. Special meetings of the stockholders, for any purpose or purposes,
unless otherwise prescribed by statute or by the Articles of Incorporation, may
be called by the President or the Secretary, by resolution of the Board of
Directors or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the corporation issued and outstanding and
entitled to vote. Such request shall state the purpose of the proposed meeting.
SECTION 4. Notices of meetings shall be in writing and signed by the President
or Vice-President or the Secretary or an Assistant Secretary or by such other
person or persons as the Directors shall designate. Such notice shall state the
purpose or purposes for which the
37
meeting is called and the time and the place, which may be within or without
this State, where it is to be held. A copy of such notice shall be either
delivered personally to or shall be mailed, postage prepaid, to each stockholder
of record entitled to vote at such meeting not less than ten nor more than sixty
days before such meeting. If mailed, it shall be directed to a stockholder at
his address as it appears upon the records of the corporation and upon such
mailing of any such notice, the service thereof shall be complete and the time
of the notice shall begin to run from the date upon which such notice is
deposited in the mail for transmission to such stockholder. Personal delivery of
any such notice to an officer of the corporation or association, or to any
member of a partnership shall constitute delivery of such notice to such
corporation, association or partnership. In the event of the transfer of stock
after delivery of such notice of and prior to the holding of the meeting, it
shall not be necessary to deliver or mail such notice of the meeting to the
transferee.
SECTION 5. Business transactions at any special meeting of stockholders shall be
limited to the purpose stated in the notice.
SECTION 6. The holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the Articles of
Incorporation. If, however, such quorum shall not be present or represented at
any meeting of the stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcements at the
meeting, until a quorum shall be presented or represented. At such adjourned
meetings at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified.
SECTION 7. When a quorum is present or represented at any meeting, the vote of
the holders of 10% of the stock having voting power present in person or
represented by proxy shall be sufficient to elect Directors or to decide any
question brought before such meeting, unless the question is one upon which by
express provision of the statute or of the Articles of Incorporation, a
different vote shall govern and control the decision of such question.
SECTION 8. Each stockholder of record of the corporation shall be entitled at
each meeting of the stockholders to one vote for each share standing in his name
on the books of the corporation. Upon the demand of any stockholder, the vote
for Directors and the vote upon any question before the meeting shall be by
ballot.
SECTION 9. At any meeting of the stockholders any stockholder may be represented
and vote by a proxy or proxies appointed by an instrument in writing. In the
event that any such instrument in writing shall designate two or more persons to
act as proxies, a majority of such persons present at the meeting, or, if only
one shall be present, then that one shall have and may exercise all the powers
conferred by such written instruction upon all of the persons so designated
unless the instrument shall otherwise provide. No proxy or power of attorney to
vote shall be voted at a meeting of the stockholders unless it shall have been
filed with the Secretary of the meeting when required by the inspectors of
election. All questions regarding the qualifications of voters, the validity of
proxies and the acceptance of or rejection of votes
38
shall be decided by the inspectors of election who shall be appointed by the
Board of Directors, or if not so appointed, then by the presiding officer at the
meeting.
SECTION 10. Any action which may be taken by the vote of the stockholders at a
meeting may be taken without a meeting if authorized by the written consent of
stockholders holding at least a majority of the voting power, unless the
provisions of the statute or the Articles of Incorporation require a greater
proportion of voting power to authorize such action in which case such greater
proportion of written consents shall be required.
ARTICLE 3
---------
DIRECTORS
SECTION 1. The business of the corporation shall be managed by its Board of
Directors which may exercise all such powers of the corporation and do all such
lawful acts and things as are not by statute or by the Articles of Incorporation
or by these Bylaws directed or required to be exercised or done by the
stockholders.
SECTION 2. The number of Directors which shall constitute the whole board shall
be riot less than one and not more than eight. The number of Directors may from
time to time be increased or decreased to not less than one nor more than eight
by action of the Board of Directors. The Directors shall be elected at the
annual meeting of the stockholders and except as provided in section 2 of this
Article, each Director elected shall hold office until his successor is elected
and qualified. Directors need not be stockholders.
SECTION 3. Vacancies in the Board of Directors including those caused by an
increase in the number of Directors, may be filed by a majority of the remaining
Directors, though less than a quorum, or by a sole remaining Director, and each
Director so elected shall hold office until his successor is elected at the
annual or a special meeting of the stockholders. The holders of a two-thirds of
the outstanding shares of stock entitled to vote may at any time peremptorily
terminate the term of office of all or any of the Directors by vote at a meeting
called for such purpose or by a written statement filed with the Secretary or,
in his absence, with any other officer. Such removal shall be effective
immediately, even if successors are not elected simultaneously and the vacancies
on the Board of Directors resulting therefrom shall only be filled from the
stockholders.
A vacancy or vacancies on the Board of Directors shall be
deemed to exist in case of death, resignation or removal of any Director, or if
the authorized number of Directors be increased, or if the stockholders fail at
any annual or special meeting of stockholders at which any Director or Directors
are elected to elect the full authorized number of Directors to be voted for at
that meeting.
The stockholders may elect a Director or Directors at any time
to fill any vacancy or vacancies not filled by the Directors. If the Board of
Directors accepts the resignation of a Director tendered to take effect at a
future time, the Board or the stockholders shall have power to elect a successor
to take office when the resignation is to become effective
39
No reduction of the authorized number of Directors shall have
the effect of removing any Director prior to the expiration of his term of
office.
ARTICLE 4
---------
MEETING OF THE BOARD OF DIRECTORS
SECTION 1. Regular meetings of the Board of Directors shall be held at any place
within or without the State which has been designated from time to time by
resolution of the Board or by written consent of all members of the Board. In
the absence of such designation regular meetings shall be held at the registered
office of the corporation. Special meetings of the Board may be held either at a
place so designated or at the registered office.
SECTION 2. The first meeting of each newly elected Board of Directors shall be
held immediately following the adjournment of the meeting of stockholders and at
the place thereof. No notice of such meeting shall be necessary to the Directors
in order legally to constitute the meeting, provided a quorum be present. In the
event such meeting is not so held, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the Board of Directors.
SECTION 3. Regular meetings of the Board of Directors may be held without call
or notice at such time and at such place as shall from time to time be fixed and
determined by the Board of Directors.
SECTION 4. Special meetings of the Board of Directors may be called by the
Chairman or the President or by the Vice-President or by any two Directors.
Written notice of the time and place of special meetings shall be delivered
personally to each Director, or sent to each Director by mail or by other form
of written communication, charges prepaid, addressed to him at his address as it
is shown upon the records or if not readily ascertainable, at the place in which
the meetings of the Directors are regularly held. In case such notice is mailed
or telegraphed, it shall be deposited in the postal service or delivered to the
telegraph company at least forty-eight (48) hours prior to the time of the
holding of the meeting. In case such notice is delivered or taxed, it shall be
so delivered or taxed at least twenty-four (24) hours prior to the time of the
holding of the meeting. Such mailing, telegraphing, delivery or taxing as above
provided shall be due, legal and personal notice of such Director.
SECTION 5. Notice of the time and place of holding an adjourned meeting need not
be given to the absent Directors if the time and place be fixed at the meeting
adjourned.
SECTION 6. The transaction of any meeting of the Board of Directors, however
called and noticed or wherever held, shall be as valid as though transacted at a
meeting duly held after regular call and notice, if a quorum be present, and if,
either before or after such meeting, each of the Directors not present signs a
written waiver of notice, or a consent of holding such meeting, or approvals of
the minutes thereof. All such waivers, consents or approvals shall be filed with
the corporate records or made a part of the minutes of the meeting.
40
SECTION 7. The majority of the authorized number of Directors shall be necessary
to constitute a quorum for the transaction of business, except to adjourn as
hereinafter provided. Every act or decision done or made by a majority of the
Directors present at a meeting duly held at which a quorum is present shall be
regarded as the act of the Board of Directors, unless a greater number be
required by law or by the Articles of Incorporation. Any action of a majority,
although not at a regularly called meeting, and the record thereof, if assented
to in writing by all of the other members of the Board shall be as valid and
effective in all respects as if passed by the Board in regular meeting.
SECTION 8. A quorum of the Directors may adjourn any Directors meeting to meet
again at stated day and hour; provided, however, that in the absence of a
quorum, a majority of the Directors present at any Directors meeting, either
regular or special, may adjourn from time to time until the time fixed for the
next regular meeting of the Board.
ARTICLE 5
---------
COMMITTEES OF DIRECTORS
SECTION 1. The Board of Directors may, by resolution adopted by a majority of
the whole Board, designate one or more committees of the Board of Directors,
each committee to consist of two or more of the Directors of the corporation
which, to the extent provided in the resolution, shall and may exercise the
power of the Board of Directors in the management of the business and affairs of
the corporation and may have power to authorize the seal of the corporation to
be affixed to all papers which may require it. Such committee or committees
shall have such name or names as may be determined from time to time by the
Board of Directors. The members of any such committee present at any meeting and
not disqualified from voting may, whether or not they constitute a quorum,
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any absent or disqualified member. At meetings of such
committees, a majority of the members or alternate members at any meeting at
which there is a quorum shall be the act of the committee.
SECTION 2. The committee shall keep regular minutes of their proceedings and
report the same to the Board of Directors.
SECTION 3. Any action required or permitted to be taken at any meeting of the
Board of Directors or of any committee thereof may be taken without a meeting if
a written consent thereto is signed by all members of the Board of Directors or
of such committee, as the case may be, and such written consent is filed with
the minutes of proceedings of the Board or committee.
ARTICLE 6
---------
COMPENSATION OF DIRECTORS
SECTION 1. The Directors may be paid their expenses of attendance at each
meeting of the Board of Directors and may be paid a fixed sum for attendance at
each meeting of the Board of Directors or a stated salary as Director. No such
payment shall preclude any Director
41
from serving the corporation in any other capacity and receiving compensation
therefore. Members of special or standing committees may be allowed like
reimbursement and compensation for attending committee meetings.
ARTICLE 7
---------
NOTICES
SECTION 1. Notices to Directors and stockholders shall be in writing and
delivered personally or mailed to the Directors or stockholders at their
addresses appearing on the books of the corporation. Notices to Directors may
also be given by fax and by telegram. Notice by mail, fax or telegram shall be
deemed to be given at the time when the same shall be mailed.
SECTION 2. Whenever all parties entitled to vote at any meeting, whether of
Directors or stockholders, consent, either by a writing on the records of the
meeting or filed with the Secretary, or by presence at such meeting or oral
consent entered on the minutes, or by taking part in the deliberations at such
meeting without objection, the doings of such meeting shall be as valid as if
had at a meeting regularly called and noticed, and at such meeting any business
may be transacted which is not excepted from the written consent to the
consideration of which no objection for want of notice is made at the time, and
if any meeting be irregular for want of notice or such consent, provided a
quorum was present at such meeting, the proceedings of said meeting may be
ratified and approved and rendered likewise valid and the irregularity or defect
therein waived by a writing signed by all parties having the right to vote at
such meeting; and such consent or approval of stockholders may be by proxy or
attorney, but all such proxies and powers of attorney must be in writing.
SECTION 3. Whenever any notice whatever is required to be given under the
provisions of the statute, of the Articles of Incorporation or of these Bylaws,
a waiver thereof in writing, signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE 8
---------
OFFICERS
SECTION 1. The officers of the corporation shall be chosen by the Board of
Directors and shall be a President, a Secretary and a Treasurer. Any person may
hold two or more offices.
SECTION 2. The Board of Directors at its first meeting after each annual meeting
of stockholders shall choose a Chairman of the Board who shall be a Director,
and shall choose a President, a Secretary and a Treasurer, none of whom need be
Directors.
SECTION 3. The Board of Directors may appoint a Vice-Chairman of the Board,
Vice-Presidents and one or more Assistant Secretaries and Assistant Treasurers
and such other officers and agents as it shall deem necessary who shall hold
their offices for such terms and
42
shall exercise such powers and perform such duties as shall be determined from
time to time by the Board of Directors.
SECTION 4. The salaries and compensation of all officers of the corporation
shall be fixed by the Board of Directors.
SECTION 5. The officers of the corporation shall hold office at the pleasure of
the Board of Directors. Any officer elected or appointed by the Board of
Directors may be removed any time by the Board of Directors. Any vacancy
occurring in any office of the corporation by death, resignation, removal or
otherwise shall be filled by the Board of Directors.
SECTION 6. The CHAIRMAN OF THE BOARD shall preside at meetings of the
stockholders and the Board of Directors, and shall see that all orders and
resolutions of the Board of Directors are carried into effect.
SECTION 7. The VICE-CHAIRMAN shall, in the absence or disability of the Chairman
of the Board, perform the duties and exercise the powers of the Chairman of the
Board and shall perform other such duties as the Board of Directors may from
time to time prescribe.
SECTION 8. The PRESIDENT shall be the chief executive officer of the corporation
and shall have active management of the business of the corporation. He shall
execute on behalf of the corporation all instruments requiring such execution
except to the extent the signing and execution thereof shall be expressly
designated by the Board of Directors to some other officer or agent of the
corporation.
SECTION 9. The VICE-PRESIDENTS shall act under the direction of the President
and in absence or disability of the President shall perform the duties and
exercise the powers of the President. They shall perform such other duties and
have such other powers as the President or the Board of Directors may from time
to time prescribe. The Board of Directors may designate one or more Executive
Vice-Presidents or may otherwise specify the order of seniority of the
Vice-Presidents. The duties and powers of the President shall descend to the
Vice-Presidents in such specified order of seniority.
SECTION 10. The SECRETARY shall act under the direction of the President.
Subject to the direction of the President he shall attend all meetings of the
Board of Directors and all meetings of the stockholders and record the
proceedings. He shall perform like duties for the standing committees when
required. He shall give, or cause to be given, notice of all meetings of the
stockholders and special meetings of the Board of Directors, and will perform
other such duties as may be prescribed by the President or the Board of
Directors.
SECTION 11. The ASSISTANT SECRETARIES shall act under the direction of the
President. In order of their seniority, unless otherwise determined by the
President or the Board of Directors, they shall, in the absence or disability of
the Secretary, perform the duties and exercise the powers of the Secretary. They
shall perform other such duties and have such other powers as the President and
the Board of Directors may from time to time prescribe.
43
12. SECTION The TREASURER shall act under the direction of the President.
Section Subject to the direction of the President he shall have custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all money and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the corporation as may be ordered by
the President or the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as Treasurer and of the financial condition of the
corporation.
If required by the Board of Directors, the Treasurer shall give
the corporation a bond in such sum and with such surety as shall be satisfactory
to the Board of Directors for the faithful performance of the duties of his
office and for the restoration to the corporation, in case of his death,
resignation, retirement or removal from office, of all books, papers, vouchers,
money and other property of whatever kind in his possession or under his control
belonging to the corporation.
SECTION 13. The ASSISTANT TREASURERS in order of their seniority, unless
otherwise determined by the President or the Board of Directors, shall, in the
absence or disability of the Treasurer, perform the duties and exercise the
powers of the Treasurer. They shall perform such other duties and have such
other powers as the President or the Board of Directors may from time to time
prescribe.
ARTICLE 9
---------
CERTIFICATES OF STOCK
SECTION 1. Every stockholder shall be entitled to have a certificate signed by
the President or a Vice- President and the Treasurer or an Assistant Treasurer,
or the Secretary or an Assistant Secretary of the corporation, certifying the
number of shares owned by him in the corporation. If the corporation shall be
authorized to issue more than one class of stock or more that one series of any
class, the designations, preferences and relative, participating, optional or
other special rights of the various classes of stock or series thereof and the
qualifications, limitations or restrictions of such rights, shall be set forth
in full or summarized on the face or back of the certificate which the
corporation shall issue to represent such stock.
SECTION 2. If a certificate is signed (a) by a transfer agent other than the
corporation or its employees or (b) by a registrar other than the corporation or
its employees, the signatures of the officers of the corporation may be
facsimiles. In case any officer who has signed or whose facsimile signatures
have been placed upon a certificate shall cease to be such officer before such
certificate is issued, such certificate may be issued with the same effect as
though the person had not ceased to be such officer. The seal of the
corporation, or a facsimile thereof, may, but need not be, affixed to
certificates of stock.
SECTION 3. The Board of Directors may direct a new certificate or certificates
to be issued in place of any certificate or certificates theretofore issued by
the corporation alleged to
44
have been lost or destroyed upon the making of an affidavit of that fact by the
person claiming the certificate of stock to be lost or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or give the corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the corporation
with respect to the certificate alleged to have been lost or destroyed.
SECTION 4. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duty endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the corporation, if it is satisfied that all provisions of the laws and
regulations applicable to the corporation regarding transfer and ownership of
shares have been compiled with, to issue a new certificate to the person
entitled thereto, cancel the old certificate and record the transaction upon its
books.
SECTION 5. The Board of Directors may fix in advance a date not exceeding sixty
(60) days nor less than ten (IO) days preceding the date of any meeting of
stockholders, or the date of the payment of any dividend, or the date of the
allotment of rights, or the date when any change or conversion or exchange of
capital stock shall go into effect, or a date in connection with obtaining the
consent of stockholders for any purpose, as a record date for the termination of
the stockholders entitled to notice of and to vote at any such meeting, and any
adjournment thereof, or entitled to receive payment of any such dividend, or to
give such consent, and in the such case, such stockholders, and only such
stockholders as shall be stockholders of record on the date so fixed, shall be
entitled to notice of and to vote as such meeting, or any adjournment thereof,
or to receive such payment of dividend, or to receive such allotment of rights,
or to exercise such rights, or to give such consent, as the case may be,
notwithstanding any transfer of any stock on the books of the corporation after
such record date fixed as aforesaid.
SECTION 6. The corporation shall be entitled to recognize the person registered
on its books as the owner of the share to be the exclusive owner for all
purposes including voting and dividends, and the corporation shall not be bound
to recognize any equitable or other claims to or interest in such shares or
shares on the part of any -other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of Nevada.
ARTICLE 10
----------
GENERAL PROVISIONS
SECTION 1. Dividends upon the capital stock of the corporation, subject to the
provisions of the Articles of Incorporation, if any, may be declared by the
Board of Directors at any regular or special meeting, pursuant to law. Dividends
may be paid in cash, in property or in shares of the capital stock, subject to
the provisions of the Articles of Incorporation.
SECTION 2. Before payment of any dividend, there may be set aside out of any
funds of the corporation available for dividends such sum or sums as the
Directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for
45
equalizing dividends or for repairing and maintaining any property of the
corporation, or for such other purpose as the Directors shall think conducive to
the interests of the corporation, and the Directors may modify or abolish any
such reserve in the manner in which it was created.
SECTION 3. All checks or demands for money and notes of the corporation shall be
signed by such officer or officers or such other person or persons as the Board
of Directors may from time to time designate.
SECTION 4. The fiscal year of the corporation shall be fixed by resolution of
the Board of Directors.
SECTION 5. The corporation may or may not have a corporate seal, as may be from
time to time determined by resolution of the Board of Directors. If a corporate
seal is adopted, it shall have inscribed thereon the name of the corporation and
the words "Corporate Seal" and "Nevada". The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or in any manner reproduced.
ARTICLE 11
----------
INDEMNIFICATION
Every person who was or is a party or is a threatened to be made a
party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he or a
person of whom he is the legal representative is or was a Director or officer of
the corporation or is or was serving at the request of the corporation or for
its benefit as a Director or officer of another corporation, or as its
representative in a partnership, joint venture, trust or other enterprise, shall
be indemnified and held harmless to the fullest legally permissible under the
General Corporation Law of the State of Nevada from time to time against all
expenses, liability and loss (including attorney's fees, judgments, fines and
amounts paid or to be paid in settlement) reasonably incurred or suffered by him
in connection therewith. The expenses of officers and Directors incurred in
defending a civil or criminal action, suit or proceeding must be paid by the
corporation as they are incurred and in advance of the final disposition of the
action, suit or proceeding upon receipt of an undertaking by or on behalf of the
Director or officer to repay the amount if it is ultimately determined by a
court of competent jurisdiction that he is not entitled to be indemnified by the
corporation. Such right of indemnification shall be a contract right which may
be enforced in any manner desired by such person. Such right of indemnification
shall not be exclusive of any other right which such Directors, officers or
representatives may have or hereafter acquire and, without limiting the
generality of such statement, they shall be entitled to their respective rights
of indemnification under any bylaw, agreement, vote of stockholders, provision
of law or otherwise, as well as their rights under this Article.
The Board of Directors may cause the corporation to purchase and
maintain insurance on behalf of any person who is or was a Director or officer
of the corporation, or is or was serving at the request of the corporation as a
Director or officer of another corporation, or as its representative in a
partnership, joint venture. trust or other enterprise against any liability
46
asserted against such person and incurred in any such capacity or arising out of
such status, whether or not the corporation would have the power to indemnify
such person.
The Board of Directors may form time to time adopt further Bylaws with
respect to indemnification and amend these and such Bylaws to provide at all
times the fullest indemnification permitted by the General Corporation Law of
the State of Nevada.
ARTICLE 12
----------
AMENDMENTS
SECTION 1. The Bylaws may be amended by a majority vote of all the stock issued
and outstanding and entitled to vote at any annual or special meeting of the
stockholders, provided notice of intention to amend shall have been contained in
the notice of the meeting.
SECTION 2. The Board of Directors by a majority vote of the whole Board at any
meeting may amend these Bylaws, including Bylaws adopted by the stockholders,
but the stockholders may from time to time specify particulars of the Bylaws
which shall not be amended by the Board of Directors.
APPROVED AND ADOPTED OCTOBER 22, 1998.
CERTIFICATE OF THE SECRETARY
----------------------------
I, Michael Wolf, hereby certify that I am the Secretary of CIGAR KING
CORPORATION, and the foregoing Bylaws, consisting of 8 pages, constitute the
code of Bylaws of this company as duly adopted at a regular meeting of the Board
of Directors of the corporation held on October 22, 1998.
IN WITNESS WHEREOF, I have hereunto subscribed my name on October 22, 1998.
/s/ "Michael Wolf"
- ------------------------
Michael Wolf - Secretary
47
Exhibit 3(a)
NOT VALID UNLESS COUNTERSIGNED BY TRANSFER AGENT
INCORPORATED UNDER THE LAWS OF THE STATE OF NEVADA
SPECIMEN STOCK CERTIFICATES
NUMBER CUSIP NO. 171788 10 2
SHARES
CIGAR KING
Authorized Common Stock: 200,000,000 Shares
Par Value: $0.001
THIS CERTIFIES THAT
IS THE RECORD HOLDER OF
-Shares of CIGAR KING CORPORATION Common Stock -
transferable on the books of the Corporation in person or by duly authorized
attorney upon surrender of this Certificate properly endorsed. This Certificate
is not valid until countersigned by the Transfer Agent and registered by the
Registrar.
Witness the facsimile seal of the Corporation and the
facsimile of its duly authorized officers.
Dated:
- -----------------------------------
President
- -----------------------------------
Secretary
Not valid unless countersigned by transfer agent
Countersigned Registered:
NEVADA AGENCY AND TRUST COMPANY
50 WEST LIBERTY STREET, SUITE 880
RENO, NEVADA, 89501
By -----------------------------
Authorized Signature
48
EXHIBIT 6 (a) (i)
TRANSFER AGENT AND REGISITRAR AGREEMENT
---------------------------------------
THIS AGREEMENT made and entered into this 22nd day of October, 1998, by
and between:
NEVADA AGENCY AND TRUST COMPANY, 50 West Liberty Street, Suite 880, Reno, Nevada
89501, hereinafter called "TRANSFER AGENT," and
CIGAR KING CORPORATION, 1100 Melville Street, Suite #320, Vancouver, B.C. V6E
4A6, a Nevada corporation, hereinafter called "COMPANY."
NOW THEREFORE, for valuable consideration and the mutual promises
herein contained, the parties hereto agree as follows, to wit:
1. [APPOINTMENT OF TRANSFER AGENT] The COMPANY hereby appoints TRANSFER
AGENT as the Transfer Agent and Registrar for the COMPANY'S Common Stock,
commencing on this 22nd day of October, 1998.
2. [COMPANY'S DUTY] The COMPANY agrees to deliver to TRANSFER AGENT a
complete up-to-date stockholder list showing the name of the individual
stockholder, current address, the number of shares and the certificate numbers,
it being specifically understood and agreed that the TRANSFER AGENT is not to be
held responsible for any omissions or error, that may leave occurred prior to
this Agreement whether on the part of the COMPANY itself or its previous
transfer agent or agents. The COMPANY hereby agrees to indemnify TRANSFER AGENT
in this regard.
3. [STOCK CERTIFICATES] The COMPANY agrees to provide an adequate number
of stock certificates to handle the COMPANY'S transfers oil a current basis.
Upon receipt of TRANSFER AGENT'S request, the COMPANY agrees to furnish
additional stock certificates as TRANSFER AGENT deems necessary considering the
volume of transfers. The stork certificates shall be supplied at COMPANY'S cost.
The TRANSFER AGENT agrees to order stock certificates from its printer upon
request of the COMPANY.
4. [TRANSFER AGENT DUTIES] TRANSFER AGENT agrees to handle the COMPANY'S
transfers, record the same, and maintain a ledger, together with a file
containing all correspondence relating to said transfers, which records shall be
kept confidential and be available to the COMPANY and its Board of Directors, or
to any person specifically authorized by the Board of Directors to review the
records which shall be made available by TRANSFER AGENT during the regular
business hours.
5. [TRANSFER AGENT REGISTRATION] TRANSFER AGENT warrants that it is
registered as a Transfer Agent with the United Stakes Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended.
49
6. [STOCKHOLIDER LIST] From time to time, as necessary for Company
stockholders meeting or mailings, the TRANSFER AGENT will certify and make
available to the current, active stockholders list for COMPANY purposes. it is
agreed that a reasonable charge for supplying such list will be made by TRANSFER
AGENT to the COMPANY. It is further agreed that in the event the TRANSFER AGENT
received a request or a demand from a stockholder or the attorney of agent for a
stockholder, for a list of stockholders, the TRANSFER AGENT will serve notice of
such request by certified mail to the COMPANY. The COMPANY will have forty-eight
(48) hours to respond in writing to the TRANSFER AGENT. If the COMPANY orders
the TRANSFER AGENT to withhold delivery of a list of stockholders as requested,
the TRANSFER AGENT agrees to follow the orders of the COMPANY. The COMPANY will
then follow the procedure set forth in the Uniform Commercial Code to restrain
the TRANSFER AGENT from making delivery of a stockholders list.
7. [TRANSFER FEE] TRANSFER AGENT agrees to assess and collect from the
person requesting a transfer and/or the transferror, a fee of Fifteen and No/100
dollars ($15.OO) for each stock certificate issued, except original issues of
stock or warrant certificates, which fees shall be paid by the COMPANY. This fee
may be decreased or increased at any time by the TRANSFER AGENT. This fee shall
be the property of the TRANSFER AGENT.
8. [ANNUAL FEE] The COMPANY agaves to pay the TRANSFER AGENT an annual fee
of TWELVE HUNDRED DOLLARS ($1,200.00) each year. This fee reimburses the
TRANSFER AGENT for the expense and time required to respond to the written and
oral inquiries from brokers and the investing public, as well as maintaining the
transfer books and records of the corporation. The annual fee will be due on 1st
of July of each year and is subject to annual review.
8 [TERMINATION] This Agreement may be terminated by either party given
written notice of such termination to the other party at least ninety (90) days
before the effective date. The TRANSFER AGENT shall return all of the transfer
records to the COMPANY and its duties and obligations as TRANSFER AGENT shall
cease at that time. The TRANSFER AGENT will be paid a Termination Fee of $1.00
per registered stockholder of the Company at the time the written termination
notice is served.
I0. [COMPANY STA'I'US] The COMPANY will promptly advise the TRANSFER AGENT
of any changes or amendments to the Articles of Incorporation, any significant
changes in corporate status, changes in officers, etc., and of all changes in
filing status with the Securities and Exchange Commission, or any state entity,
and to hold the, TRANSFER AGENT harmless from its failure to do so.
II- [INDEMNIFICATION OF TRANSFER AGENT] The COMPANY agrees to indemnify
and hold harmless the TRANSFER AGENT, from any and all loss, liability of
damage, including reasonable attorneys' fees and expenses, arising out of, or
resulting from the assertion against the TRANSFER AGENT of any claims, debts or
obligations in connection with any of the TRANSFER AGENT'S duties as set forth
in the Agreement, and specifically it is understood that the
50
TRANSFER AGENT shall have the right to apply to independent counsel at the
COMPANY'S expense in following the COMPANY'S directions and orders.
12. [COUNTERPARTS] This Agreement may be executed in any number of
counterparts, each of which, when executed and delivered, shall be an original,
but all such counterparts shall constitute one and the same instrument.
13. [NOTICE] Any notice under this Agreement shall be deemed to have been
sufficiently given if sent by registered or certified mail, postage prepaid,
addressed as follows:
TO THE COMPANY:
Michael J. Kennaugh, Director
CIGAR KING CORPORATION
320 - 1100 Melville Street
Vancouver, B.C. V6E 4A6
TO THE TRANSFER AGENT:
NEVADA AGENCY AND TRUST COMPANY
50 West Liberty Street, Suite 880 Reno,
Nevada 89501
14. [MERGER CLAUSE] This Agreement supersedes all prior agreements and
understandings between the parties and may not be changed or terminated orally,
and no attempted change, termination or waiver of any of the provisions hereof
shall binding unless in writing and signed by the parties hereto.
15. [GOVERNING LAW] This Agreement shall be governed by and construed in
accordance with the laws of the State of Nevada.
THIS AGREEMENT has been executed by the parties hereto as of the day and year
1st above written, by the duly authorized officer or officers of said parties,
and the same will be binding upon the assigns and successors in interest of the
parties hereto.
NEVADA AGENCY AND TRUST COMPANY
TRANSFER AGENT
BY /S/ "AMANDA CARDINALLI"
-------------------------------
AMANDA CARDINALLI, VICE PRESIDENT
CIGAR KING CORPORATION
COMPANY
BY /S/ "MICHAEL J. KENNAUGH"
-------------------------------
MICHAEL J. KENNAUGH
DIRECTOR
51
AGREEMENT TO ACQUIRE
100% INTEREST IN
THE CONCEPT
THIS AGREEMENT made on this 24th day of November, 1998
BETWEEN:
ARCHER INVESTMENTS INC., a Niue corporation with offices at No. 2
Commercial Centre Square, Alofi, Niue
(known herein as "Archer")
ON THE FIRST PART
AND:
CIGAR KING CORPORATION, a Nevada corporation with offices at 880 - 50
West Liberty Street, Reno, Nevada, USA, 89501
(known herein as "Cigar King")
ON THE SECOND PART
WHEREAS:
A. Archer has developed a concept for selling cigars through a kiosk system
(herinafter called "Concept") and wished to sell these rights to Cigar King; and
B. Cigar King wishes to purchase the rights, business plan and all other
material from Archer under the terms and conditions set out below.
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the mutual
covenants and agreements herein contained and the sum of One Dollar ($1.00) paid
to Archer by Cigar King and the sum of One Dollar ($1.00) paid by Cigar King to
Archer (the receipt of which are hereby acknowledged), the parties thereto agree
as follows:
1. DEFINITIONS
52
1.01 In this Agreement, including the recitals and schedules hereto, unless
there is something in the subject matter or context inconsistent therewith, the
following words and expressions shall have the following meanings:
(a) "AGREEMENT" means this Agreement to Acquire 100% Interest in the Cigar King
Concept.
(b) "CIGAR KING" is the name to be give to the Concept under the terms of this
Agreement.
(c) "CONCEPT" means the method by which the cigars and related items will be
marketed - through a system of individual kiosks.
(d) "INTEREST" means a one hundred percent (100%) in the rights to the Concept.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS
2.01 Archer represents and warrants to Cigar King that:
(a) it is a company duly incorporated, organized and validly subsisting under
the laws of its incorporating jurisdiction;
(b) it has full power and authority to carry on its business and to enter into
this Agreement and any agreement or instrument referred to or contemplated
by this Agreement;
(c) neither the execution and delivery of this Agreement nor any of the
agreements referred to herein or contemplated hereby, nor the consummation
of the transactions hereby contemplated conflict with, result in the breach
of or accelerate the performance required by, any agreement to which it is
a party; and
(d) the execution and delivery of this Agreement and the agreements
contemplated hereby will not violate or result in the breach of the laws of
any jurisdiction applicable or pertaining thereto or of its constating
documents.
2.02 Cigar King represents and warrants to Archer that:
(a) it is a company duly incorporated, organized and validly subsisting under
the laws of its incorporating jurisdiction;
(b) it has full power and authority to carry on its business and to enter into
this Agreement and any agreement or instrument referred to or contemplated
by this Agreement;
(c) neither the execution and delivery of this Agreement nor any of the
agreements referred to herein or contemplated hereby, nor the consummation
of the transactions hereby contemplated conflict with, result in the breach
of or accelerate the performance required by, any agreement to which it is
a party; and
53
(d) the execution and delivery of this Agreement and the agreements
contemplated hereby will not violate or result in the breach of the
laws of any jurisdiction applicable or pertaining thereto or of its
constating documents.
2.03 The representations, warranties and covenants hereinbefore set out are
conditions on which the parties have relied in entering into this
Agreement and shall survive the acquisition of any interest in the
Claim by Archer and Cigar King and any loss, damage, cause of action
and suits arising out of or in connection with any breach of any
representation warranty, covenant, agreement or condition made by them
and contained in this Agreement.
3. TERMS AND CONDITIONS OF PURCHASE
3.01 On the part of Cigar King:
a. Cigar King will acquire a one hundred percent (100%) interest
in the Concept from Archer for the sum of fifty thousand
dollars ($50,000) payable on or before December 31, 1998 by way
of money order, draft or wire transfer to Archer's bank
account;
b. Cigar King will be granted the rights to use the name of "Cigar
King" in any association with the Concept;
c. Cigar King will be able to market the Concept anywhere in the
world without Archer's approval;
d. Cigar King will receive from Archer any reports, analysis,
blueprints and documentation held by Archer relating to the
developing, marketing and sale of the Concept; and
e. Cigar King will save harmless Archer from any liabilities
incurred subsequent to the sales by Archer of the Concept to
Cigar King.
3.02 On the part of Archer:
a. Archer will immediately upon receipt of the fifty thousand
dollars ($50,000) payment from Cigar King send to Cigar King
all information, reports, blueprints and other documentation it
has in its possession;
b. Archer will undertake to prepare and deliver to Cigar King a
business plan under the name of "Cigar King";
c. Archer will, upon payment, have no further rights or interest
in the Concept;
d. Archer will save harmless Cigar King from any and all legal
actions, liabilities or encumbrances incurred prior to Cigar
King making the required payment noted in (a) above; and
54
e. Archer will not enter into any similar or related cigar
concepts and will not participate in the development the
Concept with any third parties.
4. AREA OF INTEREST
4.01 In respect to this Agreement the area of interest is defined the entire
world as mankind knows it today.
5. TERMINATION OF AGREEMENT
5.01 This Agreement shall terminate:
(a) if Cigar King fails to meet the terms and conditions in paragraphs
3.01; or
(c) if either Archer and/or Cigar King gives notice in writing to that
effect that either and/or both of them wish to terminate the Agreement
prior to the payment being made as set forth in 3.01 above.
6. FORCE MAJEURE
6.01 No party will be liable for its failure to perform any of its
obligations under this Agreement due to a cause beyond its reasonable control
(except those caused by its own lack of funds)including, but not limited to acts
of God, fire, storm, flood, explosions, strikes, lockouts or other industrial
disturbances, act of the public enemy, riots, laws, rules and regulations or
orders of any duly constituted governmental authority, including environmental
protection agencies, or nonavailability of materials or transportation.
6.02 All time limits imposed by this Agreement will be extended by a period
of equivalent to the period of delay resulting from events described in
paragraph 6.01 hereof but may not exceed ninety (90) days in total.
6.03 A party relying on the provisions of paragraph 6.01 hereof will take
all reasonable steps to eliminate any of the events mentioned in 6.01 and, if
possible, will perform its obligations under this Agreement as far as practical,
but nothing herein will require such party to settle or adjust any labour
dispute or to question or to test the validity of any law, rule, regulation or
order of any duly constituted governmental authority or to complete its
obligations under this Agreement if an event under 6.01 renders completion
impossible.
7. NOTICE
7.01 Any notice, direction, cheque or other instructions required or
permitted to be given under this Agreement shall be in writing and may be given
by the delivery of the same or by mailing the same by prepaid registered or
certified mail or by sending the same by telegram, telex, telecommunication or
other similar forms of communication including facsimile, in each case
55
addressed to the intended recipient at the address of the respective party set
out on the front page hereof.
7.02 Any notice, direction, cheque or other instrument aforesaid will, if
delivered, be deemed to have been given and received on the day it was
delivered, and if mailed, be deemed to have been given and received on the fifth
business day following the day of mailing, except in the event of a disruption
of the postal service in which event notice will be deemed to be received only
when actually received and, if sent by telegram, telex, fax machine,
telecommunication or other similar form of communication, be deemed to have been
given or received on the day it was so sent.
7.03 Any party may at any time give to the other notice in writing of any
changes or address of the party giving such notice and from and after the giving
of such notice the address or addresses therein specified will be deemed to be
the address of such party for the purposes of giving notice hereunder.
8. FURTHER ASSURANCES
8.01 Each of the parties hereto shall from time to time and at all times do
all such further acts and execute and deliver all further deeds and documents as
shall be reasonably required in order to fully perform and carry out the terms
of this Agreement. For greater certainty this section shall not be construed as
imposing any obligation on any party to provide guarantees.
9. ENTIRE AGREEMENT
9.01 This Agreement embodies the entire agreement and understanding between
Archer and Cigar King and supersedes all prior agreements and undertakings,
whether oral or written, relative to the subject matter hereof.
10. AMENDMENT
10.01 This Agreement may be changed orally but only by an agreement in
writing, executed under seal, by the party or parties against which enforcement,
waiver, change, modification or discharge is sought.
11. ARBITRATION
11.01 If any question, differences or disputes shall arise between the
parties in respect of any matters arising under this Agreement or in relation to
the construction hereof the same shall be determined by the award of three
arbitrators to be named as follows:
(a) the party sharing one side of the dispute shall name an arbitrator and
give notice thereof to the pay sharing the other side of the dispute;
(b) the party sharing the other side of the dispute shall, within 14 days
of receipt of the notice, name an arbitrator; and
56
(c) the two arbitrators so named shall, within 15 days of the naming of the
latter of them, select a third arbitrator.
The decision of the majority of these arbitrators shall be made within 30 days
after the selection of the latter of them. The expense of the arbitration shall
be borne equally by Archer and Cigar King. If the parties on either side of the
dispute fail to name an arbitrator within the time limit or proceed with the
arbitration, the arbitrator named may decide the question. The place of
arbitration shall be Reno, Nevada, United States.
12. ENUREMENT
12.01 This Agreement shall enure to the benefit and be binding upon the
parties hereto and their respective successors and permitted assigns.
13. GOVERNING LAW
13.01 This Agreement shall be governed by and interpreted in Cigar King with
the laws of the State of Nevada.
14. SEVERABILITY
14.01 If any one or more of the provisions contained herein shall be invalid,
illegal or unenforceable in any respect in any jurisdiction, the validity,
legality and enforceability of such provision shall not in any way be affected
or impaired thereby in any other jurisdiction and the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.
15. NUMBER AND GENDER
15.01 Words used herein importing the singular number only shall include the
plural, and vice versa, and words importing the masculine gender shall include
the feminine and neuter genders, and vice versa, and words importing persons
shall include firms and corporations.
16. HEADINGS
16.01 The division of this Agreement into articles and sections and the
insertion of headings are for convenience of reference only and shall not affect
the construction or interpretation of this Agreement.
57
17. CURRENCY
17.01 All references to currency are stated in United States dollars.
18. TIME OF THE ESSENCE
18.01 Time shall be of the essence in the performance of this Agreement.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the
day, month and year first above written.
THE COMMON SEAL OF ARCHER )
INVESTMENTS INC. was hereunto )
affixed in the presence of: )
) C/S
)
/c/ "Kelvin Smith" )
- -------------------------------
(Authorized Signatory) )
THE COMMON SEAL OF CIGAR KING )
CORPORATION was hereunto )
affixed in the presence of: )
) C/S
)
/c/ "Steven Bruce"
- -------------------------------- )
(Authorized Signatory) )
)
)
/c/ "Michael Kennaugh" )
- --------------------------------
(Authorized Signatory) )
58
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
CIGAR KING CORPORATION
We hereby consent to the use of our report dated February 26, 1998, in the
registration statement of Cigar King Corporation filed in form 10-SB in
accordance with Section 12 of the Securities Exchange Act of 1934.
/s/ L. REX ANDERSEN
ANDERSEN ANDERSEN & STRONG, L.C.
Salt Lake City, Utah
March 2, 1999
59
EXHIBIT 99 (a)
CIGAR KING
BUSINESS PLAN
This Business Plan does not constitute an offer of securities; any investment in
Cigar King will be negotiated between the parties.
By accepting this Business Plan, the recipient agrees to keep permanently
confidential information contained herein or made available in connection with
any further investigation of Cigar King.
This Business Plan shall not be photocopied, reproduced, or distributed to
others at any time without the consent of Cigar King.
This Business Plan includes certain statements, estimates, and projections in
respect of anticipated future performance. Such statements, estimates, and
projections reflect various assumptions which may or may not prove to be
correct.
September, 1998 Copy
------------
60
CIGAR KING
BUSINESS PLAN
September 1998
INDEX
-----
61
EXECUTIVE SUMMARY
The Cigar King Corporation ("Cigar King" or "the Company") is a start-up company
founded for the purpose of building a retail premium cigar business that
purchases premium cigars and sells them, along with premium cigar accessories,
through Company-owned and operated Cigar King retail kiosks. Management in the
Company includes a senior-level manager with entrepreneurial start-up and growth
company management experience. The Company's objective is to establish Cigar
King as the leading purveyor of premium cigars in the Greater Vancouver Area.
The Company's plan is to locate twenty-five Company-owned and operated Cigar
King retail kiosks in the Greater Vancouver Area in a period of two years. The
twenty-five kiosks will be centrally located and clustered in close proximity to
achieve operating and marketing efficiencies and to enhance awareness of the
Cigar King brand. The Company will locate the twenty-five kiosks in high-foot
traffic, high-visibility, key intercept market locations. The Company intends to
supplement its retail kiosk operations with direct mail and, in select settings,
Cigar King humidified vending machines.
The Company will offer only the highest-quality cigars, stocking and displaying
them in the Company's climate- controlled (King Climate Control) kiosk
merchandise display cases. Thirty types of premium cigars will be offered, along
with a limited selection of premier cigar cutters, ashtrays, lighters, travel
and pocket humidors, and cigar-related publications. The design of the Cigar
King kiosk will be upscale, with emphasis on Cigar King branding and on
maximizing cigar display. The kiosk design will reflect Cigar King's principal
position, that of an expert and knowledgeable purveyor of premium cigars.
The Company's start-up and expansion plan involves three phases: Phase I - the
design, development, and test of the Cigar King kiosk prototype; Phase 11 - the
opening of a further fourteen Cigar King kiosks; and, Phase III - the opening of
a further ten, bringing the total number of Cigar King kiosks to twenty-five. To
complete Phase 1, the design, development, and test of the Cigar King kiosk
prototype, the Company will require $150,000.
PROJECTED INCOME
The projected yearly income statements for the three phases, reflecting kiosk
sales at 50% Tinder Box 1996 average store sales, are as follows:
(000'S)
PHASE 1 PHASE 11 PHASE 111
Revenue $283 $4,252 $7,087
Operating Profit 43 639 1,066
Corporate SG&A - 213 354
Pre-Tax Profit - 427 711
Number of Kiosks 1 15 25
Phase Financing 150 750 500
62
RISK FACTORS
o The premium cigar industry is highly competitive and has relatively few
barriers to entry.
o The availability of premium cigars is increasingly constrained by
accelerating demand in the face of a world-wide shortage of premium
cigar leaf tobacco. The success of the Company's business plan is
dependent in part on management's ability to procure high-quality
premium cigars.
o The success of the Company's business plan is dependent in part on
management's ability to identify and acquire suitable locations.
o The success of the Company's business plan is dependent in part on
management's ability to secure adequate financing to fund Phases 11 and
111.
o The Company's current operations will be dependent on certain key
individuals. A loss of the services of these individuals may impact
operations.
63
BUSINESS
The Cigar King Company ("Cigar King" or "the Company") is a start-up company
founded for the purpose of building a retail premium cigar business that
purchases premium cigars and sells them, along with premium cigar accessories,
through Company-owned and operated Cigar King retail kiosks. Management in the
Company includes a senior-level manager with entrepreneurial start-up and growth
company management experience. The Company's objective is to establish Cigar
King as the leading purveyor of premium cigars in the Greater Vancouver Area.
The Company's plan is to locate twenty-five Company-owned and operated Cigar
King retail kiosks in the Greater Vancouver Area in a period of two years. The
twenty-five kiosks will be centrally located and clustered in close proximity to
achieve operating and marketing efficiencies and to enhance awareness of the
Cigar King brand. The Company will locate the twenty-five kiosks in high-foot
traffic, high-visibility, key intercept market locations. The Company intends to
supplement its retail kiosk operations with direct mail and, in select settings,
Cigar King humidified vending machines.
The Company will offer only the highest-quality cigars, stocking and displaying
them in the Company's climate-controlled (King Climate Control) kiosk
merchandise display cases. Thirty types of premium cigars will be offered, along
with a limited selection of premium cigar cutters, ashtrays, lighters, travel
and pocket humidors, and cigar-related publications. The design of the Cigar
King kiosk will be upscale, with emphasis on Cigar King branding and on
maximizing cigar display. The design will reflect Cigar King's principal
position, that of an expert and knowledgeable purveyor of premium cigars.
INDUSTRY OVERVIEW
The Cigar Association of America (the "Cigar Association") uses three criteria
to define a premium cigar: i) made by hand; (ii) consisting of all natural,
long-filler tobacco; and, (iii) retailing anywhere from $1.25 to more than $25
each.
According to the Cigar Association, approximately 280 million premium cigars
were sold in the United States in 1996, reflecting sales of $550 to $600
million, or $1.96 to $2.14 per cigar. The number of premium cigars sold in 1996
increased 67% over 1995. In units, premium cigars accounted for 6.4% of all
cigars sold, but over 40% of the total retail dollars ($1.3 billion) spent on
cigars.
Growth in the retail market for premium cigars has been aided by several
factors, including the emergence of cigar evenings, the publication of the
magazine Cigar Aficionado, the recapture of the cigar's traditional image as a
symbol of success, celebration and achievement, and the rise in self-indulgence.
The availability of premium cigars is increasingly constrained by accelerating
demand in the face of a worldwide shortage of premium cigar leaf tobacco.
The retail market for premium cigars is highly fragmented. The market is
characterized by hundreds of small, independent operators and small retail
chains. No single chain in the United States has a significant share of the
retail market for premium cigars. The Company anticipates the
64
retail market will become consolidated, with the emergence of a small number of
larger companies in clear leadership positions.
Cigar Smokers
Smokers of premium cigars tend to be more highly educated and more affluent than
the population at large. The magazine Cigar Aficionado ("Cigar Aficionado") ran
an advertisement in the magazine "Direct" in February 1996 which reported that
the average household income for its 150,000 readers was $148,000; the median
income was $109,000; the average net worth was $1.1 million. Seventy-nine
percent (79%) graduated from college and forty-nine percent (49%) took
post-graduate courses. As for occupation, sixty-five percent (65%) were
described as managerial/professional; seventeen percent (I 7%) were
owner/president; twenty-four percent (24%) were CEO/COO/CFO. They smoked an
average of eight cigars per week and spent an average of $4.10 per cigar. The
average usually spent on premium cigars per week was $35.50. Seventy-three
percent (73%) reportedly stock up by the box.
The Cigar Association estimates that there are more than 10 million cigar
smokers in the United States, many of them being occasional smokers. Less than
four percent (4%) of all cigar smokers are women and they tend to smoke the
premium cigars. The Cigar Association estimates that the regular cigar smoker
smokes six to eight cigars per week, or about one per day. Many are occasional
smokers who smoke about two or three premium cigars per month.
Tinder Box International ("Tinder Box"), a franchiser, is the largest retailer
of premium cigars, tobacco products, gifts and accessory products in North
America with 108 franchised stores operating in 3 1 states, as at September 10,
1997 (Exhibit 3). Tinder Box describes its core customer as: an adult male,
twenty-five to fifty- five years old; college graduate; professional or business
executive; income level of $75,000 to $300,000; drives a $35,000+ luxury car.
Further, Tinder Box states more than half its customers purchase their cigars by
the box, smoke three to five cigars per day and spend more than $3 per cigar.
According to Tinder Box, the Dominican Republic cams the top rank as the origin
for most of its customers' everyday cigar - fifty-two percent (52%). Honduras is
second at twenty-four percent (24%) and Jamaica is third at seventeen percent
(17%). Surprisingly fourteen percent (l4%) of the survey group acknowledged that
their everyday cigar was Cuban, in spite of the trade embargos. Cigars from the
Canary Islands and Mexico rank next in order of popularity with ten percent
(10%) and seven percent (7%) respectively.
According to Tinder Box, the most important single attribute when buying a
cigar, listed by fifty-one percent (51%) of the survey respondents, is its size.
The most popular size is a corona at five and one-half inches in length by a
forty-two ring gauge, followed by a Lonsdale at six and one-half inches in
length by a forty-two ring gauge. The third most popular is a double corona at
six and one-half inches in length by a forty-eight ring gauge. The fourth is a
Churchill at seven and one-half inches in length by a fifty ring gauge. The
fifth is a Rothschild at four and one-quarter inches in length by a fifty ring
gauge.
Again, the most important single attribute when buying a cigar, listed by
fifty-one percent (51%) of the Tinder Box survey respondents, is its size.
Freshness is cited in forty-seven percent (47%) of the answers, and smoothness
of taste is checked in thirty-eight percent (38%) of the questionnaires. Quality
of construction is considered by thirty-eight percent (38%) of buyers and rich
taste by
65
thirty-four percent (34%). Other factors that between twenty percent (20%) and
twenty-two percent (22%) of all buyers look for include brand name, full-bodied
flavor and mildness. Price is only a consideration with fourteen percent (14%)
of the respondents in the survey.
STRATEGY
Each element of the Company's strategy is designed to differentiate and
reinforce the Cigar King brand and to engender a high degree of loyalty among
Cigar King customers. The bases of the Company's strategy include:
Highest-Quality Cigars
The Company will offer only premium cigars rated 80 or higher by Cigar
Aficionado. Further, the kiosk merchandise display case climate will be
controlled to ensure the cigars are perfectly maintained at 70 degrees
Fahrenheit and 70% humidity (King Climate Control).
Cigars and Cigar Accessories Only
To reinforce the Company's association with cigars, the Company will
sell premium cigars and premium cigar accessories only.
Retail Kiosks
The Company will retail its cigars through Company-owned and operated
Cigar King kiosks. The small size of the kiosk, approximately 50 to 75
square feet, enables the kiosk to be located in non-traditional, key
intercept market locations. Further, the small size translates into
low-cost. Another benefit is the short time period required to open new
sites. Lastly, if free-standing, the kiosk can be relocated if
necessary.
Retail Kiosk Design
The Cigar King kiosk design will be upscale, with emphasis on Cigar
King branding and on maximizing cigar display. The kiosk design will
reflect Cigar King's principal position, that of an expert and
knowledgeable purveyor of premium cigars.
Retail Kiosk Merchandising
The Company will display each cigar type by open box and support each
with professional signs describing the cigar's origin and flavor
characteristics, as well as the Cigar Aficionado rating. Packaging will
display the Cigar King logo. The Company will aggressively promote King
Climate Control, the Company's merchandise display case climate
control. In addition, the Company will promote its cigar expertise and
knowledge through kiosk signs and free-of-charge Cigar King brochures.
66
Retail Kiosk Operations
Retail kiosk operations will be sales-driven, with emphasis on customer
service and on merchandising policy and procedure.
Retail Kiosk Clustering
The Company will centrally locate and cluster in close proximity the
Cigar King kiosks to achieve operating and marketing efficiencies and
to enhance awareness of the Cigar King brand.
Investment in Key Locations
The Company allocates $20,000 per Cigar King kiosk for key intercept
market location acquisition. The $20,000 is comprised of $5,000 for the
production of the property manager proposal, which includes
site-specific kiosk renderings, and $15,000 to incite the property
manager to agree to the kiosk install and the terms of the tenancy
agreement.
CIGARS
The Company will offer only premium cigars rated 80 or higher by Cigar
Aficionado. Cigar Aficionado maintains a comprehensive Internet database of
nearly 1,300 cigar ratings - every cigar the magazine has rated since the
magazine's launch in September, 1992. All cigars in the database are scored on a
100-point scale: 95 to 100 - classic; 90 to 94 - outstanding; 80 to 89 - very
good to excellent; 70 to 79 - average to good commercial quality; and below 70 -
not worth considering. Further, the database enables the user to profile cigars
based not only on rating, but also: size; origin; brand; and price.
Of the cigars rated 80 or higher, the Company will focus its efforts on
procuring a selection of premium cigars based on size: corona (thirty-five
percent [35%] of mix); Lonsdale (twenty-five percent [25%] of mix); double
corona (twenty percent [20%] of mix); Churchill (ten percent [10%] of mix); and,
Rothschild (ten percent [10%] of mix). Within each size category, the Company
will focus its efforts on procuring a selection of premium cigars based on
origin: Dominican Republic (fifty percent [50%] of mix); Honduras (twenty-five
percent [25%] of mix); Jamaica (fifteen percent [15%] of mix); Canary Islands
(ten percent [10%] of mix); and, Mexico (ten percent [10%) of mix).
The Company will price its cigars at the medium to high-end of the market. Half
of the cigars offered will be priced between $2 to $5 per cigar; one-quarter
will be priced between $5 to $ 10 per cigar; and one-quarter will be priced at
$10 and over per cigar. In respect of each cigar type, the Company will sell the
cigars individually, as well as by the box. Each type will be displayed by open
box, and supported with professional signs describing the cigar's origin and
flavor characteristics, as well as the Cigar Aficionado rating. Further, the
kiosk merchandise display case climate will be controlled to ensure the cigars
are perfectly maintained at 70 degrees Fahrenheit and 70% humidity (King Climate
Control).
The Company estimates approximately 600 types of premium cigars meet the
Company's cigar selection criteria. The Company will offer a selection of
approximately thirty.
67
CIGAR ACCESSORIES
In addition to premium cigars, the Company will offer a limited selection of
premium cigar cutters, ashtrays, lighters, travel and pocket humidors, and
cigar-related publications.
RETAIL KIOSKS
The Company will retail its premium cigars and premium cigar accessories through
Company-owned and operated Cigar King kiosks. The Company estimates the kiosks
will vary in size from approximately 50 to 75 square feet. Depending on the
location, the kiosks will either be self-standing or built-out. The kiosk design
will be upscale, with emphasis on Cigar King branding and on maximizing cigar
display. The kiosk design will reflect Cigar King's principal position, that of
an expert and knowledgeable purveyor of premium cigars.
Retail kiosks located within downtown buildings will likely be open from 8 a.m.
till 6 p.m., six days per week. Other kiosks, those located in shopping centers
or airports, for example, will likely be open till 9 p.m. or later, seven days
per week. The typical staff for one retail kiosk will consist of one full-time
kiosk manager and two to three part-time employees. Each employee will be
trained to be knowledgeable about premium cigars. Retail kiosk operations will
be sales-driven, with training emphasis on customer service and on merchandising
policy and procedure.
The Company anticipates the retail kiosk, open a minimum of three months, will
achieve annual sales of approximately $283,476, generating a kiosk-level
operating contribution (profit) of approximately $42,627. The kiosk annual sales
projection is equal to one-half (50%) of Tinder Box's 1996 average store sales
of $5,669,500. The Company's estimated cost to develop the kiosk is $65,000,
which includes kiosk manufacture and install costs, beginning inventory, and the
$20,000 key location acquisition allowance.
DIRECT MAIL
The Company intends to test and try direct mail, but only after the Cigar King
kiosk prototype is proven (Phase 1). Direct mail sales are not reflected in the
Company's forecasts or projections.
HUMIDIFIED VENDING MACHINES
The Company intends to test and try Cigar King humidified vending machines in
select settings, but only after a minimum of ten Cigar King kiosks are opened
and operating in downtown Vancouver. Humidified vending machine sales are not
reflected in the Company's forecasts or projections.
68
EXPANSION PLAN
The Company's expansion plan involves the opening of twenty-five Cigar King
kiosks in the Greater Vancouver Area over a period of two years. The expansion
plan is comprised of three phases:
Phase I
Phase I is the design, development, and test of the Cigar King kiosk
prototype. The design and development of the kiosk prototype, the
acquisition of the kiosk location, the design and development of
promotional and merchandising programs, and the procurement of cigars
and cigar accessories, as well as the hiring and training of staff,
will take three months from the date the Company receives the $150,000
in funding. The Cigar King kiosk prototype will be open in month 4.
Phase II
Phase If involves the opening of a further fourteen Cigar King kiosks
in downtown Vancouver, bringing the total number of Cigar King kiosks
to fifteen, by month 16. Direct mail and humidified vending machines
will be tested and tried in Phase 11.
Phase III
Phase III involves the opening of a further ten Cigar King kiosks in
the Greater Vancouver Area, bringing the total number of Cigar King
kiosks to twenty-five, by month 24.
LOCATIONS
The Company will identify the highest-visibility, highest-foot traffic key
market intercept locations and acquire them where possible. The small size of
the kiosk and its free-standing nature enables the kiosk to be installed in
non-traditional locations. In many cases, the locations sought by the Company
are build-outs, anchored by vacant nooks, crannies, or comers; and, as a result,
the locations are not presently occupied, nor do retailers regard them as
location opportunities in general.
The Company's initial focus will be key market intercept locations within the
retail malls that anchor the commercial high-rises in the downtown Vancouver
core. The Company allocates $20,000 per kiosk for key location acquisition. The
$20,000 is comprised of $5,000 for the production of the property manager
proposal, which includes site-specific kiosk renderings, and $15,000 to incite
the property manager to agree to the kiosk install and the terms of the tenancy
agreement. The Company will pay a revenue royalty equal to 5% of the kiosk's
sales, guaranteeing a minimum monthly royalty of $ 1,000.
The twenty-five kiosks will be central and in close proximity (Greater Vancouver
Area) to achieve operating and marketing efficiencies and to enhance awareness
of the Cigar King brand.
69
COMPETITION
Competition in the retail market for premium cigars is highly fragmented. In the
United States, the market is characterized by hundreds of small, independent
operators and small retail chains. Tinder Box, a franchiser, is the largest
retailer of premium cigars, tobacco products, gifts and accessory products in
North America with I 08 franchised stores operating in 31 states, as at
September 10, 1997.
According to the Internet Cigar Group, the largest cigar-related internet
organization, there are sixteen premium cigar retailers in Vancouver, as listed
in the Internet Cigar Group regional review - Vancouver Cigar Scene (Exhibit 2).
The list does not include retailers that offer cigars for sale on a limited
basis. Each retailer listed is a single store, with the exception of Smoke Plus,
of which there are two. None of the retailers operate kiosks. All of the
retailers operate in-line stores. The list is consistent with the Cigar,
Cigarette & Tobacco - Retail directory in the Vancouver Metro Yellow Pages,
through April 1998.
In addition to premium cigar retailers, the Company competes directly against
all stores, restaurants, and clubs that sell premium cigars.
PRODUCT SUPPLY
Although the availability of premium cigars is increasingly constrained by
accelerating demand in the face of a worldwide shortage of premium cigar leaf
tobacco, the Company believes there are adequate sources of supply of premium
cigars to meet its expansion plans. Because the Company will offer a selection
of approximately thirty cigar types, and that the Company estimates
approximately 600 types of premium cigars meet the Company's cigar selection
criteria, and that the Company is not committed to any one type in particular,
if one were to become unavailable or prohibitively expensive, the Company could
introduce another type with no significant impact.
70
CIGAR KING
PHASE I - SOURCES AND USES OF FUNDS
SOURCE/USE AMOUNT
Equity Financing $150,000
-------
Total Sources $150,000
-------
Legal $ 5,000
Kiosk Design 15,000
Kiosk Manufacture & Install 25,000
Property Manager Proposal 5,000
Property Manager Signing 15,000
Management Fees 32,000
Promotion 5,000
Merchandising 10,000
Inventory 20,000
Operating Capital 18,000
-------
Total Uses $150,000
=======
71
CIGAR KING
PHASE I - NOTES AND HYPOTHESES TO THE SOURCES AND USES OF FUNDS
The hypotheses set out below are consistent with the purposes for which the
information is presented, but cannot be determined to be the most probable under
the prevailing conditions of uncertainty.
EQUITY FINANCING
To complete Phase 1, $150,000 in equity financing is required.
LEGAL
Legal expense is projected at $5,000, reflecting incorporation, immigration, and
property manager agreement costs.
KIOSK DESIGN
Kiosk design expense is projected at $15,000.
KIOSK MANUFACTURE & INSTALL
Kiosk manufacture & install expense is projected at $25,000.
PROPERTY MANAGER PROPOSAL
Property manager proposal expense is projected at $5,000, reflecting graphic
design, output and architectural rendering costs.
PROPERTY MANAGER SIGNING
Property manager signing expense is projected at $15,000, reflecting key
location acquisition costs.
MANAGEMENT FEES
Management fees are projected at $32,000, reflecting the budget in aggregate for
months 1 through 6.
PROMOTION
Promotion expense is projected at $5,000, reflecting grand opening promotion
costs.
72
MERCHANDISING
Merchandising expense is projected at $10,000, reflecting integrated,
professional display and product promotion program costs.
INVENTORY
Inventory expense is projected at $20,000, reflecting opening inventory.
OPERATING CAPITAL
Operating capital is projected at $18,000, reflecting start-up, accounting,
training and other costs not included in other categories.
73
CIGAR KING
PHASE I - MONTHLY ADVANCES
74
CIGAR KING
PHASE I - PROJECTED INCOME STATEMENTS - 50% TINDER BOX 1996 AVERAGE STORE SALES
OPERATING
YEAR MONTH DAY
Revenue $283,476 $23,623 $906
Cost of Goods Sold 170,086 14,174 544
Gross Profit 113,390 9,449 362
Site Labor 46,640 3,887 149
Site Promotions 3,600 300 12
Site Operations 3,600 300 12
Revenue-Sharing 14,174 1,181 45
Depreciation & Amortization 2,750 229 9
Operating Profit $42,626 $3,552 $135
Number of Kiosks 1 1 1
75
CIGAR KING
PHASE I - NOTES AND HYPOTHESES TO THE PROJECTED INCOME STATEMENTS
The hypotheses set out below are consistent with the purposes for which the
information is presented, but cannot be determined to be the most probable under
the prevailing conditions of uncertainty.
GENERAL
The time estimated to design, build, locate and open the kiosk is 3 months. The
projections do not reflect the kiosk start-up, the first 90 days of operating.
OPERATIONS
The kiosk is projected to be open from 8 a.m. till 6 p.m., six days per week.
REVENUE
As a percentage of Tinder Box International's 1996 Average Store Sales of
$666,951, four kiosk revenue estimates are projected: 50% ($283,476) and the
kiosk break-even revenue estimate of 30.2% ($171,475).
COST OF GOODS SOLD
Cost of goods sold is projected at 60% of revenue. Cost of goods sold is founded
on Tinder Box International's published expected profit margins for premium
cigars of 40% to 45%.
GROSS PROFIT
Gross profit is revenue less cost of goods sold. Gross profit is projected at
40% of revenue.
SITE LABOR
Labor expense is projected at $46,640 per year, reflecting kiosk salaries and
benefits of $30,000 per year for one full-time kiosk manager, as well as $16,640
per year for part-time kiosk labor (32 hours per week at $10 per hour).
SITE PROMOTIONS
Site promotion expense is projected at $300 per month.
76
SITE OPERATIONS
Site operations expense is projected at $300 per month, reflecting insurance,
office and other kiosk costs not included in other categories.
REVENUE-SHARING
Revenue-Sharing expense is projected at 5% of revenue, with minimum payments per
month of $1,000.
DEPRECIATION & AMORTIZATION
Depreciation and amortization rates of 10% for kiosk manufacture & install
(physical plant) and 2.5% for goodwill on property manager signing (location
acquisition) have been applied.
77
CIGAR KING
PHASE I-PROJECTED INCOME STATEMENTS - 30.2% TINDER BOX 1996 AVERAGE STORE SALES
(BREAK-EVEN ANALYSIS)
OPERATING
YEAR MONTH DAY
Revenue $171,475 $14,290 $548
Cost of Goods Sold 102,885 8,574 329
Gross Profit 68,590 5,716 219
Site Labor 46,640 3,887 149
Site Promotions 3,600 300 12
Site Operations 3,600 300 12
Revenue-Sharing 12,000 1,000 38
Depreciation & Amortization 2,750 229 8
Operating Profit $0 $0 $0
Number of Kiosks 1 1 1
78
CIGAR KING
PHASE 11 - PROJECTED INCOME STATEMENTS - % TINDER BOX 1996 AVERAGE STORE SALES
50% 45% 40%
Revenue $4,252,140 $3,826,919 $3,401,700
Cost of Goods Sold 2,551,290 2,296,151 2,041,020
Gross Profit 1,700,850 1,530,768 1,360,680
Site Labor 699,600 699,600 699,600
Site Promotions 54,000 54,000 54,000
Site Operations 54,000 54,000 54,000
Revenue-Sharing 212,610 191,346 180,000
Depreciation & Amortization 41,250 41,250 41,250
Operating Profit 639,390 490,572 331,830
Corporate SG&A 212,607 191,346 170,085
Pre-Tax Profit $426,783 $299,226 $161,745
Number of Kiosks 15 15 15
Equity Financing $750,000 $750,000 $750,000
79
CIGAR KING
PHASE 111 - PROJECTED INCOME STATEMENTS - % TINDER BOX 1996 AVERAGE STORE SALES
50% 45% 40%
Revenue $7,086,900 $6,378,199 $5,669,500
Cost of Goods Sold 4,252,150 3,826,919 3,401,700
Gross Profit 2,834,750 2,551,280 2,267,800
Site Labor 1,166,600 1,166,600 1,166,600
Site Promotions 90,000 90,000 90,000
Site Operations 90,000 90,000 90,000
Revenue-Sharing 354,350 318,910 300,000
Depreciation & Amortization 68,750 68,750 68,750
Operating Profit 1,065,675 817,020 552,450
Corporate SG&A 354,345 318,910 382,365
Pre-Tax Profit $ 711,330 $ 498,110 $ 161,745
Number of Kiosks 25 25 25
Equity Financing $ 500,000 $ 500,000 $ 500,000
80
CIGAR KING
PHASES 11 & III - NOTES AND HYPOTHESES TO THE PROJECTED INCOME STATEMENTS
The hypotheses set out below are consistent with the purposes for which the
information is presented, but cannot be determined to be the most probable under
the prevailing conditions of uncertainty.
GENERAL
Phase 11 involves the opening of 14 additional kiosks, bringing the total to 15.
The time estimated to build, locate and open the 14 kiosks is 12 months. Phase
III involves the opening of a further 10, bringing the total to 25. The time
estimated to build, locate and open the further 10 kiosks is 8 months. The
projections do not reflect the kiosk start-ups, the first 90 days of operating.
OPERATIONS
The kiosks are projected to be open from 8 a.m. till 6 p.m., six days per week.
REVENUE
As a percentage of Tinder Box International's 1996 Average Store Sales of
$566,951, three kiosk revenue estimates are projected: 50% ($283,476) (refer to
Page 75).
COST OF GOODS SOLD
Cost of goods sold is projected at 60% of revenue. Cost of goods sold is founded
on Tinder Box International's published expected profit margins for premium
cigars of 40% to 45%.
GROSS PROFIT
Gross profit is revenue less cost of goods sold. Gross profit is projected at
40% of revenue.
SITE LABOR
Labor expense is projected at $46,640 per year per kiosk, reflecting kiosk
salaries and benefits of $30,000 per year for one full-time kiosk manager, as
well as $16,640 per year for part-time kiosk labor (32 hours per week at $10 per
hour).
SITE PROMOTIONS
Site promotion expense is projected at $300 per month per kiosk.
81
SITE OPERATIONS
Site operations expense is projected at $300 per month per kiosk, reflecting
insurance, office and other kiosk costs not included in other categories.
REVENUE-SHARING
Revenue-Sharing expense is projected at 5% of revenue, with minimum payments per
month per kiosk of $1,000.
DEPRECIATION & AMORTIZATION
Depreciation and amortization rates of I0% for kiosk manufactures & installs
(physical plant) and 2.5% for goodwill on property manager signings (location
acquisition) have been applied.
CORPORATE SG&A
Corporate SG&A expense is projected at 5% of revenue, reflecting corporate
salaries, as well as general and administrative costs.
EQUITY FINANCING
To complete Phase 11, $750,000 in equity financing (estimated) is required. To
complete Phase III, $500,000 in equity financing (estimated) is required.
82
EXHIBIT 99 (b)
OFFERING MEMORANDUM
(the "Memorandum")
(Corporate logo)
(the "Issuer")
DECEMBER 4, 1998
- --------------------------- ------------------- ------------- ------------------
NUMBER TO PRICE
DESCRIPTION BE ISSUED PER SHARE GROSS PROCEEDS
- --------------------------- ------------------- ------------- ------------------
- --------------------------- ------------------- ------------- ------------------
COMMON 100,000 $ 0.25 $ 25,000
- --------------------------- ------------------- ------------- ------------------
THIS MEMORANDUM CONSTITUTES AN OFFERING OF THESE SECURITIES ONLY IN THOSE
JURISDICTIONS AND TO THOSE PERSONS WHERE AND TO WHOM THEY MAY BE LAWFULLY
OFFERED FOR SALE. THE OFFERING CONTEMPLATED IN THIS MEMORANDUM IS NOT, AND UNDER
NO CIRCUMSTANCES IS TO BE CONSTRUED AS, A PUBLIC OFFERING OF THE SECURITIES
DESCRIBED HEREIN. NO SECURITIES COMMISSION OR SIMILAR REGULATORY AUTHORITY HAS
IN ANY WAY PASSED UPON THE MERITS OF THE SECURITIES OFFERED HEREIN NOR HAS IT
REVIEWED THIS MEMORANDUM AND ANY REPRESENTATION TO THE CONTRARY IS AN OFFENSE.
AS THE ISSUER IS NOT A REPORTING ISSUER THE SHARES WILL BE SUBJECT TO AN
INDEFINITE HOLD PERIOD AND MAY NOT BE SOLD DURING THAT PERIOD UNLESS THE SALE IS
MADE IN ACCORDANCE WITH THE PROVISIONS OF ALL APPLICABLE SECURITIES LAWS.
THERE CURRENTLY IS NO PUBLIC MARKET FOR THE SHARES AND THERE CAN BE NO ASSURANCE
THAT ANY SUCH MARKET WILL EVER DEVELOP. THE OFFERING PRICE OF THE SHARES HAS
BEEN DETERMINED ARBITRARILY BY THE ISSUER AND BEARS NO RELATIONSHIP TO THE
FINANCIAL CONDITION, PROSPECTS, OR ASSETS OF THE ISSUER OR ANY OTHER RECOGNIZED
CRITERIA OF VALUE.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND SHOULD BE
PURCHASED ONLY BY PERSONS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT.
SEE "RISK FACTORS".
83
SUITE 825 - 1200 WEST 73RD AVENUE, VANCOUVER, BRITISH COLUMBIA, CANADA, V6P 6G5
The Issuer reserves the right to accept or reject any subscriptions for Shares
in whole or in part and in the event any subscriptions are rejected or accepted
in part, the applicable amount of the subscription funds will be returned to the
investor without interest or deduction.
This information presented in this Offering Memorandum has been prepared from
information supplied by management of the Issuer and is being furnished solely
for use by prospective investors in connection with this Offering. This
Memorandum does not purport to be all inclusive or to contain all the
information that a prospective investor may desire in investigating the Issuer.
Each investor must conduct and rely on his own evaluation of the Issuer and the
terms of the Memorandum, including the merits and risks involved, in making an
investment decision with respect to the Shares.
The information contained in this Memorandum is confidential and proprietary to
the Issuer and is being submitted to prospective investors solely for such
investors' confidential use with the express understanding that, without the
prior written permission of the Issuer, such persons will not release this
document or discuss the information contained herein or make reproductions of or
use this Memorandum for any purpose other than evaluating a potential investment
in the Shares offered hereby. A prospective investor, by accepting delivery of
this Memorandum, agrees to comply with this paragraph and promptly return to the
Issuer this Memorandum and any other documents or information furnished if the
prospective investor elects not to purchase any of the Shares offered hereby.
No person has been authorized to give any information other than contained in
this Memorandum, or to make any representations in connection with the
Memorandum made hereby, and if given or made, such other information or
representations must not be relied upon as having been authorized by the Issuer.
The Shares offered hereby have not been and will not be registered under the
United States Securities Act of 1933 (the "1933 ACT") or State securities laws
and may not be offered for sale or resale, sold or resold or otherwise
transferred or assigned, directly or indirectly, in the United States or to a US
person, as defined by Regulation S under the 1933 Act, unless they are
registered under the 1933 Act and applicable State securities laws or unless an
exemption from such registration is available. Any representation to the
contrary is unlawful.
PRIOR TO SUBSCRIBING, PROSPECTIVE PURCHASERS ARE ADVISED TO READ THE ENTIRE
MEMORANDUM WHICH CONTAINS A COMPLETE COPY OF THE SUBSCRIPTION AGREEMENT. EACH
PROSPECTIVE PURCHASER IS ALSO ENCOURAGED TO SEEK THE ADVICE OF HIS SOLICITOR,
TAX CONSULTANT AND BUSINESS ADVISER WITH RESPECT TO THE LEGAL, TAX, AND BUSINESS
ASPECTS OF THIS INVESTMENT. PROSPECTIVE PURCHASERS ARE NOT TO CONSTRUE THE
CONTENTS OF THIS MEMORANDUM OR ANY OTHER COMMUNICATION FROM THE COMPANY OR ANY
OF ITS AGENTS AS INVESTMENT, LEGAL OR TAX ADVICE, AND NO REPRESENTATIONS OR
WARRANTIES OF ANY KIND ARE INTENDED OR SHOULD BE INFERRED WITH
84
RESPECTS TO THE ECONOMIC RETURN OR OTHER VALUE OF AN INVESTMENT IN THE SHARES.
NAME AND INCORPORATION OF ISSUER
- ------------------------------------
The full name of the Issuer is Cigar King Corporation. The Issuer's head office
and principal business address is located at Suite 825 - 1200 West 73rd Avenue,
Vancouver, British Columbia, Canada, V6P 6G5. Its registered and records office
is located at Suite 880, 50 West Liberty Street, Reno, Nevada, 89501.
The Issuer was incorporated under the laws of the State of Nevada on October 8,
1998
The Issuer is not a reporting issuer but will make application to obtain a
quotation for its shares on the NASD OTC Bulletin Board.
DESCRIPTION OF SECURITIES
The Issuer is offering for sale through its own "best efforts" 100,000 Shares at
a deemed price of $0.25 share to give gross proceeds of $25,000.
The Shares are subject to resale restrictions. See "Restrictions on Resale of
Securities".
The authorized share capital of the Issuer is 200,000,000 shares with a par
value of $0.001 per share. All common shares rank equally as to dividends,
voting rights and as to any distribution of assets on winding-up or liquidation.
There are no indentures or agreements limiting the payment of dividends and
there are no preemptive rights, conversion rights, special liquidation rights,
or subscription rights attached to any of the Shares. The Offering Price for the
Shares offered under this Memorandum was established by the Issuer. The Offering
Price for the Shares bears no necessary relationship to the Issuer's assets,
book value, net worth or any other recognized criteria of value.
SHARES AND LOAN CAPITAL STRUCTURE
- -------------------------------------
The share structure of the Issuer is as follows:
The 10,500,000 shares outstanding as at the date of this Memorandum have been
purchased as follows:
4,500,000 shares at $0.002 per share for gross proceeds of
$9,000; and
6,000,000 shares at $0.01 per share for gross proceeds of
$60,000.
85
There are no formal loan agreements outstanding as at the date of this
Memorandum.
There is no minimum amount of funds to be raised through this Memorandum. There
is no assurance that the Issuer will receive the maximum proceeds or a
substantial amount of the proceeds from this Memorandum.
There is no responsibility for the Issuer to return any funds raised from this
Memorandum and any funds so raised will be used as either exploration funds or
as working capital for the Issuer depending upon the Shares issued. If the
Issuer decides to return any funds to the Subscribers (the "Subscriber"), there
will be no penalty imposed on the Issuer nor will there be any interest paid to
the Subscriber during the period the funds were held by the Issuer. All funds
received from this Memorandum will be held by the Issuer and used as general
working capital. None of the proceeds from this issue will be held in trust at
any time.
THIS OFFERING IS NOT SUBJECT TO ANY MINIMUM SUBSCRIPTION LEVEL, AND THEREFORE
ANY FUNDS RECEIVED FROM A PURCHASER ARE AVAILABLE TO THE ISSUER AND NEED NOT BE
REFUNDED TO THE PURCHASER.
PLAN OF DISTRIBUTION
- ----------------------
SUBSCRIPTION PROCEDURES
A person wishing to subscribe for Shares may so do by completing a Subscription
Agreement (in the form attached hereto as Appendix A) and indicating that he is:
(a) a sophisticated purchaser in that he has knowledge of the
stock market and investment activities; or
(b) fully aware that he is acquiring the shares based on no
prospectus being filed with any regulatory body and that the
Issuer is relying upon Regulation D, Rule 504.
Subscriptions for Shares are subject to acceptance by the Issuer and the Issuer
reserves the right to reject any subscriptions or terminate the Memorandum at
any time without notice. If a subscription is rejected the monies received by
the Issuer for that subscription will be returned forthwith to the Subscriber
without interest or deduction. No interest will be paid to the Subscriber
pending acceptance or rejection of its subscription. A term of the Securities
Subscription Agreement to be signed by the Subscriber will irrevocably authorize
the Agent to close the subscription on behalf of each Subscriber. If a
subscription is accepted, it will be accepted by the Issuer executing the
Securities Subscription Agreement which has been signed by the Subscriber and
dating the Securities Subscription Agreement as of the date of execution by the
Issuer.
CLOSING OF MEMORANDUM
The Memorandum will be completed at one or more closings as subscriptions are
accepted by the Issuer at which time the Issuer will issue and deliver the
Shares for the subscriptions received.
86
EXEMPTION FROM PROSPECTUS REQUIREMENTS AND RESTRICTIONS ON RESALE OF SECURITIES
- -------------------------------------------------------------------------------
The Issuer will be primarily relying upon exemption from prospectus as allowable
under Regulation D, Rule 504. The Subscriber acknowledges that he is aware that
there are certain advantages to the Issuer by relying on Rule 504:
o the Issuer is not required to provide any specific information
to investors;
o there is no limitation on the number of investors;
o investors need not meet the suitability standard; and
o the prohibitions against solicitation and restrictions on
resale is waived.
The Issuer, by making only a Rule 504 offering or an offering to only to
accredited investors, is not required to furnish any specific information to
Subscribers. Therefore, one of the significant advantages to an offering under
Rule 504 is the avoidance of the time and cost of complying with the detail
informational requirements of Rule 505 and 506 offerings when nonaccredited
investors are present.
The Subscriber acknowledges that in subscribing to the Shares offered under this
Memorandum that he realizes that:
(a) no Securities Commission or similar regulatory authority has
reviewed or passed on the merits of the Shares;
(b) there is no government or other insurance covering the Shares;
(c) the Subscriber may lose all of the investment made hereunder;
(d) there are restrictions on the ability of the subscriber to
resell the Shares and it is the Subscriber's responsibility to
find out what those restrictions are and to comply with them
before selling the Shares;
(e) that the Subscriber will not receive a Prospectus because the
Issuer has advised the Subscriber in this Memorandum that the
Issuer is relying on Regulation D, Rule 504;
(f) that since the Subscriber is not purchasing the Shares under
Prospectus, the Subscriber will not have the civil remedies
that otherwise would have been available to the Subscriber;
and
(g) the Issuer has advised the Subscriber that it is using an
exemption from the requirements to sell through a registered
dealer and, as a result, the Subscriber
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does not have the benefit of any protection that might have
been available to the Subscriber by having a registered dealer
act on the Subscriber's behalf.
SUBSCRIBERS RESIDENT IN JURISDICTIONS OUTSIDE OF THE UNITED STATES
- -------------------------------------------------------------------
The Shares offered hereunder may be offered in jurisdictions outside of the
United States. Subscribers in such other jurisdictions may be requested by the
Issuer to provide representations or to complete forms other than those
contained in or contemplated by the Securities Subscription Agreement referred
to under Appendix A, in order to ensure compliance with the applicable
securities laws. The Issuer reserves the right to reject subscriptions from
persons resident in jurisdictions on the basis that it is impossible or
impractical to comply with the securities laws of such jurisdictions.
Subscribers in such other jurisdictions should consult with their legal advisors
to determine the extent of resale restrictions which may be applicable in those
jurisdictions to the Shares offered hereunder.
RESALE RESTRICTIONS
- -------------------
As there is no market for these Shares, it may be difficult or even impossible
for the purchaser to resell them.
Further, the Issuer is not presently a reporting issuer under securities
legislation in any jurisdiction and therefore, any resale of the Shares, unless
an exemption is available, may be restricted.
The certificates for the Shares to be issued pursuant to the Memorandum may bear
a legend disclosing the above restrictions on the resale. Therefore, the Shares
are not suitable for investors who are not able to make a long term investment
commitment. AS THERE IS NO MARKET FOR THESE SECURITIES, IT MAY BE DIFFICULT OR
EVEN IMPOSSIBLE FOR THE PURCHASER TO SELL THEM.
ALL INVESTORS PURCHASING SECURITIES UNDER THIS MEMORANDUM SHALL CONSULT WITH
THEIR LEGAL ADVISORS TO DETERMINE THE EXTENT OF RESALE RESTRICTIONS AND THE
POSSIBILITIES OF UTILIZING ANY FURTHER STATUTORY EXEMPTIONS AVAILABLE IN THEIR
RESPECTIVE JURISDICTIONS. INVESTORS SHOULD ALSO CONSULT WITH THEIR LEGAL
ADVISORS PRIOR TO RE-SELLING ANY OF THE SECURITIES ACQUIRED BY THEM.
NATURE OF BUSINESS OF THE ISSUER
- --------------------------------------
The Issuer is a start-up company founded for the purpose of building a retail
premium cigar business that purchases premium cigars and sells them, along with
premium cigar accessories, through the Issuer-owned and operated retail kiosks.
ACQUISITION OF CONCEPT
- ----------------------
On November 24, 1998, the Issuer entered into an Agreement to Acquire 100%
Interest in the Concept with Archer Investments Inc. whereby for the sum of
$50,000 payable on or before December 31, 1998 the Issuer obtained a 100%
interest in the rights to the use of the Concept. Upon payment of $50,000 Archer
Investments Inc. must deliver all designs, blueprints, documents
88
and other related material, if any, to the Issuer and has agreed not to
participate in the development of any cigar-related concepts which are similar
in nature. The payment has not yet been made to Archer
Investments Inc. but will be made upon receipt of a completed business plan
prepared by Archer under the name of "Cigar King".
PLAN OF ACTION
- --------------
The Issuer's plan is to locate twenty-five Company-owned and operated Cigar King
retail kiosks in the Greater Vancouver area in a period of two years. The
twenty-five kiosks will be centrally located and clustered in close proximity to
achieving operating and marketing efficiencies and to enhance awareness of the
Cigar King brand. The Issuer will located twenty-five kiosks in high-foot
traffic, high-visibility, key intercept market locations. The Issuer intends to
supplement its retail kiosk operations with direct mail and, in select settings,
Cigar King humidified vending machines.
PRODUCTS OFFERED FOR SALE
- -------------------------
The Issuer will offer only the highest-quality cigars, stocking and displaying
them with the Issuer's climate-controlled (King Climate Control) kiosk
merchandise display case. Thirty types of premium cigars will be offered, along
with a limited selection of premium cigar cutters, ashtrays, travel and pocket
humidors and cigar-related publications.
The Issuer will offer only premium cigars rated 80 or higher by Cigar
Aficionado. Cigar Aficionado maintains a comprehensive Internet database of
nearly 1,300 cigar ratings - every cigar the magazine has rated since the
magazine's launch in September, 1992. All cigars in the database are scored on a
100-point scale:
95 to 100 - classic;
90 - 94 - outstanding;
80 to 89 - very good to excellent;
70 to 79 - average to good commercial
quality; and
below 70 - not worth considering.
Of the cigars rated 80 or higher, the Issuer will focus its efforts on procuring
a selection of premium cigars based on size:
Corona (thirty-five percent (35%) of mix);
Lonsdale (twenty-five percent (25%) of mix);
Double Corona (twenty percent (20%) of mix);
Churchill (ten percent (10%) of mix); and
Rothchilds (ten percent (10%) of mix).
The Cigar Association of America (the "Cigar Association") uses three criteria
to define a premium cigar:
1. made by hand;
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2. consisting of all natural, long-filler tobacco;
and
3. retailing anywhere from $1.25 to more than $25
each.
PRICING OF CIGARS
- -----------------
The Issuer will price its cigars at a medium to high-end of the market. Half of
the cigars offered will be priced between $2 to $5 per cigar; one-quarter will
be priced between $5 to $10 per cigar; and one-quarter will be priced at $10 and
over per cigar. Cigars can be purchased either individually or in boxes.
INDUSTRY OVERVIEW
- -----------------
According to the Cigar Association, approximately 280,000,000 premium cigars
were sold in the United States in 1996, reflecting sales of $550,000,000 to
$600,000,000, or $1.96 to $2.14 per cigar. The number of premium cigars sold in
1996 increased 67% over 1995. In units, premium cigars accounted for 6.4% of all
cigars sold, but over 40% of the total retail dollars ($1,300,000,000) spent on
cigars of all classes.
Growth in the retail market for premium cigars has been aided by several
factors:
[] the emergence of cigar evenings;
[] the publication of the magazine Cigar Aficionado;
[] the recapture of the cigar's traditional image of a
symbol of success, celebration and achievement; and
[] the rise in self-indulgence.
The Issuer estimates approximately 600 type of premium cigars with meet the
Issuer's cigar selection criteria. The Issuer will offer a selection of
approximately thirty.
KIOSK SYSTEM
- ------------
The Issuer will retail its cigars through Company-owned and operated Cigar King
kiosks. The small size of the kiosk, approximately 50 to 75 square feet, enables
the kiosk to be located in non-traditional, key intercept market locations.
Further, the small size translates into low-cost. Another benefit is the short
time period required to open new sites. Lastly, if free-standing, the kiosk can
be relocated if necessary.
The Cigar King kiosk design will be upscale, with emphasis on Cigar King
branding and on maximizing cigar display. The kiosk design will reflect Cigar
King's principal position, that of an expert and knowledgeable purveyor of
premium cigars.
The Issuer will display each cigar type by open box and support each with
professional signs describing the cigar's origin and flavor characteristics, as
well as the Cigar Aficionado rating.
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Packaging will display the Cigar King logo. The Issuer will aggressively
promote, King Climate Control, the Issuer's merchandise display case climate
control. In addition, the Issuer will promote its cigar expertise and knowledge
through kiosk sign and free-of-charge Cigar King brochures.
Retail kiosk operations will be sales-driven, with emphasis on customer service
and on merchandising policy and procedures. Retail kiosks located within
downtown buildings will likely be open from 8 a.m. till 6 p.m., six days a week.
Other kiosks, those located in shopping centers or airports, for example, will
likely be open till 9 p.m. or later, seven days a week. The typical staff of one
retail kiosk will consist of one full-time kiosk manager and two to three
part-time employees. Each employee will be trained to be knowledgeable about
premium cigars. Retail kiosk operations will be sales-driven, with training
emphasis on customer services and on merchandising policy and procedures.
PHASES OF EXPANSION
- -------------------
The Issuer's start-up and expansion plan involves three phases:
Phase 1 the design, development and testing of the Cigar King kiosk
prototype;
Phase 11 the opening of a further fourteen Cigar King kiosks; and
Phase 111 the opening of a further ten, bringing the total number of
Cigar King kiosks to twenty five.
REQUIRED INVESTMENT IN KEY LOCATIONS
- ------------------------------------
The Issuer will allocate $20,000 per Cigar King kiosk for key intercept
marketing location acquisition. The $20,000 is comprised of $5,000 for the
production of property manager proposal, which includes site-specific kiosk
renderings, and $15,000 to incite the property manager to agree to the kiosk
install and the term of the tenancy agreement.
ANTICIPATED PROFITABILITY IN THE SHORT TERM
- -------------------------------------------
The Issuer anticipates the retail kiosk, open a minimum of three months, will
achieve annual sales of approximately $283,476, generating a kiosk-level
operating contribution (profit) of approximately $42,627. The projected yearly
income statements for the three Phases, as noted above, are as follows:
(000'S)
PHASE 1 PHASE 11 PHASE 111
Revenue $ 283 $4,252 $7,087
Operating profit 43 639 1,066
Sales, general and administrative
Expenses - 213 354
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Pre-tax profit - 427 711
Number of Kiosks 1 15 25
Estimated Phase financing $ 150 $ 750 $ 500
RISK FACTORS
- -------------
The securities offered hereunder must be considered speculative, generally
because of the nature of the Issuer's business and its present stage of
development. In particular, a prospective investor should consider carefully the
following risk factors:
1. The availability of premium cigars is increasing constrained by
accelerating demand in the face of worldwide shortage of premium cigar
leaf tobacco.
2. The retail market for premium cigars is highly fragmented. The market
is characterized by hundreds of small, independent operators and small
retail chains. No single chain in North America has a significant share
of the retail market for premium cigars.
3. Society has adopted a hard stance at those that smoke. In some cities,
laws have been passed to prohibit smoking in one's work place,
restaurants and other public areas.
4. The Issuer might not be able to induce landlords to provide it will the
desirable locations required to increase its sales. The cost to locate
the kiosk in certain locations might be prohibitive.
5. The Issuer's current operations are dependent on attracting certain key
individuals to assist in the development of the Cigar King concept. Any
future loss of the services of these individuals may impact operations.
6. Subscribers of the Shares have no individual legal representation with
this Memorandum. Accordingly, Subscribers should consult with their own
counsel prior to purchasing Shares.
7. The Issuer has not, since incorporation, paid dividends and the Issuer
has no plans, at this time, to pay dividends.
8. The only present source of funds available to the Issuer is through the
sale of equity shares. Even if the results of sales through the kiosk
system is encouraging, the Issuer may not have sufficient funds to
conduct is expansions plans and hence reduce its market share of its
product. While additional working capital may be generated through the
operation, there is no assurance that any such funds will be available.
9. There is no public market for the Shares of the Issuer and there can be
no assurance that an active public market for the Shares will develop
or be sustained. In addition, the Shares of the Issuer are subject to
various governmental and regulatory body rules which effect the
liquidity of the Shares. As such the Shares may not be suitable for
Subscribers who may need to liquidate their investment prior to the
expiry of any hold periods.
92
10. As one or more of the directors or officers of the Issuer might have in
the future an interest, direct or indirect, in other business ventures
of a similar nature resulting in them not being able to devote their
full time to the Issuer's business and conflicts of interest between
such directors or officers and the Issuer might arise.
THE SUBSCRIBER IS NOT LIABLE TO MAKE AN ADDITIONAL
CONTRIBUTION BEYOND HIS INITIAL INVESTMENT.
CORPORATE INFORMATION
- ----------------------
NAME AND INCORPORATION
The Issuer was incorporated under the laws of the State of Nevada on October 8,
1998.
AUTHORIZED AND ISSUED CAPITAL
The authorized capital of the Issuer consists of 200,000,000 common shares with
a par value of $0.001 per share. All the common shares of the Issuer rank
equally in all respects.
USE OF PROCEEDS
- -----------------
The Issuer expects to use the proceeds from this Offering to pay for certain
costs relating to assisting the Issuer to obtain a quotation on the NASD OTC
Bulletin Board. Such costs will include, but will not be limited to, the cost of
having its records audited, a legal opinion being given on the tradeabliltiy of
its shares, cost to prepare various documentation for submission to the
regulatory authorities and other costs the directors in their absolute wisdom
deem fit.
DIRECTORS, OFFICERS, PROMOTERS AND PERSONS HOLDING MORE THAN 10% OF THE ISSUED
EQUITY SHARES
- --------------------------------------------------------------------------------
DIRECTORS, OFFICERS AND PROMOTERS
The following are the full names, municipality of residence, positions with the
Issuer and principal occupations with the preceding five years of the directors
and officers of the Issuer.
93
(i) Member of the Audit Committee
(ii) These shares have been deemed to be Rule 144 stock and are, therefore,
restricted from trading and any such trading will be in conformity with
the rules and regulations of the NASD OTC Bulletin Board and the
Exchange Act in the United States. Refer to "Restricted Shares" below.
Certain directors, officers and shareholders of the Issuer might become or are
at this time directors, officers and shareholders of other companies engaged in
similar activities as the Issuer is developing and conflicts of interest may
arise between their duties as directors of the Issuer and as directors of other
companies. All such possible conflicts will be disclosed and the directors
concerned will govern themselves in respect thereof to the best of their ability
in accordance with the obligations imposed on them under the laws of the State
of Nevada.
OTHER DIRECTORSHIPS
Other reporting companies of which the above-noted individuals are or have been
during the past five year either a director, officer or promoter, are as
follows:
Steven Bruce - Director and Vice-President of Newgen Environmental
Systems Inc., a company listed and trading on the
Alberta Stock Exchange. Mr. Bruce has never been a
director nor officer of an OTC Bulletin Board
company.
Michael Wolf - Is currently a directors of Mandalay Capital Corp.,
a company quoted on the OTC Bulletin Board. He has
never been a director and/or officer of any other
public listed company.
Michael Kennaugh - Formerly a director of Sweetbrier Corporation, a
company with a quotation on the OTC Bulletin Board
which now trades under the name of Dippy Foods Inc.
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REMUNERATION OF DIRECTORS, OFFICERS, PROMOTERS OR INSIDERS OF THE ISSUER SINCE
INCEPTION.
None of the Issuer's directors, officers, promoters or insiders have received
anything of value from the Issuer since inception.
PERSONS BENEFICIALLY OWING MORE THAN 10% OF THE EQUITY SHARES OF THE ISSUER
To the knowledge of the Issuer, there are no persons holding beneficially,
directly or indirectly, a greater than 10% interest in the Shares of the Issuer
other than Steven Bruce, President of the Issuer, who has 25% of the outstanding
shares and Michael Wolf, Secretary Treasurer of the Issuer, who has 15% of the
outstanding shares. These shares are Rule 144 stock and have certain trading
restriction thereon as more fully described under "Restricted Shares".
OPTIONS TO PURCHASE SECURITIES OF THE ISSUER
- --------------------------------------------------
INCENTIVE STOCK OPTIONS GRANTED TO DIRECTORS, OFFICERS, PROMOTERS AND OTHER
INSIDERS
The Issuer has not granted options to Directors, Officers, Promoters and other
insiders of the Issuer to purchase any shares as at the date of this Memorandum.
SECURITIES OF THE ISSUER IN ESCROW, IN POOL OR SUBJECT TO HOLD RESTRICTIONS
RESTRICTED SHARES
The shares issued to the directors have been restricted under Rule 144 as
defined below.
Rule 144 governs the sale of restricted securities in limited quantities and
generally applies to corporate insiders and/or buyers of private placement
securities not sold under SEC registration statement requirements.
Corporate insiders are officers, directors, or anyone else owning 10% or more of
the outstanding Issuer's securities. Stock either acquired through compensation
arrangements or open market purchases is considered restricted for as long as
the insider is affiliated with the Issuer. Buyers of private placement
securities who have no management or major ownership interest in the Issuer, the
restricted status of the shares expires over a period of time.
Under Rule 144, restricted securities may be sold to the public without full
registration (registration is completed upon transfer of ownership) if the
following conditions are met:
95
1. The shares have been owned and fully paid for at least one year, or
upon the death of the owner.
2. Current financial information must be made available to the buyer. The
Issuer that files 10K or 10Q reports with the SEC satisfies this
requirement.
3. The seller must file Form 144, "Notice of Proposed Sale of Securities"
, with the SEC no later than the first day of the sale. The filing is
effective for 90 days. If the seller wishes to extend the selling
period or sell additional shares, a new Form 144 is required.
4. The sale of the shares may not be advertised and no additional
commissions can be paid.
5. If the shares were owned for between one and two years, the volume of
shares sold is limited to the greater of 1% of all outstanding shares,
or the average weekly trading volume for the proceeding four weeks. If
the shares have been owned for three years or more, no volume
restrictions apply to non-insiders. Insiders are always subject to
volume restrictions.
POOLED SHARES
None of the Issuer's securities are subject to pooling restrictions.
PARTICULARS OF ANY OTHER MATERIAL FACTS
- --------------------------------------------
LEGAL PROCEEDINGS
There are no material legal proceedings to which the Issuer is a party or to
which its property is subject, nor to the best of the knowledge of management,
are any material legal proceedings contemplated.
ASSETS PROPOSED TO BE ACQUIRED
There are no assets proposed to be acquired in the immediate future other than
what is stated in this Memorandum.
BONDS, DEBENTURES, NOTES AND OTHER DEBT OBLIGATIONS
There are no bonds, debentures, notes or other debt obligations outstanding as
at the date of this Memorandum which have not been mentioned herein.
OTHER MATERIAL FACTS
There are no material facts relating to the securities being offered hereunder
which have not been previously disclosed in this Memorandum.
96
MATERIAL CONTRACTS
- -------------------
All material contracts are noted elsewhere in this Memorandum.
INSPECTION OF DOCUMENTS
- -------------------------
All contracts and engineering reports referred to in this Memorandum may be
examined at the office of the Issuer, located at Suite 825 - 1200 West 73rd
Avenue, Vancouver, British Columbia, Canada, V6P 6G5 during normal business
hours during the period of the offering under this Memorandum and for a period
of thirty days thereafter.
CONFLICT OF INTEREST
- ----------------------
Certain officers and directors of the Issuer are or may become officers or
directors of other reporting companies and as such may be presented, from time
to time, with situations or opportunities which give rise to apparent conflicts
of interest which cannot be resolved by arm's-length negotiations but only
through exercise by the officers and directors of such judgment as is consistent
with their fiduciary duties to the Issuer which arise under the relevant
statutory laws and general corporate law. All officers and directors are aware
of their fiduciary responsibilities under corporate law, especially insofar as
taking advantage, directly or indirectly, of information or opportunities
acquired in their capacities as officers and directors of the Issuer. Any
transaction with officers or directors will only be on terms consistent with
industry standards and sound business practice in accordance with the fiduciary
duties of those persons to the Issuer, and depending upon the magnitude of the
transactions and the absence of any disinterested board members, the
transactions may be submitted to the shareholders for their approval in the
absence of any independent board members.
CONTINUOUS REPORTING OBLIGATIONS TO SUBSCRIBERS
- ---------------------------------------------------
The Issuer will be applying for a quotation of its shares on NASD OTC Bulletin
Board but will not become a reporting issue at that time. As such, the Issuer is
not required to prepare and file with an Exchange or regulatory body any
financial information and is not required to file financial information with its
shareholders. Nevertheless, it is the intention of management to prepare annual
audited financial statements for submission to its shareholders.
FINANCIAL STATEMENTS
- ---------------------
Copies of the Issuer's interim unaudited financial statements for the period
from incorporation until November 30, 1998 are attached as Appendix B and form
an integral part of this Memorandum.
INCOME TAX CONSIDERATIONS
- ---------------------------
97
The Issuer has not undertaken a study of potential income tax consequences to
Subscribers.
QUALIFIED INVESTORS ARE URGED TO CONSULT WITH THEIR PROFESSIONAL ADVISERS
REGARDING ANY TAX CONSEQUENCES APPLICABLE TO THEM.
CONTRACTUAL RIGHTS OF ACTION
- -------------------------------
In certain circumstances, the investor who purchases Shares has, by contract,
the same rights of action against the Issuer for rescission or damages as are
afforded to a person who purchases securities in respect of which a prospectus
has been filed. This right of action is in addition to any other rights of
remedy the investor may have at law and may be summarized as follows:
In the event that this Memorandum, including any amendment thereto, contains a
misrepresentation which was a misrepresentation on the date of investment, an
investor to whom the Memorandum was delivered and who purchases the securities
and who is still the owner of the securities has a right of action against the
Issuer for damages or alternatively for rescission of the purchase provided
that:
(a) the right is only enforceable on written notice being given to the
Issuer not later than 90 days subsequent to the date of investment;
(b) the Issuer is not liable if the investor purchased the securities with
knowledge of the misrepresentation;
(c) in an action for damages, the Issuer is not liable for any or all
portion of such damages that the Issuer proves does not represent the
depreciation in value of the securities as a result of this
misrepresentation; and
(d) in no case shall the amount recoverable exceed the price at which the
securities were sold to the Investor.
For these purposes "misrepresentation" means an untrue statement of a material
fact or an omission to state a material fact which is required to be stated or
which is necessary to prevent any statement that is made from being false or
misleading in the circumstances in which it is made.
98
CERTIFICATE
The foregoing contains no untrue statement of a material fact and does not omit
to state a material fact that is required to be stated or omit to state a
material fact that is necessary to be stated in order for the statement not to
be misleading.
DATED this 4th day of December, 1998.
CIGAR KING CORPORATION
Per: "Steven Bruce"
----------------------------
Steven Bruce
President and Director
Per: "Michael Wolf"
----------------------------
Michael Wolf
Secretary Treasurer and Director
99
APPENDIX A
SUBSCRIPTION AGREEMENT
CIGAR KING CORPORATION
825 - 1200 West 73rd Avenue
Vancouver, British Columbia
Canada, V6P 6G5
Gentlemen:
I understand that Cigar King Corporation, a Nevada corporation (the "Company"),
is offering shares of the Company's stock, $0.001 par value per share, (the
"Shares") pursuant to the exemptions from registration contained under
Regulation D, Rule 504, and Section 3(b) and 4(2) of the Securities Act of 1933,
as amended. I also understand that the subscription price is $0.25 per Share.
Acknowledging the foregoing and upon consideration and affirmation of the
following representations, I offer to purchase the number of Shares at the price
of $0.25 per share for the aggregate amount (the "Subscription Funds") that are
set out in paragraph 6. In order to induce the Company to accept my offer, I
advise you as follows:
1. AVAILABILITY OF INFORMATION
I represent and warrant that I have been furnished with and have received a copy
of the Offering Memorandum prepared by the Company. I also acknowledge that in
addition to the business and financial information about the Company provided to
me, the Company has permitted me the opportunity to ask questions of, and
receive answers from, the Company, and any other person or entity acting on its
behalf, concerning the terms and conditions of the offering and to obtain any
additional information necessary to verify the accuracy of the information
provided by the Company and any other person or entity acting on its behalf.
2. REPRESENTATIONS AND WARRANTIES
I represent and warrant to the Company (and understand that they are relying on
the accuracy and completeness of these representations and warranties in
connection with the availability of an exemption from the registration
requirements of applicable Federal and State securities laws from the offer and
sale of the Shares) that:
A. NO REGISTRATION. I understand the Shares offered have not been
registered under the Securities Act of 1933, as amended (the "1933
Act"), or any applicable State securities laws, and that I must bear
the economic risk of the investment for an indefinite period of
100
time because the Shares cannot be sold unless they are registered under
the 1933 Act or applicable State securities laws or exemption from them
are available; that registration under the 1933 Act is unlikely at any
time in the future; that the Company is not obligated to file a
registration statement under the 1933 Act; and that Rule 144, adopted
under the 1933 Act governing the possible disposition of Securities, is
applicable to the share of common stock. I agree not to sell the Shares
without registration under the 1933 Act and the applicable State
securities laws unless in an exempt transaction as set forth in
Regulation D, Rule 144 or any other Federal securities act.
B. OWN ACCOUNT. I am the only party with an interest in this Subscription
Agreement, and I am acquiring Shares for investment purposes and for my
own account for long-term investment only, and not with any intent or
arrangement to resell, fractionalize, divide or redistribute all or any
part of the Shares to any other person. I have no present plans to
enter into any contract, undertaking or agreement for any resale,
distribution, subdivision or fractionalization.
C. CITIZENSHIP. I am a citizen of Canada. I am a bonafide resident of the
Province of British Columbia as set forth next to my signature.
D. KNOWLEDGE AND EXPERIENCE. I have knowledge and experience in financial
and business matters and in investments in particular and I am capable
of evaluating the merits and risks of an investment in the Company. I
understand that the Company is relying upon my representations for the
purpose of confirming my suitability as an investor in the Company.
E. ACCURACY OF INFORMATION. The information that I have provided to the
Company concerning my financial position and knowledge of financial
business matters is correct and complete as of this date. If any of the
information changes materially before you accept this subscription, I
immediately will provide the new information. I indemnify the Company
against any damages, claims, loss, expense or liability that may arise
as a result of a breach of any representation or covenant that I have
made.
F. SPECULATIVE NATURE OF INVESTMENT. I am aware that the Company is new
and is starting to operate and that an investment in the Shares is a
speculative investment which involves a high degree of risk. I
acknowledge that this transaction and the material provided to me have
not been reviewed by the U.S. Securities and Exchange Commission or by
any State's securities authorities.
G. ADEQUACY OF MEANS. I have adequate means of providing for my current
needs and personal contingencies and have no need to liquidate this
investment in the Company's Shares.
H. NET WORTH. I represent and warrant either that:
(1) my net worth (along with my spouse, but exclusive of home,
furnishings and automobile) is three times the amount of the
investment in the Company's Shares and that I (alone or
jointly with my spouse) have an adjusted gross income in the
most recent years of $75,000 or more; or
101
(2) I have a net worth (alone or with my spouse, but exclusive of
home, furnishings and automobile) that is five times the
amount of an investment in the shares without regard to my
annual income.
3. OFFERING PROCEDURES
I understand this Subscription Agreement is subject to each of the following
terms and conditions:
a. The Company may reject this Subscription Agreement for any
reason, and this Subscription Agreement becomes binding upon
the Company only when the Company accepts it in writing.
b. If my Subscription Agreement is rejected, the Company will
return to me the Subscription funds that I have submitted
within ten days of the rejection without interest or
deduction.
c. If my subscription is accepted, I must execute any additional
documents that are necessary to effect the issuance of the
Shares that I have purchased.
4. INDEMNIFICATION
I acknowledge that I understand the meaning and legal consequences of the
representations and warranties I have given and I agree to indemnify the Company
and its management against any loss, damage or liability arising out of a breach
of any representation or warranty or covenant of the undersigned contained in
the Subscription Agreement or in the financial information that I have provided
to the Company.
5. MISCELLANEOUS
A. ENTIRE AGREEMENT. This Agreement represents the entire
agreement between the Company and me and supersedes all prior
agreements, understandings or conversations with respect to
any transactions or the type contemplated hereby.
B. WAIVER AND AMENDMENT. Any right granted to either me or the
Company under this Agreement may be waived only in writing
signed by both of us. No delay in our exercising any right
granted under this Agreement operates as a waiver of the
right, and no partial exercise of any right precludes our
exercising that right in the future. Any amendment of this
Agreement must be written and signed by the Company and me.
C. GOVERNING LAW. This Agreement is governed by, and construed in
accordance with, the laws of the State of Nevada.
102
D. ENFORCEMENT. If legal action becomes necessary to enforce this
Agreement or any part of it, the party prevailing in the
action is entitled to collect its reasonable expenses incurred
in the action, including reasonable attorney's fees, from the
non-prevailing party.
6. PAYMENT FOR SHARES
I subscribe for Shares and submit my cheque payable to CIGAR
--------------------
KING CORPORATION for the full amount of $
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Dated: , 1998
-----------------------------
WITNESS: )
)
) ------------------------
- ---------------------------------------------- ) (SIGNATURE OF SUBSCRIBER)
(Signature) )
)
)
- ---------------------------------------------- )
(Address) )
)
)
- ---------------------------------------------- )
)
)
- ---------------------------------------------- )
Receipt is hereby acknowledged of the amount first written in connection with
and on the terms and subject to the conditions set out in this Subscription
Agreement:
DATED: CIGAR KING CORPORATION
----------------------------
Per:
---------------------------
Authorized Signatory
103
(TO BE COMPLETED IN DUPLICATE, ONE COPY TO SUBSCRIBER, ONE COPY FOR COMPANY)
APPENDIX B
CIGAR KING CORPORATION
(A Development Stage Company)
BALANCE SHEET
November 30, 1998
(Unaudited - Prepared by Management)
ASSETS
CURRENT ASSETS
Bank $ 67,130
OTHER ASSETS
Rights to Cigar King concept - Note 3 50,000
--------
$117,130
========
LIABILITIES
Accounts payable and accrued liabilities $ 50,000
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STOCKHOLDERS' EQUITY
Common stock
200,000,000 shares authorized, at $0.001 par
value, 10,500,000 shares issued and outstanding 10,500
Capital in excess of par value 58,500
Deficit accumulated during the development stage (1,870)
-------
Total Stockholders' Equity 67,130
------
104
$ 117,130
=======
The accompanying notes are an integral part of these unaudited financial
statements.
CIGAR KING CORPORATION
(A Development Stage Company)
STATEMENT OF OPERATIONS
For the period from October 8, 1998 (Date of Inception)
to November 30, 1998
(Unaudited - Prepared by Management)
SALES $ -
EXPENSES 1,870
-------
NET LOSS $ 1,870
=======
NET LOSS PER COMMON SHARE
Basic $ 0.001
=======
AVERAGE OUTSTANDING SHARES
Basic 10,500,000
==========
105
The accompanying notes are an integral part of these unaudited financial
statements.
CIGAR KING CORPORATION
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the period from October 8, 1998 (Date of Inception)
to November 30, 1998
(Unaudited - Prepared by Management)
106
The accompanying notes are an integral part of these unaudited financial
statements.
CIGAR KING CORPORATION
(A Development Stage Company)
STATEMENT OF CASH FLOWS
For the period from October 8, 1998 (Date of Inception)
to November 30, 1998
(Unaudited - Prepared by Management)
107
The accompanying notes are an integral part of these unaudited financial
statements.
CIGAR KING CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
November 30, 1998
(Unaudited - Prepared by Management)
1. ORGANIZATION
The Company was incorporated under the laws of the State of Nevada on
October 8, 1998 with the authorized common shares of 200,000,000 shares
at $0.001 par value.
The Company is a start-up company founded for the purpose of building a
retail premium cigar business that purchases premium cigars and sells
them, along with cigar accessories, through the Company's-owned and
operated Cigar King retail kiosk.
The Company is in the development stage.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Methods
------------------
The Company recognizes income and expenses based on the accrual method
of accounting.
Dividend Policy
---------------
The Company has not yet adopted a policy regarding payment of
dividends.
Income Taxes
------------
The Company has not yet elected a fiscal year but has not completed a
full operating period and therefore has not filed any income tax
returns.
Loss per Share
--------------
Loss per share amounts are computed based on the weighted average
number of shares actually outstanding using the treasury stock method
in accordance with FADS Statement No. 128.
108
Cash and Cash Equivalents
-------------------------
The Company considers all highly liquid instruments purchased with a
maturity, at the time of purchase, of less than three months, to be
cash equivalents.
CIGAR KING CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
November 30, 1998
(Unaudited - Prepared by Management)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Foreign Currency Translation
----------------------------
The translations of the Company completed in Canadian dollars have been
translated to US dollars. Assets and liabilities are translated at the
year end exchange rates and the income and expenses at the average
rates of exchange prevailing during the period reported on.
Financial Instruments
---------------------
The carrying amounts of financial instruments, including cash, prepaid
expenses and deferred offering costs are considered by management to be
their standard fair values. These values are not necessarily indicative
of the amounts that the Company could realize in a current market
exchange.
Estimates and Assumptions
-------------------------
Management uses estimates and assumptions in preparing financial
statements in accordance with generally accepted accounting principles.
Those estimated and assumption affect the reported amounts of the
assets and liabilities, the disclosure of contingent assets and
liabilities, and the reported revenues and expenses. Actual results
could vary from the estimates that were assumed in preparing these
financial statements.
3. RIGHTS TO CIGAR KING CONCEPT
On November 24, 1998, the Company entered into an Agreement to Acquire
100% Interest in the Concept with Archer Investments Inc. whereby the
sum of $50,000 payable on or before December 31, 1998 the Company
obtains a 100% interest in the rights to use the Cigar King concept.
The Company obtains the sole and exclusive rights to the concept
worldwide and will call the Concept "Cigar King".
109
As at the date of the Balance Sheet the Company has not paid the
purchase price to Archer Investments Inc.
CIGAR KING CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
November 30, 1998
(Unaudited - Prepared by Management)
4. RELATED PARTY TRANSACTIONS
Related parties acquired 42.85% of the common shares issued for cash.
The officers and directors of the Company are involved in other
business activities and they may, in the future, become involved in
additional business ventures which also may require their attention. If
specific business opportunities become available, such persons may face
a conflict in selecting between the Company and their other business
interests. The Company has formulated no policy for the resolution of
such conflicts.
5. GOING CONCERN
Continuation of the Company as a going concern is dependent upon
obtaining additional working capital and the management of the Company
has developed a strategy, which it believes will accomplish this
objective through additional equity funding, and long term financing,
which will enable the Company to operate in the future.
Management recognizes that, if it is unable to raise additional
capital, the Company cannot operate in the future.
110