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
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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) 267-1100
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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)
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TABLE OF CONTENTS
ITEM PAGE
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PART 1
Item 1 Description of Business 3
Item 2 Management's Discussion and Analysis or Plan of Operation 15
Item 3 Description of Property 18
Item 4 Security Ownership of Certain Beneficial
Ownership and Management 18
Item 5 Directors, Executive Officers, Promoters and
Control Persons 20
Item 6 Executive Compensation 21
Item 7 Certain Relationships and Related Transactions 22
Item 8 Description of Securities 23
PART 11
Item 1 Market Price of and Dividends on the Registrant's
Common Equity and Other Stockholders Matters 24
Item 2 Legal Proceedings 24
Item 3 Disagreement With Accountants and Financial Disclosure 24
Item 4 Recent Sales of Unregistered Securities 24
Item 5 Indemnification of Directors and Officers 25
PART F/S
Financial Statements 27
PART 111
Item 1 Index to Exhibits 36
Item 2 Description of Exhibits 36
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DOCUMENTS INCORPORATED BY REFERENCE
Documents incorporated by reference: None
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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, (TEL)
604-267-1100 (FAX) 604-267-1101.
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,
"Development of the Cigar King Concept"). Management anticipates that the
Company's shares will be qualified on the system of the National Association of
Securities Dealers, Inc. ("NASD") known as the Bulletin Board. The Company has
not yet applied to have its shares quoted on the Bulletin Board but will
consider having its shares called for trading once this Form 10-SB has no more
comments from the United States Securities and Exchange Commission.
On November 24, 1999, the Company entered into an agreement with Archer
Investments Inc. ("Archer"), a party dealing at arm's length with the Company,
its directors and officers, whereby it acquired the rights to develop the
concept for selling cigars through a kiosk system in consideration for $50,000;
which the Company has paid (Exhibit 6 (a) (ii)). Under the above noted
agreement, the Company acquired the rights to use the name of "Cigar King" and
the rights to market the concept any where in the world without Archer's
approval. The Company was to receive any reports, blueprints and documents held
by Archer relating to the development, marketing and sale of the concept. The
only documentation received by the Company was a business plan which forms, in
part, the basis of this Form 10-SB, other than it related to establishing the
kiosk system in Seattle, Washington rather than Vancouver, British Columbia.
Under the agreement the Company does have the executive rights to use the name
"Cigar King" in the marketing of high quality cigars through a climate
controlled kiosk merchandise display case. There are no copyrights or trademarks
for the Cigar King concept and no applications have been made or are pending.
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. Initially, the Company will require $27,500 to design the kiosk
prototype and acquire the kiosk location. Once the Company has obtained a
suitable location it will require an additional $75,800 to construct and test
the prototype. 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 its concept from the sale of its capital stock or in otherwise raising
substantial capital. The directors and officers of the Company have not pledged,
at this time, any further financial commitment to the Company but are willing to
add additional funding if required to a limit of $30,000. No other commitments
for funding is available at this time.
In the event the consuming public is not interested in the Company's
concept of selling cigars by way of a kiosk the Company will consider an
association with several cigar manufacturers to distribute their cigars and
tobacco leaves. With the competition already in place this might prove to
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be difficult for the Company. There is no assurance the Company will be able to
sell enough cigars to ensure a profit. The Company has not taken any steps to
identify cigar manufacturers and no discussions have taken place in this regard.
The Company must be considered subject to all the risks inherent in any newly
formed business, including the absence of a long, profitable operating history,
lack of market recognition and limited banking and financial relationships.
In an Offering Memorandum dated December 4, 1998, the investors signing
a subscription agreement attached to the Offering Memorandum acknowledged that
the nature of their investment was speculative and involved a high degree of
risk. Each potential investor was supplied with a copy of the Offering
Memorandum. In the Offering Memorandum it states "the Subscriber may lose all of
the investment made hereunder". If the Company is not successful, management
does not intend to return any of the subscription proceeds to the shareholders.
The Company was incorporated in the State of Nevada for tax reasons.
Had the Company been incorporated in the Province of British Columbia, it would
have been subject to Provincial Capital Tax on its outstanding capital stock and
Federal Corporate Income Tax on its profits. Once the Company becomes a public
entity, the Federal Corporate Income Tax rate will be approximately 51% of net
income. Management is considering registering ex-provincially once operations
commence. This will allow it to transfer funds to Nevada by paying a withholding
tax rate of 15% based on the Canada/US Tax Treaty. With Nevada having no State
tax it was advantageous for the Company to incorporate in the State of Nevada.
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.
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"
in that actual results may materially differ from the Company's plans as
currently contemplated. Information concerning all the factors associated with
the 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.
None of the directors or officers have any experience in owning or
operating a cigar retail business.
All dollar amounts shown in this document are stated in United States
dollars unless otherwise noted.
DEVELOPMENT OF THE CIGAR KING CONCEPT
a. Industrial Overview
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According to 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 dollars ($1,300,000,000) were spent
on cigars. According to Tobacconist Magazine, the Official Publication of the
Retail Tobacco Dealers of America, the number of premium cigars sold in the
United States in 1997 increased 22% over 1996. The Tobacconist Magazine reported
flat sales in the United States in the first half of 1998.
The Company was unable to procure market data specific to Canada other
than is more fully described under Cigar Smokers below. However, the Company
believes, on a per person basis, the consumption of premium cigars in Canada
reflects that of the United States. Therefore, because the population of Canada
is one-tenth the population of the United States, the Company estimates the
market for premium cigars in Canada is one-tenth the size of that of the United
States. Accordingly, the Company estimates premium cigar sales in Canada of
$650,000,000 in 1997. Because the population of Greater Vancouver area is
roughly one-tenth the population of Canada, the Company estimates the 1997
market for premium cigars in the Greater Vancouver area at CDN $65,000,000. In
Canadian dollars, at an exchange rate of 1.45, the Company estimates the 1997
market in the Greater Vancouver area at CDN $95,000,000. The Company believes
that this is the current market as at the date of this Form 10-SB.
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 ("Cigar Aficionado"), the recapture of the cigar's
traditional image as a symbol of success, celebration and achievement, and the
rise in self-indulgence. However, it appears that the market for premium cigars
has reached its peak in both the U.S. and Canada. The future for the market is
uncertain. There are no assurances that the market will sustain current sales,
or whether it will drop dramatically to its earlier levels.
The Company is relying of its selection of cigars as set forth in the
publications of Cigar Aficionado. If Cigar Aficionado ceases publication, the
Company will rely on other publications, namely Smoke magazine and Cigar
magazine, for critiques of newly introduced cigars. In addition, the Company can
access the Internet Cigar Group's comprehensive database of cigar critiques. The
Internet Cigar Group is the largest cigar-related Internet organization in the
world. For established brands, the back editions of Cigar Aficionado provide the
critiques of the 1,300 cigars in its database. Additionally, The Ultimate Cigar
Book, written by Richard Carleton Hacker, is the best-selling cigar book in the
world, and is regarded as an authority on the different cigar brands.
When the premium cigar market was growing in 1995, 1996 and 1997, the
availability of premium cigars became increasingly constrained by accelerating
demand in the face of a world-wide shortage of premium cigar leaf tobacco. In
response to this demand, premium cigar manufacturers rushed to produce more
premium cigar leaf tobacco and more premium cigars. Currently, with the flatness
of the market, and the output of the newly produced cigars, there is no shortage
in supply.
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 or Canada has a significant share
of the retail market for premium cigars. The
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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
Almost 60 percent of Canadian smokers are addicted. There are 5,800,000
smokers in Canada, approximately 19 percent of the entire population. The
National Population Health Survey interviews members of more than 200,000
households every two years. The results from 1996/1997 shows 10% of Canadians
who said they were smokers in 1994/1995 have quit and 3 percent have cut down.
But 1,300,000 have started or resumed smoking, so in total there has been a
slight decrease in the number of smokers, from 31 percent to 29 percent. Other
statistics revealed are as follows:
o the average number of cigarettes smoked daily is 18 whereas the number
of cigars is 4.
o men are more likely to smoke than women; less than 4% of all cigar
smoker are women.
o 44 percent of Canadians have never smoked.
o lower income Canadians are more likely to smoke than richer ones.
o smokers are more likely to be found in jobs in factories, fishing,
construction and mining than in ones such as teaching, natural resources
and medicine.
o Smokers in percentage of the numbers of persons in some of the Canadian
provinces are as follows:
Quebec 34%
Nova Scotia 33%
Prince Edward Island 33%
Ontario 26%
British Columbia 26%
The above noted statistics are derived from the Globe & Mail newspaper
(January 21, 1999) published in Toronto, Ontario.
In an article published by the Province newspaper in Vancouver, British
Columbia on November 18, 1998 it stated that cigarette and other smoking among
US college students of all back-grounds has increased by 28% in the last 4
years. A survey of 116 four-year colleges by the Harvard School of Public Health
found 28% of students smoking in 1997, up from 23% in 1994.
More than a quarter of the smokers in the 1997 survey began smoking
regularly while in college. "We found a dramatic increases in smoking among all
college students, at all types of colleges" said Henry Wechsler, Director of
College Alcohol Studies at the school and lead author of the report published in
the Journal of American Medical Association.
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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 $1.1 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 (17%) 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.
c. Plan of Operation
The Company intends to locate twenty-five Company-owned and operated
Cigar King retail kiosks in the Greater Vancouver Area in a period of two and
one-half years. The Company intends to locate the kiosks centrally and in close
proximity to achieve operating and marketing efficiencies and to enhance
awareness of the Cigar King brand. The Company intends to locate the kiosks in
high-foot traffic, high-visibility.
The Company's start-up and expansion plan involves four phases:
Phase I
Phase I is the design of the kiosk prototype and the acquisition of the
kiosk location. The Company estimates the cost of Phase I at $27,500
(Cdn. $40,000), which is comprised of $3,500 for legal expense, $10,300
for kiosk design, $3,500 for the production of the property manager
proposal, and $10,200 to induce the property manager to agree to the
kiosk installation and the terms of the tenancy agreement. The Company
estimates that Phase I will take three months from the date the Company
receives the $27,500 in funding.
Phase II
Phase II is the construction and test of the kiosk prototype. The
Company estimates the construction of the kiosk prototype, 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 two months from the date the Company
acquires the kiosk location. Accordingly, the Company anticipates the
kiosk prototype will be open for business and operating immediately
thereafter. The Company estimates the cost of Phase II at $75,800 (Cdn.
$110,000). This cost includes kiosk construction expense, promotion and
merchandising expense, and inventory expense, as well as unallocated
working capital to cover, in part, start-up losses.
Phase III
Provided the kiosk concept is viable, Phase III involves the opening of
a further fourteen Cigar King kiosks in central Vancouver, bringing the
total number of Cigar King kiosks to fifteen. The Company estimates the
cost of Phase III at $386,000 (Cdn. $560,000). Provided the Company is
adequately funded, the Company estimates it will take twelve
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months to procure fourteen adequate locations, construct the kiosks, and
have them open for business.
Phase IV
Provided Phase III is viable, Phase IV 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. The Company
estimates the cost of Phase IV at $276,000 (Cdn. $400,000). Provided
the Company is adequately funded, the Company estimates it will take
twelve months to procure ten adequate locations, construct the kiosks,
and have them open for business.
At present the Company does not the funds to complete Phase I without
the help of its directors who have agreed to advance $30,000 to the Company.
These funds will only be advanced if there is certainty that the Company can
progress to Phases II and III. If the funds are not advanced for Phase I then
there is the possibility that the Company will not proceed with the concept.
d. Product
The Company will offer only the highest-quality cigars, stocking and
displaying them in the Company's climate-controlled 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.
The Company will offer only premium cigars rated 80 or better 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
Rothchild (ten percent (10%) of mix).
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With each size category, the Company will focus its efforts on procuring a
selection of premium cigars based on origin:
Cuban (fifty percent (50%) of mix) *;
Dominion Republic (twenty-five percent (25%) of mix);
Honduras(fifteen percent (15%) of mix);
Jamaica (five percent (5%) of mix); and
Canary Islands and Mexico together
(five percent (5%) of mix).
(*) In Canada there is no embargo on the importing of Cuban cigars.
The Company will price cigars at the medium to high-end of the market
(refer to Cigar King's website at www.cigarkingcorp.com). 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 cigars are
perfectly maintained at 70 degrees Fahrenheit and 70% humidity.
The Company estimates approximately 600 types of premium cigars meet the
Company's cigar selection criteria. The Company will offer a selection of
approximately 30. With 600 types of cigars to choose from and the Company only
offering a selection of approximately 30, if one type of cigar was 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 intends to 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 cigar accessories through
Company-owned and operated 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 build-out. The kiosk design will be
upscale, with emphasis on Cigar King branding and on maximizing cigar display.
Retail kiosks located in downtown buildings will likely be open from 8 a.m.
till 6: p.m. six days a week. Other kiosks, 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 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
sale-driven, with training emphasis on customer service and on merchandising
policy and procedure.
The Company anticipates it will take three months from the date the kiosk
is first opened for the kiosk to achieve projected monthly sales of
approximately $15,400 or approximately $700 a day. On a monthly basis the net
income derived from a kiosk is estimated to be as follows:
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Gross revenue ($700 per day) (i) $15,400
Less: Cost of goods sold ($400 per day) (ii) 8,800
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Gross profit 6,600
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Wages - $175 per day (iii) 3,850
Revenue sharing with landlord (iv) 1,000
Promotion and miscellaneous expenses (v) 500
Depreciation and amortization (vi) 520
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Total expenses 5,870
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Net operating profit $ 730
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(i) It is assumed a 30 day month less 4 days for Saturday and 4 days
for Sunday. In this situation the kiosk is assumed to be located in an
office complex and not a mall or transportation facility.
(ii) Represents the cost for the cigars. Until operations actually
commence this cost will not be known since the combination of cigars
required by the customers will only be determined at this time. No
consideration has been given to spoilage due to length of time the
cigars are kept on hand. Even with a climate controlled temperature,
the cigars not sold will be subject eventually to spoilage. This figure
will be known only after operations commence.
(iii) Represents two individuals, both working part time during the
day.
(iv) The majority of landlords will accept either a percentage of the
monthly revenue or a flat rental charge. Since the kiosk can be located
in any unused area, the monthly charge should not be high. The Company
will offer a 5% commission based on gross revenue to the landlord as
the monthly rental fee. For conservative purposes a flat fee of $1,000
has been used.
(v) Represents advertising literature, other assorted displays not
supplied by the cigar manufacturers. Also included in this figure is
the cost of monthly insurance premiums for generally liability
insurance.
(vi) Deprecation and amortization is based on the cost of the kiosk at
$26,000 and equipment, being the humidor system, at a cost of
approximately $5,000 for a total cost of $31,000 which will be written
off in total over a sixty month period.
With a net profit of approximately $730 an individual kiosk is subject to
the distinct possibility of suffering a loss. There is not enough monthly profit
to protect against unknown expenses. For example, damage to the kiosk itself,
spoilage of cigars, refunds to dissatisfied customers, sudden increases in cigar
prices that cannot be passed immediately onto the customer due to a need to
amend the advertising. The contingency plan of the Company is to move the kiosk
to another available location, if possible, in hopes of improving the profit
margin. Until full operations commence, the Company does not know when its
concept will be a marginal operations or whether any profit can be made at all.
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g. Future Possibilities
Direct Mail
The Company intends to investigate the feasibility of compiling a
customer database for the purpose of developing a direct mail catalogue
program. This program will only be considered if the Cigar King kiosk
prototype proves to be a viable concept.
Humidified Vending Machines
The Company intends to investigate the feasibility of supplementing
kiosk sales through use of humidified vending machines in select
settings. This program will only be considered if the Cigar King kiosk
prototype proves to be a viable concept. Further, this program will
only be considered if the Company successfully locates no fewer than
ten kiosks in downtown Vancouver. At this time no consideration has
been given to developing this concept.
LOCATIONS
The Company intends to identify the highest-visibility, highest-foot
traffic locations and acquire them where possible. The Company believes the
small size of the kiosk and its freestanding nature should enable the kiosk to
be installed in non-traditional locations. The Company anticipates that many of
the locations sought will be build-outs, anchored by vacant nooks, crannies, or
corners; and, as a result, the locations are not presently occupied, nor do
conventional retailers regard them as location opportunities in general. In
addition, the Company intends to pay a revenue royalty equal to 5% of the
kiosk's sales, guaranteeing the property manager a minimum monthly royalty of
CDN $1,000. The Company intends to locate the kiosks centrally and in close
proximity (Greater Vancouver Area) to achieve operating and marketing
efficiencies and to enhance awareness of the Cigar King brand.
With many of the office buildings in Vancouver being "smoke-free" and
the trend for this status increasing continually with municipal by-laws enacted,
it will become more difficult for the Company to secure good location.
COMPETITION
Competition in the retail market for premium cigars is highly
fragmented. In the U.S., the market is characterized by hundreds of small,
independent operators and small retail chains. In Canada, the market is the
same: it is characterized by dozens 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
roughly 100 franchised stores as at the date of this Form 10-SB.
According to the Internet Cigar Group, the largest cigar-related
Internet organization, there are ten premium cigar retailers in Vancouver, as
listed in the Internet Cigar Group International Database. The list does not
include retailers that offer cigars for sale on a limited basis. Each retailer
listed is a single store. None of the retailers operate kiosks. All of the
retailers operate conventional retail stores. The list is consistent with the
Cigar, Cigarette & Tobacco - Retail directory in the Vancouver Metro Yellow
Pages, through April 1999. These retailers are better known than the Company and
many are better funded. Accordingly, the Company may not be able to successfully
compete with them. In addition to premium cigar
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retailers, the Company will compete directly against all stores, restaurants,
hotels and clubs that sell premium cigars.
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. If the kiosk concept is viable, the Company runs the
risk of more established companies and of unknowns copying the concept,
which would impact the availability of choice locations, which would
adversely affect unit revenue and the opening of new kiosks.
o When the premium cigar market was growing in 1995, 1996 and 1997, the
availability of premium cigars became increasingly constrained by
accelerating demand in the face of a world-wide shortage of premium cigar
leaf tobacco. In response to this demand, premium cigar manufacturers
rushed to produce more premium cigar leaf tobacco and more premium cigars.
Currently, with the flatness of the market, and the output of the newly
produced cigars, there is no shortage in supply. However, the success of
the Company's business plan is dependent in part on management's ability
to procure high-quality premium cigars. The Company competes for supply
with established competitors. These competitors will likely take priority
with distributors. Accordingly, it is possible, if supply again becomes
short, that the Company will have to resort to less known premium cigar
brands, which would likely adversely affect unit revenue.
o The Company's competitors, as existing retailers, are better known than
the Company and many are better funded. Accordingly, the Company may not
be able to successfully compete with them.
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 Company has no operating history, nor does the Company have a
management team with either retail kiosk management expertise or premium
cigar management expertise. There are no assurances the Company will
operate efficiently or viably.
o There are no assurances that the Company will be able to raise the funds
necessary to design, install and begin operating the kiosk prototype.
Accordingly, investors in this venture run the risk of losing their
investment.
o Tobacco kills more people than alcohol, drugs and car accidents combined,
yet in the eyes of our children we continue to treat it with a passive
attitude (The Province newspaper - British Columbia, June 4, 1998). For
example, statistics show that nearly one-third of Canadians between the
age of 15 to 19 years smoke. Every year, 40,000 Canadians die of
smoking-related diseases (that's about equal to the number of Canadians
killed on active duty during the Second World War and ten times the number
killed each year in car accidents (The Vancouver Sun, British Columbia,
April 21, 1998).
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o The Company recognizes that there is a trend in Vancouver whereby many of
the office buildings are "smoke-free" and that this trend is accelerating.
This trend definitely makes it more difficult for the Company to obtain
good locations for its kiosks. For example, on January 1, 1999 the Capital
Regional Board implemented Canada's toughest anti-tobacco laws. The bylaw
bans smoking in all indoor workplaces, including pubs, restaurants, bingo
halls, bowling alleys, casinos, prisons and long-term health care
facilities. The only enclosed places smokers can still light up are
private homes and cars. The vast majority of businesses are complying
successfully with the by-laws (The Province newspaper - March 9, 1999).
These trends in non-smoking areas might inhibit the Company from placing
its kiosks in buildings and malls which otherwise it might have been able
to do.
o The Federal Government in Ottawa collects more than $1,333,400,000 (Cdn.
$2,000,000,000) a year in taxes but only spends $13,334,000 (Cdn.
$20,000,000) a year on anti-smoking enforcement and educational programs
for youth (The Vancouver Sun newspaper, April 21, 1998). The
responsibility for health care rests with the provincial governments and
not the Federal. In an article in the Globe & Mail newspaper published in
Toronto, Ontario on February 25, 1999 it stated that the Government of
Ontario is considering joint the British Columbia Government in a lawsuit
against three major tobacco companies, Imperial Tobacco, Rothmans, Bensons
& Hedges and RJR MacDonalds Inc., alleging that the industry know for
decades that smoking was addictive and lethal but conspired to keep that
information from the public. The lawsuit is seeking billions of dollars to
compensate the British Columbia Government for costs of treating illnesses
caused by smoking; actual statistics are $333,400,000 (Cdn. $500,000,000).
With the press that this lawsuit will attract, the Company might have
extremely difficulty in attracting and retaining a customer base.
o The World Health Organization ("WHO") wants to ban tobacco advertising,
and possible smoking in public, around the world. The UN Agency plans to
introduce the world's first public health treaty by the year 2003 which
would cover such areas as harmonization of taxes on tobacco and
legislation on smuggling, advertising, sponsorship and labeling. The push
for the treaty is being spearheaded by WHO Director-General Gro Harlem
Brundtland, who is supported by the World Bank and UN Children's Fund,
UNICEF. WHO states that tobacco will kill 10,000,000 people a year by the
year 2020. If the treaty is ratified by the member states it would be
legally binding (The Province newspaper, January 31, 1999). With this
happening the Company's business might suddenly be terminated and the
Company will be unable to operate.
o In an article published in the Wall Street Journal on February 26, 1999
(Issue 39, Page A3) it stated that the United States Department of Health
& Human Services would introduce the inclusion of a Surgeon General's
warning on cigar packages. This will be a trend that will immediately be
introduced in Canada. In fact, cigar packages such as Old Port bear a
consumer's alert warning indicating the health risk of cigar smoking on
each package. If this trend continues, as it surely will, it will have a
negative effect on the Company's business.
o In an article published in the Consumer's Research Magazine in May 1998,
Robert Pitofsky, Commission of the Food & Drug Administration has stated
that Congress should regulate cigars just as it wants to regulate
cigarettes. He points to a new report from the National Cancer Institute
("NCI"), which in April 1998 released a report which indicate a
significant increase in cigar smoking. The NCI report also notes that
smoking just one or two cigars a
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<PAGE>
day, without inhaling, doubles the risk of esophageal and oral cancer and
increases the risk of cancer of the larynx by more than six times. These
facts will hurt the Company's changes of marketing its cigars to
individuals who read or have knowledge of the facts stated by the NCI.
o The Company's auditors have qualified their opinion as follows:
"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 does not have the necessary working
capital for its planned activity, which raises substantial doubt
about its ability to continue as a going concern. Management's
plans in this 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".
In Note 5 to the financial statements, the Company acknowledges the
fact that it is dependent upon additional financing in order to develop
its concept. If the Company is unable to raise additional financing it
will not be able to continue and may eventually cease to operate as a
company. The auditor wishes to alert the readers of the financial
statements that he agrees with the Company that there is a possibility
that without additional funding the Company will not be able to complete
its goals and might cease to be an operating entity.
o The Federal Government of Canada, through its annual Budget, constantly
introduces new taxes on both liquor and tobacco products. For example, a
pack of 35 cigarettes sells for $3.80 (Cdn. $5.50); the majority of this
cost being the taxes imposed by the Government. The public does not
resent increases in taxes when it applied to either tobacco or alcohol
since they look upon it as a hidden tax. If this trend continues it will
hurt the Company's sales as less individuals are willing to pay the
high price for the luxury of smoking.
o Out of the 10,535,000 shares issued and outstanding, Steven Bruce,
President of the Company, owns 2,500,000 shares, former director and
officer, Michael Wolf, owns 1,500,000 shares and Michael Kennaugh,
Director and Secretary Treasurer, own 500,000 shares representing 42.71%
of the stock issued. There is very little chance that any individual or
group of individuals can exercise their shareholders' voting right to
replace either of these two directors. Therefore, these three individuals
effectively control the Company and can dedicate policy as they determine
it.
o Some of the Directors of the Company are also directors and officers of
other companies and conflicts of interest may arise between their duties
as directors of the Company and as directors, officers of other companies.
Even with full disclosure by all the directors and officers, the Company
cannot insure that it will receive fair and equitable treatment in every
transaction.
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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 July 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 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. As at
July 31, 1999 no individual(s) have been identified and hired.
The Company is not a party to any employment contracts or collective
bargaining agreements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The discussion contained in this Item 2 is "forward looking". 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. No expansion to other
cities in Canada will be considered until the Company has sufficient resources
to accomplish it. There is a distinct possibility the Company will never have
sufficient resources to expand outside the Greater Vancouver area or within it.
LIQUIDITY AND CAPITAL RESOURCES
As at April 30, 1999, the Company had $61,298 of assets, and $4,273 of
liabilities including cash or cash equivalents amounting to $11,170. Outside of
cash, the remaining asset is the cost paid to acquire the rights to develop the
concept for selling cigars through the kiosk system from Archer Investments Inc.
for the sum of $50,000 (Exhibit 6 (a) (ii)). The purchase
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<PAGE>
price of the rights to the Cigar King concept will be amortized over a five year
period commencing with operations.
Since October 8, 1999, the date of inception, to April 30, 1999 the
Company has incurred the following expenses:
Accounting and audit (1) $ 6,700
Bank charges (2) 157
Consulting (3) 3,950
Edgar filing fees (4) 1,420
Legal (5) 2,530
Management fee (6) 1,400
Office and miscellaneous (7) 808
Rent (8) 1,500
Telephone (9) 750
Transfer agent's fees (10) 3,160
Travel (11) 2,000
-------
Total expenses for the period $ 24,375
=======
(1) Audit fee - $6,700
The Company had its financial statements audited for the periods ended
January 31 and April 30, 1999 for a total fee of $3,200. In addition,
accounting services in the preparation of working paper files and the
accounting records of the Company was $3,500.
(2) Bank changes - $157
Monthly service charges for operating the account as charged by the
Bank of Montreal.
(3) Consulting - $3,950
Consulting services for preparation of the various forms required for
submission of the Form 10-SB and other documentation.
(4) Edgar filing fees - $1,420
The Company filed the Form 10-SB electronically under the Edgar filing
system.
(5) Legal - $2,530
The Company has accrued $2,500 for a legal opinion on the tradeability
of its shares. In addition, it has paid legal expense for using an
attorney as a notary for signing certain documents.
(6) Management fees - $1,400
The Company has not paid any fees to its directors or officers during
the current period. Nevertheless, the Company realizes that there is a
cost involved in the directors and officers devoting time and effort to
the affairs of the Company. Therefore, a management fee of $1,400 has
been expensed and credited to capital contribution during the current
period.
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<PAGE>
(7) Office and miscellaneous - $808
Office and miscellaneous represents the printing of cheques for use by
the Company, photocopying, courier and fax charges for the period.
(8) Rent - $1,500
The Company uses the offices of the President of the Company as an
office. No charge has been incurred by the Company. Nevertheless, the
Company recognizes that there is a cost to using an office and
therefore has expensed $1,500 and credited to capital contribution a
similar amount.
(9) Telephone - $750
The Company has not incurred any telephone charges to date.
Nevertheless, the Company recognizes the fact that there is a telephone
cost to operating a business and therefore has expensed $750 with an
offsetting credit to capital contribution. This expense was determined
on the fair market value of obtaining a telephone line and operating
for a three month period.
(10) Transfer agent's fees - $3,160
Transfer agent's fees comprise $1,200 as the annual fee paid to
maintain an account with the transfer agent and $1,960 for preparation
and issuance of share certificates. The Company has treated for
accounting purposes the annual fee of $1,200 as a period cost and has
written it off in the current period rather than amortizating it over
the entire year.
(11) Travel - $2,000
Various charges for the period of travel.
Management feels that its present cash position after the payment of
all outstanding accounts payable is sufficient to meet its present needs, being
approximately six months, other than undertaking either Phases I or II mentioned
above. Expenses required by the Company in the immediate future would be for
accounting, transfer agent charges, office expenses and audit. If the Company
wishes to proceed with Phases I it will require additional funds. The Directors
have agreed to fund the development of the Phases I and II in the amount of
$30,000. Other sources of funds which might be available to the Company is by
way of bank financing or the selling of the Company's capital stock. No
consideration, at this time, has been given to the raising additional funds from
these two sources.
If the Company is unable to raise additional funds it cannot operate as
a going concern in the future and will cease to exist as an entity.
Management does not believe the Company's operations have been
materially affected by inflation.
ITEM 3. DESCRIPTION OF PROPERTY
The Company does not own or lease any physical property. It does not
own any kiosks and the Company currently lacks the funds to develop a kiosk
prototype.
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OFFICES
The Company's executive offices are located at 825 - 1200 West 73rd
Avenue, Vancouver, British Columbia, Canada. The office is located in the
offices of the President of the Company which are used to transact business of
his other business interests. There is no charge to the Company for office but
an imputed charge of $1,500 has been expensed during the current period with an
offsetting entry to capital contribution. The Company realizes it will
eventually be required to contribute its fair share to office rent. No
discussions between the directors has taken place to date to decide upon the
terms and conditions of the office rent.
OTHER PROPERTY
The Company does not own any other property.
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 July 31,
1999.
(1) (2) (3) (4)
Title Name and Address Amount and Nature Percent
of of Beneficial of Beneficial of
Class Owner Ownership (1),(2) Class (2)
----- --------- ----------------- ---------
Common STEVEN BRUCE 2,500,000 23.73%
Shares 269 Robson Place
Delta, British Columbia
Canada, V4M 3P3
Common MICHAEL WOLF 1,500,000 14.24%
Shares 2101 - 1238 Melville Street
Vancouver, British Columbia
Canada, V3R 2L1
(1) As of July 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. None of the officers or
directors have any options, warrants, rights or conversion privileges
outstanding.
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<PAGE>
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 July 31, 1999.
(1) (2) (3) (4)
Title Name and Address Amount and Nature Percent
of of Beneficial of Beneficial of
Class Owner Ownership (1),(2) Class (2)
----- ------------ ------------------ ---------
Common STEVEN BRUCE 2,500,000 (3) 23.73%
Shares 269 Robson Place
Delta, British Columbia
Canada, V4M 3P3
Common MICHAEL J. KENNAUGH 500,000 (3) 4.75%
Shares 42 - 2951 Panorama Drive
Coquitlam, British Columbia
Canada, V3E 2W3
All officers and directors 3,000,000 28.48%
as a group (two persons)
(1) As of July 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.
(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. Kennaugh
is a Director and the Secretary Treasurer 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.
Mr. Michael Wolf resigned as a director and officer on July 22, 1999
due to other business interests. He was replaced as Secretary Treasurer by
Michael Kennaugh, currently a director of the Company. Mr. Wolf has 1,500,000
common shares or 14.23% of the issued and outstanding shares 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. 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.
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<PAGE>
The Company is seeking a new director who has knowledge in the cigar business
and who will be available to devote the majority of his time to the affairs of
the Company. No such person has been found to date.
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 July 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.
Term as
Director
Name Position Held Expires
------- --------------- ----------
Stephan Bruce President and Director October 1999
Secretary Treasurer and
Michael J. Kennaugh Director October 1999
The senior officers and directors of the Company have been officers and
directors since inception.
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 J. KENNAUGH, 57, graduated in 1963 from Oak Bay High School in
Victoria, British Columbia, Canada before attending the University of Victoria.
In 1971 he graduated with a Bachelor of Science degree in Psychology and Urban
Geography. Subsequent to graduation he became employed as an air traffic
controller before resigning and enrolling in the Masters of Business
Administration program at the University of British Columbia where he
specialized in Urban Land Economics. He graduated in 1977. Upon graduation he
worked for DFH Real Estate Company in Victoria, British Columbia until 1982 when
he moved to Vancouver and joined the commercial division of Royal Trust Company.
In 1986 he joined Realty World's commercial division under the name of Kerr &
Kerr Real Estate Ltd. For three years he worked in their appraisal division
specializing in appraisals of businesses and property. In 1989 he purchased
Canwest Appraisals Ltd. from his former employers and became the sole director
and officer of the Company. Canwest Appraisals specialized in appraisals of
business; mainly in the lumber business. In 1995 he joined the commercial
division of Windermere Cascade Ltd. as a real estate appraiser until 1997 when
he sold out his interest in Windermere Cascade Ltd. In 1997 he joined Kensington
Green Real Estate Services Ltd. where he worked in their commercial property
division selling real estate projects and appraising real estate investments for
clients. He is currently working for Kensington Green Real Estate Services Ltd.
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<PAGE>
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. Kennaugh was a director of
Sweetbrier Resources Inc., a company that is presently quoted on the OTC
Bulletin Board under the name of Dippy Foods Inc.
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 although the Company has given recognition in its
financial statements to the benefit the Company receives from the services of
its officers. An imputed amount of $1,400 has been included in expenses and
credited to capital contribution as at April 30, 1999 in recognition of the
services performed by its officers.
The following table sets forth compensation paid or accrued by the
Company during the period ended July 31, 1999 to the Company's President and
shows compensation paid to any other officers or directors.
SUMMARY COMPENSATION TABLE (1999)
<TABLE>
<CAPTION>
Long Term Compensation (US Dollars)
------------------------------------
Annual Compensation Awards Payouts
--------------------- -------- --------
(a) (b) (c) (e) (f) (g) (h) (i)
Other Restricted All other
annual stock Options/ LTIP compen-
Name and Princi- Comp. awards SAR payouts sation
pal position Year Salary ($) ($) (#) ($) ($)
------------ ---- ------ --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Steven Bruce, 1999 -0- -0- -0- -0- -0- -0-
President and
Director
Michael J. Kennaugh, 1999 -0- -0- -0- -0- -0- -0-
Director
</TABLE>
There has been no compensation given to any of the Directors or
Officers, past or present, during 1998 and 1999. There are no stock options
outstanding as at July 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.
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<PAGE>
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, officers and former director and officer (Michael Wolf)
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 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.
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<PAGE>
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 July 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, 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.
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 OTC Bulletin
Board when there are no more comments from the United States Securities and
Exchange Commission. To date no documents have been filed with the NASD
Regulations Inc.
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<PAGE>
HOLDERS
The number of record holders of the Company's common stock as at July
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 April 30, 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 July 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):
(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 former Secretary
Treasurer and former 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
24
<PAGE>
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.
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.
25
<PAGE>
PART F/S
FINANCIAL STATEMENTS
The following financial statements are filed with this Form 10-SB:
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Report of Independent Certified Public Accountants 28
Financial Statements of CIGAR KING CORPORATION
Balance Sheet as at April 30, 1999 29
Statement of Operations for the Period from October 8, 1998 (Date
of Inception) to April 30, 1999 30
Statement of Changes in Stockholders' Equity for the Period from
October 8, 1998 (Date of Inception) to April 30, 1999 31
Statement of Cash Flows for the Period from October 8, 1998 (Date
of Inception) to April 30, 1999 32
Notes to Financial Statements 33
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ANDERSEN ANDERSEN & STRONG, L.C. 941 East 3300 South, Suite 220
Certified Public Accountants and Business Consultants Board Salt Lake City, Utah, 84106
Member SEC Practice Section of the AICPA Telephone 801-486-0096
Fax 801-486-0098
E-mail Kandersen @ msn.com
</TABLE>
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 April 30, 1999, and the statement of operations,
stockholders' equity, and cash flows for the period from October 8, 1998 (date
of inception) to April 30, 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 April
30, 1999, and the results of operations, and cash flows for the period from
October 8, 1998 (date of inception) to April 30, 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"
May 27, 1999
A member of ACF International with affiliated offices worldwide
28
<PAGE>
CIGAR KING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
APRIL 30, 1999
ASSETS
CURRENT ASSETS
Cash $ 11,170
Accounts receivable 128
-------
Total Current Assets 11,298
OTHER ASSETS
Rights to Cigar King concept- Note 3 50,000
-------
$ 61,298
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 4,273
-------
Total Current Liabilities 4,273
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 70,865
Deficit accumulated during the development stage (24,375)
-------
Total Stockholders' Equity 57,025
$ 61,298
=======
The accompanying notes are an integral part of these financial statements.
29
<PAGE>
CIGAR KING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM OCTOBER 8, 1998 (DATE OF INCEPTION) TO APRIL 30, 1999
SALES $ --
EXPENSES 24,375
-----------
NET LOSS $ (24,375)
===========
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.
30
<PAGE>
CIGAR KING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM OCTOBER 8,1998 (DATE OF INCEPTION)
TO APRIL 30, 1999
<TABLE>
<CAPTION>
Common Stock Capital in
---------------------- Excess of Accumulated
Shares Amount Par Value Deficit
-------- ------- ---------- -----------
<S> <C> <C> <C> <C>
Balance October 8, 1998 (date of inception) -- $ -- $ -- $ --
Issuance of common stock for cash
at $.002 - November 20, 1998 4,500,000 4,500 4,500 --
Issuance of common stock for cash
at $.01- November 25, 1998 6,000,000 6,000 54,000 --
Issuance of common stock for cash
at $.25 - December 4, 1998 35,000 35 8,715 --
Capital contribution -- -- 3,650 --
Net operating loss for the period from
October 8, 1998 to April 30, 1999 -- -- -- (24,375)
BALANCE APRIL 30, 1999 10,535,000 $ 10,535 $ 70,865 $(24,375)
========== ======== ========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
31
<PAGE>
CIGAR KING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM OCTOBER 8, 1998 (DATE OF INCEPTION) TO APRIL 30, 1999
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net loss $ (24,375)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Changes in current assets and liabilities
Accounts receivable (128)
Accounts payable 4,273
Capital contributions - expenses 3,650
Net Cash From Operations (16,580)
========
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 11,170
Cash at Beginning of Period --
--------
Cash at End of Period $ 11,170
========
SCHEDULE OF NONCASH INVESTING AND FINANCIAL ACTIVITIES
Capital contributions - expenses $ 3,650
--------
The accompanying notes are an integral part of these financial statements.
32
<PAGE>
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 quality cigar
sales. At the report date the Company had acquired the right to use the
name "Cigar King" to market high quality cigars (see Note 3).
Since its inception the company has completed 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.
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.
33
<PAGE>
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, a cigar king
concept, 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 use the name
"Cigar King" to market high quality cigars through a climate controlled kiosk
merchandising display case, by the payment of $50,000. The purchase price will
be amortized to expense over a five years after operations begin.
4. RELATED PARTY TRANSACTIONS
Related parties have acquired 43% of the common stock.
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.
34
<PAGE>
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 for its planned activities 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.
35
<PAGE>
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 38)
(b) Bylaws (filed herewith, page 42)
(3) Instruments Defining Rights of Securities Holders
(a) Text of stock certificates for common stock (filed herewith,
page 53)
(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 54)
(ii) Agreement to Acquire 100% Interest in the Concept from
Archer Investments dated November 24, 1998 (files
herewith, page 57)
(10) Consent of experts and counsel
(i) Consent of Andersen Andersen & Strong, L.C., independent
certified public accountants (filed herewith, page 64)
(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
None
(27) Financial Data Schedule (filed herewith, page 65)
(99) Addition Exhibits
Item 2. Descriptions of Exhibits
[Attached, pages 38 through 67]
36
<PAGE>
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: July 31, 1999
37
<PAGE>
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 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.
38
<PAGE>
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.
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.
39
<PAGE>
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 }
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
40
<PAGE>
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 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.
42
<PAGE>
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 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
43
<PAGE>
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.
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.
44
<PAGE>
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.
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.
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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 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
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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 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
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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.
SECTION 12. 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
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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 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
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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.
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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 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.
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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
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
52
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
53
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.
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
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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.
9. [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.
10. [COMPANY STATUS] 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.
11. [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 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:
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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
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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
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:
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(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
(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;
58
<PAGE>
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
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
59
<PAGE>
(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 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.
60
<PAGE>
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
(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.
61
<PAGE>
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.
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.
62
<PAGE>
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) )
63
<TABLE>
<CAPTION>
<S> <C>
ANDERSEN ANDERSEN & STRONG, L.C. 941 East 3300 South, Suite 202
Certified Public Accountants and Business Consultants Salt Lake City, Utah, 84106
Member SEC Practice Section of the AIPCA Telephone 801-486-0096
Fax 801-486-0098
E-mail KAndersen @ msn.com
</TABLE>
Exhibit 10(i)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
CIGAR KING CORPORATION
We hereby consent to the use of our report dated May 27, 1999, 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
May 27, 1999
64
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
EXHIBIT 27
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0001074828
<NAME> Cigar King
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> APR-30-1999
<EXCHANGE-RATE> 1.000
<CASH> $11,170
<SECURITIES> 0
<RECEIVABLES> 128
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 11,298
<PP&E> 50,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 61,298
<CURRENT-LIABILITIES> (4,273)
<BONDS> 0
0
0
<COMMON> (81,400)
<OTHER-SE> 24,375
<TOTAL-LIABILITY-AND-EQUITY> 61,286)
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 24,375
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (24,375)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
