Attached files
file | filename |
---|---|
EX-23.1 - CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - OMNI HEALTH, INC. | vcig_ex23z1.htm |
EX-5.1 - LEGAL OPINION - OMNI HEALTH, INC. | vcig_ex5z1.htm |
SECURITIES AND EXCHANGE COMMISSION
==================================
FORM S-1 /A
AMENDMENT #1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
==================================
|
|
| ||
VitaCig, Inc. (Name of Small Business Issuer in Its Charter) | ||||
| ||||
Nevada (State or Other Jurisdiction of Incorporation or Organization) |
2111 (Primary Standard Industrial Classification Code Number) |
46-4597341 (IRS Employer Identification No.) | ||
|
|
| ||
Address 800 Bellevue Way NE, Suite 400, Bellevue, WA 98004 425-462-4219
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices) | ||||
| ||||
Address Mark Linkhorst Chief Executive Officer 800 Bellevue Way NE, Suite 400, Bellevue, WA 98004 425-462-4219
(Name, address, including zip code, and telephone number, including area code, of agent for service) | ||||
| ||||
Copies to: William Robinson Eilers, Esq.
169 NE 43rd Street Miami, FL 33137 (786) 273-9152 | ||||
Approximate date of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this from are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.x
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a smaller reporting company:
|
|
|
|
|
|
|
Large accelerated filer ¨ |
|
Accelerated filer ¨ |
|
Non-accelerated filer ¨ |
|
Smaller reporting company x |
1
Title of each class of securities to be Registered |
|
Amount |
|
Proposed |
|
Proposed |
|
Amount of |
Common Stock, $.0001 par value(3) |
|
270,135,000 |
|
$.01 |
|
$ 2,701,350 |
|
$ 347.93 |
|
|
|
|
|
|
|
|
|
|
1. Represents 54% of the issued and outstanding shares of the Registrant currently held by mCig, Inc, the Parent, with the reaming shares to be retained by the parent. .
2. Estimated solely for the purpose of calculating the amount of the registration fee paid pursuant to Rule 457(a) under the Securities Act.
NO SHARES OF REGISTRANT’S COMMON STOCK WILL BE ISSUED TO ANY HOLDER OF SHARES OF PARENT IN ANY JURISDICTION IN WHICH SUCH ISSUANCE WOULD NOT COMPLY WITH THE LAWS OF THAT JURISDICTION.
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. The selling stockholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. |
PRELIMINARY PROSPECTUS
VitaCig, Inc.
270,135,000 SHARES OF COMMON STOCK
SUBJECT TO COMPLETION DATED June 16, 2014
mCig, Inc., a Nevada corporation (“mCig”or "MCIG"), is distributing to its shareholders 270,135,000 shares of Common Stock of VitaCig, Inc. (the “Company” or “VitaCig”), owned by mCig, a shareholder of VitaCig. The shareholders of mCig will receive one share of VitaCig common stock for every one shares of mCig common stock that they hold as of the record date. The record date shall be defined as the first business day following an effective statement from the SEC in regards to this Form S-1 filing.
This Prospectus is being furnished in connection with the planned spin-off of VitaCig from MCIG and the issuance of VitaCig common stock in the spin-off, which will issue shortly after the date of this Prospectus (referred to herein as the “spin-off date”). Following the registered spin-off, each of VitaCig and MCIG will be independent, publicly-traded companies. Upon effectiveness of the Registration Statement, VitaCig will be a company reporting to the SEC under the Securities Exchange Act of 1934.
2
MCIG is effecting the spin-off pursuant to the terms of the MCIG Board of Directors’ resolution and related organic actions. MCIG currently owns all of the Registrant’s 500,135,000 common shares issued and outstanding. MCIG will be distributing 270,135,000 shares of VitaCig common stock to MCIG shareholders on a one for one pro rata basis with MCig retaining all remaining shares of common stock.
Reason for Furnishing this Prospectus
We are furnishing this Prospectus to provide information to holders of MCIG who will be issued VitaCig shares in the spin-off. It is not, and is not to be construed as, an inducement or encouragement to buy or sell any of VitaCig’s securities or those of MCIG. The information contained in this Prospectus is believed by us to be accurate as of the date set forth on its cover. Changes may occur after that date, and neither VitaCig nor MCIG are required to update the information except in the normal course of our public disclosure obligations and practices.
No stockholder approval of the spin-off is required, and none is being sought. Neither MCIG nor VitaCig are asking you for a proxy.
mCig is an "underwriter" within the meaning of the Securities Act of 1933 in connection with the distribution of VitaCig common shares to its shareholders. The shareholders of mCig receiving shares in the distribution may be considered underwriters within the meaning of the Securities Act of 1933 in connection with the resale of the distributed shares.
There is currently no public market for VitaCig securities. Our common stock is not publicly traded. Company management anticipates that an application will be filed with FINRA for the public trading of our common stock on the OTC Bulletin Board or the OTC Markets within 90 days of the distribution, but there is no assurance that the VitaCig common stock will be quoted on the OTC Bulletin Board, the OTC Markets, or any Exchange.
IN REVIEWING THIS PROSPECTUS, YOU SHOULD CAREFULLY CONSIDER THE MATTERS DESCRIBED UNDER THE CAPTION “RISK FACTORS” BEGINNING ON PAGE 8.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION NOT CONTAINED IN THE PROSPECTUS IN CONNECTION WITH THIS OFFERING AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
UNTIL FEBRUARY, 2011 (90 DAYS AFTER THE DATE HEREOF), ANY BROKER-DEALER EFFECTING TRANSACTIONS IN THE SHARES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A CURRENT COPY OF THIS PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A COPY OF THIS PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO ANY UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
The date of this prospectus is June 16, 2014.
3
TABLE OF CONTENTS
PROSPECTUS SUMMARY |
6 |
RISK FACTORS |
9 |
USE OF PROCEEDS |
15 |
DIVIDEND POLICY |
16 |
DISTRIBUTION SUMMARY |
16 |
SHARES ELIGIBLE FOR FUTURE SALES |
16 |
|
|
BUSINESS |
19 |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
24 |
MANAGEMENT |
27 |
EXECUTIVE COMPENSATION |
28 |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT |
28 |
DESCRIPTION OF SECURITIES |
28 |
EXPERTS |
29 |
WHERE YOU CAN FIND MORE INFORMATION |
29 |
INDEX OF FINANCIAL STATEMENTS |
30 |
5
PART I
PROSPECTUS SUMMARY
You should rely only on the information contained in this prospectus. We have not, and the selling shareholders have not, authorized anyone to provide you with information different from the information that is contained in this prospectus. You should not rely on any information or representations not contained in this prospectus, if given or made, as having been authorized by us. This prospectus does not constitute an offer or solicitation in any jurisdiction in which the offer or solicitation would be unlawful. The selling security holders are offering to sell, and seeking offers to buy, shares of common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of the common stock.
Except as otherwise indicated, market data and industry statistics used throughout this prospectus are based on independent industry publications and other publicly available information.
Our Business
VitaCig, Inc. (the “Company”) was incorporated under the laws of the state of Nevada on January 22, 2014. VitaCig is a technology company that is engaged in the manufacturing and retailing of nicotine-free Electronic Cigarettes (“eCigs”) that are pre-packaged with vitamins, nutrients, and generic pharmaceuticals. Generic pharmaceuticals include the dietary supplements: Vitamin A1, B1, C, E, and anti-oxidant ubidecarenone (CO-Q10).
Unlike traditional tobacco cigarettes or the majority of electronic cigarettes, the VitaCig does not contain any nicotine. Therefore, it is geared towards non-smokers or existing smokers that are looking for ways to quit. Since the electronic cigarette industry is relatively new, it is not currently possible to gauge or project the extent of demand for nicotine-free devices. Currently, nicotine-free devices represent a small percentage of the electronic-cigarette industry.
VitaCig, Inc. was originally formed as a wholly-owned subsidiary of mCig, Inc. On February 24, 2014 the company entered into a Contribution Agreement with mCig, Inc. In accordance with this agreement VitaCig, Inc. accepted the contribution by mCig, Inc. of specific assets consisting solely of pending trademarks for the term “VitaCig” filed with the USPTO and $500 in cash as contribution in exchange for 500,135,000 shares of common capital stock representing 100% of the shares outstanding of VitaCig, Inc.
As of the date of this prospectus, the company’s cash balance is $13,030 and our inventory stands at 28,300 units valued at $84,000. Our current monthly cash burn is roughly $7,500. Thus far, VitaCig, Inc. management has relied on mCig, Inc. for capital loans and equity investments for the purpose of maintaining ongoing operations. Without continued loans from our parent, mCig, Inc. we will not have the necessary capital required to execute our business plan and grow our business. We anticipate our required financing needs to be in excess of $ 35 0,000 in capital over the next twelve months. We are confident that our parent, mCig, Inc. will make available to us the majority of that amount with the remainder, if required, coming from outside investors.
Electronic Cigarettes
VitaCig is engaged in the business of marketing and distributing an electronic cigarette (eCig) that provides vapor and vitamins for inhalation while avoiding: smoke, flame, tobacco, tar, carbon monoxide, ash, stub, associated smells and all the other chemicals found in traditional cigarettes. We believe that our products provide our consumers with a smoking experience without the social stigmas increasingly associated with cigarettes.
We compete in a highly competitive market that includes other e-cigarette marketing companies, as well as traditional tobacco companies. In this highly fragmented market, we have focused on building brand awareness early through viral adoption and word of mouth. In the future, we expect to employ additional marketing strategies while continuing to develop our supply chain and fulfillment capabilities.
Viral Marketing is a technique that uses pre-existing social networking services and other technologies to try to produce increases in brand awareness or to achieve other marketing objectives (such as product sales) through self-replicating viral processes,
6
Thus far, we have been successful in driving traffic to our website: www.VitaCig.org and building a client base by utilizing viral marketing strategies. Specifically, we have built a presence on leading social-media sites such as Facebook and Twitter. Through these sites, we post information about our products and make daily attempts to engage our target audience. This process drives traffic to our websites and eventually leads to sales. The viral marketing strategy is cost-effective and we do not anticipate any significant costs arising from this strategy.
We have also experienced organic interest in our products from nationally syndicated cable news network CNBC. On April 7, 2014, the VitaCig was profiled as part of a segment on electronic cigarettes. This has helped drive traffic to our website and has increased the awareness of our products.
In addition our parent, mCig, Inc. has launched a national media campaign which included the deployment of over 40 billboards in Manhattan, Brooklyn, and San Francisco. As part of this campaign several VitaCig billboards have been deployed driving additional traffic and sales. The costs of this campaign have been assumed by our parent, mCig, Inc. We cannot currently anticipate any future expenditures for billboard marketing due to our financial position unless such expenditures will be underwritten by our parent, mCig, Inc.
Our Electronic Cigarettes
We currently offer disposable electronic cigarettes named "VitaCigs" that retail for $2.00 each. We currently offer three flavor combinations:
• VitaCig “Relax” - Blueberry and Black Currant flavor with B-Myrcene.
• VitaCig “Refresh” – Mint and Peppermint flavor with Eucalyptol.
• VitaCig “Energize” – Orange and Grapefruit flavor with Limonene.
In addition to the flavor combinations every VitaCig includes the following base Vitamins: A, B, C, E, and CoQ10 (Ubidecarenone).
Our in-house engineering, graphic design, and flavor mixing teams work to provide improvements and research or develop new product categories. Any R&D expenses were incurred after March 1, 2014.
The Market for Electronic Cigarettes
We market our electronic cigarettes as an alternative to traditional tobacco cigarettes. We offer our products in three flavor combinations. Because electronic cigarettes offer a “smoking” experience without the burning of tobacco leaf, electronic cigarettes offer users the ability to satisfy their traditional cigarette cravings without smoke, tar, ash or carbon monoxide. In many cases electronic cigarettes may be used where tobacco-burning cigarettes may not. Electronic cigarettes may be used in some instances where for regulatory or safety reasons tobacco burning cigarettes may not be used. However, we cannot provide any assurances that future regulations may not affect where electronic cigarettes may be used.
According to the U.S. Centers for Disease Control and Prevention, in 2010, an estimated 45.3 million people, or 19.3% of adults, in the United States smoke cigarettes. According to the Tobacco Vapor Electronic Cigarette Association, an industry trade group, more than 3.5 million people currently use electronic cigarettes in the United States. In 2011, about 21% of adults who smoke traditional tobacco cigarettes had used electronic cigarettes, up from about 10% in 2010, according to the U.S. Centers for Disease Control and Prevention. Annual sales of electronic cigarettes in the United States are estimated to increase to $1 billion in 2013 from $500 million in 2012. Annual sales of traditional tobacco cigarettes, according to industry estimates, were $80 billion in 2012.
Private businesses, such as coffee houses, cafes, restaurants, clubs, may impose restrictions on the use of electronic cigarettes even absent regulations. If e-cigarettes are subject to restrictions on smoking in public places, our business, operating results and financial condition could be materially and adversely affected.
Restrictions on the public use of e-cigarettes may reduce the attractiveness and demand for our e-cigarettes. Certain states, cities, businesses, providers of transportation and public venues in the U.S. have already banned the use of e-cigarettes, while others are considering banning the use of e-cigarettes. If the use of e-cigarettes is banned anywhere the use of traditional tobacco burning cigarettes is banned, e-cigarettes may lose their appeal as an alternative to traditional tobacco burning cigarettes, which may reduce the demand for our products and, thus, have a material adverse effect on our business, results of operations and financial condition.
7
Advertising
Currently, we advertise our products primarily through our direct marketing campaign, on the Internet. We also attempt to build brand awareness through social media marketing activities, web-site promotions, and pay-per-click advertising campaigns.
We intend to strategically expand our advertising activities in 2014 and also increase our public relations campaigns to gain editorial coverage for our brands. Some of our competitors promote their brands through print media and through celebrity endorsements, and have substantial resources to devote to such efforts. We believe that our and our competitors’ efforts have helped increase our sales, our product acceptance and general industry awareness.
Distribution and Sales
We offer our electronic cigarettes and related products through our online store at www.VitaCig.Org and through a Wholesale Distributor Reseller (WDR) program for large bulk orders. Since their introduction to the U.S. market, electronic cigarettes have predominantly been sold online, while tobacco products, most notably cigarettes are currently sold in approximately 400,000 retail locations. Our online store was beta-launched on April 1, 2014, and officially launched on April 15, 2014. We believe that future growth of electronic cigarettes is dependent on higher volume, lower margin sales channels, such as the broad based distribution network through which traditional cigarettes are sold.
The Offering
Securities Being Distributed: |
270,135,000 shares of common stock, par value $0.0001 per share. |
Spin Off Date |
The spin-off date is expected to occur on or about the date of the effectiveness of this registration statement. Holders of record of mCig, Inc. on the record date to be selected will become entitled to receive the Company common shares as outlined above. In addition, their rights as holders of common shares of mCig will continue |
Spin Off Ratio |
Pursuant to the mCig, Inc. common stock spin-off and associated distributions outlined above, there will be a dividend to mCig shareholders of VitaCig capital stock based on 1 for 1 basis of the 270,135,000 shares of the outstanding common and preferred shares in VitaCig. |
Net proceeds to us |
We will not receive any of the proceeds from the resale of common stock by our shareholders. |
Securities Issued and Outstanding: |
There are 500,135,000 shares of common stock issued and outstanding as of the date of this prospectus |
Registration Costs |
We estimate our total offering registration costs to be approximately $15,000. |
Risk Factors |
See “Risk Factors” and the other information in this prospectus for a discussion of the factors you should consider before deciding to invest in shares of our common stock. |
SUMMARY FINANCIAL INFORMATION
The following tables summarize the relevant financial information for VitaCig, Inc. Because this is only a financial summary, it does not contain all of the financial information that may be important to you. Therefore, you should carefully read all of the information in this prospectus, including the financial statements and the explanatory notes, before making an investment decision.
The tables and information below are derived from our audited financial statements for the period from Inception (January 22, 2014) to February 28, 2014. Such information should be read in conjunction with such financial statements, including the notes thereto.
Financial summary |
February 28, 2014 ($) |
Cash |
477 |
Total Assets |
477 |
Total Liabilities |
1,017 |
Total Stockholder’s deficit |
(540) |
|
|
Statement of Operations |
From Inception to February 28, 2014 |
Total Expenses |
1,040 |
Net Loss for the period |
(1,040) |
Net Loss per share |
(0.00) |
8
RISK FACTORS
An investment in our common stock involves a number of very significant risks. You should carefully consider the following risks and uncertainties in addition to other information in this prospectus in evaluating our company and our business before purchasing shares of our common stock. Our business, operating results and financial condition could be seriously harmed as a result of the occurrence of any of the following risks. You could lose all or part of your investment due to any of these risks.
RISKS RELATED TO OUR BUSINESS
We have no operating history and have maintained losses since inception, which we expect to continue into the future.
We were incorporated on January 22, 2014, and have very limited operations. We have not realized any revenues to date. Our proposed business is to manufacture and retail the tobacco-free cigarettes that are pre-packaged with vitamins, nutrients, and generic pharmaceuticals.
We have no operating history at all upon which an evaluation of our future success or failure can be made. Our net loss from inception to February 28, 2014 is $1,040. Based upon our proposed plans, we expect to incur significant operating losses in future periods, because there are substantial costs and expenses associated with the development and marketing of our business plan. We may fail to generate revenues in the future. If we cannot attract a significant number of customers, we will not be able to generate any significant revenues or income. Failure to generate revenues will cause us to go out of business because we will not have the money to pay our ongoing expenses.
Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern.
Our independent registered public accounting firm issued its report connection with the audit of our financial statements which included an explanatory paragraph describing the existence of conditions that raise substantial doubt about our ability to continue as a going concern. If we are not able to continue as a going concern, it is likely that holders of our common stock will lose all of their investment. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The market for electronic cigarettes is a niche market, subject to a great deal of uncertainty and is still evolving.
Electronic cigarettes, having recently been introduced to market, are at an early stage of development, represent a niche market and are evolving rapidly and are characterized by an increasing number of market entrants. Our future sales and any future profits are substantially dependent upon the widespread acceptance and use of electronic cigarettes. Rapid growth in the use of, and interest in, electronic cigarettes is recent, and may not continue on a lasting basis. The demand and market acceptance for these products is subject to a high level of uncertainty.
Therefore, we are subject to all of the business risks associated with a new enterprise in a niche market, including risks of unforeseen capital requirements, failure of widespread market acceptance of electronic cigarettes, in general or, specifically our products, failure to establish business relationships and competitive disadvantages as against larger and more established competitors.
Electronic cigarettes may become subject to regulation by the FDA.
The FDA did not appeal the decision of the U.S. Court of Appeals for the D.C. Circuit in Sottera, Inc. v. Food & Drug Administration (2010) which held that e-cigarettes and other nicotine-containing products are not drugs or devices unless they are marketed for therapeutic purposes. The Court held further that electronic cigarettes and other nicotine-containing products can be regulated as “tobacco products” under the Food, Drug and Cosmetic Act. Consequently, the FDA may choose to develop regulations governing the manufacture, marketing and sale of e-cigarettes. Potential FDA regulations, or significant costs to comply with potential FDA regulations could have a materially adverse effect on our company’s operations and profitability. Failure to comply with FDA regulatory requirements could result in significant financial penalties and could have a material adverse effect on our business, financial condition and results of operations and ability to market and sell our products.
9
New product faces intense media attention and public pressure.
Our product is new to the marketplace and since its introduction certain members of the media, politicians, government regulators and advocate groups, including independent doctors have called for an outright ban of all electronic cigarettes, pending regulatory review and a demonstration of safety. A ban of this type would likely have the effect of terminating our United States’ sales and marketing efforts of certain products which we may currently market or have plans to market in the future. Such a ban would also likely cause public confusion as to which products are the subject of the ban and which are not and would have a material adverse effect on our business, financial condition and performance.
The recent development of electronic cigarettes has not allowed the medical profession to study the long-term health effects of electronic cigarette use.
Because electronic cigarettes were recently developed, the medical profession has not had a sufficient period of time to study the long-term health effects of electronic cigarette use. Currently, therefore, there is no way of knowing whether or not electronic cigarettes are safe for their intended use. If the medical profession were to determine conclusively that electronic cigarette usage poses long-term health risks, electronic cigarette usage could decline, which could have a material adverse effect on our business, results of operations and financial condition.
If we experience product recalls, we may incur significant and unexpected costs and our business reputation could be adversely affected.
We may be exposed to product recalls and adverse public relations if our products are alleged to cause illness or injury, or if we are alleged to have violated governmental regulations. A product recall could result in substantial and unexpected expenditures that could exceed our product recall insurance coverage limits and harm to our reputation, which could have a material adverse effect on our business, results of operations and financial condition. In addition, a product recall may require significant management time and attention and may adversely impact on the value of our brands. Product recalls may lead to greater scrutiny by federal or state regulatory agencies and increased litigation, which could have a material adverse effect on our business, results of operations and financial condition.
We currently do not have product recall insurance
We recognize that we may be subject to product recalls and, at present, do not have product recall insurance to mitigate for such a contingency. Accordingly, we cannot assure that the risks inherent to any potential product recall will be mitigated in all circumstances nor can we assure the continuing viability of our company in the event of any product recall.
We face intense competition and our failure to compete effectively could have a material adverse effect on our business, results of operations and financial condition.
Competition in the electronic cigarette industry is intense. We compete with other sellers of electronic cigarettes, most notably Lorillard, Inc., Altria Group, Inc. and Reynolds American Inc., through their electronic cigarettes business segments; the nature of our competitors is varied as the market is highly fragmented and the barriers to entry into the business are low.
We compete primarily on the basis of product quality, brand recognition, brand loyalty, service, marketing, advertising and price. We are subject to highly competitive conditions in all aspects of our business. The competitive environment and our competitive position can be significantly influenced by weak economic conditions, erosion of consumer confidence, competitors’ introduction of low-priced products or innovative products, cigarette excise taxes, higher absolute prices and larger gaps between price categories, and product regulation that diminishes the ability to differentiate tobacco products.
Our principal competitors are “big tobacco”, U.S. cigarette manufacturers of both conventional tobacco cigarettes and electronic cigarettes like Altria Group, Inc., Lorillard, Inc. and Reynolds American Inc. We compete against “big tobacco” who offers not only conventional tobacco cigarettes and electronic cigarettes but also smokeless tobacco products such as “snus” (a form of moist ground smokeless tobacco that is usually sold in sachet form that resembles small tea bags), chewing tobacco and snuff.
10
Furthermore, we believe that “big tobacco” will devote more attention and resources to developing and offering electronic cigarettes as the market for electronic cigarettes grows. Because of their well-established sales and distribution channels, marketing expertise and significant resources, “big tobacco” is better positioned than small competitors like us to capture a larger share of the electronic cigarette market. We also compete against numerous other smaller manufacturers or importers of cigarettes. There can be no assurance that we will be able to compete successfully against any of our competitors, some of whom have far greater resources, capital, experience, market penetration, sales and distribution channels than us. If our major competitors were, for example, to significantly increase the level of price discounts offered to consumers, we could respond by offering price discounts, which could have a materially adverse effect on our business, results of operations and financial condition.
We may not be unable to promote and maintain our brands.
We believe that establishing and maintaining the brand identities of our products is a critical aspect of attracting and expanding a large customer base. Promotion and enhancement of our brands will depend largely on our success in continuing to provide high quality products. If our customers and end users do not perceive our products to be of high quality, or if we introduce new products or enter into new business ventures that are not favorably received by our customers and end users, we will risk diluting our brand identities and decreasing their attractiveness to existing and potential customers.
Moreover, in order to attract and retain customers and to promote and maintain our brand equity in response to competitive pressures, we may have to increase substantially our financial commitment to creating and maintaining a distinct brand loyalty among our customers. If we incur significant expenses in an attempt to promote and maintain our brands, our business, results of operations and financial condition could be adversely affected.
We rely on Chinese factories for the production of our products.
We rely exclusively on Chinese factories for the production of our products. Therefore, our ability to maintain operations is dependent on third-party manufacturers.
Potential Risks in Public Perception Associated with Chinese Factories.
Should Chinese factories continue to draw public criticism for exporting unsafe products, we may be adversely and materially affected by the stigma associated with Chinese production. This in turn would negatively affect our business operations, our revenues, and our financial projections and prospects.
We expect that new products and/or brands we develop will expose us to risks that may be difficult to identify until such products and/or brands are commercially available.
We are currently developing, and in the future will continue to develop, new products and brands, the risks of which will be difficult to ascertain until these products and/or brands are commercially available. For example, we are developing new formulations, packaging and distribution channels. Any negative events or results that may arise as we develop new products or brands may adversely affect our business, financial condition and results of operations.
Internet security poses a risk to our e-commerce sales.
At present we generate a portion of our sales through e-commerce sales on our websites. We have started selling our products from April 1, 2014. We manage our websites and e-commerce platform internally and as a result any compromise of our security or misappropriation of proprietary information could have a material adverse effect on our business, financial condition and results of operations. We rely on encryption and authentication technology licensed from third parties to provide the security and authentication necessary to effect secure Internet transmission of confidential information, such as credit and other proprietary information. Advances in computer capabilities, new discoveries in the field of cryptography or other events or developments may result in a compromise or breach of the technology used by us to protect client transaction data. Anyone who is able to circumvent our security measures could misappropriate proprietary information or cause material interruptions in our operations. We may be required to expend significant capital and other resources to protect against security breaches or to minimize problems caused by security breaches. To the extent that our activities or the activities of others involve the storage and transmission of proprietary information, security breaches could damage our reputation and expose us to a risk of loss and/or litigation. Our security measures may not prevent security breaches. Our failure to prevent these security breaches may result in consumer distrust and may adversely affect our business, results of operations and financial condition.
11
Credit card payment processors and merchant account pose a risk.
We accept credit cards as a means of payment for the sale of our products. If we are unable to find suitable providers or an alternative method of payment for our customers, our cash-flow will be constrained and our sales may be effected which may have a material adverse effect on our performance, financial condition and results of operations.
Product exchanges, returns, warranty claims, defect and recalls may adversely affect our business.
Any and all products are subject to customer service claims, malfunctions and defects, which may subject us to requests for product exchanges, returns, warranty claims and recalls. If we are unable to maintain a certain degree of quality control of our products we will incur costs of replacing and or recalling our products and servicing our customers. Any product returns, exchanges, and or recalls we may make will have a material adverse effect on our business, our operations and our profitability and will likely result in the loss of customers and goodwill.
Moreover products that do not meet our quality control standards and or those products that do not comply with U.S. safety and health standards or that may be defective may reduce the effectiveness, enjoyment and or cause harm to property, person and or death to persons who use the product. Any such instance will likely result in claims against us and potentially subject us to liability and legal claims which may cause injury to our reputation, goodwill and operating results.
There may be deficiencies with our internal controls that require improvements, and we will be exposed to potential risks from legislation requiring companies to evaluate controls under Section 404 of the Sarbanes-Oxley Act of 2002 in the event we become a fully reporting company.
It may be time consuming, difficult and costly for us to develop and implement the additional internal controls, processes and reporting procedures required by the Sarbanes-Oxley Act. We may need to hire additional financial reporting, internal auditing and other finance staff in order to develop and implement appropriate additional internal controls, processes and reporting procedures.
If we fail to comply in a timely manner with the requirements of Section 404 of the Sarbanes-Oxley Act regarding internal control over financial reporting or to remedy any material weaknesses in our internal controls that we may identify, such failure could result in material misstatements in our financial statements, cause investors to lose confidence in our reported financial information and have a negative effect on the trading price of our common stock.
Pursuant to Section 404 of the Sarbanes-Oxley Act and current SEC regulations, we are required to prepare assessments regarding internal controls over financial reporting and, furnish a report by our management on our internal control over financial reporting. We have begun the process of documenting and testing our internal control procedures in order to satisfy these requirements, which is likely to result in increased general and administrative expenses and may shift management time and attention from revenue-generating activities to compliance activities. While our management is expending significant resources in an effort to complete this important project, there can be no assurance that we will be able to achieve our objective on a timely basis. Failure to achieve and maintain an effective internal control environment or complete our Section 404 certifications could have a material adverse effect on our stock price.
In addition, in connection with our on-going assessment of the effectiveness of our internal control over financial reporting, we may discover “material weaknesses” in our internal controls as defined in standards established by the Public Company Accounting Oversight Board, or the PCAOB. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. The PCAOB defines “significant deficiency” as a deficiency that results in more than a remote likelihood that a misstatement of the financial statements that is more than inconsequential will not be prevented or detected.
In the event that a material weakness is identified, we will employ qualified personnel and adopt and implement policies and procedures to address any material weaknesses that we identify. However, the process of designing and implementing effective internal controls is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company. We cannot assure you that the measures we will take will remediate any material weaknesses that we may identify or that we will implement and maintain adequate controls over our financial process and reporting in the future.
12
Any failure to complete our assessment of our internal control over financial reporting, to remediate any material weaknesses that we may identify or to implement new or improved controls, or difficulties encountered in their implementation, could harm our operating results, cause us to fail to meet our reporting obligations or result in material misstatements in our financial statements. Any such failure could also adversely affect the results of the periodic management evaluations of our internal controls and, in the case of a failure to remediate any material weaknesses that we may identify, would adversely affect the annual auditor attestation reports regarding the effectiveness of our internal control over financial reporting that are required under Section 404 of the Sarbanes-Oxley Act. Inadequate internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock.
Because our current President and officers have other business interests, they may not be able or willing to devote a sufficient amount of time to our business operations, causing our business to fail.
Mark Linkhorst, our president and director, as well as other officers, currently devote approximately thirty hours per week providing their services to us. While they presently possesses adequate time to attend to our interest, it is possible that the demands on our President and officers from other obligations could increase, with the result that they would no longer be able to devote sufficient time to the management of our business and provide their services to our company. The loss of Mark Linkhorst and other officers to our company could negatively impact our business development.
RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK AND THIS DISTRIBUTION
The distribution is a taxable transaction, and therefore you could be subject to material amounts of taxes.
The distribution of our shares by mCig pursuant to this prospectus does not qualify as a tax-free spin-off to mCig shareholders under Section 355 of the Internal Revenue Code of 1986. As a consequence, you could be subject to material amounts of taxes. In addition, mCig may have to recognize a taxable capital gain on the difference between the fair market value of the interest in the Company it is distributing to its shareholders and its tax basis in the distributed stock. Furthermore, those mCig shareholders who receive our common stock in the distribution may suffer adverse tax consequences resulting from the characterization of the distribution as a taxable dividend to such shareholders, even though we believe the shares to be distributed in the distribution to have only nominal value. Neither this prospectus nor the registration statement of which it is a part should be read to constitute tax or legal advice with respect to the distribution of our shares.
Our compliance with the Sarbanes-Oxley Act and SEC rules concerning internal controls may be time consuming, difficult and costly.
Although one member of our Board of Directors has limited experience as officers of publicly-traded companies, much of that experience came prior to the adoption of the Sarbanes-Oxley Act of 2002. Additionally, the Company’s sole officer s and director s do not have experience in management of a publicly reporting company. It may be time consuming, difficult and costly for us to develop and implement the internal controls and reporting procedures required by Sarbanes-Oxley. We may need to hire additional financial reporting, internal controls and other finance staff in order to develop and implement appropriate internal controls and reporting procedures. If we are unable to comply with Sarbanes-Oxley’s internal controls requirements, we may not be able to obtain the independent accountant certifications that Sarbanes-Oxley Act requires publicly-traded companies to obtain.
There is no public market for our securities and an active trading market may not develop.
We cannot predict the extent to which investor interest will lead to the development of an active trading market on the OTC Bulletin Board or otherwise or how liquid that market might become. An active public market for our Common Stock may not develop or be sustained after the offering. If an active public market does not develop or is not sustained, it may be difficult for our current shareholders to sell their shares of Common Stock at a price that is attractive to them, or at all.
13
Our stock price may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at or above the initial public offering price and the price of our common stock may fluctuate significantly.
Once our shares begin trading, the market price for our common stock is likely to be volatile, in part because our shares have not been traded publicly. In addition, the market price of our common stock may fluctuate significantly in response to a number of factors, most of which we cannot control, including:
• changes in general economic or market conditions or trends in our industry or the economy as a whole and, in particular, in the nutraceutical industry;
• changes in key personnel;
• entry into new geographic markets;
• actions and announcements by us or our competitors or significant acquisitions, divestitures, strategic partnerships, joint ventures or capital commitments;
• investors’ perceptions of our prospects and the prospects of the nutraceutical industry;
• fluctuations in quarterly operating results, as well as differences between our actual financial and operating results and those expected by investors;
• the public’s response to press releases or other public announcements by us or third parties, including our filings with the SEC;
• announcements relating to litigation;
• financial guidance, if any, that we provide to the public, any changes in this guidance or our failure to meet this guidance;
• changes in financial estimates or ratings by any securities analysts who follow our common stock, our failure to meet these estimates or failure of those analysts to initiate or maintain coverage of our common stock;
• the development and sustainability of an active trading market for our common stock;
• future sales of our common stock by our officers, directors and significant stockholders; and
• changes in accounting principles affecting our financial reporting.
These and other factors may lower the market price of our common stock, regardless of our actual operating performance. As a result, our common stock may trade at prices significantly below the initial public offering price.
The stock markets and trading facilities, including the OTC Bulletin Board, have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many e-cigarette companies. In the past, stockholders of some companies have instituted securities class action litigation following periods of market volatility. If we were involved in securities litigation, we could incur substantial costs and our resources and the attention of management could be diverted from our business.
The Company may issue more shares in connection with future mergers or acquisitions, which could result in substantial dilution to existing shareholders.
Our Certificate of Incorporation authorizes the issuance of 560,000,000 shares of common stock. Any future merger or acquisition effected by us may result in the issuance of additional securities without stockholder approval and may result in substantial dilution in the percentage of our common stock held by our then-current stockholders. Moreover, the common stock issued in any such merger or acquisition transaction may be valued on an arbitrary or non-arm’s-length basis by our management, resulting in an additional reduction in the percentage of common stock held by our then existing stockholders. Our Board of Directors has the power to issue any or all of such authorized but unissued shares without stockholder approval. To the extent that additional shares of common stock or preferred stock are issued in connection with a future business combination or otherwise, dilution to the interests of our stockholders will occur, and the rights of the holders of common stock could be materially and adversely affected.
We cannot assure you that the common stock will become liquid or that it will be listed on a securities exchange.
We cannot assure you that we will be able to meet the initial listing standards of any stock exchange, or that we will be able to maintain any such listing. Until the common stock is listed on an exchange, we expect that it would be eligible to be quoted on the OTC Bulletin Board, the OTC Markets (including OTCQB and OTCQX), another over-the-counter quotation system, or in the “pink sheets.” In those venues, however, an investor may find it difficult to obtain accurate quotations as to the market value of the common stock. In addition, if we failed to meet the criteria set forth in SEC regulations, various requirements would be imposed by law on broker-dealers who sell our securities to persons other than established customers and accredited investors. Consequently, such regulations may deter broker-dealers from recommending or selling the common stock, which may further affect its liquidity. This would also make it more difficult for us to raise additional capital.
14
Even if publicly-traded in the future, our common stock may be subject to “Penny Stock” restrictions.
If our common stock becomes publicly-traded and our stock price remains at less than $5, we will be subject to so-called penny stock rules which could decrease our stock's market liquidity. The Securities and Exchange Commission has adopted regulations which define a "penny stock" to include any equity security that has a market price of less than $5 per share or an exercise price of less than $5 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require the delivery to and execution by the retail customer of a disclosure statement written suitability relating to the penny stock, which must include disclosure of the commissions payable to both the broker/dealer and the registered representative and current quotations for the securities. Finally, the broker/dealer must send monthly statements disclosing recent price information for the penny stocks held in the account and information on the limited market in penny stocks. Those requirements could adversely affect the market liquidity of such stock. There can be no assurance that if our common stock becomes publicly-traded the price will rise above $5 per share so as to avoid these regulations.
mCig shareholders may want to sell their VitaCig shares after they are received in the distribution and this could adversely affect the market for our securities.
mCig, Inc. will distribute 270,135,000 shares of our common stock to its shareholders in the distribution. Management of mCig made the decision to invest in us without shareholder approval and the shareholders of mCig that will now be our shareholders may not be interested in retaining their investment in us. Because mCig shareholders will receive registered shares in the distribution, they will be free to resell their shares immediately upon receipt. If any numbers of mCig shareholder offer their shares for sale, the market for our securities could be adversely affected.
Our internal controls over financial reporting may not be effective and our independent registered public accounting firm may not be able to certify as to their effectiveness, which could have a significant and adverse effect on our business and reputation.
As a public company, we will be required to evaluate our internal controls over financial reporting. Furthermore, at such time as we cease to be an “emerging growth company,” as more fully described in these Risk Factors, we shall also be required to comply with Section 404. At such time, we may identify material weaknesses that we may not be able to remediate in time to meet the applicable deadline imposed upon us for compliance with the requirements of Section 404. In addition, if we fail to achieve and maintain the adequacy of our internal controls, as such standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404.
We cannot be certain as to the timing of completion of our evaluation, testing and any remediation actions or the impact of the same on our operations. If we are not able to implement the requirements of Section 404 in a timely manner or with adequate compliance, our independent registered public accounting firm may issue an adverse opinion due to ineffective internal controls over financial reporting and we may be subject to sanctions or investigation by regulatory authorities, such as the SEC. As a result, there could be a negative reaction in the financial markets due to a loss of confidence in the reliability of our financial statements. In addition, we may be required to incur costs in improving our internal control system and the hiring of additional personnel. Any such action could negatively affect our results of operations and cash flows.
THE DISTRIBUTION
Common Stock to be resold by VitaCig, Inc. Shareholders |
270,135,000 |
Common Stock outstanding before the distribution |
500,135,000 |
Common Stock outstanding after the distribution (maximum) |
500,135,000 |
USE OF PROCEEDS
Neither we nor mCig will receive any proceeds resulting from the distribution of the shares.
15
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock or other securities and do not anticipate paying any cash dividends in the foreseeable future. Any future determination to pay cash dividends will be at the discretion of our Board of Directors and will be dependent upon our financial condition, results of operations, capital requirements, and such other factors as the Board of Directors deems relevant.
DISTRIBUTION SUMMARY
Record Date
For purposes of determining a record date for distribution to current mCig, Inc. common shareholders, we have determined that the business day following the date that the Securities and Exchange Commission deems this prospectus effective shall be the record date.
Prospectus
A copy of this prospectus will accompany each certificate being distributed to the mCig shareholders on the distribution date.
Distribution Date
The Distribution Date shall be defined as the first business calendar day following an effective statement from the SEC. This shall be deemed the record date and only shareholders beneficially holding shares of mCig, Inc. on the record date shall receive shares of VitaCig, Inc. per this distribution. Following the spin-off, these shares are held by a total of 68 shareholders of record.
Listing and Trading
There is currently no public market for our shares. Upon completion of this distribution, our shares will not qualify for trading on any national or regional stock exchange or on the NASDAQ Stock Market. Management anticipates that within 3 months of the date of the distribution, an application will be filed with FINRA for the public trading of our common stock on the OTC Bulletin Board or the OTC Markets, but there is no assurance that the Company's common stock will be quoted on the OTC Bulletin Board or the OTC Markets or any other exchange or trading facility. Even if a market develops for our common shares, we can offer no assurances that the market will be active, or that it will afford our common shareholders an avenue for selling their securities. Many factors will influence the market price of our common shares, including the depth and liquidity of the market which develops investor perception of our business, general market conditions, and our growth prospects.
SHARES ELIGIBLE FOR FUTURE SALES
After completion of the spin-off, there will be approximately 500,135,000 VitaCig shares of common stock outstanding, based upon the number of shares of common shares outstanding as of the date of this prospectus. All of these shares will be freely transferable without restriction under the Securities Act except for shares that are owned by our “affiliates,” as that term is defined in Rule144 under the Securities Act, which includes our directors, our significant stockholders, including mCig, Inc. and those that received shares prior to the applicable holding period pursuant to Rule 144. Shares of our common stock held by affiliates may not be sold unless they are registered under the Securities Act or are sold pursuant to an exemption from registration, including an exemption contained in Rule 144 under the Securities Act.
Rule 144
In general, under Rule 144 as currently in effect, a person (or persons whose shares are aggregated), including an affiliate, who beneficially owns “restricted securities” of a “reporting company” may not sell these securities until the person has beneficially owned them for at least six months. Thereafter, affiliates may not sell within any three-month period a number of shares in excess of the greater of: 1% of the then outstanding shares of common stock
Sales under Rule 144 by our affiliates also will be subject to restrictions relating to manner of sale, notice and the availability of current public information about us and may be effected only through unsolicited brokers’ transactions.
Persons not deemed to be our affiliates who have beneficially owned “restricted securities” for at least six months but for less than one year may sell these securities, provided that current public information about us is “available,” which means that, on the date of sale, we have been subject to the reporting requirements of the Exchange Act for at least ninety days and are current in our Exchange Act filings. After beneficially owning “restricted securities” for one year, our non-affiliates may engage in unlimited resales of such securities.
16
Shares received by our affiliates in the spin-off or upon exercise of stock options or upon vesting of other equity-linked awards may be “controlled securities” rather than “restricted securities.” “Controlled securities” are subject to the same volume limitations as “restricted securities” but are not subject to holding period requirements.
Dilution
As there is only 1 current shareholder and the shares will be issued per dividend from the holdings of that 1 shareholder, the only dilutive effect of this registration statement will be to mCig, Inc., the sole shareholder at its own knowledge. No other shareholder shall be diluted as a result of this offering.
Background and Reasons for the Distribution
Company Information; Organization
VitaCig, Inc. (the “Company”) was incorporated under the laws of the state of Nevada on January 22, 2014. The Company intends to serve as a technology company which manufactures and retail the tobacco-free cigarettes that are pre-packaged with vitamins, nutrients, and generic pharmaceuticals.
VitaCig, Inc. is a wholly-owned subsidiary of mCig, Inc. On February 24, 2014 the company entered into a Contribution Agreement with mCig, Inc. In accordance with this agreement VitaCig, Inc. accepted the contribution by mCig, Inc. of specific assets consisting solely of pending trademarks for the term “VitaCig” filed with the USPTO and $500 in cash as contribution in exchange for 500,135,000 shares of common capital stock representing 100% of the shares outstanding of VitaCig, Inc.
Mechanics of Completing the Distribution
mCig management anticipates that within thirty days of the date of the effective date this prospectus, mCig will deliver 270,135,000 shares of our common stock to the distribution agent, Clear Trust LLC, to be distributed to the shareholders of mCig. We have defined the record date as the first business day following the effective statement from the SEC. Only holder of mCig, Inc. on the record date shall receive shares of VitaCig, Inc. Only those shares deemed "free trading" by our transfer agent shall be registered under this prospectus. These shares are held by a total of 68 shareholders.
If you hold your mCig shares in a brokerage account, your VitaCig shares of common stock will be credited to that account. If you hold your mCig shares in certificated form, a certificate representing shares of your VitaCig common stock will be mailed to you by the distribution agent. The mailing process is expected to take about thirty days.
No cash distributions will be paid. No shareholder of mCig will be required to make any payment or exchange any shares in order to receive our common shares in the distribution. mCig will bear all of the costs of the distribution, and VitaCig is bearing the costs of this Registration Statement.
Tax Consequences of the Distribution
We have not requested and do not intend to request a ruling from the Internal Revenue Service or an opinion of tax counsel that the distribution will qualify as a tax free spin-off under United States tax laws. Under the U.S. Tax Code, mCig would need to control at least 80% of our outstanding capital stock to qualify the distribution of our shares by mCig as a tax free spin-off. mCig does not meet this requirement and consequently, we do not believe that the distribution by mCig of our stock to its shareholders will qualify for tax free spin-off status.
This prospectus should not be read as providing legal or tax advice with respect to the distribution to our shareholders. The distribution of the VitaCig stock to mCig shareholders will constitute a dividend, taxable as ordinary income, in an amount equal to the fair market value of the VitaCig stock on the date of the distribution, as determined in good faith by mCig. In determining the fair market value of the shares distributed hereunder, mCig may reference the price of our shares in recent sales of our common stock, our book value, our discounted cash flows, similar sized entities in similar industries as those in which we operate, as well as recent economic conditions. If required by the tax laws, the distribution will be reported to the Internal Revenue Service on Form 1099 - DIV. The tax impact of the distribution on mCig is not anticipated to be significant, given the large number of shareholders receiving shares in the distribution.
17
CAPITALIZATION
The table below describes our cash, cash equivalents and investments and capitalization as of February 28, 2014. You should read this table in conjunction with the information under the captions "Selected Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our financial statements and the related notes included elsewhere in this prospectus.
|
As of February 28, 2014 (unaudited) |
Cash and cash equivalents |
$477 |
Common stock, $0.0001 par value per share; 560,000,000 shares authorized; 500,135,000 shares issued and outstanding as of February 28, 2014 |
50,014 |
Additional paid in capital |
(-) |
Accumulated deficit |
(50,554) |
Total stockholder’s deficit |
(540) |
Total liabilities and stockholder’s deficit |
$ 477 |
As of June 16 , 2014, there were 500,135,000 shares of our common stock outstanding.
SHARES ELIGIBLE FOR FUTURE SALE
There is not currently any market for our common stock. We cannot predict the effect, if any, that market sales of shares of our common stock or the availability of shares of our common stock for sale will have on the market price of our common stock prevailing from time to time. Sales of substantial amounts of our common stock in the public market after this offering could adversely affect market prices prevailing from time to time and could impair our ability to raise capital through the sale of our equity securities.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
Although the Company anticipates that a public market for over-the-counter trading of the Company's securities may develop after the distribution is completed, there can be no assurance that such a market will develop or that it will be sustained. After the effective date of this registration statement and the distribution, the shares of the Company's common stock distributed by mCig in the distribution will be unrestricted and freely salable. We expect to apply for listing of our common stock on the OTC Bulletin Board or the OTC Markets (including the OTCQB or OTCQX), but there can be no assurance that such application, if filed, will be accepted, or that if accepted, any market for our shares will ever develop. For information on shareholders who will own 5% or more of our common stock following the distribution, as well as the ownership of our officers and directors, please see “Security Ownership of Certain Beneficial Owners and Management” on page 29.
Holders
Immediately following the distribution, the Company anticipates that there will be approximately 68 shareholders of the Company.
Dividends
Since its incorporation, the Company has not declared any dividend on its common stock. The Company does not anticipate declaring or paying a dividend on its common stock for the foreseeable future. We plan to retain any future earnings for use in our business activities.
Transfer Agent and Registrar
18
The transfer agent and registrar for the Company's common stock will be ClearTrust LLC, 16540 Pointe Village Dr, Ste 206, Lutz, FL 33558. We have appointed the transfer agent on April 14, 2014.
Equity Compensation Plans
The Company currently does not have any equity compensation plans.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, including the sections entitled "Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business," contains forward-looking statements that are based on our management's beliefs and assumptions and on information currently available to our management. We may, in some cases, use words such as "project," “forecast,” "believe," "anticipate," "plan," "expect," "estimate," "intend," "should," "would," "could," "potentially," "will" or "may," or other words that convey uncertainty of future events or outcomes, to identify these forward-looking statements. Forward-looking statements in this prospectus may include, but are not limited to, statements about:
• expectations of future operating results or financial performance;
• introduction of new products;
• plans for growth, future operations and potential acquisitions;
• our plans to develop and commercialize our products;
• the size and growth potential of possible markets for our product candidates and our ability to serve those markets;
• the rate and degree of market acceptance of any future products;
• the accuracy of our estimates regarding expenses, future revenues, capital requirements and needs for additional financing and our ability to obtain additional financing;
• our ability to attract strategic partners with development, regulatory and commercialization expertise; and
• the development of our marketing capabilities.
There are a number of important factors that could cause actual results to differ materially from the results anticipated by these forward-looking statements. These important factors include those that we discuss in this prospectus under the caption "Risk Factors." Given these risks, uncertainties and other factors, you should not place undue reliance on these forward-looking statements. You should read these factors and the other cautionary statements made in this prospectus as being applicable to all related forward-looking statements wherever they appear in this prospectus. If one or more of these factors materialize, or if any underlying assumptions prove incorrect, our actual results, performance or achievements may vary materially from any future results, performance or achievements expressed or implied by these forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
BUSINESS
VitaCig, Inc. (the “Company”) was incorporated under the laws of the state of Nevada on January 22, 2014. VitaCig is a technology company that is engaged in the manufacturing and retailing of nicotine-free Electronic Cigarettes (“eCigs”) that are pre-packaged with vitamins, nutrients, and generic pharmaceuticals.
VitaCig, Inc. was originally formed as a wholly-owned subsidiary of mCig, Inc. On February 24, 2014 the company entered into a Contribution Agreement with mCig, Inc. In accordance with this agreement VitaCig, Inc. accepted the contribution by mCig, Inc. of specific assets consisting solely of pending trademarks for the term “VitaCig” filed with the USPTO and $500 in cash as contribution in exchange for 500,135,000 shares of common capital stock representing 100% of the shares outstanding of VitaCig, Inc.
At the moment we are still a 100% owned subsidiary of mCig, Inc. However, the purpose of this registration statement is to finalize the spin-off whereby mCig, Inc. will be reduced to a 49% ownership position and mCig, Inc. public shareholders and management will retain the remaining 51%.
mCig, Inc. (mCig) was incorporated in the State of Nevada on December 30, 2010 originally under the name Lifetech Industries, Inc. Effective August 2, 2013, their name was changed from "Lifetech Industries, Inc." to "mCig, Inc." reflecting their new business model. Since October 2013, mCig, Inc. has positioned itself as a technology company focused on two long-term secular trends sweeping the globe: (1) The decriminalization and legalization of marijuana for medicinal or recreational purposes (2) The adoption of electronic vaporizing cigarettes (commonly known as “eCigs”) by the world’s 1.2 Billion smokers. They manufacture and retail the mCig — the world’s most affordable loose-leaf eCig priced at only $10. Designed in the USA — the mCig provides a superior smoking experience by heating plant material, waxes, and oils delivering a smoother inhalation experience. The company also owns Vapolution, Inc. which manufactures and retails home-use vaporizers such as the Vapolution 2.0.
19
mCig, Inc., Vapolution, Inc. and VitaCig are currently in the process of researching and developing a future line of products including the mCig 3.0, the Vapolution 3.0, and the LiqCig, respectively. These products are still in the conceptual phase, as we hope to have these out sometime in the Winter of 2014.
Electronic Cigarettes
VitaCig is engaged in the business of marketing and distributing an electronic cigarette (eCig) that provides vapor and vitamins for inhalation while avoiding: smoke, flame, tobacco, tar, carbon monoxide, ash, stub, associated smells and all the other chemicals found in traditional cigarettes. We believe that our products provide our consumers with a smoking experience without the social stigmas increasingly associated with cigarettes.
We compete in a highly competitive market that includes other e-cigarette marketing companies, as well as traditional tobacco companies. In this highly fragmented market, we have focused on building brand awareness early through viral adoption and word of mouth. In the future, we expect to employ additional marketing strategies while continuing to develop our supply chain and fulfillment capabilities.
Our Electronic Cigarettes
We currently offer disposable electronic cigarettes named "VitaCigs" that we retail for $2.00 each. We currently offer three flavor combinations:
• VitaCig “Relax” - Blueberry and Black Currant flavor with B-Myrcene.
• VitaCig “Refresh” – Mint and Peppermint flavor with Eucalyptol.
• VitaCig “Energize” – Orange and Grapefruit flavor with Limonene.
In addition to the flavor combinations every VitaCig includes the following base Vitamins: A, B, C, E, and CoQ10 (Ubidecarenone).
Our in-house engineering, graphic design, and flavor mixing teams work to provide improvements and research or develop new product categories. Any R&D expenses were incurred after March 1, 2014.
The Market for Electronic Cigarettes
We market our electronic cigarettes as an alternative to traditional tobacco cigarettes. We offer our products in three flavor combinations. Because electronic cigarettes offer a “smoking” experience without the burning of tobacco leaf, electronic cigarettes offer users the ability to satisfy their traditional cigarette cravings without smoke, tar, ash or carbon monoxide. In many cases electronic cigarettes may be used where tobacco-burning cigarettes may not. Electronic cigarettes may be used in some instances where for regulatory or safety reasons tobacco burning cigarettes may not be used. However, we cannot provide any assurances that future regulations may not affect where electronic cigarettes may be used.
According to the U.S. Centers for Disease Control and Prevention, in 2010, an estimated 45.3 million people, or 19.3% of adults, in the United States smoke cigarettes. According to the Tobacco Vapor Electronic Cigarette Association, an industry trade group, more than 3.5 million people currently use electronic cigarettes in the United States. In 2011, about 21% of adults who smoke traditional tobacco cigarettes had used electronic cigarettes, up from about 10% in 2010, according to the U.S. Centers for Disease Control and Prevention. Annual sales of electronic cigarettes in the United States are estimated to increase to $1 billion in 2013 from $500 million in 2012. Annual sales of traditional tobacco cigarettes, according to industry estimates, were $80 billion in 2012.
Competition
We compete with other sellers of electronic cigarettes, most notably Lorillard, Inc., Altria Group, Inc. and Reynolds American Inc., through their electronic cigarettes business segments; the nature of our competitors is varied as the market is highly fragmented and the barriers to entry into the business are low. We compete primarily on the basis of product quality, brand recognition, brand loyalty, service, marketing, advertising and price. We are subject to highly competitive conditions in all aspects of our business. The competitive environment and our competitive position can be significantly influenced by weak economic conditions, erosion of consumer confidence, competitors’ introduction of low-priced products or innovative products, cigarette excise taxes, higher absolute prices and larger gaps between price categories, and product regulation that diminishes the ability to differentiate tobacco products.
20