Attached files
As filed with the Securities and Exchange Commission on October 17, 2014
Registration No.___________
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
RICH CIGARS, INC.
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(Exact Name of Registrant as specified in its charter)
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FLORIDA 2100 46-3289369
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(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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5100 SW 103rd Street, Ocala, FL 34476 / phone (214) 702-8775
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(Address and Telephone Number of Registrant's Principal
Executive Offices and Principal Place of Business)
Richard Davis, Chief Executive Officer, President and Chairman of the Board
5100 Sw 103rd Street, Ocala, Florida 34476/ Phone (214) 702-8775
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(Name, address and telephone number of agent for service)
Copies of communications to:
Michael A. Littman, Attorney at Law
7609 Ralston Road, Arvada, Colorado 80002
Phone: (303) 422-8127 / Fax: (303) 431-1567
Approximate date of commencement 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 Form 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 of 1933, 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 of 1933, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
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Large accelerated filer [___] Accelerated filer [___]
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Non-accelerated filer [___] Smaller reporting company [_X_]
(Do not check if a smaller
reporting company)
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CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER SHARE PRICE(1) FEE
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Common Stock for 58,080 $0.10 $5,808 $0.67
Distribution as an in kind
distribution
Common Stock for resale 246,080 $0.10 $24,608 $2.86
from the Distributees of
the Plan of Liquidation
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(1) Estimated solely for the purpose of computing the registration fee pursuant
to Rule 457(a) under the Securities Act.
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.
ii
(SUBJECT TO COMPLETION)
PROSPECTUS
RICH CIGARS, INC.
58,080 SHARES OF COMMON STOCK FOR DISTRIBUTION TO DISTRIBUTEES
OF LIMITED LIABILITY COMPANY
AND 246,080 SHARES OF COMMON STOCK FOR RESALE BY DISTRIBUTEES
AND OTHER SHAREHOLDERS
We are registering:
(a) 58,080 common shares to be distributed to Distributees of Rich Keys
Enterprises, LLC
(b) 246,080 shares of common stock for resale by Distributees of the Rich Keys
Enterprises, LLC, and other shareholders
We will NOT receive any proceeds from sales of shares by selling shareholders.
Our selling shareholders plan to sell common shares at $0.10, or any other
privately negotiated price, until such time as a market develops for any of the
securities and thereafter at such prices as the market may dictate from time to
time, or in private transactions at negotiated prices. There is no market price
for the stock and our pricing is arbitrary with no relation to market value,
liquidation value, earnings or dividends. The price was arbitrarily set at $0.10
per share, based on a speculative concept unsupported by any other comparables.
We have set the initial fixed price as follows:
TITLE PRICE PER SHARE
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Common Stock $0.10
At any time after a market develops, our security holders may sell their
securities in a market, at market prices or at any price in privately negotiated
transactions.
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK; SEE "RISK FACTORS" BEGINNING ON
PAGE 6 TO READ ABOUT FACTORS YOU SHOULD CONSIDER BEFORE BUYING SHARES OF THE
COMMON STOCK.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (THE "SEC") OR ANY STATE OR PROVINCIAL SECURITIES
COMMISSION, NOR HAS THE SEC OR ANY STATE OR PROVINCIAL SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
We intend to obtain a quotation for our stock in the future, but cannot make any
assurances that we will be approved for such quotation by FINRA. An application
has not yet been filed, nor is there any selected broker/dealer to file for
quotation on our behalf as of yet. Our common stock is presently not quoted on
any national securities exchange or the NASDAQ Stock Market or any other venue.
This offering will be on a delayed and continuous basis only after the
distribution upon registration of stock to distributees and for sales of selling
shareholders' shares, some of whom are distributees. The selling shareholders
are not paying any of the offering expenses and we will not receive any of the
proceeds from the sale of the shares by the selling shareholders. (See
"Description of Securities - Shares").
(1) This Registration Statement covers the distribution of shares by
RichKeys Enterprises LLC to its members, who are also deemed selling
shareholders hereunder and resale thereafter, by our selling shareholders of up
to 246,080 shares of common stock previously issued to such selling
shareholders.
(2) The offering price has been estimated solely for the purpose of
computing the amount of the registration fee in accordance with Rule 457(o). Our
common stock is not traded on any national exchange and in accordance with Rule
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457; the offering price was determined by the price of the shares that were sold
to our shareholders in a private placement memorandum. The price of $0.10 is a
fixed price at which the selling security holders may sell their shares until
our common stock is quoted on the OTC Pink Sheets at which time the shares may
be sold at prevailing market prices or privately negotiated prices. There can be
no assurance that a market maker will agree to file the necessary documents with
the Financial Industry Regulatory Authority, which operates the OTC Pink Sheets,
nor can there be any assurance that such an application for quotation will be
approved.
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 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH SECTION 8(a), MAY
DETERMINE.
The information in this preliminary prospectus is not complete and may be
changed. These securities may not be sold until the registration statement filed
with the U.S. Securities and Exchange Commission ("SEC") is effective. This
preliminary prospectus is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any jurisdiction where the offer
or sale is not permitted.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission becomes effective. This prospectus is not an
offer to sell these securities and we are not soliciting offers to buy these
securities in any state where the offer or sale is not permitted.
The date of this Prospectus is October 16, 2014.
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TABLE OF CONTENTS
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PART I - INFORMATION
REQUIRED IN PROSPECTUS Page No.
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ITEM 1. Front of Registration Statement and Outside Front Cover Page
of Prospectus
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ITEM 2. Prospectus Cover Page
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ITEM 3. Prospectus Summary Information, Risk Factors and Ratio of 4
Earnings to Fixed Charges
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ITEM 4. Use of Proceeds 14
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ITEM 5. Determination of Offering Price 14
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ITEM 6. Dilution 15
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ITEM 7. Selling Security Holders 15
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ITEM 8. Plan of Distribution 18
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ITEM 9. Description of Securities 19
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ITEM 10. Interest of Named Experts and Counsel 19
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ITEM 11. Information with Respect to the Registrant 20
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a. Description of Business 20
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b. Description of Property 24
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c. Legal Proceedings 24
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d. Market for Common Equity and Related Stockholder Matters 24
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e. Financial Statements 25
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f. Selected Financial Data 26
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g. Supplementary Financial Information 26
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h. Management's Discussion and Analysis of Financial Condition 26
and Results of Operations
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i. Changes In and Disagreements With Accountants on Accounting 30
and Financial Disclosure
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j. Quantitative and Qualitative Disclosures About Market Risk 30
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k. Directors and Executive Officers 30
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l. Executive and Directors Compensation 32
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m. Security Ownership of Certain Beneficial Owners and 34
Management
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n. Certain Relationships, Related Transactions, Promoters And 34
Control Persons
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ITEM 11 A. Material Changes 34
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ITEM 12. Incorporation of Certain Information by Reference 34
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ITEM 12 A. Disclosure of Commission Position on Indemnification for 35
Securities Act Liabilities
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PART II - INFORMATION NOT
REQUIRED IN PROSPECTUS
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ITEM 13. Other Expenses of Issuance and Distribution 36
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ITEM 14. Indemnification of Directors and Officers 36
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ITEM 15. Recent Sales of Unregistered Securities 37
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ITEM 16. Exhibits and Financial Statement Schedules 38
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ITEM 17. Undertakings 38
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Signatures 40
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ITEM 3. PROSPECTUS SUMMARY INFORMATION, RISK FACTORS AND RATIO OF EARNINGS TO
FIXED CHARGES
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Please read this prospectus carefully. It describes our business, our financial
condition and results of operations. We have prepared this prospectus so that
you will have the information necessary to make an informed investment decision.
You should rely only on information contained in this prospectus. We have not
authorized any other person to provide you with different information. This
prospectus is not an offer to sell, nor is it seeking an offer to buy, these
securities in any state where the offer or sale is not permitted. The
information in this prospectus is complete and accurate as of the date on the
front cover, but the information may have changed since that date.
PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in this
prospectus. This summary does not contain all the information that you should
consider before investing in the common stock. You should carefully read the
entire prospectus, including "Risk Factors", "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Financial
Statements, before making an investment decision. In this Prospectus, the terms
"Rich Cigars," "Company," "we," "us" and "our" refer to Rich Cigars, Inc.
OVERVIEW
Our Company, Rich Cigars, was established in July 2013 to manufacture and
distribute cigars under the Rich Cigars brand name. Our founders seek to create
sales of high-quality, hand-rolled, premium cigars. Founder Alfred Rushing has
been involved with the cigar industry for more than 20 years. Through Rich
Cigars, he intends to introduce new styles of premium cigars to build sales of
private label cigars. We intend to conduct our business principally in the U.S.
through our own sales and marketing team.
WHERE YOU CAN FIND US
We presently maintain our principal offices at 5100 SW 103rd Street, Ocala, FL
34476. Our telephone number is (214) 702-8775.
IMPLICATIONS OF BEING AN EMERGING GROWTH COMPANY
We qualify as an emerging growth company as that term is used in the JOBS Act.
An emerging growth company may take advantage of specified reduced reporting and
other burdens that are otherwise applicable generally to public companies. These
provisions include:
o A requirement to have only two years of audited financial statements
and only two years of related MD&A ;
o Exemption from the auditor attestation requirement in the assessment
of the emerging growth company's internal control over financial
reporting under Section 404 of the Sarbanes-Oxley Act of 2002;
o Reduced disclosure about the emerging growth company's executive
compensation arrangements; and
o No non-binding advisory votes on executive compensation or golden
parachute arrangements.
We have already taken advantage of these reduced reporting burdens in this
prospectus, which are also available to us as a smaller reporting company as
defined under Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
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In addition, Section 107 of the JOBS Act also provides that an emerging growth
company can take advantage of the extended transition period provided in Section
7(a)2(B) of the Securities Act of 1933, as amended (the "Securities Act") for
complying with new or revised accounting standards. We have elected to use the
extended transition period provided above and therefore our financial statements
may not be comparable to companies that comply with public company effective
dates.
We could remain an emerging growth company for up to five years, or until the
earliest of (i) the last day of the first fiscal year in which our annual gross
revenues exceed $1 billion, (ii) the date that we become a "large accelerated
filer" as defined in Rule 12b-2 under the Exchange Act, which would occur if the
market value of our common stock that is held by non-affiliates exceeds $700
million as of the last business day of our most recently completed second fiscal
quarter, or (iii) the date on which we have issued more than $1 billion in
non-convertible debt during the preceding three year period.
For more details regarding this exemption, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Critical Accounting
Policies."
THE OFFERING
Common stock offered by selling security holders is 246,080 shares of common
stock. This number represents 51.6% of our current outstanding common stock (1).
Common stock outstanding before the offering is 477,080 as of June 30, 2014.
Common stock outstanding after the offering is 477,080.
Terms of the Offering: Our selling security holders will determine when and how
they will sell the common stock offered in this prospectus. Our selling security
holders may sell at a fixed price of $0.10 per share until our common stock is
quoted on the OTC Pink Sheets, and thereafter at prevailing market prices or
privately negotiated prices or in transactions that are not in the public
market.
Termination of the Offering: The offering will conclude upon the earliest of (i)
such time as all of the common stock has been sold pursuant to the registration
statement or (ii) such time as all of the common stock becomes eligible for
resale without volume limitations pursuant to Rule 144 under the Securities Act,
or any other rule of similar effect.
Trading Market: There is currently no trading market for our common stock. We
intend to apply soon for quotation on the OTC Bulletin Board. We will require
the assistance of a market-maker to apply for quotation and there is no
guarantee that a market-maker will agree to assist us.
Use of Proceeds: We are not selling any shares of the common stock covered by
this prospectus. As such, we will not receive any of the offering proceeds from
the registration of the shares of common stock covered by this prospectus.
Risk Factors: Our Common Stock offered hereby involves a high degree of risk and
should not be purchased by investors who cannot afford the loss of their entire
investment. See "Risk Factors" beginning on page 4.
(1) Based on 476,080 shares of common stock outstanding as of June 30, 2014.
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SUMMARY OF FINANCIAL INFORMATION
The following summary financial data should be read in conjunction with
"Management's Discussion and Analysis," "Plan of Operation" and the Financial
Statements and Notes thereto, included elsewhere in this prospectus. The
statement of operations and balance sheet data as of and from July 29, 2013
(inception) through December 31, 2013 and for the six months ended June 30, 2014
are derived from our audited financial statements. The data set forth below
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations," our financial statements and the
related notes included in this prospectus.
The Summary Financial Information presented below is at June 30, 2014
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June 30, 2014 December 31, 2013
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Total Assets $3,672 $0
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Current Liabilities $2,446 $150,176
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Shareholders' Equity (Deficit) $1,226 $(150,176)
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For the Six months Period from inception
ended June 30, 2014 December 31, 2013
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Revenues $0 $0
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Net Loss $34,430 $156,208
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As of June 30, 2014, the accumulated deficit was $190,638. We anticipate that we
will operate in a deficit mode and continue to sustain net losses for the
foreseeable future.
RISK FACTORS
The shares of our common stock being offered for resale by the selling security
holders are highly speculative in nature, involve a high degree of risk and
should be purchased only by persons who can afford to lose their entire amount
invested in the common stock. Accordingly, prospective investors should
carefully consider, along with other matters referred to herein, the following
risk factors in evaluating our business before purchasing any Units. If any of
the following risks actually occurs, our business, financial condition or
operating results could be materially adversely affected. In such case, you may
lose all or part of your investment. You should carefully consider the risks
described below and the other information in this process before investing in
our common stock.
RISKS RELATED TO OUR BUSINESS
LIMITED OPERATING HISTORY
There can be no assurance that our management will be successful in its attempts
to implement the our business plan, build the corporate infrastructure required
to support operations at the levels called for by our business plan or that we
will generate sufficient revenues to meet expenses or to achieve or maintain
profitability. We will encounter risks and difficulties that companies at a
similar stage of development frequently experience, including the potential
failure to:
o Obtain sufficient working capital to support our establishment and
expansion;
o Find and realize the asset management opportunities required to
generate revenue;
o Maintain adequate control of our expenses allowing us to realize
anticipated income growth; and
o Anticipate and adapt to changing conditions in the tobacco products
industry resulting from changes in government regulations, mergers and
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acquisitions involving our competitors, technological developments and
other significant competitive and market dynamics.
OUR MANAGEMENT TEAM HAS NO EXPERIENCE OPERATING A PUBLIC COMPANY. ANY FAILURE TO
COMPLY OR ADEQUATELY COMPLY WITH FEDERAL AND STATE SECURITIES LAWS, RULES OR
REGULATIONS COULD SUBJECT US TO FINES OR REGULATORY ACTIONS, WHICH MAY
MATERIALLY ADVERSELY AFFECT OUR BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL
CONDITION.
Members of our management team have no experience managing and operating a
public company and may rely in many instances on the professional experience and
advice of third parties including its attorneys and accountants. Failure to
comply or adequately comply with any federal or state securities laws, rules, or
regulations may result in fines or regulatory actions, which may materially
adversely affect our business, results of operation, or financial condition and
could result in delays in achieving either the effectiveness of a registration
statement relating to the Securities being sold in this Offering or the
development of an active and liquid trading market for our Common Stock.
OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM HAS EXPRESSED SUBSTANTIAL
DOUBT AS TO OUR ABILITY TO CONTINUE AS A GOING CONCERN.
The audited financial statements included in the registration statement have
been prepared assuming that we will continue as a going concern and do not
include any adjustments that might result if we cease to continue as a going
concern. We have incurred significant losses since our inception. We have funded
these losses primarily through the sale of securities.
Based on our financial history since inception, in their report on the financial
statements for the period ended June 30, 2014, our independent registered public
accounting firm has expressed substantial doubt as to our ability to continue as
a going concern. We are a development stage company that has not commenced
revenue. There is no assurance that any revenue will be realized in the future.
There can be no assurance that we will have adequate capital resources to fund
planned operations or that any additional funds will be available to us when
needed or at all, or, if available, will be available on favorable terms or in
amounts required by us. If we are unable to obtain adequate capital resources to
fund operations, we may be required to delay, scale back or eliminate some or
all of our operations, which may have a material adverse effect on our business,
results of operations and ability to operate as a going concern.
IF WE NEED ADDITIONAL CAPITAL TO FUND OUR FUTURE OPERATIONS, WE MAY NOT BE ABLE
TO OBTAIN SUFFICIENT CAPITAL AND MAY BE FORCED TO LIMIT THE SCOPE OF OUR
OPERATIONS.
If adequate additional financing is not available on reasonable terms, we may
not be able to undertake sufficient sales and business development efforts
required to identify clients and assist them with asset acquisitions,
development of their real estate projects or management of existing stabilized
assets, which may result in a negative impact to our cash flow and we would have
to modify our business plans accordingly. There is no assurance that additional
financing will be available to us.
In connection with our growth strategies, we may experience increased capital
needs and accordingly, we may not have sufficient capital to fund our future
operations without additional capital investments. Our capital needs will depend
on numerous factors, including (i) our profitability; (ii) the development of
similar products undertaken by our competition; (iii) the level of our
investment in sales and marketing; and (iv) the amount of our capital
expenditures, including corporate acquisitions. We cannot assure you that we
will be able to obtain capital in the future to meet our needs.
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In recent years, the securities markets in the United States have experienced a
high level of price and volume volatility, and the market price of securities of
many companies have experienced wide fluctuations that have not necessarily been
related to the operations, performances, underlying asset values or prospects of
such companies. For these reasons, our Common Stock can also be expected to be
subject to volatility resulting from purely market forces over which we will
have no control.
If we cannot obtain additional funding, we may be required to: (i) limit our
expansion; (ii) limit our marketing efforts; and (iii) decrease or eliminate
capital expenditures. Such reductions could materially adversely affect our
business and our ability to compete.
Even if we do find a source of additional capital, we may not be able to
negotiate terms and conditions for receiving the additional capital that are
favorable to us. Any future capital investments could dilute or otherwise
materially and adversely affect the holdings or rights of our existing
shareholders. In addition, new equity or convertible debt securities issued by
us to obtain financing could have rights, preferences and privileges senior to
the Shares. We cannot give you any assurance that any additional financing will
be available to us, or if available, will be on terms favorable to us.
YOU WILL EXPERIENCE DILUTION OF YOUR OWNERSHIP INTEREST BECAUSE OF THE FUTURE
ISSUANCE OF ADDITIONAL SHARES OF OUR COMMON STOCK
If we raise additional capital subsequent to hereto through the issuance of
equity or convertible debt securities, the percentage ownership of our company
held by existing shareholders will be reduced and those shareholders may
experience significant dilution. In addition, we may also have to issue
securities that may have rights, preferences and privileges senior to our Common
Stock. In the event we seek to raise additional capital through the issuance of
debt or its equivalents, this will result in increased interest expense.
WE WILL BE DEPENDENT UPON KEY PERSONNEL FOR THE FORESEEABLE FUTURE.
We will be dependent on several key members of its management and operations
teams for the foreseeable future. In particular, we are dependent on Richard
Davis as our president and Alfred Rushing, our Vice President, Secretary and
Operation's Officer. The loss of the services of either executive could have a
material adverse effect on our operations and prospects. At this time, we have
no employment agreements with any of these individuals, though it is
contemplated that the Company may enter into such agreements with certain of its
key employees on terms and conditions usual and customary for its industry. We
do not currently have any "key man" life insurance on any employees or officers.
WE MAY FACE DIFFICULTIES ESTABLISHING A NEW BRAND
Our principal business strategy is to develop the Rich Cigars brand name as a
respected brand associated with the highest quality premium cigars. The
marketing of luxury consumer goods such as high-quality, premium cigars is
highly dependent on creating favorable consumer perception through
well-orchestrated advertising and public relations. We will be expending a
significant percentage of the proceeds of any future cash raises for advertising
and promotional activities. The Company has little advertising experience,
having spent only minimal amounts on such activities to-date. The Company's
competitors have significantly greater advertising resources and experience and
enjoy well-established brand names. There can be no assurance that our initial
advertising and promotional activities will be successful in creating the
desired consumer perception.
WE MAY REQUIRE ADDITIONAL FUNDING
We are highly dependent on the infusion of additional capital through other
private placements or loans supporting ongoing operations and expansion. If we
are not successful in obtaining subscriptions for this Offering it could be
necessary to seek additional financing elsewhere or to materially curtail our
expansion plans. There can be no assurance that such other financing would be
available to us on satisfactory terms or at all. Failure to obtain such
financing could materially impair our ability to increase sales and achieve
profitability. See "USE OF PROCEEDS."
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WE MAY BE ADVERSELY AFFECTED BY CHANGES IN THE REGULATION OF TOBACCO PRODUCTS
All manufacturers of tobacco products are subject to extensive and increasing
regulation at the federal, state and local levels. These regulations have, for
example, imposed labeling requirements, limited advertising of tobacco products,
restricted smoking in public areas such as office buildings and restaurants and
prohibited sales of tobacco products to minors. Proposals have been entertained
to transfer regulation of tobacco products from the Federal Trade Commission to
the Food and Drug Administration, which has expressed the intention to regulate
tobacco products as an addictive "drug." There can be no assurance as to the
content, timing or effect of future regulations on the federal, state or local
levels or that such regulations would not have a material adverse effect on our
business.
WE MAY FACE LITIGATION ISSUES SIMILAR TO THOSE IN THE CIGARETTE INDUSTRY
Manufacturers and distributors of tobacco products have been the subject of
increasing litigation seeking to extend product liability to such companies for
allegedly tobacco-related medical conditions of smokers. While such litigation
has primarily centered on cigarettes, there can be no assurance that the
increased popularity and visibility of cigars will not result in similar
litigation against manufacturers and distributors of cigars. If we were to
become a party to such litigation, either any finding of liability on our or the
expense and diversion of management time in defending such litigation could have
a material adverse effect on our Company.
WE MAY BE SUBJECT TO INCREASING EXCISE TAXES
Cigars (and tobacco products generally) have long been subject to excise taxes
on the federal, state and local levels. From time to time proposals have been
made to increase such taxes to fund various legislative initiatives. Substantial
increases in excise taxes could have a material adverse impact on the cigar
industry in general and our Company in particular.
OUR COMPETITION IS MUCH LARGER AND HAS BEEN IN THE MARKETPLACE MUCH LONGER
Several large, well-financed competitors with long-standing brand recognition,
successful histories of new product introductions and long-standing
relationships dominate the market for the distribution of premium cigars with
tobacco growers and distributors. We compete with well-established companies for
sales to distributors and to consumers. While we believe that the rapidly
expanding market for sales of premium cigars has created room for new
competitors to achieve substantial sales and profits, there can be no assurance
that we can compete successfully on price or in obtaining raw materials,
building facilities and attracting and keeping skilled labor, which could result
in material adverse effects on our business.
WE FACE RISKS ASSOCIATED WITH INTERNATIONAL MANUFACTURING AND IMPORTATION
Our operations are in Ocala, Florida, but the sources of our products and
tobacco are located in Nicaragua. As such, we are subject to the risks of
changes in social, political and regulatory climate inherent in foreign trade,
including potential changes in either Nicaraguan or U.S. laws or regulations
regarding foreign investment in and transfers of capital from Nicaragua. While
we are not aware of any such social, political or regulatory changes, if such a
change should occur, it could materially impair our operations and its financial
condition.
WE WILL INCUR SIGNIFICANT COSTS TO BE A PUBLIC COMPANY TO ENSURE COMPLIANCE WITH
U.S. CORPORATE GOVERNANCE AND ACCOUNTING REQUIREMENTS AND WE MAY NOT BE ABLE TO
ABSORB SUCH COSTS.
We may incur significant costs associated with our public company reporting
requirements, costs associated with newly applicable corporate governance
requirements, including requirements under the Sarbanes-Oxley Act of 2002 and
other rules implemented by the Securities and Exchange Commission. We expect
these costs to be approximately $50,000-$75,000 per year. We expect all of these
applicable rules and regulations to significantly increase our legal and
financial compliance costs and to make some activities more time consuming and
costly. We also expect that these applicable rules and regulations may make it
-9-
more difficult and more expensive for us to obtain director and officer
liability insurance and we may be required to accept reduced policy limits and
coverage or incur substantially higher costs to obtain the same or similar
coverage. As a result, it may be more difficult for us to attract and retain
qualified individuals to serve on our board of directors or as executive
officers. We are currently evaluating and monitoring developments with respect
to these newly applicable rules, and we cannot predict or estimate the amount of
additional costs we may incur or the timing of such costs. In addition, we may
not be able to absorb these costs of being a public company which will
negatively affect our business operations.
WE ARE AN "EMERGING GROWTH COMPANY," AND ANY DECISION ON OUR PART TO COMPLY ONLY
WITH CERTAIN REDUCED DISCLOSURE REQUIREMENTS APPLICABLE TO "EMERGING GROWTH
COMPANIES" COULD MAKE OUR COMMON STOCK LESS ATTRACTIVE TO INVESTORS.
We are an "emerging growth company," as defined in the JOBS Act, and, for as
long as we continue to be an "emerging growth company," we expect and fully
intend to take advantage of exemptions from various reporting requirements
applicable to other public companies but not to "emerging growth companies,"
including, but not limited to, not being required to comply with the auditor
attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002,
reduced disclosure obligations regarding executive compensation in our periodic
reports and proxy statements, and exemptions from the requirements of holding a
nonbinding advisory vote on executive compensation and shareholder approval of
any golden parachute payments not previously approved. We could be an "emerging
growth company" for up to five years, or until the earliest of (i) the last day
of the first fiscal year in which our annual gross revenues exceed $1 billion,
(ii) the date that we become a "large accelerated filer" as defined in Rule
12b-2 under the Exchange Act, which would occur if the market value of our
common stock that is held by non-affiliates exceeds $700 million as of the last
business day of our most recently completed second fiscal quarter, or (iii) the
date on which we have issued more than $1 billion in non-convertible debt during
the preceding three year period.
In addition, Section 107 of the JOBS Act also provides that an "emerging growth
company" can take advantage of the extended transition period provided in
Section 7(a)2(B) of the Securities Act for complying with new or revised
accounting standards. In other words, an "emerging growth company" can delay the
adoption of certain accounting standards until those standards would otherwise
apply to private companies. We have elected to opt in to the extended transition
period for complying with the revised accounting standards. We have elected to
rely on these exemptions and reduced disclosure requirements applicable to
"emerging growth companies" and expect to continue to do so.
WE MAY NOT BE ABLE TO MEET THE FILING AND INTERNAL CONTROL REPORTING
REQUIREMENTS IMPOSED BY THE SEC WHICH MAY RESULT IN A DECLINE IN THE PRICE OF
OUR COMMON SHARES AND AN INABILITY TO OBTAIN FUTURE FINANCING.
As directed by Section 404 of the Sarbanes-Oxley Act, as amended by SEC Release
No. 33-8934 on June 26, 2008, the SEC adopted rules requiring each public
company to include a report of management on the company's internal controls
over financial reporting in its annual reports. In addition, the independent
registered public accounting firm auditing a company's financial statements may
have to also attest to and report on management's assessment of the
effectiveness of the company's internal controls over financial reporting. We
may be required to include a report of management on its internal control over
financial reporting. The internal control report must include a statement
o Of management's responsibility for establishing and maintaining
adequate internal control over its financial reporting;
o Of management's assessment of the effectiveness of its internal
control over financial reporting as of year end; and
o Of the framework used by management to evaluate the effectiveness of
our internal control over financial reporting.
-10-
Furthermore, our independent registered public accounting firm may be required
to file its attestation on whether it believes that we have maintained, in all
material respects, effective internal control over financial reporting.
While we expect to expend significant resources in developing the necessary
documentation and testing procedures required by Section 404 of the
Sarbanes-Oxley Act, there is a risk that we may not be able to comply timely
with all of the requirements imposed by this rule. In the event that we are
unable to receive a positive attestation from our independent registered public
accounting firm with respect to our internal controls, investors and others may
lose confidence in the reliability of our financial statements and our stock
price and ability to obtain equity or debt financing as needed could suffer.
In addition, in the event that our independent registered public accounting firm
is unable to rely on our internal controls in connection with its audit of our
financial statements, and in the further event that it is unable to devise
alternative procedures in order to satisfy itself as to the material accuracy of
our financial statements and related disclosures, it is possible that we would
be unable to file our Annual Report on Form 10-K with the SEC, which could also
adversely affect the market price of our Common Stock and our ability to secure
additional financing as needed.
THE JOBS ACT ALLOWS US TO DELAY THE ADOPTION OF NEW OR REVISED ACCOUNTING
STANDARDS THAT HAVE DIFFERENT EFFECTIVE DATES FOR PUBLIC AND PRIVATE COMPANIES.
Since, we have elected to use the extended transition period for complying with
new or revised accounting standards under Section 102(b)(1) of the JOBS Act,
this election allows us to delay the adoption of new or revised accounting
standards that have different effective dates for public and private companies
until those standards apply to private companies. As a result of this election,
our financial statements may not be comparable to companies that comply with
public company effective dates.
OUR COMMON SHARES WILL NOT INITIALLY BE REGISTERED UNDER THE EXCHANGE ACT AND AS
A RESULT WE WILL HAVE LIMITED REPORTING DUTIES WHICH COULD MAKE OUR COMMON STOCK
LESS ATTRACTIVE TO INVESTORS.
Our common shares are not registered under the Exchange Act. As a result, we
will not be subject to the federal proxy rules and our directors, executive
officers and 10% beneficial holders will not be subject to Section 16 of the
Exchange Act. In additional our reporting obligations under Section 15(d) of the
Exchange Act may be suspended automatically if we have fewer than 300
shareholders of record on the first day of our fiscal year. Our common shares
are not registered under the Securities Exchange Act of 1934, as amended, and we
do not intend to register our common shares under the Exchange Act for the
foreseeable future, provided that, we will register our common shares under the
Exchange Act if we have, after the last day of our fiscal year, more than either
(i) 2000 persons; or (ii) 500 shareholders of record who are not accredited
investors, in accordance with Section 12(g) of the Exchange Act. As a result,
although, upon the effectiveness of the registration statement of which this
prospectus forms a part, we will be required to file annual, quarterly, and
current reports pursuant to Section 15(d) of the Exchange Act, as long as our
common shares are not registered under the Exchange Act, we will not be subject
to Section 14 of the Exchange Act, which, among other things, prohibits
companies that have securities registered under the Exchange Act from soliciting
proxies or consents from shareholders without furnishing to shareholders and
filing with the Securities and Exchange Commission a proxy statement and form of
proxy complying with the proxy rules. In addition, so long as our common shares
are not registered under the Exchange Act, our directors and executive officers
and beneficial holders of 10% or more of our outstanding common shares will not
be subject to Section 16 of the Exchange Act. Section 16(a) of the Exchange Act
requires executive officers and directs, and persons who beneficially own more
than 10% of a registered class of equity securities to file with the SEC initial
statements of beneficial ownership, reports of changes in ownership and annual
reports concerning their ownership of common shares and other equity securities,
on Forms 3, 4 and 5, respectively. Such information about our directors,
executive officers, and beneficial holders will only be available through this
(and any subsequent) registration statement, and periodic reports we file
thereunder. Furthermore, so long as our common shares are not registered under
-11-
the Exchange Act, our obligation to file reports under Section 15(d) of the
Exchange Act will be automatically suspended if, on the first day of any fiscal
year (other than a fiscal year in which a registration statement under the
Securities Act has gone effective), we have fewer than 300 shareholders of
record. This suspension is automatic and does not require any filing with the
SEC. In such an event, we may cease providing periodic reports and current or
periodic information, including operational and financial information, may not
be available with respect to our results of operations.
BECAUSE OUR COMMON STOCK IS NOT REGISTERED UNDER THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED, OUR REPORTING OBLIGATIONS UNDER SECTION 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, MAY BE SUSPENDED AUTOMATICALLY IF
WE HAVE FEWER THAN 300 SHAREHOLDERS OF RECORD ON THE FIRST DAY OF OUR FISCAL
YEAR.
Our common stock is not registered under the Exchange Act, and we do not intend
to register our common stock under the Exchange Act for the foreseeable future
(provided that, we will register our common stock under the Exchange Act if we
have, after the last day of our fiscal year, $10,000,000 in total assets and
either more than 2,000 shareholders of record or 500 shareholders of record who
are not accredited investors (as such term is defined by the Securities and
Exchange Commission), in accordance with Section 12(g) of the Exchange Act). As
long as our common stock is not registered under the Exchange Act, our
obligation to file reports under Section 15(d) of the Exchange Act will be
automatically suspended if, on the first day of any fiscal year (other than a
fiscal year in which a registration statement under the Securities Act has gone
effective), we have fewer than 300 shareholders of record. This suspension is
automatic and does not require any filing with the SEC. In such an event, we may
cease providing periodic reports and current or periodic information, including
operational and financial information, may not be available with respect to our
results of operations.
OUR ARTICLES OF INCORPORATION PROVIDE FOR INDEMNIFICATION OF OFFICERS AND
DIRECTORS AT OUR EXPENSE AND LIMIT THEIR LIABILITY WHICH MAY RESULT IN A MAJOR
COST TO US AND HURT THE INTERESTS OF OUR SHAREHOLDERS BECAUSE CORPORATE
RESOURCES MAY BE EXPENDED FOR THE BENEFIT OF OFFICERS AND/OR DIRECTORS.
Our By-Laws include provisions that eliminate the personal liability of the
directors of the Company for monetary damages to the fullest extent possible
under the laws of the State of Florida or other applicable law. These provisions
eliminate the liability of directors to the Company and its stockholders for
monetary damages arising out of any violation of a director of his fiduciary
duty of due care. Under Florida law, however, such provisions do not eliminate
the personal liability of a director for (i) breach of the director's duty of
loyalty, (ii) acts or omissions not in good faith or involving intentional
misconduct or knowing violation of law, (iii) payment of dividends or
repurchases of stock other than from lawfully available funds, or (iv) any
transaction from which the director derived an improper benefit. These
provisions do not affect a director's liabilities under the federal securities
laws or the recovery of damages by third parties.
REPORTING REQUIREMENTS UNDER THE EXCHANGE ACT AND COMPLIANCE WITH THE
SARBANES-OXLEY ACT OF 2002, INCLUDING ESTABLISHING AND MAINTAINING ACCEPTABLE
INTERNAL CONTROLS OVER FINANCIAL REPORTING, ARE COSTLY AND MAY INCREASE
SUBSTANTIALLY.
The rules and regulations of the SEC require a public company to prepare and
file periodic reports under the Exchange Act, which will require that the
Company engage legal, accounting, auditing and other professional services. The
engagement of such services is costly. Additionally, the Sarbanes-Oxley Act of
2002 (the "Sarbanes-Oxley Act") requires, among other things, that we design,
implement and maintain adequate internal controls and procedures over financial
reporting. The costs of complying with the Sarbanes-Oxley Act and the limited
technically qualified personnel we have may make it difficult for us to design,
implement and maintain adequate internal controls over financial reporting. In
the event that we fail to maintain an effective system of internal controls or
discover material weaknesses in our internal controls, we may not be able to
produce reliable financial reports or report fraud, which may harm our overall
financial condition and result in loss of investor confidence and a decline in
our share price.
-12-
As a public company, we will be subject to the reporting requirements of the
Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Act of 2010 and other
applicable securities rules and regulations. Despite recent reforms made
possible by the JOBS Act, compliance with these rules and regulations will
nonetheless increase our legal and financial compliance costs, make some
activities more difficult, time-consuming or costly and increase demand on our
systems and resources, particularly after we are no longer an "emerging growth
company." The Exchange Act requires, among other things, that we file annual,
quarterly, and current reports with respect to our business and operating
results.
We are working with our legal, accounting and financial advisors to identify
those areas in which changes should be made to our financial and management
control systems to manage our growth and our obligations as a public company.
These areas include corporate governance, corporate control, disclosure controls
and procedures and financial reporting and accounting systems. We have made, and
will continue to make, changes in these and other areas. However, we anticipate
that the expenses that will be required in order to adequately prepare for being
a public company could be material. We estimate that the aggregate cost of
increased legal services; accounting and audit functions; personnel, such as a
chief financial officer familiar with the obligations of public company
reporting; consultants to design and implement internal controls; and financial
printing alone will be a few hundred thousand dollars per year and could be
several hundred thousand dollars per year. In addition, if and when we retain
independent directors and/or additional members of senior management, we may
incur additional expenses related to director compensation and/or premiums for
directors' and officers' liability insurance, the costs of which we cannot
estimate at this time. We may also incur additional expenses associated with
investor relations and similar functions, the cost of which we also cannot
estimate at this time. However, these additional expenses individually, or in
the aggregate, may also be material.
In addition, being a public company could make it more difficult or more costly
for us to obtain certain types of insurance, including directors' and officers'
liability insurance, and we may be forced to accept reduced policy limits and
coverage or incur substantially higher costs to obtain the same or similar
coverage. The impact of these events could also make it more difficult for us to
attract and retain qualified persons to serve on our board of directors, our
board committees or as executive officers.
The increased costs associated with operating as a public company may decrease
our net income or increase our net loss, and may cause us to reduce costs in
other areas of our business or increase the prices of our products or services
to offset the effect of such increased costs. Additionally, if these
requirements divert our management's attention from other business concerns,
they could have a material adverse effect on our business, financial condition
and results of operations.
WE MAY BE SUBJECT TO LITIGATION IN THE FUTURE WHICH COULD IMPACT THE FINANCIAL
HEALTH OF THE COMPANY.
Currently there are no legal proceedings pending or threatened against the
Company. However, from time to time, we may become involved in various lawsuits
and legal proceedings that arise in the ordinary course of business. Litigation
is subject to inherent uncertainties, and an adverse result in these or other
matters may arise from time to time that may harm our business.
RISKS RELATED TO OUR COMMON STOCK
THERE IS NO ASSURANCE OF A PUBLIC MARKET OR THAT OUR COMMON STOCK WILL EVER
TRADE ON A RECOGNIZED EXCHANGE. THEREFORE, YOU MAY BE UNABLE TO LIQUIDATE YOUR
INVESTMENT IN OUR STOCK.
There is no established public trading marketing for our Common Stock and there
can be no assurance that one will ever develop. Market liquidity will depend on
the perception of our operating business and any steps that our management might
take to bring us to the awareness of investors. There can be no assurance given
that there will be any awareness generated. Consequently, investors may not be
able to liquidate their investment or liquidate it at a price that reflects the
value of the business. As a result holders of our securities may not find
purchasers for our securities should they to sell securities held by them.
-13-
Consequently, our securities should be purchased only by investors having no
need for liquidity in their investment and who can hold our securities for an
indefinite period of time.
WE MAY NEVER PAY ANY DIVIDENDS TO SHAREHOLDERS.
We currently intend to retain any future earnings for use in the operation and
expansion of our business. Accordingly, we do not expect to pay any dividends in
the foreseeable future, but will review this policy as circumstances dictate.
THE OFFERING PRICE OF THE COMMON STOCK WAS DETERMINED BASED ON THE PRICE OF OUR
PRIVATE OFFERING, AND THEREFORE SHOULD NOT BE USED AS AN INDICATOR OF THE FUTURE
MARKET PRICE OF THE SECURITIES. THEREFORE, THE OFFERING PRICE BEARS NO
RELATIONSHIP TO OUR ACTUAL VALUE, AND MAY MAKE OUR SHARES DIFFICULT TO SELL.
Since our shares are not listed or quoted on any exchange or quotation system,
the offering price of $0.10 per share for the shares of common stock was
determined based on the price of our private offering. The facts considered in
determining the offering price were our financial condition and prospects, our
limited operating history and the general condition of the securities market.
The offering price bears no relationship to the book value, assets or earnings
of our company or any other recognized criteria of value. Our share offering
price herein should not be regarded as an indicator of the future market price
of the securities.
OUR COMMON STOCK IS CONSIDERED A PENNY STOCK, WHICH MAY BE SUBJECT TO
RESTRICTIONS ON MARKETABILITY, SO YOU MAY NOT BE ABLE TO SELL YOUR SHARES.
We may be subject now and in the future to the SEC's "penny stock" rules if our
shares of Common Stock sell below $5.00 per share. Penny stocks generally are
equity securities with a price of less than $5.00. The penny stock rules require
broker-dealers to deliver a standardized risk disclosure document prepared by
the SEC which provides information about penny stocks and the nature and level
of risks in the penny stock market. The broker-dealer must also provide the
customer with current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and its salesperson, and monthly account
statements showing the market value of each penny stock held in the customer's
account. The bid and offer quotations, and the broker-dealer and salesperson
compensation information must be given to the customer orally or in writing
prior to completing the transaction and must be given to the customer in writing
before or with the customer's confirmation.
In addition, the penny stock rules require that prior to a transaction, the
broker dealer must make a special written determination that the penny stock is
a suitable investment for the purchaser and receive the purchaser's written
agreement to the transaction. The penny stock rules are burdensome and may
reduce purchases of any offerings and reduce the trading activity for shares of
our Common Stock. As long as our shares of Common Stock are subject to the penny
stock rules, the holders of such shares of Common Stock may find it more
difficult to sell their securities.
ITEM 4. USE OF PROCEEDS
------------------------
We will not receive any proceeds from the sale of common stock by the
distributees, or the selling security holders. All of the net proceeds from the
sale of our common stock will go to the selling security holders as described
below in the sections entitled "Selling Security Holders" and "Plan of
Distribution". We have agreed to bear the expenses relating to the registration
of the common stock for the selling security holders.
ITEM 5. DETERMINATION OF OFFERING PRICE
----------------------------------------
Since our common stock is not listed or quoted on any exchange or quotation
system, the offering price of the shares of common stock was determined by the
price of the common stock that was sold to our security holders pursuant to an
exemption under Section 4(a) (2) of the Securities Act of 1933 and Rule 506 of
Regulation D promulgated under the Securities Act of 1933.
-14-
The offering price of the shares of our common stock does not necessarily bear
any relationship to our book value, assets, past operating results, financial
condition or any other established criteria of value. The facts considered in
determining the offering price were our financial condition and prospects, our
limited operating history and the general condition of the securities market.
Although our common stock is not listed on a public exchange, we will be filing
to obtain a quotation on the OTCQ Pink Sheets concurrently with the filing of
this prospectus. In order to be quoted on the OTC Pink Sheets, a market maker
must file an application on our behalf in order to make a market for our common
stock. There can be no assurance that a market maker will agree to file the
necessary documents with FINRA, which supervises the OTC Market, nor can there
be any assurance that such an application for quotation will be approved.
In addition, there is no assurance that our common stock will trade at market
prices in excess of the initial offering price as prices for the common stock in
any public market which may develop will be determined in the marketplace and
may be influenced by many factors, including the depth and liquidity.
ITEM 6. DILUTION
-----------------
The common stock to be sold by the selling shareholders as provided in the
"Selling Security Holders" section is common stock that is currently issued.
Accordingly, there will be no dilution to our existing shareholders.
ITEM 7. DISTRIBUTION AND SELLING SECURITY HOLDERS
--------------------------------------------------
The common shares being offered for a) distribution by RichKeys Enterprises, LLC
to its interest holders and b) for resale by the selling security holders and
consist of 246,080 shares of our common stock. Such shareholders include the
holders of 18,000 shares sold in our private offering pursuant to Regulation D
Rule 506 sold through June 2014 at an offering price of $0.50 per share.
The following table sets forth the names of the selling security holders, after
the distribution to its interest holders by Rich Keys Enterprises LLC the number
of shares of common stock beneficially owned by each of the selling stockholders
as of June 30, 2013 and the number of shares of common stock being offered by
the selling stockholders. The shares being offered hereby are being registered
to permit public secondary trading, and the selling stockholders may offer all
or part of the shares for resale from time to time. However, the selling
stockholders are under no obligation to sell all or any portion of such shares
nor are the selling stockholders obligated to sell any shares immediately upon
effectiveness of this prospectus. All information with respect to share
ownership has been furnished by the selling stockholders.
Under the RichKeys Enterprises LLC Operating Agreement, we intend to distribute
the 58,080 shares of Rich Cigars in kind to RichKeys interest holders upon
registration. Most of our selling shareholders (RichKeys Enterprises
distribution) RichKeys Enterprises will obtain their shares of our common stock
from a Distribution in kind effective upon Registration hereunder as set forth
in "A" below.
Distributor: RichKeys Enterprises LLC
NAME OF THE ENTITY PERSON WITH VOTING NUMBER OF COMMON SHARES AFFILIATE OF COMPANY?
CONTROL BEING REGISTERED
-------------------------- -------------------------- ------------------------- ---------------------------
RichKeys Enterprises, LLC Andre Crawford, Manager 58,080 (a)(b)
(For Distribution upon
Registration)
--------------------------
(a) Yes, prior to conversion and distribution
(b) No, upon distribution.
-15-
All of the securities listed below are being registered in this Registration
Statement for distribution, in kind, to Interest Holders of RichKeys
Enterprises, LLC, which interest holder/distributees are listed in the table
following
------------------------------- -------------------- ------------------------ ---------------------- ----------------------
NAME OF CURRENT HOLDER SECURITIES BY EACH COMMON SHARES TO BE COMMON % OWNED UPON SHARES OWNED AFTER
SHARE-HOLDER DISTRIBUTED FOR REGISTRATION (BEFORE DISTRIBUTION
BEFORE DISTRIBUTION SHAREHOLDERS ACCOUNT DISTRIBUTION) (1)
------------------------------- -------------------- ------------------------ ---------------------- ----------------------
RichKeys Enterprises, LLC 58,080 58,080 12. 2% 0%
------------------------------- -------------------- ------------------------ ---------------------- ----------------------
----------------------- ----------- --------------------- --------------------
Common % owned upon
Distributees Registration
from RichKeys Number of (Before Shares owned after
Enterprises LLC Shares Distribution) (1) Distribution (2)
----------------------- ----------- --------------------- --------------------
----------------------- ----------- --------------------- --------------------
Anthony Bailey 2500 0 <1%
----------------------- ----------- --------------------- --------------------
Lawaylon Brown 400 0 <1%
----------------------- ----------- --------------------- --------------------
Lornando Brown 2000 0 <1%
----------------------- ----------- --------------------- --------------------
Jeremy Moore 4000 0 <1%
----------------------- ----------- --------------------- --------------------
Pam Moore 2080 0 <1%
----------------------- ----------- --------------------- --------------------
M.J. Ned 8000 0 1.7%
----------------------- ----------- --------------------- --------------------
Ryan Lee 400 0 <1%
----------------------- ----------- --------------------- --------------------
Derrick Pittman 10000 0 1.8%
----------------------- ----------- --------------------- --------------------
Byron Powell 1200 0 <1%
----------------------- ----------- --------------------- --------------------
Michael Turner 1000 0 <1%
----------------------- ----------- --------------------- --------------------
Jessica Ray 250 0 <1%
----------------------- ----------- --------------------- --------------------
Brian Moore 2000 0 <1%
----------------------- ----------- --------------------- --------------------
William Hicks Jr. 50000 0 10.5%
----------------------- ----------- --------------------- --------------------
William Hicks Sr. 50000 0 10.5%
----------------------- ----------- --------------------- --------------------
William Hirschy 5000 0 1.1%
----------------------- ----------- --------------------- --------------------
Joshua Jones 2600 0 <1%
----------------------- ----------- --------------------- --------------------
Daniel McDonald 2000 0 <1%
----------------------- ----------- --------------------- --------------------
William Robinson 500 0 <1%
----------------------- ----------- --------------------- --------------------
Brian Stewart 12000 0 2.5%
----------------------- ----------- --------------------- --------------------
Bobby Nicholson 1000 0 <1%
----------------------- ----------- --------------------- --------------------
Vivian Logan 250 0 <1%
----------------------- ----------- --------------------- --------------------
Keith Buckner 500 0 <1%
----------------------- ----------- --------------------- --------------------
Austin Pettigrew 400 0 <1%
----------------------- ----------- --------------------- --------------------
(1) Based on 477,080 shares outstanding as of June 30, 2014.
(2) Assuming sale or distribution of all shares registered hereby.
-16-
SHARES REGISTERED FOR RESALE
----------------------- ----------- --------------------- --------------------
Common % owned upon
Registration
Number of (Before Shares owned after
Distributees Shares Distribution) Distribution
----------------------- ----------- ------------------- ----------------------
----------------------- ----------- ------------------- ----------------------
Anthony Bailey 2500 0 <1%
----------------------- ----------- ------------------- ----------------------
Lawaylon Brown 400 0 <1%
----------------------- ----------- ------------------- ----------------------
Lornando Brown 2000 0 <1%
----------------------- ----------- ------------------- ----------------------
Jeremy Moore 4000 0 <1%
----------------------- ----------- ------------------- ----------------------
Pam Moore 2080 0 <1%
----------------------- ----------- ------------------- ----------------------
M.J. Ned 8000 0 1.7%
----------------------- ----------- ------------------- ----------------------
Ryan Lee 400 0 <1%
----------------------- ----------- ------------------- ----------------------
Derrick Pittman 10000 0 1.8%
----------------------- ----------- ------------------- ----------------------
Byron Powell 1200 0 <1%
----------------------- ----------- ------------------- ----------------------
Michael Turner 1000 0 <1%
----------------------- ----------- ------------------- ----------------------
Jessica Ray 250 0 <1%
----------------------- ----------- ------------------- ----------------------
Brian Moore 2000 0 <1%
----------------------- ----------- ------------------- ----------------------
William Hicks Jr. 50000 0 10.5%
----------------------- ----------- ------------------- ----------------------
William Hicks Sr. 50000 0 10.5%
----------------------- ----------- ------------------- ----------------------
William Hirschy 5000 0 1.1%
----------------------- ----------- ------------------- ----------------------
Joshua Jones 2600 0 <1%
----------------------- ----------- ------------------- ----------------------
Daniel McDonald 2000 0 <1%
----------------------- ----------- ------------------- ----------------------
William Robinson 500 0 <1%
----------------------- ----------- ------------------- ----------------------
Brian Stewart 12000 0 2.5%
----------------------- ----------- ------------------- ----------------------
Bobby Nicholson 1000 0 <1%
----------------------- ----------- ------------------- ----------------------
Vivian Logan 250 0 <1%
----------------------- ----------- ------------------- ----------------------
Keith Buckner 500 0 <1%
----------------------- ----------- ------------------- ----------------------
Austin Pettigrew 400 0 <1%
----------------------- ----------- ------------------- ----------------------
AL Rushing 1000000 0 21%
----------------------- ----------- ------------------- ----------------------
Richard Davis 1500000 0 31.4%
----------------------- ----------- ------------------- ----------------------
Tiffany Brinston 17000 0 3.6%
----------------------- ----------- ------------------- ----------------------
Marc Miranne 1000 0 <1%
----------------------- ----------- ------------------- ----------------------
Mike Rushing 50,000 0 10.5%
----------------------- ----------- ------------------- ----------------------
----------------------- ----------- ------------------- ----------------------
There are no agreements between us and any selling shareholder pursuant to which
the shares subject to this registration statement were issued.
RichKeys Enterprises, LLC, Al Rushing, Andre Crawford, and Michael Rushing
(officers/employees):
- have had a material or affiliate relationship with us within the past
three years;
- have been our officers or directors or an officer
-17-
RichKeys Enterprises LLC is managed by Andre Crawford. It was founded in 2012 to
seek funding for another venture which was not completed.
None of the above listed shareholders are registered broker-dealers or are
associates of a registered broker-dealer. None of the above listed shareholders
are affiliates of any registered broker-dealers.
ITEM 8. PLAN OF DISTRIBUTION
-----------------------------
Upon effectiveness of this registration statement, of which this prospectus is a
part, our existing selling shareholders may sell their securities at market
prices or at any price in privately negotiated transactions.
Our distributor RichKeys Enterprises, LLC may be deemed an underwriter in this
registration as to the distribution.
Our selling shareholders may be deemed underwriters in this registration.
The selling shareholders are not paying any of the offering expenses and we will
not receive any of the proceeds from the sale of the shares by the selling
shareholders.
Our selling security holders may sell some or all of their shares at a fixed
price of $0.10 per share until our shares are quoted on the OTC Pink Sheets and
thereafter at prevailing market prices or privately negotiated prices. Prior to
being quoted on the OTC Pink Sheets, shareholders may sell their shares in
private transactions to other individuals. Although our common stock is not
listed on a public exchange, we will be filing to obtain a quotation on the OTC
Pink Sheets concurrently with the filing of this prospectus. In order to be
quoted on the OTC Pink Sheets, a market maker must file an application on our
behalf in order to make a market for our common stock. There can be no assurance
that a market maker will agree to file the necessary documents with FINRA, which
supervises the OTC Markets, nor can there be any assurance that such an
application for quotation will be approved. However, sales by selling security
holder must be made at the fixed price of $0.10 until a market develops for the
stock.
Once a market has developed for our common stock, the shares may be sold or
distributed from time to time by the selling stockholders, who may be deemed to
be underwriters, directly to one or more purchasers or through brokers or
dealers who act solely as agents, at market prices prevailing at the time of
sale, at prices related to such prevailing market prices, at negotiated prices
or at fixed prices, which may be changed. The distribution of the shares may be
effected in one or more of the following methods:
o ordinary brokers transactions, which may include long or short sales,
o transactions involving cross or block trades on any securities or
market where our common stock is trading,
o through direct sales to purchasers or sales effected through agents,
o through transactions in options, swaps or other derivatives (whether
exchange listed of otherwise), or
o any combination of the foregoing.
In addition, the selling stockholders may enter into hedging transactions with
broker-dealers who may engage in short sales, if short sales were permitted, of
shares in the course of hedging the positions they assume with the selling
stockholders. The selling stockholders may also enter into option or other
transactions with broker-dealers that require the delivery by such
broker-dealers of the shares, which shares may be resold thereafter pursuant to
this prospectus. None of the selling security holders are broker-dealers or
affiliates of broker dealers.
We will advise the selling security holders that the anti-manipulation rules of
Regulation M under the Exchange Act may apply to sales of shares in the market
and to the activities of the selling security holders and their affiliates. In
addition, we will make copies of this prospectus (as it may be supplemented or
amended from time to time) available to the selling security holders for the
purpose of satisfying the prospectus delivery requirements of the Securities
Act. The selling security holders may indemnify any broker-dealer that
-18-
participates in transactions involving the sale of the shares against certain
liabilities, including liabilities arising under the Securities Act.
Brokers, dealers, or agents participating in the distribution of the shares may
receive compensation in the form of discounts, concessions or commissions from
the selling stockholders and/or the purchasers of shares for whom such
broker-dealers may act as agent or to whom they may sell as principal, or both
(which compensation as to a particular broker-dealer may be in excess of
customary commissions). Neither the selling stockholders nor we can presently
estimate the amount of such compensation. We know of no existing arrangements
between the selling stockholders and any other stockholder, broker, dealer or
agent relating to the sale or distribution of the shares. We will not receive
any proceeds from the sale of the shares of the selling security holders
pursuant to this prospectus. We have agreed to bear the expenses of the
registration of the shares, including legal and accounting fees, and such
expenses are estimated to be approximately $30,000.
ITEM 9. DESCRIPTION OF SECURITIES
----------------------------------
GENERAL
We are authorized to issue an aggregate number of 200,000,000 common shares of
capital stock, $0.001 par value per share.
COMMON STOCK
We are authorized to issue 200,000,000 shares of common stock, $0.001 par value
per share. Currently we have 477,080 shares of common stock issued and
outstanding as of June 30, 2014.
Each share of common stock shall have one (1) vote per share for all purpose.
Our common stock does not provide a preemptive, subscription or conversion
rights and there are no redemption or sinking fund provisions or rights. Our
common stock holders are not entitled to cumulative voting for election of Board
of Directors.
DIVIDENDS
We have not paid any cash dividends to our shareholders. The declaration of any
future cash dividends is at the discretion of our board of directors and depends
upon our earnings, if any, our capital requirements and financial position, our
general economic conditions, and other pertinent conditions. It is our present
intention not to pay any cash dividends in the foreseeable future, but rather to
reinvest earnings, if any, in our business operations.
WARRANTS
There are no outstanding warrants to purchase our securities.
OPTIONS
There are no outstanding options to purchase our securities.
TRANSFER AGENT AND REGISTRAR
Currently we do not have a stock transfer agent. However, upon filing this
Registration Statement, we do intend to engage a transfer agent to issue
physical certificates to our shareholders.
ITEM 10. INTEREST OF NAMED EXPERTS AND COUNSEL
-----------------------------------------------
No expert or counsel named in this prospectus as having prepared or certified
any part of this prospectus or having given an opinion upon the validity of the
securities being registered or upon other legal matters in connection with the
registration or offering of the common stock was employed on a contingency
basis, or had, or is to receive, in connection with the offering, a substantial
interest, direct or indirect, in the registrant or any of its parents or
subsidiaries. Nor was any such person connected with the registrant or any of
-19-
its parents or subsidiaries as a promoter, managing or principal underwriter,
voting trustee, director, officer, or employee.
Michael A. Littman, Attorney at Law will pass on the validity of the common
stock being offered pursuant to this registration statement.
The financial statements as of June 30, 2014 and for the period from July 29,
2013 (inception) to June 30, 2014 included in this prospectus and the
registration statement have been audited by Accell Audit & Compliance P.A., an
independent registered public accounting firm, to the extent and for the periods
set forth in their report appearing elsewhere herein and in the registration
statement, and are included in reliance upon such report given upon the
authority of said firm as experts in auditing and accounting.
ITEM 11. INFORMATION WITH RESPECT TO THE REGISTRANT
----------------------------------------------------
A. DESCRIPTION OF BUSINESS
--------------------------
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
The information contained in this document, including in the documents
incorporated by reference into this report, includes some statements that are
not purely historical and that are "forward-looking statements." Such
forward-looking statements include, but are not limited to, statements regarding
our and their management's expectations, hopes, beliefs, intentions or
strategies regarding the future, including our financial condition, results of
operations. In addition, any statements that refer to projections, forecasts or
other characterizations of future events or circumstances, including any
underlying assumptions, are forward-looking statements. The words "anticipates,"
"believes," "continue," "could," "estimates," "expects," "intends," "may,"
"might," "plans," "possible," "potential," "predicts," "projects," "seeks,"
"should," "would" and similar expressions, or the negatives of such terms, may
identify forward-looking statements, but the absence of these words does not
mean that a statement is not forward-looking.
The forward-looking statements contained in this document are based on current
expectations and beliefs concerning future developments and the potential
effects on the parties and the transaction. There can be no assurance that
future developments actually affecting us will be those anticipated. These that
may cause actual results or performance to be materially different from those
expressed or implied by these forward-looking statements, including the
following forward-looking statements involve a number of risks, uncertainties
(some of which are beyond the parties' control) or other assumptions.
DESCRIPTION OF BUSINESS
Overview
We were incorporated on July 29, 2013 under the laws of the state of Florida.
Rich Cigars was established to manufacture and distribute cigars under the Rich
Cigars brand name. The Company's founders seek to create a cigar that would
appeal to aficionados of high-quality, hand-rolled, premium cigars. Founder
Alfred Rushing has been involved with the cigar industry for more than 20 years.
Through Rich Cigars, he intends to introduce new styles of premium cigars to
build sales of private label cigars. The Company intends to conduct its business
principally in the U.S. through its sales and marketing team.
OUR BUSINESS
We intend to contract with a Nicaraguan supplier for the manufacture of hand
rolled cigars and market in the U.S in both units and dollars sales of brand
name premium cigars (imported, hand-made or hand-rolled cigars made with Cuban
seed long leaf filler and all natural tobacco leaf). We intend to produce at
least six premium lines for sales in the U.S. We believe that higher priced
branded premium cigars constitute the fastest growing Segment of the premium
cigar market. We intend to sell under the name "Rich Cigars". This brand will be
made from premium imported Nicaraguan, Honduran, Dominican Republic and
-20-
Brazilian Cuban seed long leaf filler tobacco such as (seco, viso and ligero).
Complimenting each cigar with one of six different wrappers (Connecticut Shade,
Connecticut Broad Leaf Maduro, Sumatra, Oscuro, Habanna 2000 and Criollo).
We believe that increasing demand for cigars will offer us growth opportunities.
In recent years, cigar smoking has experienced a resurgence resulting in an
increase in consumption and retail sales of cigars, especially in the premium
cigar segment. This growth produced overall retail sales in the U.S. cigar
market of approximately $1.0 billion in 2013. The gain comes despite an
increasingly unfriendly environment for smokers as a myriad of states enact
smoking bans.
We believe that this increase in cigar consumption and retail sales is the
result of a number of factors, including: (i) the improving image of cigar
smoking resulting from increased publicity plus social media, including the
success of cigar publications and the visibility of cigar smoking by
celebrities; (ii) the emergence of an expanding base of younger, highly
educated, affluent adults age 25 to 45 and the growing interest of this group in
luxury goods, including premium cigars; (iii) the increase in the number of
adults over the age of 40 (a demographic group believed to smoke more cigars
than any other demographic group); and (iv) the opening of establishments, such
as restaurants and clubs, and "cigar bars" where cigar smoking is encouraged, as
well as other special events for cigar smokers.
We intend to use the following strategies, to move the business of the company
forward:
BUILD MARKET SHARE IN THE U.S. PREMIUM SEGMENT.
We hope to penetrate the premium cigar market by:
(i) Creating market awareness and recognition of its cigar brands
through advertising through social media and campaign marketing with
twitter, Facebook, product placement ads, increased penetration of
targeted retail outlets and professional sales management; (ii)
developing and selling new premium cigars that carry well our brand
name "Rich"; (iii) developing line extensions in higher price
categories that leverage the premium brands. (iv) Employing a sales
force and distribution channel of distribution to increase sales of the
products.
DEVELOP "PREMIUM" CIGAR BUSINESS.
Our intentions are to seek to increase revenues in cigar business by
focusing on higher price categories. We believe that the higher-end
mass market segment can experience growth. We are attempting to
capitalize on market growth by expanding our products such as our "Rich
Cigar" and by developing similar higher-end flavor infused cigars under
our "Rich" name.
IMPLEMENT PRODUCTION CAPACITY AND TOBACCO INVENTORY.
We intend to expand manufacturing relationships if volume demand occurs
while maintaining high quality standards. Our intended contract
supplier indicates it can absorb an increase in volume.
SELECTIVELY BROADEN CIGAR DISTRIBUTION CHANNELS. We intend to actively
develop new channels and methods of distribution. With respect to
premium cigars, we are pursuing opportunities in a number of developing
distribution channels, including cigar bars and clubs, hotel shops,
wine shops, restaurants and upscale specialty retail tobacco stores .
With respect to mass market cigars, we are seeking to establish
relations with new retailers by acting as the tobacco "category
manager," assisting such retailers in increasing their sales of tobacco
products.
-21-
Market Overview
Cigars have a long history in the US, with the public image of cigars tending to
be of premium hand-rolled products, often from the Dominican Republic, Nicaragua
or Cuba (although the latter have been illegal in the US since the 1960s),
smoked by powerful, wealthy and usually older men. This perception changed
somewhat in the 1990s, as the cigar industry attracted women and younger adults
alike to try higher quality cigars.
Currently, machine-made cigars and cigarillos account for the bulk of the
category volume sales, and tend to be purchased by a younger, less affluent
demographic, and do not achieve the same status as their premium counterparts.
Overall, cigar smoking is still more popular among men than women, although
women have shown some growing interest in recent years.
Our management believes principal changes that can lead to growth in the premium
cigar market cigar market are (1) the emergence of an expanding base of younger
new cigar smokers, both male and female, a(5) increasing popularity of cigars
among celebrities who are viewed as trend-setters, (3) continued media interest,
especially through Cigar Aficionado magazine, (4) promotion of "cigar friendly"
locations and (5) the increase in the population of people over 50 years in age,
a group that has traditionally been viewed as consuming more luxury goods,
including cigars.
PRODUCTS
The Vendetta line will consist of a Nicaraguan and Dominican blend with a
Connecticut Broad leaf Maduro wrapper. The King Pin line will consist of a
Nicaraguan and Honduran blend with a Criollo wrapper. The God Father line will
consist of a Nicaraguan blend with a Sumatra wrapper. The Billionaire line will
consist of a Brazilian blend with a Habanna 2000 wrapper. The Wall Street line
will consist of a Nicaraguan and Honduran blend with a Connecticut Shade
wrapper. The Market Maker line will consist of a Nicaraguan, Dominican and
Honduran blend with a Oscuro wrapper.
SALES AND MARKETING
We have signed agreements with two independent sales representatives that will
call on retail cigar outlets commencing on the east coast. We plan to sign on
two additional sales representatives by the end of the first year of operation.
COMPETITION
We will be in competition with many large, well-financed competitors in the
market for premium cigars. Each of these better known companies enjoys strong
brand names and a history of successful product launches. These companies
compete directly with us for consumer sales, as well for supplies of tobacco and
marketing resources.
All of these companies have substantially greater capital resources,
manufacturing, sales and marketing experience, and substantially longer and more
extensive relationships with growers and long-standing brand recognition and
market acceptance than we do. See "RISK FACTORS". We believe, however, that the
market for premium cigars is growing rapidly enough to support the entry of new
brands such as ours and that the inability of the entrenched competitors to meet
current demand supports this position.
REGULATION AND LITIGATION IN THE TOBACCO INDUSTRY
Cigar manufacturers, like other producers of tobacco products, are subject to
regulation at the federal, state and local levels. Since the early 1970's the
trend has been for increasing regulation, which when coupled with changing
public attitudes toward smoking, has had the effect of reducing overall
consumption of tobacco products in the United States. Federal law has required
warning labels on cigarettes since 1965, though no such warnings have been
required for cigars. Recent federal law enacted by Congress has required states
applying for certain federal grants for substance abuse programs to adopt a
minimum age of 18 for purchase of tobacco products and to establish elaborate
enforcement programs to support this requirement. Legislation proposed but not
enacted by Congress has sought to impose (1) bans on advertising of tobacco
-22-
products or on the deductibility of such advertising expenses for federal tax
purposes, (2) additional labeling, warnings or listings of additives, (3)
preemption of state law to impose civil liabilities on manufacturers and
distributors of tobacco products, (4) reimbursement to the federal government
for health care costs incurred in connection with tobacco-related conditions and
(5) regulation of tobacco products by the Food and Drug Administration as a
possibly addictive "drug." Moreover, the Environmental Protection Agency has
concluded that widespread exposure to so-called "secondary smoke" may present a
serious and substantial public health concern. The impact of this finding and
the EPA's authority to regulate "secondary smoke" are the subject of ongoing
litigation.
Many states and local governments have passed statutes or ordinances severely
limiting the types of establishments (such as restaurants and office buildings),
and the areas within such establishments, in which persons may smoke, or have
banned smoking.
We cannot predict the outcome of these legislative and regulatory initiatives or
of litigation in the future. Presumably, the trend toward increased regulation
will continue at all levels. Depending on these outcomes, there may be a
materially adverse effect on the tobacco products industry in general and our
Company in particular. See "RISK FACTORS."
EXCISE TAXES
Cigars have long been subject to federal, state and local excise taxes and it is
frequently suggested that additional excise taxes be levied on such products to
support various legislative programs. We are unable to predict whether
significant increases in excise taxes on its products will be enacted in the
future. Such increases were proposed by the Clinton Administration in 1993 to
fund that administration's health care reform initiatives, but were not enacted
by Congress. Imposition of significant increases in excise taxes could have a
material adverse impact on the large cigar industry in general and our efforts
in particular.
EMPLOYEES
We presently have 3 consultants including Messrs. Davis, Alfred Rushing and
Michael Rushing, under hourly oral consulting agreements. There are no employees
at this time.
DESCRIPTION OF PROPERTY
We do not own any property or patents or leases.
Our principal executive office is located at 5100 SW 103rd Street, Ocala, FL
34476, and our telephone number is (214) 702-8775. There is no lease on the
premises the Company is occupying and it is not responsible for paying rent. It
is furnished by Mr. Rushing free of charge.
LEGAL PROCEEDINGS
From time to time, we may become involved in various lawsuits and legal
proceedings, which arise, in the ordinary course of business. However,
litigation is subject to inherent uncertainties, and an adverse result in these
or other matters may arise from time to time that may harm our business. We are
currently not aware of any such legal proceedings or claims that we believe will
have a material adverse effect on our business, financial condition or operating
results.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is presently no public market for our shares of common stock. We
anticipate applying for quoting of our common stock on the OTC Pink Sheets upon
the effectiveness of the registration statement of which this prospectus forms
apart. However, we can provide no assurance that our shares of common stock will
-23-
be quoted on the OTC Pink Sheets or, if quoted, that a public market will
materialize.
HOLDERS OF CAPITAL STOCK
As of the date of this registration statement, we had 6 holders of our common
stock, prior to distribution of the RichKeys Enterprises, LLC shares to LLC
Interest Holders.
RULE 144 SHARES
As of the date of this registration statement, we do not have any shares of our
common stock that are currently available for sale to the public in accordance
with the volume and trading limitations of Rule 144.
STOCK OPTION GRANTS
We do not have a stock option plan in place and have not granted any stock
options at this time.
B. DESCRIPTION OF PROPERTY
--------------------------
DESCRIPTION OF PROPERTIES/ASSETS/OIL AND GAS PROSPECTS/PATENTS
------- ------------------------- ----------------------
(a) Real Estate. None.
------- ------------------------- ----------------------
(b) Title to properties. None.
------- ------------------------- ----------------------
(c) Oil and Gas Properties. None.
------- ------------------------- ----------------------
(d) Patents. None.
------- ------------------------- ----------------------
C. LEGAL PROCEEDINGS
--------------------
We anticipate that we (including any future subsidiaries) will from time to time
become subject to claims and legal proceedings arising in the ordinary course of
business. It is not feasible to predict the outcome of any such proceedings and
we cannot assure that their ultimate disposition will not have a materially
adverse effect on our business, financial condition, cash flows or results of
operations. As of this filing date, we are not a party to any pending legal
proceedings, nor are we aware of any civil proceeding or government authority
contemplating any legal proceeding.
D. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
-----------------------------------------------------------
MARKET INFORMATION
Currently there is no public trading market for our stock, and we have not
applied to have the common stock quoted for trading in any venue.
We might try to obtain a listing for our stock on an exchange in the future, but
cannot make any assurances that we will be approved for such listing, as the
exchanges have certain listing requirements that we would have to meet. Such
listing requirements at a minimum include, but are not limited to:
o Stockholders' equity of at least $4,000,000 and/or 2 years of
operating history and/or pre-tax income of at least $750,000 in our
last fiscal year or two of the last three fiscal years;
o Be able to meet certain distribution requirements; and
o Be able to meet certain market values of publicly held shares and
aggregate market values of the shares.
-24-
RULES GOVERNING LOW-PRICE STOCKS THAT MAY AFFECT OUR SHAREHOLDERS' ABILITY TO
RESELL SHARES OF OUR COMMON STOCK
--------------------------------------------------------------------------------
We are a "penny stock" company, as our stock price is less than $5.00 per share.
If we are able to obtain an exchange listing for our stock, we cannot make an
assurance that we will be able to maintain a stock price greater than $5.00 per
share and if the share price was to fall to such prices, that we wouldn't be
subject to the Penny Stocks rules.
The penny stock rules require broker-dealers, prior to a transaction in a penny
stock not otherwise exempt from the rules, to make a special suitability
determination for the purchaser to receive the purchaser's written consent to
the transaction prior to sale, to deliver standardized risk disclosure documents
prepared by the SEC that provides information about penny stocks and the nature
and level of risks in the penny stock market. The broker-dealer must also
provide the customer with current bid and offer quotations for the penny stock.
In addition, the penny stock regulations require the broker-dealer to deliver,
prior to any transaction involving a penny stock, a disclosure schedule prepared
by the SEC relating to the penny stock market, unless the broker-dealer or the
transaction is otherwise exempt. A broker-dealer is also required to disclose
commissions payable to the broker-dealer and the registered representative and
current quotations for the securities. Finally, a broker-dealer is required to
send monthly statements disclosing recent price information with respect to the
penny stock held in a customer's account and information with respect to the
limited market in penny stocks.
HOLDERS
As of October 14, 2014, we have 6 stockholders of record of our common stock.
DIVIDENDS
As of the filing of this registration statement, we have not paid any dividends
to stockholders. There are no restrictions which would limit our ability to pay
dividends on common equity or that are likely to do so in the future. The
Florida Revised Statutes, however, do prohibit us from declaring dividends
where, after giving effect to the distribution of the dividend; we would not be
able to pay our debts as they become due in the usual course of business; or our
total assets would be less than the sum of the total liabilities plus the amount
that would be needed to satisfy the rights of stockholders who have preferential
rights superior to those receiving the distribution.
E. FINANCIAL STATEMENTS
-----------------------
The following is a complete list of the financial statements filed as a part of
this Report.
o Audited financial statements of Rich Cigars, Inc. as of and for the
year ended December 31, 2013 and as of and for the period from July
29, 2013 (inception) through December 31, 2013 (pages F-1 through
F-10)
-25-
RICH CIGARS, INC.
FINANCIAL STATEMENTS AND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
JUNE 30, 2014 AND DECEMBER 31, 2013
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders
Rich Cigars, Inc.
We have audited the accompanying balance sheets of Rich Cigars, Inc. (the
"Company") as of June 30, 2014 and December 31, 2013, and the related statements
of operations, shareholders' equity (deficit) and cash flows for the six months
ended June 30, 2014 and the period from inception (July 29, 2013) to December
31, 2013. 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 audit.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall 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 Rich Cigars, Inc. as of June
30, 2014 and December 31, 2013, and the results of its operations and its cash
flows for the six months ended June 30, 2014 and the period from inception (July
29, 2013) to December 31, 2013, in conformity with accounting principles
generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2, the Company
has incurred a net loss and negative cash flow from operations since inception.
These factors, and the need for additional financing in order for the Company to
meet its business plans, raise substantial doubt about the Company's ability to
continue as a going concern.
/s/ Accell Audit & Compliance, PA
Tampa, Florida
October 14, 2014
4868 West Gandy Boulevard * Tampa, Florida 33611 * 813.440.6380
F-2
RICH CIGARS, INC.
BALANCE SHEETS
JUNE 30, 2014 AND DECEMBER 31, 2013
JUNE 30, DECEMBER 31,
2014 2013
------------- ----------------
ASSETS
Current assets:
Inventory $ 3,672 $ -
------------- ----------------
Total assets $ 3,672 $ -
------------- ----------------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accrued liabilities $ 976 $ 150,176
Due to shareholder 1,470 -
------------- ----------------
Total current liabilities 2,446 150,176
------------- ----------------
Shareholders' equity (deficit):
Common stock; no par value; 200,000,000
shares authorized; 477,080 shares issued and
outstanding 191,864 6,032
Accumulated deficit (190,638) (156,208)
------------- ----------------
Total shareholders' equity (deficit) 1,226 (150,176)
------------- ----------------
Total liabilities and shareholders' equity (deficit) $ 3,672 $ -
------------- ----------------
See accompanying Notes to Financial Statements and
Report of Independent Registered Public Accounting Firm
F-3
RICH CIGARS, INC.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2014 AND THE
PERIOD FROM INCEPTION (JULY 29, 2013) TO DECEMBER 31, 2013
JUNE 30, DECEMBER 31,
2014 2013
----------------- -----------------
REVENUES $ - $ -
COSTS OF SALES - -
----------------- -----------------
GROSS PROFIT - -
----------------- -----------------
OPERATING EXPENSES
Travel 7,344 3,948
Professional fees 23,954 150,486
Other general and administrative 1,637 1,313
Telephone 1,495 461
----------------- -----------------
Total operating expenses 34,430 156,208
----------------- -----------------
NET LOSS $ (34,430) $ (156,208)
----------------- -----------------
See accompanying Notes to Financial Statements and
Report of Independent Registered Public Accounting Firm
F-4
RICH CIGARS, INC.
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD FROM INCEPTION (JULY 29, 2013) TO JUNE 30, 2014
TOTAL
COMMON COMMON ACCUMULATED SHAREHOLDERS'
SHARES STOCK DEFICIT EQUITY (DEFICIT)
--------------- ---------------- ---------------- ----------------
BALANCE, INCEPTION (JULY 29. 2013) - $ - $ - $ -
Shares issued for cash and subscription receivable 175,080 6,032 - 6,032
Net loss for period - - (156,208) (156,208)
--------------- ---------------- ---------------- ----------------
BALANCE, DECEMBER 31, 2013 175,080 6,032 (156,208) (150,176)
Shares issued for cash 2,000 1,000 - 1,000
Collection of subscriptions receivable - 34,832 - 34,832
Accrued expenses converted to common stock 300,000 150,000 - 150,000
Net loss for period - - (34,430) (34,430)
--------------- ---------------- ---------------- ----------------
BALANCE, JUNE 30, 2014 477,080 $ 191,864 $ (190,638) $ 1,226
--------------- ---------------- ---------------- ----------------
See accompanying Notes to Financial Statements and
Report of Independent Registered Public Accounting Firm
F-5
RICH CIGARS, INC.
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2014 AND THE
PERIOD FROM INCEPTION (JULY 29, 2013) TO DECEMBER 31, 2013
JUNE 30, DECEMBER 31,
2014 2013
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (34,430) $ (156,208)
Adjustments to reconcile net loss to net cash
from operating activities:
Change in assets and liabilities:
Inventory (3,672) -
Accrued liabilities 800 150,176
-------------- --------------
Net cash from operating activities (37,302) (6,032)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of shares 1,000 6,032
Collection of subscriptions receivable 34,832 -
Shareholder advances 1,470 -
-------------- --------------
37,302 6,032
-------------- --------------
NET CHANGE IN CASH - -
CASH AND CASH EQUIVALENTS, beginning of period - -
-------------- --------------
CASH AND CASH EQUIVALENTS, end of period $ - $ -
-------------- --------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ - $ -
-------------- --------------
Cash paid for income taxes $ - $ -
-------------- --------------
DISCLOSURE OF NON-CASH FINANCING INFORMATION:
Accrued expenses converted to common stock $ 150,000 $ -
-------------- --------------
See accompanying Notes to Financial Statements and
Report of Independent Registered Public Accounting Firm
F-6
RICH CIGARS, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2014 AND THE
PERIOD FROM INCEPTION (JULY 29, 2013) TO DECEMBER 31, 2013
NOTE 1 NATURE OF ORGANIZATION
Rich Cigars, Inc. (the "Company") is a Florida Corporation incorporated
on July 29, 2013. The Company has branded custom cigars to be sold via
the internet and through retail locations. The Company's primary
operations are currently in the New Orleans, Louisiana area.
NOTE 2 GOING CONCERN
These financial statements have been prepared on a going concern basis
which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business for the foreseeable
future. As shown in the accompanying financial statements, the Company
has incurred a net loss of approximately $191,000 since inception (July
29, 2013).
Management's plans include raising capital through the equity markets
to fund operations and eventually, the generating of revenue through
its business; however, there can be no assurance that the Company will
be successful in such activities. These financial statements do not
include any adjustments relating to the recovery of the recorded assets
or the classifications of the liabilities that might be necessary
should the Company be unable to continue as a going concern.
NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of
America ("GAAP") on the accrual basis of accounting.
USE OF ESTIMATES
The preparation of financial statements in conformity with GAAP
requires management to adopt accounting policies and make estimates and
assumptions that affect amounts reported in the financial statements.
The significant accounting policies, estimates and related judgments
underlying the Company's financial statements are summarized below. In
applying these policies, management makes subjective judgments that
frequently require estimates about matters that are inherently
uncertain.
CASH AND CASH EQUIVALENTS
The Company considers all investments with a maturity date of three
months or less when purchased to be cash equivalents. There were no
cash equivalents at June 30, 2104 or December 31, 2013.
INVENTORY
Inventory, which consists of ready for sale cigars and other
accessories, is carried at the lower of cost or fair market value. Cost
is determined using the first-in, first-out method.
F-7
RICH CIGARS, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2014 AND THE
PERIOD FROM INCEPTION (JULY 29, 2013) TO DECEMBER 31, 2013
PROPERTY AND EQUIPMENT
The Company will record property and equipment at historical cost, less
accumulated depreciation. Expenditures for additions and improvements
over $1,500 that substantially extend the useful life of property and
equipment or increase its operating effectiveness are capitalized.
Repair and maintenance costs are expensed as incurred. Long-lived
assets are reviewed for impairment whenever events or circumstances
warrant such a review, at least annually, pursuant to the provisions
Financial Accounting Standards Board Accounting Standards Codification
("ASC") 360 PROPERTY, PLANT, AND EQUIPMENT. The Company will depreciate
the cost of property and equipment over the estimated useful lives of
the assets, ranging from two to ten years, using the straight-line
method. At June 30, 2014 and December 31, 2013, the Company had no
property and equipment.
REVENUE RECOGNITION
The Company recognizes revenue when a sales transaction closes and the
product is shipped or picked-up by the customer. No revenue has been
recognized since inception (July 29, 2013).
COST OF GOODS SOLD
The Company recognizes the direct cost of purchasing product for sale,
including freight-in and packaging, as cost of goods sold in the
accompanying income statement.
SHIPPING AND HANDLING COSTS
Outgoing shipping and handling costs are primarily paid directly by the
customer.
ADVERTISING AND PROMOTION
The Company recognizes advertising and promotion costs as incurred. The
Company incurred no advertising and promotion expense since inception
(July 29, 2013).
INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Additionally, the recognition of future tax
benefits, such as net operating loss carryforwards, is required to the
extent that realization of such benefits is more likely than not.
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which the
assets and liabilities are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income tax expense in the period that includes the
enactment date.
In the event the future tax consequences of differences between the
financial reporting bases and the tax bases of the Company's assets and
liabilities result in deferred tax assets, an evaluation of the
probability of being able to realize the future benefits indicated by
such asset is required. A valuation allowance is provided for the
portion of the deferred tax asset when it is more likely than not that
some or all of the deferred tax asset will not be realized. In
assessing the realizability of the deferred tax assets, management
considers the scheduled reversals of deferred tax liabilities,
projected future taxable income, and tax planning strategies.
F-8
RICH CIGARS, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2014 AND THE
PERIOD FROM INCEPTION (JULY 29, 2013) TO DECEMBER 31, 2013
The Company files income tax returns in the United States and Florida,
which are subject to examination by the tax authorities in these
jurisdictions. Generally, the statute of limitations related to the
Company's federal and state income tax return is three years. The state
impact of any federal changes for prior years remains subject to
examination for a period up to five years after formal notification to
the states.
The Company has evaluated tax positions in accordance with ASC 740
INCOME TAXES and has not identified any significant tax positions,
other than those disclosed.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 2014, the FASB issued Accounting Standards Update (ASU) No.
2014-10, DEVELOPMENT STAGE ENTITIES (TOPIC 915): ELIMINATION OF CERTAIN
FINANCIAL REPORTING REQUIREMENTS, INCLUDING AN AMENDMENT TO VARIABLE
INTEREST ENTITIES GUIDANCE IN TOPIC 810, CONSOLIDATION. The update
removes Topic 915, DEVELOPMENT STAGE ENTITIES, from the Accounting
Standards Codification for fiscal years that begin after December 15,
2014, but early adoption is allowed. As such, the Company has elected
not to include the disclosures and reporting requirements previously
required for development stage entities.
NOTE 4 TAXES
The difference between income tax expense computed by applying the
statutory federal income tax rate to earnings before taxes for the
periods ended are as follows:
Income tax at federal statutory rate 34.00%
State income tax, net of federal benefit 3.96%
Valuation allowance -37.96%
-------
0.00%
=======
At June 30, 2014 and December 31, 2013, a valuation allowance was
established for the entire amount of the net deferred tax asset as the
realization of the deferred tax asset is dependent on future taxable
income.
At June 30, 2014, the Company had net operating loss carryforwards for
tax purposes of $190,638 which will begin expiring in 2023.
NOTE 5 RELATED PARTY TRANSACTIONS AND COMMITMENTS
As of June 30, 2014 and December 31, 2013, the Company had unpaid stock
subscriptions from a company formerly controlled by the Chief Executive
Officer of the Company totaling $46,676 and $81,508, respectively. In
accordance with the U.S. Securities and Exchange Commission Rule
5-02.30 of Regulation S-X, this receivable has not been recorded on the
Company's balance sheet.
F-9
RICH CIGARS, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2014 AND THE
PERIOD FROM INCEPTION (JULY 29, 2013) TO DECEMBER 31, 2013
During the period from inception (July 29, 2013) to December 31, 2013,
the Company incurred $150,000 in consulting services from three
officers of the Company. This amount is included in accrued expenses as
of December 31, 2013 and was converted into 300,000 shares of common
stock during 2014.
As of June 30, 2014, the Company has received $1,400 in advances from a
shareholder that is recorded as a Due to shareholder on the balance
sheet. The amount is non-interest bearing and due upon demand.
NOTE 6 CONTINGENCIES
During the normal course of business, the Company may be exposed to
litigation. When the Company becomes aware of potential litigation, it
evaluates the merits of the case in accordance with ASC 450,
CONTINGENCIES. The Company evaluates its exposure to the matter,
possible legal or settlement strategies and the likelihood of an
unfavorable outcome. If the Company determines that an unfavorable
outcome is probable and can be reasonably estimated, it establishes the
necessary accruals. As of the date of this report, the Company is not
aware of any pending litigation.
F-10
F. SELECTED FINANCIAL INFORMATION
----------------------------------
Not applicable.
G. SUPPLEMENTARY FINANCIAL INFORMATION
---------------------------------------
Not applicable.
H. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
--------------------------------------------------------------------------------
The following plan of operation provides information which management believes
is relevant to an assessment and understanding of our results of operations and
financial condition. The discussion should be read along with our financial
statements and notes thereto. This section includes a number of forward-looking
statements that reflect our current views with respect to future events and
financial performance. Forward-looking statements are often identified by words
like believe, expect, estimate, anticipate, intend, project and similar
expressions, or words which, by their nature, refer to future events. You should
not place undue certainty on these forward-looking statements. These
forward-looking statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from our predictions.
Plan of Operations
We established Rich Cigars, Inc. on July 29, 2013 to manufacture and distribute
cigars under the "Rich" Cigars brand name.
We may engage independent sales representatives to solicit retail cigar outlets
on the east coast. We plan to sign sales representatives by the end of the first
year of operation.
We are a development stage company, and to date, our development efforts have
been focused primarily on the development and marketing of our business model.
In addition, to date we have limited operating history for investors to evaluate
the potential of our business development. As such, we have not built our
customer base or our brand name. In addition, our sources of cash are not
adequate for the next 12 months of operations. If we are unable to raise
additional cash, we will either have to suspend or cease our expansion plans
entirely.
Limited Operating History
We have generated no independent financial history and have not previously
demonstrated that we will be able to expand our business. Our business is
subject to risks inherent in growing an enterprise, including limited capital
resources and possible rejection of our business model and/or sales methods.
Critical Accounting Policies and Estimates
While our significant accounting policies are more fully described in Note 1 to
our financial statements for the year ended June 30, 2014 we believe that the
following accounting policies are the most critical to aid you in fully
understanding and evaluating this management discussion and analysis.
Our financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America. The preparation
of these financial statements requires us to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and expenses, and
related disclosure of contingent assets and liabilities. We continually evaluate
our estimates, including those related to bad debts, recovery of long-lived
assets, income taxes, and the valuation of equity transactions. We base our
estimates on historical experience and on various other assumptions that we
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Any future changes to these
-26-
estimates and assumptions could cause a material change to our reported amounts
of revenues, expenses, assets and liabilities. Actual results may differ from
these estimates under different assumptions or conditions. We believe the
following critical accounting policies affect our more significant judgments and
estimates used in the preparation of the financial statements.
Basis of Presentation and Organization
Our Company, Rich Cigars, Inc. ("Rich Cigars" or the "Company") is a Florida
corporation in the development stage and has barely commenced operations. The
Company was incorporated under the laws of the State of Florida on July 29,
2013. Our business plan is to introduce a new brand of premium cigars and build
sales of private labels to build sales of private label cigars.
Cash and Cash Equivalents
For purposes of reporting within the statement of cash flows, we consider all
cash on hand, cash accounts not subject to withdrawal restrictions or penalties,
and all highly liquid debt instruments purchased with a maturity of three months
or less to be cash and cash equivalents.
Revenue Recognition
We are in the development stage and have yet to realize revenues from
operations. We will recognize revenues when delivery of goods or completion of
services has occurred provided there is persuasive evidence of an agreement,
acceptance has been approved by our customers, the fee is fixed or determinable
based on the completion of stated terms and conditions, and collection of any
related receivable is probable.
Loss per Common Share
Our basic loss per share is computed by dividing the net loss attributable to
the common stockholders by the weighted average number of shares of common stock
outstanding during the period. Our fully diluted loss per share is computed
similar to basic loss per share except that the denominator is increased to
include the number of additional common shares that would have been outstanding
if the potential common shares had been issued and if the additional common
shares were dilutive. We have issued no dilutive financial instruments for the
period from inception to date
Income Taxes
Deferred tax assets and liabilities are determined based on the differences
between the financial reporting and tax bases of assets and liabilities using
the enacted tax rates and laws that will be in effect when the differences are
expected to reverse. A valuation allowance is established when necessary to
reduce deferred tax assets to the amounts expected to be realized.
We account for income taxes under the provisions of Financial Accounting
Standards Board ("FASB") Accounting Standards Codification ("ASC") 740,
"Accounting for Income Taxes. It prescribes a recognition threshold and
measurement attributes for the financial statement recognition and measurement
of a tax position taken or expected to be taken in a tax return. As a result, we
have applied a more-likely-than-not recognition threshold for all tax
uncertainties. The guidance only allows the recognition of those tax benefits
that have a greater than 50% likelihood of being sustained upon examination by
the various taxing authorities. The Company is subject to taxation in the United
States. All of our tax years since inception remain subject to examination by
Federal and state jurisdictions.
-27-
We classify penalties and interest related to unrecognized tax benefits as
income tax expense in the Statements of Operations.
Fair Value of Financial Instruments
We estimate the fair value of financial instruments using the available market
information and valuation methods. Considerable judgment is required in
estimating fair value. Accordingly, the estimates of fair value may not be
indicative of the amounts we could realize in a current market exchange.
Estimates
The financial statements are prepared on the basis of accounting principles
generally accepted in the United States. The preparation of financial statements
in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities as of the
date of the financial statements, and revenues and expenses for the period from
July 29, 2013 (inception) through June 30, 2014. Actual results could differ
from those estimates made by management.
Recent Accounting Pronouncements
Accounting standards that have been issued or proposed by FASB that do not
require adoption until a future date are not expected to have a material impact
on the financial statements upon adoption.
RESULTS OF OPERATIONS
For the period from July 29, 2013 (Inception) to December 31, 2013 and the
period to June 30, 2014
Revenue
For the period from July 29, 2013 (inception) to December 31, 2013 and the six
months ended June 30, 2014 we had no revenue.
Expenses
Expenses for the six months ended June 30, 2014 totaled $34,430. Our expenses
for the period July 29, 2013 (Inception) to December 31, 2013 were $156,208. The
majority of the expenses incurred during the period consisted of general and
administrative start-up costs.
Net Loss
As a result of the factors described above, our net loss on operations and
capitalization from July 29, 2013 (inception) to June 30, 2013 was $190,638.
July 29, 2013 (inception) to December 31, 2013 loss was $156,208 and the six
months ended June 30, 2014 was $34,430.
Comparison of the period from July 29, 2013 (inception) to December 31, 2013 and
for the six months ended June 30, 2014: we were newly incorporated on July 29,
2013, and therefore no comparison - year to year, or period to period, can be
stated.
Operating Loss
Our operating loss for the period from July 29, 2013 (inception) to June 30,
2014 from inception was $190,638.
-28-
Net Loss
Our net loss for the year ended June 30, 2014 was ($170,638) for the period from
inception to June 30, 2014 including stock related compensation expenses.
Liquidity and Capital Resources
Liquidity is the ability of a company to generate funds to support its current
and future operations, satisfy its obligations, and otherwise operate on an
ongoing basis. We have been funding our operations through the sale of our
common stock.
Our primary uses of cash have been for costs paid to third parties. All funds
received have been expended in the furtherance of growing the business and
establishing brand portfolios. The following trends are reasonably likely to
result in a material decrease in our liquidity over the near to long term:
o An increase in working capital requirements to finance additional
product development,
o Addition of administrative and sales personnel as the business grows,
o Increases in advertising, public relations and sales promotions for
existing and new brands as the company expands within existing markets
or enters new markets,
o The cost of being a public company, and
o Capital expenditures to add additional technology.
Our net revenues are not sufficient to fund our operating expenses. At June 30,
2014, we had a inventory balance of $3,672 and working capital of $1,226. We
currently have no material commitments for capital expenditures. We may be
required to raise additional funds, particularly if we are unable to generate
positive cash flow as a result of our operations. We estimate that based on
current plans and assumptions, that our available cash will not be sufficient to
satisfy our cash requirements under our present operating expectations, without
further financing, for up to 12 months. Other than working capital, we presently
have no other alternative source of working capital. We may not have sufficient
working capital to fund the expansion of our operations and to provide working
capital necessary for our ongoing operations and obligations. We will need to
raise significant additional capital to fund our operating expenses, pay our
obligations, and grow our company. We do not anticipate that we will be
profitable in 2014. Therefore our future operations will be dependent on our
ability to secure additional financing. Financing transactions may include the
issuance of equity or debt securities, obtaining credit facilities, or other
financing mechanisms. However, the trading price of our common stock and a
downturn in the U.S. equity and debt markets could make it more difficult to
obtain financing through the issuance of equity or debt securities. Even if we
are able to raise the funds required, it is possible that we could incur
unexpected costs and expenses, fail to collect amounts owed to us, or experience
unexpected cash requirements that would force us to seek alternative financing.
Furthermore, if we issue additional equity or debt securities, stockholders may
experience additional dilution or the new equity securities may have rights,
preferences or privileges senior to those of existing holders of our common
stock. The inability to obtain additional capital will restrict our ability to
grow and may reduce our ability to continue to conduct business operations. If
we are unable to obtain additional financing, we will likely be required to
curtail our marketing and development plans and possibly cease our operations.
-29-
We anticipate that depending on market conditions and our plan of operations, we
may incur operating losses in the foreseeable future. Therefore, our auditors
have raised substantial doubt about our ability to continue as a going concern.
Our liquidity may be negatively impacted by the significant costs associated
with our public company reporting requirements, costs associated with newly
applicable corporate governance requirements, including requirements under the
Sarbanes-Oxley Act of 2002 and other rules implemented by the Securities and
Exchange Commission. We expect all of these applicable rules and regulations to
significantly increase our legal and financial compliance costs and to make some
activities more time consuming and costly.
Our business plan for the next 12 months is outlined below:
Over the twelve month period starting upon the effective date of this
registration statement, we intend to market our brand and begin to sell our
products to retail cigar outlets.
If we are unable to build our customer base or gain any clients, we will cease
our development and/or marketing operations until we raise money. Attempting to
raise capital after failing in any phase of our development plan could be
difficult. As such, if we cannot secure additional proceeds we will have to
cease operations and investors would lose their entire investment. At the
present time, we have not made any arrangements to raise additional cash.
However, we intend to raise additional capital through private placements once
we gain a quotation on the OTC Pink Sheets, for which there is no assurance. If
we need additional cash but are unable to raise it, we will either suspend
marketing operations until we do raise the cash, or cease operations entirely.
Other than as described in this paragraph, we have no other financing plans.
Off-Balance Sheet Arrangements. We have no off-balance sheet arrangements.
Contractual Obligations. None
I. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURES
--------------------------------------------------------------------------------
There have been no changes in or disagreements with accountants on accounting or
financial disclosure matters.
J. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
-------------------------------------------------------------
NOT APPLICABLE.
K. DIRECTORS AND EXECUTIVE OFFICERS
-----------------------------------
The following table sets forth the names and ages of officers and directors as
of June 30, 2014. Our executive officers are elected annually by our Board of
Directors. Our executive officers hold their offices until they resign, are
removed by the Board, or his successor is elected and qualified.
NAME AGE POSITION
---------------------- --- -----------------------------------------
Richard Davis 33 CEO/President & Director
Alfred Rushing 51 Vice President, COO, Secretary & Director
Michael Rushing 30 Vice President of Sales & Director
-30-
Set forth below is a brief description of the background and business experience
of our executive officer and director for the past five years.
RICHARD DAVIS, PRESIDENT AND DIRECTOR
Mr. Davis, age 33, attended University of North Carolina from 2001 - 2005, where
he studied Business Administration and Marketing. Mr. Davis has been President
and Director of MainStreet Ventures from 2009 - 2014. Mr. Davis experience in
business and marketing qualifies him for the position with our company. Mr.
Davis will spend approximately 30 hours per week on our company's business.
ALFRED MICHAEL RUSHING, VICE PRESIDENT, SECRETARY AND CHIEF OPERATING OFFICER
AND DIRECTOR
Mr. Rushing, age 51, attended University of Detroit in 1980, and Miramar College
in 1985 and received an Associates Degree. He has been an operations manager and
owner at "The Cigar Factory" in New Orleans, LA from 2003 to present. This
experience qualification is the basis for his participation in management of our
company. Mr. Rushing will spend part time, approximately 20 hours a week, on our
company's business.
MICHAEL RUSHING, VICE PRESIDENT OF SALES AND DIRECTOR
Mr. Rushing, age 30, is the son of Alfred Rushing and is Vice President of
Sales/COO since Spring of 2014, obtained a Bachelor of Arts degree in Business
Management n 2008 from Dillard University in New Orleans. From 2000-2004, he
worked in various positions at the Cuban Cigar Factory in San Diego, CA
finishing as a supervisor. He then worked at the Cigar Factory in New Orleans,
from 2004-2010 finishing as a Store Manager, overseeing sales, stocking, staff
and products. From August 2010 to date he has been employed at Target
Corporation as an Executive Team Leader in the areas of Guest Experience and
Human Resources.
Term of Office
Our directors are appointed for a one-year term to hold office until the next
annual general meeting of our shareholders or until removed from office in
accordance with our bylaws. Our officers are appointed by our board of directors
and hold office until removed by the board.
-31-
L. EXECUTIVE AND DIRECTORS COMPENSATION
---------------------------------------
The following summary compensation table sets forth all compensation awarded to,
earned by, or paid to the named executive officers paid by us during the period
from July 29, 2013 (inception) through June 30, 2014:
SUMMARY COMPENSATION TABLE
SUMMARY EXECUTIVES COMPENSATION TABLE
---------------------- ------- ----------- --------- --------- ---------- ----------- -------------- ------------ ----------
Non-equity Non-qualified
Stock incentive deferred
Contract awards Option plan compensation All other
Payments Bonus ($)(1) awards compensation earnings compensation Total
Name & Position Year ($) ($) (2)(3) ($) ($) ($) ($) ($)
---------------------- ------- ----------- --------- --------- ---------- ----------- -------------- ------------ ----------
Richard Davis, 2013 0 0 75,000 0 0 0 0 $75,000
President/CEO,
Director
---------------------- ------- ----------- --------- --------- ---------- ----------- -------------- ------------ ----------
Richard Davis, 2014 0 0 0 0 0 0 0 $0
President/CEO,
Director
---------------------- ------- ----------- --------- --------- ---------- ----------- -------------- ------------ ----------
Alfred Rushing, 2013 0 0 50,000 0 0 0 0 $50,000
COO, V.P.
Secretary & Director
---------------------- ------- ----------- --------- --------- ---------- ----------- -------------- ------------ ----------
Alfred Rushing, 2014 0 0 0 0 0 0 0 $0
COO, V.P.
Secretary & Director
---------------------- ------- ----------- --------- --------- ---------- ----------- -------------- ------------ ----------
Michael Rushing 2013 0 0 50,000 0 0 0 0 $50,000
V.P. of Sales &
Director
---------------------- ------- ----------- --------- --------- ---------- ----------- -------------- ------------ ----------
Michael Rushing 2014 0 0 25,000 0 0 0 0 $25,000
V.P. of Sales &
Director
---------------------- ------- ----------- --------- --------- ---------- ----------- -------------- ------------ ----------
(1) Accrued consulting in 2013
(2) In exchange for accruals
(3) @ $0.50 per share
Option Grants Table
We made no individual grants of stock options to purchase our common stock to
the executive officers named in the Summary Compensation Table for the period
from July 29, 2013 (inception) through June 30, 2014.
Aggregated Option Exercises and Fiscal Year-End Option Value Table. There were
no stock options exercised during period ending June 30, 2014 by the executive
officers named in the Summary Compensation Table.
Long-Term Incentive Plan ("LTIP") Awards Table
We made no awards to named executive officers in the last completed fiscal year
under any LTIP
-32-
Compensation of Directors
Our Directors are permitted to receive fixed fees and other compensation for
their services as directors. Our Board of Directors has the authority to fix the
compensation of directors. No amounts have been paid to, or accrued to,
directors in such capacity.
DIRECTORS COMPENSATION TABLE
Fees Non-qualified
earned or deferred
paid in Non-equity compensation
cash Stock Option incentive plan earnings All other Total
Name ($) awards ($) awards ($) compensation ($) ($) compensation ($) ($)
---------------- ------------ ------------- ------------ ------------------ ------------------ ----------------- -----------
Richard Davis(1) $ -0- $ -0- $ -0- $ -0- $ -0- $ -0- $ -0-
Alfred Rushing(1) $ -0- $ -0- $ -0- $ -0- $ -0- $ -0- $ -0-
Michael Rushing(1) $ -0- $ -0- $ -0- $ -0- $ -0- $ -0- $ -0-
Totals $ -0- $ -0- $ -0- $ -0- $ -0- $ -0- $ -0-
----------------
(1) Messrs. Davis, Rushing and Rushing received shares as compensation for
services as officers as shown on the Officers Compensation Table.
Employment Agreements
Currently, we do not have an employment agreement in place with our officers and
director. They act as consultants under oral agreements, on an hourly basis and
bill the company monthly at an hourly rate of $50.00 per hour.
-33-
M. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AS OF OCTOBER
14, 2014
--------------------------------------------------------------------------------
The following table provides the names and addresses of each person known to us
to own more than 5% of our outstanding shares of common stock as of June 30,
2014, and by the officers and directors, individually and as a group. Except as
otherwise indicated, all shares are owned directly and the shareholders listed
possesses sole voting and investment power with respect to the shares shown.
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF
TITLE OF CLASS NAME OF BENEFICIAL OWNER (1) OWNER CLASS (2)
----------------------- ------------------------------------------- ------------------- ---------------
Common shares Richard Davis, President, Chief Executive 150,000 31.4%
Officer & Director
Common shares Alfred Rushing, COO, Vice President, 100,000 21%
Secretary & Director
Common shares Michael Rushing, Vice President of Sales, 50,000 10.5%
& Director
----------------------- ------------------------------------------- ------------------- ---------------
Common shares All Directors and Executive Officers as a 300,000 62.9%
Group (3 persons) ------------------- ---------------
-----------------------
(1) *The address of each person listed above, unless otherwise indicated,
is c/o 5100 SW 103rd Street, Ocala, FL 34476.
(2) Based upon 477,080 shares issued and outstanding on a fully diluted
basis.
N. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS, PROMOTERS AND CONTROL PERSONS
-----------------------------------------------------------------------------
In June 2014, the Company issued 300,000 shares of its common stock to Richard
Davis, Michael Rushing and Alfred Rushing, the founders, Directors and/or
Officers for services with a fair value of $150,000 ($0.50 per share).
RichKeys Enterprises LLC, deemed an affiliate due to 36.7% control of our
shares, has subscribed for $87,540 in stock @ $0.50 of which all but $46,676 has
been paid.
ITEM 11A. MATERIAL CHANGES
---------------------------
None.
ITEM 12. INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
-----------------------------------------------------------
Not Applicable.
-34-
ITEM 12A. DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES
ACT LIABILITIES
--------------------------------------------------------------------------------
Our directors and officers are indemnified as provided by the Florida corporate
law and our Bylaws. We have agreed to indemnify each of our directors and
certain officers against certain liabilities, including liabilities under the
Securities Act of 1933. Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to our directors, officers and
controlling persons pursuant to the provisions described above, or otherwise, we
have been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than our payment of expenses
incurred or paid by our director, officer or controlling person in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, we will, unless in the opinion of our counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
We have been advised that in the opinion of the Securities and Exchange
Commission indemnification for liabilities arising under the Securities Act is
against public policy as expressed in the Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities is asserted by one of our directors, officers, or controlling
persons in connection with the securities being registered, we will, unless in
the opinion of our legal counsel the matter has been settled by controlling
precedent, submit the question of whether such indemnification is against public
policy to a court of appropriate jurisdiction. We will then be governed by the
court's decision.
-35-
[OUTSIDE BACK COVER PAGE OF PROSPECTUS]
DEALER PROSPECTUS DELIVERY REQUIREMENTS
RICH CIGARS, INC.
246,080 SHARES OF COMMON STOCK
PROSPECTUS
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR THAT WE
HAVE REFERRED YOU TO. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS PROSPECTUS IS NOT AN OFFER TO SELL COMMON
STOCK AND IS NOT SOLICITING AN OFFER TO BUY COMMON STOCK IN ANY STATE WHERE THE
OFFER OR SALE IS NOT PERMITTED.
Until _____________, all dealers that effect transactions in these securities
whether or not participating in this offering may be required to deliver a
prospectus. This is in addition to the dealer's obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
The Date of This Prospectus is October 14, 2014
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
----------------------------------------------------
We have expended, or will expend fees in relation to this registration
statement as detailed below:
================================================================= =============
Expenditure Item Amount
----------------------------------------------------------------- -------------
Attorney Fees $13,000
----------------------------------------------------------------- -------------
Audit Fees $7,500
----------------------------------------------------------------- -------------
Transfer Agent Fees $2,000
----------------------------------------------------------------- -------------
SEC Registration and Blue Sky Registration fees (estimated) $1,000
----------------------------------------------------------------- -------------
Printing Costs and Miscellaneous Expenses (estimated) $1,500
----------------------------------------------------------------- -------------
Total $25,000
================================================================= =============
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
---------------------------------------------------
To the fullest extent permitted by the laws of the State of Florida, and our
Bylaws, we may indemnify an officer or director who is made a party to any
proceeding, including a lawsuit, because of his/her position, if he/she acted in
good faith and in a manner he/she reasonably believed to be in our best
interest. We may advance expenses incurred in defending a proceeding. To the
extent that the officer or director is successful on the merits in a proceeding
as to which he/she is to be indemnified, we must indemnify him/her against all
expenses incurred, including attorney's fees. With respect to a derivative
action, indemnity may be made only for expenses actually and reasonably incurred
in defending the proceeding, and if the officer or director is judged liable,
only by a court order.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers or persons controlling us pursuant to the
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foregoing provisions, we have been informed that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is theretofore unenforceable.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
------------------------------------------------
We were incorporated in the State of Florida on July 29, 2013. We issued 300,000
shares of common stock to our officers in June 2014 for services with a fair
value of $0.50. These shares were issued in reliance on the exemption under
Section 4a(2) of the Securities Act of 1933, as amended (the "Act"). These
shares of our common stock qualified for exemption under Section 4a(2) of the
Securities Act of 1933 since the issuance shares by us did not involve a public
offering, due to the insubstantial number of persons involved the offering,
solely to officers for compensation manner of the offering and number of shares
offered. In addition, the investors had the necessary investment intent as
required by Section 4a(2) since they agreed to and received share certificates
bearing a legend stating that such shares are restricted pursuant to Rule 144 of
the 1933 Securities Act. Based on an analysis of the above factors, we have met
the requirements to qualify for exemption under Section 4a(2) of the Securities
Act of 1933 for this transaction.
From inception 2013 to June 30, 2014 we sold through a Private offering a total
of 177,080 shares of common stock to three unaccredited investors, at a price
per share of $0.50 for an aggregate offering price of $88,540 of which $41,864
has been paid, and of which $46,676 is due as a subscription receivable. The
Common Stock issued in such offering was issued in a transaction not involving a
public offering in reliance upon an exemption from registration provided by Rule
506 of Regulation D of the Securities Act of 1933. In accordance with Section
230.106 (b)(1) of the Securities Act of 1933, these shares qualified for
exemption under the Rule 506 exemption for these offerings $0.10 based upon the
following:
(A) No general solicitation or advertising was conducted by us in
connection with the offering of any of the Shares.
(B) At the time of the offering we were not: (1) subject to the reporting
requirements of Section 13 or 15 (d) of the Exchange Act; or (2) an "investment
company" within the meaning of the federal securities laws.
(C) Neither we, nor any of our predecessors, nor any of our directors, nor
any beneficial owner of 10% or more of any class of our equity securities, nor
any promoter currently connected with us in any capacity has been convicted
within the past ten years of any felony in connection with the purchase or sale
of any security.
(D) The offers and sales of securities by us pursuant to the offerings were
not attempts to evade any registration or resale requirements of the securities
laws of the United States or any of its states.
Please note that pursuant to Rule 506, all shares purchased in the Regulation D
Rule 506 offering to June 30, 2014 were restricted in accordance with Rule 144
of the Securities Act of 1933. In addition, each of these shareholders were
either accredited as defined in Rule 501 (a) of Regulation D promulgated under
the Securities Act or sophisticated as defined in Rule 506 of Regulation D
promulgated under the Securities Act.
We have never utilized an underwriter for an offering of our securities. Other
Than the securities mentioned above, we have not issued or sold any securities.
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ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
---------------------------------------------------
-------- -------------------------------------------------------- --------------
EXHIBIT
NO. DESCRIPTION
-------- -------------------------------------------------------- --------------
3(i).1 Articles of Incorporation of Rich Cigars, Inc. Filed Herewith
-------- -------------------------------------------------------- --------------
3(ii).1 Bylaws of Rich Cigars, Inc. Filed Herewith
-------- -------------------------------------------------------- --------------
5.1 Opinion re: Legality Filed Herewith
-------- -------------------------------------------------------- --------------
23.1 Consent of Attorney Filed Herewith
-------- -------------------------------------------------------- --------------
23.2 Consent of Independent Registered Public Accounting Firm Filed Herewith
-------- -------------------------------------------------------- --------------
ITEM 17. UNDERTAKINGS
---------------------
(A) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
i. To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
ii. To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than 20% change
in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement.
iii. To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
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person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(5) Each prospectus filed pursuant to Rule 424(b) as part of a
registration statement relating to an offering, other than registration
statements relying on Rule 430B or other than prospectuses filed in reliance on
Rule 430A, shall be deemed to be part of and included in the registration
statement as of the date it is first used after effectiveness. Provided,
however, that no statement made in a registration statement or prospectus that
is part of the registration statement or made in a document incorporated or
deemed incorporated by reference into the registration statement or prospectus
that is part of the registration statement will, as to a purchaser with a time
of contract of sale prior to such first use, supersede or modify any statement
that was made in the registration statement or prospectus that was part of the
registration statement or made in any such document immediately prior to such
date of first use.
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SIGNATURES
Pursuant to the requirement of the Securities Act of 1933, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Ocala, State of Florida,
on October 16, 2014.
RICH CIGARS, INC.
/s/ Richard Davis October 16, 2014
------------------------------------------------------
Richard Davis
(Chief Executive Officer, President, Chief Financial
Officer and Principal Accounting Officer and Principal
Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
/s/ Richard Davis
---------------------------------------- October 16, 2014
Richard Davis, President, Chief Executive
Officer and Director
/s/ Alfred Rushing
------------------------------------------ October 16, 2014
Alfred Rushing, Vice President, COO
Secretary and Director
/s/ Michael Rushing
------------------------------------------ October 16, 2014
Michael Rushing, Vice President
of Sales and Director
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