CARIBBEAN CIGAR CO, SB-2/A, 1996-07-26

CARIBBEAN CIGAR CO
SB-2/A, 1996-07-26
CIGARETTES

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 26, 1996

REGISTRATION NO. 333-04415
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

AMENDMENT NO. 2

FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

CARIBBEAN CIGAR COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------

THOMAS R. DILK
CHIEF FINANCIAL OFFICER
CARIBBEAN CIGAR COMPANY
6265 S.W. EIGHTH STREET
MIAMI, FL 33144
(305) 267-3911 FAX: (305) 267-6026
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
------------------------

COPIES TO:

<TABLE>
<S> <C>
ERIC S. KAMISHER, ESQ. BERT GUSRAE, ESQ.
ASHER S. LEVITSKY P.C. DAVID A. CARTER, P.A.
ESANU KATSKY KORINS & SIGER 355 WEST PALMETTO PARK RD.
605 THIRD AVENUE BOCA RATON, FL 33432
NEW YORK, NEW YORK 10158 (407) 750-6999 FAX: (407) 367-0960
(212) 953-6000 FAX: (212) 953-6899
</TABLE>

------------------------
CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
MAXIMUM OFFERING
TITLE OF EACH CLASS OF AMOUNT TO BE PRICE PER AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED UNIT(1) OFFERING PRICE FEE
<S> <C> <C> <C> <C> <C>
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Common Stock, par value $.001 per share(2)......... 1,523,750 Shs. $ 7.00 $ 10,666,250.00 $ 3,678.02
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Redeemable Common Stock Purchase Warrants(2)....... 1,523,750 Wts. .125 190,468.75 65.68
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Common Stock, par value $.001 per share(3)(4)...... 1,523,750 Shs. 7.00 10,666,250.00 3,678.02
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Common Stock Underwriter Warrants(5)............... 132,500 Wts. .00008 10.60 0
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Common Stock, par value $.001 per share(4)(6)...... 132,500 Shs. 10.15 1,344,875.00 463.75
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Warrant Underwriter Warrants(7).................... 132,500 Shs. .00001 1.33 0
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Common Stock Purchase Warrants(4)(8)............... 132,500 Wts. .18125 24,015.63 8.28
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Common Stock, par value $.001 per share(4)(9)...... 132,500 Shs. 10.15 1,344,875.00 463.75
- ----------------------------------------------------------------------------------------------------------------------------------
Total...................................... $ 8,357.50
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</TABLE>

(1) Estimated solely for purposes of computation of the registration fee
pursuant to Rule 457.

(2) Includes 198,750 shares of Common Stock and Redeemable Common Stock Purchase
Warrants ("Warrants") to purchase 198,750 shares of Common Stock issuable
upon exercise of the Underwriter's over-allotment option.

(3) Represents shares of Common Stock issuable upon exercise of the Warrants
offered pursuant to this Registration Statement.

(4) Pursuant to Rule 416, there are also being registered such additional
securities as may become issuable pursuant to the anti-dilution provisions
of the Warrants or the Underwriter's Warrants.

(5) Represents warrants to purchase Common Stock to be issued to the Underwriter
(the "Common Stock Underwriter's Warrants").

(6) Represents shares of Common Stock issuable upon exercise of the Common Stock
Underwriter's Warrants.

(7) Represents warrants to purchase Warrants to be issued to the Underwriter
(the "Warrant Underwriter's Warrants," and together with the Common Stock
Underwriter's Warrants, the "Underwriter's Warrants").

(8) Represents Warrants (the "Underlying Warrants") issuable upon exercise of
the Warrant Underwriter's Warrants.

(9) Represents shares of Common Stock issuable upon exercise of the Underlying
Warrants.

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<PAGE> 2

CARIBBEAN CIGAR COMPANY

CROSS-REFERENCE SHEET

<TABLE>
<CAPTION>
FORM SB-2 ITEM NUMBER AND CAPTION LOCATION OF CAPTION IN PROSPECTUS
- ----------------------------------------------------- -------------------------------------------------
<C> <S> <C>
1. Front of Registration Statement and Outside
Front Cover Page of Prospectus.................. Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus...................................... Inside Front and Outside Back Cover Pages
3. Summary Information and Risk Factors............ Prospectus Summary; Risk Factors
4. Use of Proceeds................................. Use of Proceeds
5. Determination of Offering Price................. Outside Front Cover Page; Risk Factors;
Underwriting
6. Dilution........................................ Dilution
7. Plan of Distribution............................ Outside Front Cover Page; Underwriting
8. Legal Proceedings............................... *
9. Directors, Executive Officers, Promoters and
Control Persons................................. Management; Principal Stockholders
10. Security Ownership of Certain Beneficial Owners
and Management.................................. Principal Stockholders; Certain Transactions
11. Description of the Securities................... Description of Securities; Underwriting
12. Interests of named Experts and Counsel.......... Legal Matters; Experts
13. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities..................................... Management
14. Organization Within Last Five Years............. Management; Principal Stockholders; Certain
Transactions
15. Description of Business......................... Prospectus Summary; Business
16. Management's Discussion and Analysis or Plan of
Operation....................................... Management's Discussion and Analysis of Results
of Operations
17. Description of Property......................... Business
18. Certain Relationships and Related
Transactions.................................... Certain Transactions
19. Market for Common Equity and Related Stockholder
Matters......................................... Outside Front Cover Page; Risk Factors
20. Executive Compensation.......................... Management
21. Financial Statements............................ Financial Statements
22. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure............. *
23. Selling Security Holders........................ *
</TABLE>

- ---------------
* Omitted because item is inapplicable or answer is in the negative.
<PAGE> 3

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

SUBJECT TO COMPLETION DATED JULY 26, 1996

PROSPECTUS
[CARIBBEAN CIGAR COMPANY LOGO]

1,325,000 SHARES OF COMMON STOCK AND

1,325,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
------------------------

Caribbean Cigar Company (the "Company") is offering 1,325,000 shares of
Common Stock (the "Common Stock") and 1,325,000 Redeemable Common Stock Purchase
Warrants (the "Warrants"). The Common Stock and the Warrants (collectively, the
"Securities") are being offered separately and not as units, and each are
separately transferable. Each Warrant entitles the holder to purchase one share
of Common Stock at $7.00 per share (subject to adjustment) during the three-year
period commencing on the date of this Prospectus. The Warrants are redeemable by
the Company, for $.25 per Warrant, on not less than thirty (30) nor more than
sixty (60) days' written notice if the average closing price per share of Common
Stock is at least $14.00 per share during a period of thirty (30) consecutive
trading days ending not earlier than ten (10) days of the date the Warrants are
called for redemption and provided there is then a current effective
registration statement under the Securities Act of 1933, as amended (the "Act"),
with respect to the issuance and sale of the Common Stock upon exercise of the
Warrants. Any redemption of the Warrants during the one-year period commencing
on the date of this Prospectus shall require the consent of Barron Chase
Securities, Inc. (the "Underwriter"). See "Description of Securities."

Prior to this Offering, there has been no public market for the Common
Stock or Warrants. The initial public offering prices of the Common Stock and
Warrants and the exercise price and other terms of the Warrants have been
determined through negotiations between the Company and the Underwriter, and are
not related to the Company's assets, book value, financial condition or other
recognized criteria of value. Although the Company has applied for the inclusion
of the Common Stock and Warrants in The Nasdaq SmallCap(R) Market under the
symbols CIGR and CIGRW respectively, and the Boston Stock Exchange under the
symbols HAV and HAVW, respectively, there can be no assurance that an active
trading market in the Company's securities will develop or be sustained.

------------------------

THESE ARE SPECULATIVE SECURITIES. AN INVESTMENT IN THE SECURITIES OFFERED HEREBY
INVOLVES A HIGH DEGREE OF RISK AND IMMEDIATE AND SUBSTANTIAL
DILUTION AND SHOULD BE CONSIDERED ONLY BY INVESTORS WHO CAN
AFFORD TO SUSTAIN A LOSS OF THEIR ENTIRE
INVESTMENT.
SEE "RISK FACTORS" ON PAGE 6 OF THIS PROSPECTUS AND "DILUTION."
------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNTS(1) COMPANY(2)
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Per Share...................................... $7.00 $.70 $6.30
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Per Warrant.................................... $.125 $.0125 $.1125
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Total(3)....................................... $9,440,625.00 $944,062.50 $8,496,562.50
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</TABLE>

(1) Excludes additional compensation to be received by the Underwriter in the
form of (a) a non-accountable expense allowance equal to 3% of the gross
proceeds of this Offering, for a total of $283,218.75 ($325,701.54 if the
Underwriter's over-allotment option is exercised in full) and (b) warrants
(the "Underwriter's Warrants") to purchase 132,500 shares of Common Stock
and 132,500 Warrants at an exercise price equal to 145% of the initial
public offering price of the Common Stock and the Warrants, respectively,
during the five-year period commencing on the date of this Prospectus. In
addition, the Company has agreed to indemnify the Underwriter against
certain liabilities, including liabilities under the Securities Act of 1933,
as amended (the "Securities Act"). See "Underwriting."

(2) Before deducting estimated expenses of the Offering of approximately
$692,000.00, which are payable by the Company and which include the
Underwriter's non-accountable expense allowance.

(3) The Company has granted to the Underwriter an option, exercisable within 45
days after the date of this Prospectus, to purchase up to an additional
198,750 shares of Common Stock and 198,750 Warrants on the same terms solely
to cover over-allotments. If the over-allotment option is exercised in full,
the Price to Public, Underwriting Discounts and Proceeds to Company will be
$10,856,718.75, $1,085,671.87 and $9,771,046.88, respectively. See
"Underwriting."

------------------------

The Securities are being offered, subject to prior sale, when, as and if
delivered to and accepted by the Underwriter and subject to the approval of
certain legal matters by counsel and certain other conditions. It is expected
that delivery of the certificates representing the Common Stock and Warrants
comprising the Securities will be made against payment therefor at the offices
of the Underwriter at 7700 West Camino Real, Suite 200, Boca Raton, Florida
33433 on or about , 1996.

------------------------

[BARRON CHASE SECURITIES LOGO]
The date of this Prospectus is , 1996
<PAGE> 4
Artwork

Upper left hand corner
Employees in factory

Upper right hand corner
Cigar factory interior

Lower left hand corner
Cigar retail store interior

Lower right hand corner
Cigar retail store interior

<PAGE> 5

The Company will file a registration statement covering the sale by certain
selling stockholders of an aggregate of 1,056,348 shares of Common Stock.

The Company will be subject to certain informational requirements of the
Securities Exchange Act of 1934, as amended, and in accordance therewith will
file reports and other information with the Securities and Exchange Commission
(the "Commission"). Such reports and other information can be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 or at the regional offices of the
Commission at Northwestern Atrium Center, 500 West Madison Street, Chicago,
Illinois 60661 and Seven World Trade Center, New York, New York 10048. Copies of
such material can be obtained at prescribed rates from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.

The Company intends to furnish its stockholders with annual reports
containing audited financial statements and with such other periodic reports as
the Company may from time to time deem appropriate or as may be required by law.
The Company uses March 31 as its fiscal year end.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AND/OR WARRANTS AT LEVELS ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER THE COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

2
<PAGE> 6

PROSPECTUS SUMMARY

The following discussion summarizes certain information contained in this
Prospectus. It does not purport to be complete and is qualified in its entirety
by reference to more detailed information and financial statements, including
the notes thereto, appearing elsewhere in this Prospectus. Unless otherwise
specified, all information contained in this Prospectus assumes no exercise of
the Underwriter's over-allotment option.

THE COMPANY

Caribbean Cigar Company (the "Company") is a vertically integrated
manufacturer, distributor and retailer of premium cigars. Premium cigars are
generally defined according to three criteria: (i) the cigars are made
completely by hand; (ii) the cigars consist of long-filler tobacco; and (iii)
the cigars retail at a price range from $1 to more than $20 each. The Company's
cigars are hand produced, using fine aged tobacco and traditional rolling
techniques. The Company's premium cigars are sold under the brand names of
Signature Collection by Santiago Cabana ("Signature Collection"), Havana
Classico and Calle Ocho. The Company also markets three flavored cigars -- Rum
Runner, West Indies Vanilla and Island Amaretto, which use premium tobacco and
are flavored with rum, vanilla and amaretto extracts.

The Company commenced operations in 1994 with the opening, by a predecessor
company, of a cigar store in Key Largo, Florida. In early 1996, the Company
opened a second retail store in the South Beach section of Miami Beach, Florida.
A third retail store in Key West, Florida is presently under construction and is
scheduled to be opened in August 1996. The Company's cigar stores sell its
cigars as well as other premium cigars and related products. The Company also
sells its cigars at its factory store in Miami, Florida.

In addition to its retail stores, the Company sells its cigars to tobacco
stores and tobacco departments of retail stores that sell a range of premium
cigars and tobacco products (collectively, "premium tobacco stores"). It also
sells its premium cigars to the private label market, which consists of
businesses and other organizations that sell products under their own brand
names.

The Company produces its cigars in its factory located in the Little Havana
section of Miami, Florida. The factory, which opened in December 1995, is
modeled after a traditional Cuban cigar factory. Such factories utilize a
hand-made manufacturing process, which effects the manner in which tobacco
leaves are processed, aged and made into cigars. With more than 40 skilled
rollers on staff, the factory currently has the capacity to produce premium
hand-rolled cigars at the rate of approximately 1.5 million cigars per year.

The Company is seeking to capitalize on the recent growth of the premium
cigar market. In the United States, based on reports by the Cigar Association of
America, following several decades of declines in such sales, premium cigar
sales increased by 14% in 1994 and 28% in 1995. The Company's premium cigars
have been recognized by industry experts. In its Winter 1995 issue, Cigar
Aficionado magazine, rated the Signature Collection (then known as Santiago
Cabana) against other premium brands on the basis of taste, construction and
appearance. The Signature Collection received the third highest rating in the
world (along with two other brands) and received the highest rating among United
States-produced cigars in the "torpedo class" category.

The Company intends to use the proceeds of this Offering to expand its
retail operations, purchase tobacco for future production, increase its
manufacturing operations and expand its wholesale distribution network.
Following the completion of this Offering, the Company intends to open an
offshore cigar factory in the Dominican Republic, however, no assurance can be
given that the Company will be successful in these efforts.

The Company is a Florida corporation organized in September 1995. Its
executive offices are located at 6265 S.W. Eighth St., Miami, Florida 33144,
telephone (305) 267-3911. The Company's predecessor was a sole proprietorship
operated by Kevin Doyle, President of the Company, under the name Caribbean
Cigar Factory ("Cigar Factory") which commenced operations in October 1994. In
September 1995, the assets and liabilities of Cigar Factory were acquired and
assumed by the Company in exchange for shares of the Company's Common Stock and
a note for the accumulated income of the Key Largo retail store. See "Certain
Transactions." In May 1996, the Company organized a wholly-owned subsidiary in
the Cayman Islands under the name Caribbean Cigar Company (Cayman) Limited.
References to the Company, include the Company, its subsidiary and Cigar Factory
unless the context indicates otherwise.

3
<PAGE> 7

THE OFFERING

Securities Offered......... 1,325,000 shares of Common Stock at $7.00 per share
and 1,325,000 Redeemable Common Stock Purchase
Warrants (the "Warrants") at $.125 per Warrant. The
shares of Common Stock and the Warrants are offered
separately and not as units. The Common Stock and
Warrants are separately tradeable immediately upon
issuance.

Description of Warrants

Exercise of Warrants..... Subject to redemption by the Company, the Warrants
may be exercised at any time during the three-year
period commencing on the date of this Prospectus at
an exercise price of $7.00 per share, subject to
adjustment.

Redemption of Warrants... The Warrants are redeemable by the Company, for
$.25 per Warrant, on not less than thirty (30) nor
more than sixty (60) days' written notice, if the
average closing price per share of Common Stock is
at least $14.00 per share during a period of thirty
(30) consecutive trading days ending within ten
(10) days of the date the Warrants are called for
redemption, and provided there is then a current
effective registration statement under the
Securities Act of 1933, as amended (the "Act"),
with respect to the issuance and sale of the Common
Stock upon exercise of the Warrants. Any redemption
during the one year period commencing on the date
of this Prospectus shall require the consent of the
Underwriter.

Use of Proceeds............ The net proceeds of this Offering will be used for
working capital and other corporate purposes,
including the expansion of its manufacturing
facilities. See "Use of Proceeds."

Risk Factors............... Purchase of the Securities involves a high degree
of risk and substantial dilution, and should be
considered only by investors who can afford to
sustain a loss of their entire investment. See
"Risk Factors" and "Dilution."

Nasdaq Symbols

Common Stock............. "CIGR"
Warrants................. "CIGRW"

Boston Stock Exchange Symbols

Common Stock............. "HAV"

Warrants................. "HAVW"

Securities Outstanding(1)

Prior to the date of this
Prospectus............. 3,586,948 shares of Common Stock

As Adjusted(2)........... 4,911,948 shares of Common Stock
1,325,000 Warrants

- ---------------

(1) Does not include a maximum of 500,000 shares of Common Stock which may be
issued pursuant to the Company's 1996 Long Term Incentive Plan or 100,000
shares of Common Stock which may be issued pursuant to the Company's
Non-Employee Stock Option Plan, of which 15,000 stock options to purchase
shares are outstanding, 308,000 shares of Common Stock issuable pursuant to
outstanding options, or any shares of Common Stock issuable upon exercise of
the Warrants, the Underwriter's over-allotment option or Underwriter's
Warrants or the securities underlying the Underwriter's Warrants. In the
event the Underwriter's over-allotment option is exercised, the total number
of outstanding shares of Common Stock shall be 5,110,698.

(2) Reflects the issuance of the 1,325,000 shares of Common Stock and 1,325,000
Warrants offered hereby.

4
<PAGE> 8

SUMMARY FINANCIAL INFORMATION

The following financial information reflects the operations of the Company
for the fiscal year ended March 31, 1996 and the record from inception (October
3, 1994) to March 31, 1995.

<TABLE>
<CAPTION>
INCEPTION
FISCAL YEAR ENDED (OCTOBER 3, 1994)
MARCH 31, 1996 MARCH 31, 1995
----------------- ------------------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales....................................................... $ 820,950 $ 88,331
Net loss.................................................... (521,587) (11,772)
Net loss per share(1)....................................... (0.16) (0.00)
Weighted average of shares of Common Stock outstanding(1)... 3,255,135 3,228,764
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1996
------------------------------
AS
ACTUAL ADJUSTED(2)(3)
---------- ---------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital.................................................. $ 888,542 $ 9,423,193
Total assets..................................................... 1,658,402 10,200,929
Total liabilities................................................ 364,112 364,112
Accumulated deficit.............................................. (550,743) (569,839)
Stockholders' equity............................................. 1,294,290 9,836,817
Net tangible book value per share of Common Stock................ .38 2.00
</TABLE>

- ---------------

(1) Shares of Common Stock issued to founders at the time of the Company's
organization are treated as outstanding since inception. See "Note 1 to
Notes to Financial Statements."

(2) As adjusted to reflect (i) the sale of 181,329 shares of Common Stock at
$3.50 per share during the period prior to the date of this Prospectus and
(ii) the receipt by the Company of the net proceeds from the sale of the
1,325,000 shares of Common Stock offered hereby at an initial public
offering price of $7.00 per share price and 1,325,000 Warrants offered
hereby at an initial public offering price of $.125 per warrant.

(3) As adjusted to reflect the net effect of other insignificant Common Stock
transactions during the period subsequent to March 31, 1996 through the date
of this prospectus. Such Common Stock issuances and cancellations were
primarily related to employee compensation.

5
<PAGE> 9

RISK FACTORS

The purchase of the shares of Common Stock and Warrants offered hereby
involves a high degree of risk and should be considered only by investors who
can afford to sustain the loss of their entire investment. In analyzing this
Offering, prospective investors should carefully consider the following factors,
among others.

RECENTLY ORGANIZED BUSINESS; HISTORY OF LOSSES

The Company was organized in October 1994 and has incurred a loss of
$521,587, or $.16 per share, on revenues of $820,950 for the fiscal year ended
March 31, 1996, and a loss of $11,772, or $.00 per share, on revenues of $88,332
for the period from October 3, 1994 (inception) to March 31, 1995. The ability
of the Company to operate profitably is dependent upon its ability to increase
its manufacturing and distribution channels and a continuation of an increase in
the market for premium cigars (as to which no assurance can be made). In
addition, its costs may be increased as a result of government regulations,
which may affect the ability of the Company to operate profitably. The Company
is also subject to business risks associated with new business enterprises. No
assurance can be given as to the ability of the Company to operate profitably.

ADDITIONAL FINANCING REQUIREMENTS OF THE COMPANY

At March 31, 1996, the Company had working capital of approximately
$888,500. The Company's operations have been financed to date through private
placements of Common Stock in 1995 and 1996, which generated net proceeds of
approximately $1,614,000. Prior to such private placements, the Company's
operations were financed by its principal stockholders. The Company requires
significant additional capital for the expansion of its manufacturing, marketing
and retail operations. The Company believes that the net proceeds from this
Offering will be sufficient to fund its operations for twelve months from the
date of this Prospectus. However, no assurance can be given that additional
funds will not be required prior to the expiration of such period or that any
funds which may be required will be available, if at all, on acceptable terms.
If additional funds are required, the inability of the Company to raise such
funds will have an adverse effect upon its operations. To the extent that
additional funds are obtained by the sale of equity securities, the stockholders
may sustain significant dilution.

GOVERNMENT REGULATION

The tobacco industry in general has been subject to regulation by Federal,
state and local governments, and recent trends have been toward increased
regulation. Such regulations include labeling requirements, limitations on
advertising and prohibition of sales to minors, laws restricting smoking from
both public places and in offices, office buildings and restaurants and other
eating establishments. Because the tobacco for the Company's cigars is hand
rolled, the Company's factory may become subject to increased regulation under
Federal and state health and safety regulations. In addition, cigars have been
subject to excise taxation at the Federal, state and local level, and such
taxation may increase in the future. Tobacco products are especially likely to
be subject to increases in excise taxation because of the detrimental effects of
tobacco on the health of both smokers and others who inhale secondary smoke. No
assurance can be given that future regulations, tax policies or tobacco
litigation will not have a material adverse affect upon the ability of cigar
companies, including the Company, to generate revenue and profits. See
"Business -- Government Regulation; Tobacco Industry Litigation."

EFFECTS OF FLUCTUATIONS IN TOBACCO COSTS AND AVAILABILITY

One of the principal costs of the Company's cigars is the tobacco used in
both the cigars and the cigar wrappers. The Company seeks to purchase only
premium grade tobacco, which the Company obtains from suppliers outside the
United States. The price and availability of such tobacco are subject to
numerous factors not within the Company's control, including weather conditions,
foreign government policies, potential trade restrictions and the overall demand
for the tobacco. In addition, larger tobacco companies, with greater resources
and buying power than the Company, have the resources to purchase large
quantities of tobacco

6
<PAGE> 10

which could both increase the cost and decrease the availability of the tobacco
to the Company. See "Business -- Raw Materials."

TOBACCO INDUSTRY RISKS

During the past decades the tobacco industry has been the subject of
advertising and public service campaigns against smoking in general.
Furthermore, litigation has been commenced in a number of jurisdictions seeking
damages from cigarette companies for damages resulting from cancer caused by
smoking. Although the Company is recently organized and all of its cigars have
been sold after both the risks of smoking and the addictive nature of nicotine
are generally known, no assurance can be given that the Company will not be
adversely affected by such factors. Furthermore, no assurance can be given that
the Company will be able to obtain product liability insurance or, if such
insurance is available, that it will be available on commercially reasonable
terms. See "Business -- Government Regulation; Tobacco Industry Litigation."

DECLINING MARKET FOR CIGARS THROUGH 1993

The cigar industry has, until recent years, been in substantial decline.
From the 1963 level of industry sales of approximately 9 billion cigars, the
estimated domestic market for cigars declined at a compound average rate of 5%
per year. According to a domestic industry source, the estimated domestic market
for cigars declined from approximately 4 billion cigars in 1980 to approximately
2.1 billion cigars in 1993. The decrease in cigar sales as well as the general
decline in smoking followed the 1964 report of the United States Surgeon
General, which study was followed by numerous other studies stressing the link
between smoking, including secondary smoke and cancer, heart, respiratory and
other diseases and medical problems. Furthermore, "no smoking" laws, ordinances
and prohibitions on cigar smoking in certain cases have adversely affected the
sale of cigar products. The Company believes that these factors may continue
and, if continued, will have an adverse effect upon the cigar industry in
general and the Company's business in particular. See "Business -- The Market."

COMPETITION

The tobacco industry in general, including the cigar industry, is dominated
by a small number of companies which are well known to the public. The Company
believes that, as a manufacturer of premium cigars, it competes with a smaller
number of domestic and foreign companies that specialize in premium cigars and
certain larger companies that maintain premium cigar lines, including
Consolidated Cigar Company ("Consolidated Cigar"), Culbro Corporation and
General Cigar Company. However, the market for premium cigars constitutes a
small portion of the cigar market. The Company believes that smokers of premium
cigars purchase cigars based on the perceived quality of the tobacco. The
process of producing premium cigars is not patented, but is based on the
know-how and experience of master craftsmen who can identify and purchase the
tobacco and roll the tobacco into premium cigars. The principal characteristics
that differentiate one premium cigar from another are the quality of the tobacco
in the cigar, the quality of the tobacco used as a cigar wrapper, the blend of
tobacco and the quality of the rolling. No assurance can be given as to the
ability of the Company to compete successfully in any market in which it
conducts, or may conduct, operations. See "Business -- Competition."

POTENTIAL INFRINGEMENT CLAIM

Consolidated Cigar has advised the Company that its use of the Santiago
Cabana brand name infringes upon Consolidated Cigar's trademark CABANAS.
Although the Company believes that it is not infringing on the Consolidated
Cigar trademark, the Company has modified the Santiago Cabana brand name to
Signature Collection by Santiago Cabana and only uses the SC logo in this
connection. Although no assurance can be given, the Company believes that this
modification has satisfied the claim of Consolidated Cigar. See
"Business -- Intellectual Property Rights."

7
<PAGE> 11

DEPENDENCE ON TRADEMARK PROTECTION FOR BRAND NAMES

The brand names owned by the Company are valuable assets of the Company.
Accordingly, the Company has filed for trademark protection for all its brands.
No assurance can be given that the Company will be successful in obtaining such
trademarks. In the event that such trademarks are not obtained, the Company
could be materially adversely affected. See "Business -- Intellectual Property
Rights."

SHARES ISSUABLE PURSUANT TO WARRANTS AND OPTIONS

Currently, other than the Warrants to be issued pursuant to this Offering
and those set forth below, there are no outstanding warrants or options.
Pursuant to the Company's long-term incentive plan adopted in April 1996, the
Company may grant options or other equity based incentives for up to 500,000
shares of Common Stock. Pursuant to the Company's non-employee directors plan
adopted in April 1996, the Company may grant options for up to 100,000 shares of
Common Stock, of which 15,000 are outstanding. In addition, there are
outstanding options to purchase a total of 308,000 shares of Common Stock, which
includes 125,000 shares at $1.25, 100,000 shares at $1.50, 75,000 shares at
$3.50 and 8,000 shares at $4.20. The holders of the options are likely to
exercise them, if at all, at a time when the Company would otherwise be able to
obtain capital on terms more favorable than those provided in the option. There
are also outstanding warrants to purchase a total of 29,500 shares of Common
Stock at $4.50.

DILUTION

Purchasers of Common Stock in this Offering will experience immediate and
substantial dilution of $5.00, or 71% from the $7.00 initial public offering
price of the Common Stock issued pursuant to this Prospectus. See "Dilution."

DEPENDENCE ON MANAGEMENT; MASTER CRAFTSMEN

The Company's business is largely dependent upon its president, Mr. Kevin
Doyle, and the ability of the Company to hire and retain quality master cigar
craftsmen. Mr. Doyle is responsible for both the blending and manufacturing of
the Company's cigars and the engagement of cigar craftsmen. The Company has an
employment agreement with Mr. Doyle. The loss of service of Mr. Doyle or other
key employees would have a material adverse effect upon the Company's business
and prospects. The ability of the Company to increase its capacity is dependent
upon its ability to hire and retain trained hand rollers. The market for
qualified personnel, particularly hand rollers, is highly competitive, and the
Company will compete with other cigar companies in seeking to hire such
employees, and no assurance can be given as to the ability of the Company to
employ or retain such persons. The Company does not currently maintain key-man
life insurance on any of its employees.

LIMITED INSURANCE COVERAGE

Although the Company carries general liability insurance with an aggregate
limit of $1,000,000, and product liability insurance with an aggregate limit of
$1,000,000, it has no health hazard policy. There can be no assurance that the
Company will not be subject to liability which is not covered by its general
liability insurance, and such liability may have a material adverse effect upon
its business. See "Business -- Government Regulation; Tobacco Industry
Litigations."

BROAD DISCRETION OF MANAGEMENT AS TO USE OF PROCEEDS; POTENTIAL CHANGE IN USE OF
PROCEEDS

Management will have broad discretion with respect to the expenditure of
the net proceeds of this Offering. Purchasers of the Securities offered hereby
will be entrusting their funds to the Company's management, upon whose judgment
the investors must depend. The Company may enter into joint ventures,
acquisitions or other arrangements, such as joint marketing arrangements and
licensing agreements, which the Company believes would further the Company's
growth and development. No assurance can be given that any such agreements will
result in additional revenue or net income for the Company. See "Use of
Proceeds."

8
<PAGE> 12

Notwithstanding its plan to develop its business as described in this
Prospectus, future events, including the problems, expenses, difficulties,
complications and delays frequently encountered by businesses, as well as
changes in the economic climate or changes in government regulations, may make
the reallocation of funds necessary or desirable. Any such reallocation will be
at the discretion of the Board of Directors. No assurance can be given that any
such businesses can or will be profitably operated.

LACK OF EXPERIENCE IN INTERNATIONAL OPERATIONS

The Company intends to establish manufacturing facilities outside of the
United States and to market its cigars to premium tobacco stores in the
international market. Except for the purchase of tobacco in the international
market, the Company has no experience in conducting business outside the United
States. The establishment and operation of manufacturing facilities outside of
the United States, especially in less developed countries in which the Company
intends to manufacture cigars, is subject to numerous risks,
including political and currency instability, currency controls and exchange
regulations, and import and export regulations, any of which could have a
material adverse effect upon the Company. These factors, as well as
significantly increased competition and regulations of the tobacco industry
internationally, will also affect the Company as it seeks to market its cigars
in the international market. See "Business -- Production and Manufacturing."

CONTINUED CONTROL BY MANAGEMENT AND PRESENT STOCKHOLDERS

As of the date of this Prospectus, approximately 60.3% of the outstanding
shares of Common Stock were owned by the Company's officers and directors.
Following completion of this Offering, such persons will own approximately 44%
of the outstanding Common Stock and may be able to elect all of the directors
and will thus be able to continue to control the Company.

NO PRIOR PUBLIC MARKET

Prior to this Offering, there has been no public trading market for the
Company's securities. Although the Company has applied to have the Common Stock
and Warrants included in The Nasdaq SmallCap(R) Market, there can be no
assurance that an active market in either of such securities will develop, or,
if such a market develops, that it will be sustained.

ARBITRARY OFFERING PRICE AND TERMS; EFFECT OF SEPARATE OFFERING OF COMMON STOCK
AND WARRANTS

The prices of the Common Stock and Warrants and the terms of the Warrants
offered hereby have been determined by negotiations between the Company and the
Underwriter, and do not necessarily bear any relation to the results of the
Company's operations or its financial condition or any other indicia of value.
Furthermore, the shares of Common Stock and Warrants are being offered
separately and not as units, and the Underwriter has no obligation to offer
shares of Common Stock and Warrants to the same purchasers. The market may place
a different relative value on the shares of Common Stock and Warrants than the
Underwriter.

POSSIBLE DELISTING FROM THE NASDAQ STOCK MARKET AND MARKET ILLIQUIDITY

The Company's Common Stock and Warrants, based upon the completion of this
Offering, should meet the current Nasdaq listing requirements and are expected
to be initially included in The Nasdaq SmallCap(R) Market. If the Company is
unable to satisfy Nasdaq's requirements for continued listing, the Common Stock
and Warrants may be delisted from The Nasdaq SmallCap(R) Market. In such event,
trading, if any, in such securities would thereafter be conducted in the
over-the-counter market in the so-called "pink sheets" or the OTC Bulletin
Board, established for securities that do not meet the Nasdaq SmallCap(R) Market
listing requirements. Consequently, the liquidity of the Company's securities
could be impaired, not only in the number of securities which could be bought
and sold, but also through delays in the timing of transactions, reduction in
security analysts' and the news media's coverage of the Company, and lower
prices for the Company's securities than might otherwise be attained.

9
<PAGE> 13

A significant number of shares of Common Stock and Warrants may be sold to
customers of the Underwriter. Such customers may subsequently engage in the sale
or purchase of the securities through the Underwriter. Although there is no
obligation to do so, the Underwriter may become a market maker and otherwise
effect transactions in securities of the Company and may become a dominating
influence in the trading of the securities. The prices and the liquidity of the
securities may be significantly affected by the degree, if any, of the
participation of the Underwriter in such market, should a market arise.

RISKS OF LOW-PRICED STOCKS; PENNY STOCK REGULATIONS

If the Company's securities were delisted from The Nasdaq SmallCap(R)
Market (See "Risk Factors -- "Possible Delisting from The Nasdaq Stock Market
and Market Illiquidity") they may become subject to Rule 15g-9 under the 1934
Act, which imposes additional sales practice requirements on broker-dealers
which sell such securities to persons other than established customers and
institutional accredited investors. For transactions covered by this rule, a
broker-dealer must make a special suitability determination for the purchaser
and have received the purchaser's written consent to the transaction prior to
sale. Consequently, the rule may affect the ability of broker-dealers to sell
the Company's Common Stock and Warrants and may affect the ability of purchasers
in this Offering to sell any of the Common Stock or Warrants acquired pursuant
to this Prospectus in the secondary market.

The Commission's regulations define a "penny stock" to be any equity
security that has a market price (as therein defined) less than $5.00 per share
or with an exercise price of less than $5.00 per share, subject to certain
exceptions. The penny stock restrictions will not apply to the Company's Common
Stock or Warrants if the Common Stock is listed on The Nasdaq SmallCap(R) Market
and has certain price and volume information provided on a current and
continuing basis or meet certain minimum net tangible assets or average revenue
criteria. There can be no assurance that the Company's securities will qualify
for exemption from these restrictions. If the Company's Common Stock or Warrants
were subject to the rules on penny stocks, the market liquidity for the Common
Stock or Warrants could be severely adversely affected.

POTENTIAL ADVERSE EFFECT OF REDEMPTION OF WARRANTS

Commencing one year from the date of this Prospectus, or earlier with the
consent of the Underwriter, the Warrants may be redeemed by the Company at a
redemption price of $.25 per Warrant upon not less than thirty (30) days' nor
more than sixty (60) days' written notice, if the average closing price of the
Common Stock is at least $14.00 per share during the thirty (30) consecutive
trading days ending within ten (10) days of the date the Warrants are called for
redemption. Redemption of the Warrants could force the holders to exercise the
Warrants and pay the exercise price therefor at a time when it may be
disadvantageous for the holder to do so, to sell the Warrants at the then
current market price when they might otherwise wish to hold the Warrants, or to
accept the redemption price, which, at the time the Warrants are called for
redemption, is likely to be substantially less than the market value of the
Warrants. The Company will not call the Warrants for redemption except pursuant
to a currently effective prospectus and registration statement. See "Description
of Securities -- Series A Redeemable Common Stock Purchase Warrants."

CURRENT PROSPECTUS AND STATE REGISTRATION REQUIRED TO EXERCISE WARRANTS

Holders of the Warrants will only be able to exercise the Warrants if (a) a
current prospectus under the Securities Act relating to the shares of Common
Stock issuable upon exercise of the Warrants is then in effect and (b) such
securities are qualified for sale or exemption from qualification under the
applicable securities laws of the states in which the various holders of
Warrants reside. Although the Company has undertaken to use its best efforts to
maintain the effectiveness of a current prospectus covering the Common Stock
underlying the Warrants, and may not call the Warrants for redemption unless
there is a current and effective registration statement covering the issuance of
the Common Stock upon exercise of the Warrants, there can be no assurance that
the Company will be able to do so. Pursuant to Section 10(a)(3) of the
Securities Act, this Prospectus, unless amended or supplemented in accordance
with the rules and regulations of the Commission pursuant to the Securities Act,
may not be used by the Company in connection with the exercise

10
<PAGE> 14

of any Warrants subsequent to nine months from the date of this Prospectus.
Prior to the expiration of nine months from the date of this Prospectus, or such
longer time period permitted under the Act, it may be necessary to amend or
supplement this Prospectus under certain conditions, in which event the Warrants
could not be exercised prior to the date of the amended Prospectus or
supplement. Unless there is an effective and current registration statement
covering the issuance of the Common Stock upon exercise of the Warrants, the
Company will not accept payment for, or issue Common Stock with respect to, the
exercise of any Warrants, and any payments made by a Warrant holder will be
refunded by the Company. The value of the Warrants may be greatly reduced if a
current prospectus covering the Common Stock issuable upon the exercise of the
Warrants is not kept effective or if such securities are not qualified or exempt
from qualification in the states in which the holders of Warrants reside. See
"Description of Securities -- Redeemable Common Stock Purchase Warrants."

The Company has registered or qualified the Warrants for sale in a limited
number of states. The Underwriter anticipates that it will be permitted to sell
the Warrants in the initial public offering in the following states: Colorado,
Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Illinois,
Louisiana, Massachusetts, Mississippi, Oklahoma, New Jersey, New Mexico, New
York, Rhode Island, Texas, Utah, Vermont and West Virginia. The Company is not
aware of any states which prohibit the registration or qualification of
securities of the type offered by the Company and anticipates that the Company's
Securities will qualify for after-market trading in a majority of states within
several months after the completion of the Offering. There can be no assurance
that an exception permitting the exercise of the Warrants will be available in
any jurisdiction other than those in states which the Common Stock and Warrants
were initially registered or are exempt from registration at the time a holder
seeks to exercise Warrants.

POTENTIAL ADVERSE IMPACT OF PREFERRED STOCK ON RIGHTS OF HOLDERS OF COMMON STOCK

The Company's certificate of incorporation authorizes the issuance of
so-called "blank check" preferred stock with the Board of Directors having the
right to determine the designations, rights, preferences and privileges of the
holders of one or more series of Preferred Stock. Accordingly, the Board of
Directors is empowered, without stockholder approval, to issue Preferred Stock
with voting, dividend, conversion, liquidation or other rights which could
adversely affect the voting power and equity interest of the holders of Common
Stock. The Board of Directors has the power to issue shares of Preferred Stock
with the right to vote more than one vote per share. The Preferred Stock could
be utilized as a method of discouraging, delaying or preventing a change of
control of the Company. The possible impact on takeover attempts could adversely
affect the price of the Common Stock. Although the Company has no present
intention to create any series of Preferred Stock or to issue any shares of
Preferred Stock, the Company may issue such shares in the future. The Company
has agreed that for a period of three years from the date of this Prospectus, it
will not create any series of Preferred Stock or issue any shares of Preferred
Stock without the prior written consent of the Underwriter.

NO COMMON STOCK DIVIDENDS ANTICIPATED

The Company presently intends to retain future earnings, if any, in order
to provide funds for use in the operation and expansion of its business and,
accordingly, does not anticipate paying cash dividends on its Common Stock in
the foreseeable future.

SHARES ELIGIBLE FOR FUTURE SALE; OFFERING BY SELLING SHAREHOLDERS

11
<PAGE> 15

outstanding Common Stock. Under Rule 144 unregistered resales of restricted
Common Stock cannot be made until it has been held for two years from the later
of its acquisition from the Company or an affiliate of the Company. Thereafter,
shares of Common Stock may be resold without registration subject to Rule 144's
volume limitation, aggregation, broker transaction, notice filing requirements,
and requirements concerning publicly available information about the Company
(the "Applicable Requirements"). Resales by the Company's affiliates of
restricted and unrestricted Common Stock are subject to the Applicable
Requirements. The volume limitations provide that a person (or persons who must
aggregate their sales) cannot, within any three-month period, sell more than the
greater of (i) one percent of the then outstanding shares, or (ii) the average
weekly reported trading volume during the four calendar weeks preceding each
such sale. A person who is not deemed an "affiliate" of the Company and who has
beneficially owned shares for at least three years would be entitled to sell
such shares under Rule 144 without regard to the Applicable Requirements.

If a public market develops for the Company's Common Stock, the Company is
unable to predict the effect that sales made under Rule 144 or other sales may
have on the then prevailing market price of the Common Stock. Of the 3,586,948
presently outstanding shares of Common Stock, no shares of Common Stock will
become eligible for sale pursuant to Rule 144 until 90 days after the date of
this Prospectus. Thereafter, at various times throughout the two year period
from the effective date of this Offering, 912,448 shares of Common Stock will
become eligible for sale pursuant to Rule 144.

In addition, the holders of 1,056,348 shares of Common Stock and the
holders of 2,530,600 shares of Common Stock have agreed that they will not sell
their shares for 12 months and 16 months, respectively, from the date of this
Prospectus, without the prior approval of the Underwriter (the "Lock-up"). The
Company will file a registration statement covering a secondary offering by
selling shareholders, each of whom will be subject to the Lock-up.

12
<PAGE> 16

DILUTION

The net tangible book value of the Company's Common Stock at March 31, 1996
was approximately $0.38 per share. Net tangible book value represents the amount
of the Company's tangible assets reduced by the amount of its liabilities. After
taking into effect the net change in net tangible book value of the Company
after March 31, 1996, as a result of common stock issued and the sale of the
1,325,000 shares of Common Stock and 1,325,000 Warrants pursuant to this
Offering, after deducting fees and other estimated expenses of the Offering, the
Company's net tangible book value as of March 31, 1996 would have been
approximately $2.00 per share. This amount represents an immediate increase in
net tangible book value per share of approximately $1.62 to the present
stockholders and an immediate dilution (the difference between the offering
price of the Shares and the net tangible book value per share after the
Offering) of approximately $5.00.

The following table illustrates the dilution of one share of Common Stock
as of March 31, 1996:

<TABLE>
<S> <C> <C>
Offering price per share of Common Stock............................... $7.00
Net tangible book value per share at March 31, 1996.................... $0.38
Increase per share attributable to sale of shares after
May 31, 1996 through the date of this prospectus..................... 0.16
Increase per share attributable to sale of the Shares.................. 1.41
Increase per share attributable to sale of Warrants.................... 0.05
-----
Pro forma net tangible book value per share after offering............. 2.00
-----
Dilution to investors.................................................. $5.00*
=====
</TABLE>

- ---------------

* If the Underwriter exercises the over-allotment option in full, the pro forma
net tangible book value would be $2.17 per share of Common Stock, resulting in
an increase in the net tangible book value per share of $1.79 and dilution to
the public investors of $4.83 per share.

The following tables summarize, as of the date of this Prospectus, the
number of shares of Common Stock purchased from the Company, the total
consideration and the average price per share paid to the Company for the Common
Stock outstanding prior to this Offering and to be paid by the purchasers of the
Shares:

<TABLE>
<CAPTION>
SHARES OF PERCENT TOTAL PERCENT AVERAGE
COMMON OF CASH OF TOTAL PRICE
STOCK TOTAL CONSIDERATION CONSIDERATION PER
PURCHASED SHARES PAID PAID SHARE
--------- ------- ------------- ------------- -------
<S> <C> <C> <C> <C> <C>
Existing Stockholders.......... 3,586,948 73.02% $ 2,649,101 22.22% $0.74
Public Purchasers.............. 1,325,000 26.98% 9,275,000 77.78% $7.00
------ ---- -------- -----
Total................ 4,911,948 100.00% $ 11,924,101 100.0%
====== ==== ======== =====
</TABLE>

13
<PAGE> 17

USE OF PROCEEDS

The net proceeds from the sale of the Securities offered hereby, estimated
at approximately $7.9 million after deducting estimated costs of this Offering,
will be used substantially as follows:

(a) Approximately $2.0 million (25% of the net proceeds) to expand its
retail operations(1). See "Business -- Marketing."

(b) Approximately $1.7 million (22%) to purchase tobacco for future
production(2). See "Business -- Production and Manufacturing."

(c) Approximately $1.2 million (15%) to increase its manufacturing
operations, including the lease of additional plant facilities and the
hiring of additional manufacturing personnel(3). See "Business --
Production and Manufacturing."

(d) Approximately $1.0 million (13%) to expand its wholesale
distribution network(4). See "Business -- Marketing."

(e) The balance of approximately $2.0 million (25%) will be used for
working capital and other corporate purposes, including the purchasing of
tobacco inventory for current use.

None of the proceeds of this Offering are allocated to pay obligations to
any officers, directors or principal stockholders. However, the Company has
agreements with Mr. Kevin Doyle, president and chief executive officer, Mr.
Thomas R. Dilk, chief financial officer and one employee of the Company who is a
principal stockholder, pursuant to which the Company is paying salaries at the
aggregate annual rate of $274,000. See "Management -- Remuneration". To the
extent that the Company's operations do not generate sufficient cash to enable
it to pay such compensation, a portion of the proceeds of this Offering
allocated to working capital may be used for such purposes.

The foregoing represents the Company's best estimate of its allocation of
the proceeds of this Offering based upon the present state of its business,
operations and plans, current business conditions and the Company's evaluation
of the market for cigars. Management will have broad discretion to determine the
use of a substantial portion of the proceeds of this Offering, and conditions
may develop which could cause management to reallocate proceeds from the
categories listed above, including difficulties encountered in implementing its
proposed expanded marketing program, other problems encountered in the Company's
business and changes in government policy, none of which can be predicted with
any degree of certainty. Furthermore, future events, including the problems,
expenses, difficulties, complications and delays frequently encountered by new
businesses, as well as changes in the economic climate and changes or
anticipated changes in government regulations may make the reallocation of funds
necessary or desirable. Any such reallocation will be at the discretion of the
Board of Directors.

The Company believes that the net proceeds from this Offering will be
sufficient to satisfy the Company's cash requirements for at least twelve months
following the date of this Prospectus. However, it is possible that conditions
may arise as a result of which the Company may require additional capital prior
to the expiration of such period, and no assurance can be given that the Company
will be able to obtain any or adequate funds when required or that any funds
available to it will be on reasonable terms.

- ---------------

(1) The Company plans to open approximately five retail locations in the next 12
months. ($2.0 million).

(2) To insure its future ability to produce cigars from properly aged tobacco,
the Company plans to invest in and store an inventory of premium tobacco.
($1.7 million).

(3) The Company intends to complete the expansion of its Miami facility, and
will complete the construction, furnishing and staffing for its facility in
the Dominican Republic. ($1.2 million).

(4) The Company intends to expand its activities in the wholesale distribution
of cigars manufactured by others, and will commence alternative distribution
for cigars and accessories. This expansion includes additional personnel,
increased capacity for shipping and handling of products, and an upgrade in
computer systems ($1.0 million).

14
<PAGE> 18

The Company may use a portion of the proceeds of this Offering in
connection with joint ventures, acquisitions or other arrangements, such as
joint marketing arrangements and licensing agreements, which management deems
necessary or desirable in connection with the development of the Company's
business and related activities. The Company has not entered into any letters of
intent or agreements with respect to any such arrangements or transactions and
has no informal agreement with respect to any such transaction. The Company
anticipates that it will use all proceeds received in connection with the
exercise of the Warrants for working capital and other corporate purposes.

Pending the application of the funds as described above, said funds will be
invested in high quality short-term interest-bearing deposits and securities.

15
<PAGE> 19

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
March 31, 1996, and as adjusted to reflect the sale of the Securities offered
hereby:

<TABLE>
<CAPTION>
MARCH 31, 1996
-------------------------------
AS
ACTUAL ADJUSTED(1)(3)
---------- ----------------
<S> <C> <C>
Long-term liabilities due to Stockholder:....................... $ 49,621 $ 49,621
Stockholders' equity:
Preferred Stock, par value $.001 per share, 2,000,000 shares
authorized, none issued or outstanding..................... -- --
Common Stock, par value $.001 per share, 10,000,000 shares
authorized, 3,408,369 shares issued and outstanding and
4,911,948 outstanding as adjusted(2)....................... 3,408 4,912
Additional paid-in capital.................................... 1,852,945 10,408,468
Accumulated deficit........................................... (550,743) (569,839)
Unearned compensation........................................... (11,320) (6,724)
---------- -----------
Total stockholders' equity...................................... 1,294,290 9,836,817
---------- -----------
Total capitalization............................................ $1,343,911 $ 9,886,438
========== ===========
</TABLE>

- ---------------
(1) Adjusted to reflect the sale of 181,329 shares of Common Stock at $3.50 per
share prior to the date of this Prospectus.

(2) Does not include an aggregate of 937,500 shares of Common Stock reserved for
issuance as follows: (a) 500,000 shares for issuance pursuant to the
Company's 1996 Long-Term Incentive Plan, (b) 308,000 shares upon the
exercise of outstanding options plus 29,500 shares upon the exercise of
outstanding warrants and (c) 100,000 shares for issuance pursuant to the
Company's Non-Employee Directors Stock Option Plan.

16
<PAGE> 20

SELECTED FINANCIAL INFORMATION

Set forth below is selected financial information with respect to the
Company for the period ended March 31, 1996 and the period from inception
(October 3, 1994) to March 31, 1995. The selected financial information has been
derived from the financial statements which appear elsewhere in this Prospectus.
This data should be read in conjunction with the financial statements of the
Company and the related notes which are included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
INCEPTION TO
MARCH 31, 1996 MARCH 31, 1995
-------------- --------------
<S> <C> <C>
EARNINGS DATA:
Sales........................................................... $ 820,950 $ 88,332
Cost of sales................................................... 592,258 51,953
---------- ----------
Gross Profit.................................................. 228,692 36,379
Operating costs and expenses.................................... 723,026 48,151
---------- ----------
Loss from operations.......................................... (494,334) (11,772)
Interest expense................................................ 27,253 --
---------- ----------
Loss before provision for income taxes.......................... (521,587) (11,772)
Provision for income taxes...................................... -- --
---------- ----------
Net loss........................................................ $ (521,587) $ (11,772)
========== ==========
Weighted average shares outstanding............................. 3,255,135 3,228,764
Loss per share.................................................. $ (0.16) $ (0.00)
========== ==========
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1996 MARCH 31, 1995
-------------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital (deficiency).................................... $888,542 $ (519)
Total assets.................................................... 1,658,402 24,059
Total liabilities............................................... 364,112 35,831
Stockholder's equity (deficit).................................. 1,294,290 (11,772)
</TABLE>

17
<PAGE> 21

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

PERIODS ENDED MARCH 31, 1996 AND 1995

The Company was founded in October 1994. The results of operations for the
year ended March 31, 1996 are not readily comparable with the results of
operations for the period from inception (October 3, 1994) to March 31, 1995,
which is referred to as the six months ended March 31, 1995. During the six
months from inception to March 31, 1995, the Company's sole business was the
operation of one retail store in Key Largo, Florida. This was operated as a sole
proprietorship by Mr. Kevin Doyle, president of the Company, and sold cigars
manufactured by others. During the last half of the fiscal year ended March 31,
1996, the Company expanded its retail operations, commenced manufacturing cigars
and established distribution channels to premium tobacco stores.

The Company's sales for 1996 were approximately $821,000, representing an
increase of 833% from the Company's sales for the six months ended March 31,
1995, which were approximately $88,000. This increase is attributed to the
increase in volume. The primary source of revenue for 1996 was from retail sales
at the Key Largo store, which was open for twelve months, and the South Beach
store, which was open for approximately one month. The combined sales of these
stores was approximately $545,000 or 67% of total sales. The remaining sales of
$277,000, or 33% of revenue, was attributable to wholesale sales from the
factory which opened in December 1995. The Company's sales for the six months
from inception through March 31, 1995 were entirely from sales from its Key
Largo retail store.

Gross profit increased to approximately $229,000, or approximately 28% of
sales, in fiscal 1996 as compared to approximately $36,000, or approximately 41%
of sales in the six months ended March 31, 1995, an increase of 536%. The
decline in gross margin reflects (i) the commencement of manufacturing in
December 1995 and the accompanying inefficiencies reflecting start-up and
training costs of $38,000; (ii) the establishment of a cigar box manufacturing
division, which was necessitated by the inability to purchase an adequate supply
of boxes from outside sources, resulting in higher costs for boxes of $39,000;
and (iii) lower margins from wholesale sales than from retail sales resulting in
a $30,000 decline in the gross margin.

Selling expenses for the year ended March 31, 1996 were approximately
$385,000 as compared to $41,000 for the six months ended March 31, 1995,
representing an 838% increase. The increase in selling expenses reflects the
expanded nature of the Company's operations. During fiscal 1996, the Company
expanded its marketing efforts as it expanded its retail base with the opening
of a second store late in the fiscal year and the commencement of a wholesale
marketing effort. During the six months ended March 31, 1995, the Company had
only modest selling expenses relating to its one retail store in Key Largo.

General and administrative expenses for the year ended March 31, 1996 were
approximately $338,000 reflecting the expanded nature of the Company's
operations and include $165,000 for salaries and related costs; and $69,000 for
professional fees. Pursuant to a compensation agreement with the chief financial
officer, compensation of $40,000 was paid in the form of Common Stock. During
the six months ended March 31, 1995, general and administrative expenses were
$7,200.

Interest expense was approximately $27,000 for fiscal 1996 and includes the
value of shares of Common Stock issued with the debt obligations. The Company
had no debt obligations in the six months ended March 31, 1995.

As a result of the foregoing factors, the Company sustained losses of
approximately $522,000, or $.16 per share, for 1996, as compared with a loss of
approximately $12,000, or $.00 per share, for the six months ended March 31,
1995.

During the quarter ended June 30, 1996, the Company changed the name of its
Santiago Cabana cigar line to Signature Collection by Santiago Cabana. The
Company does not believe that such a change will have a material adverse effect
on the Company's business.

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LIQUIDITY AND CAPITAL RESOURCES

At March 31, 1996, the Company had working capital of approximately
$889,000. Since its inception, it has sustained losses of approximately
$534,000. Its operations through March 31, 1996, were funded principally through
a $250,000 loan from investors in October 1995, and the sale of Common Stock
during the period from December 1995 through May 1996 which raised gross
proceeds of approximately $2,385,000, which was used for working capital and
other corporate purposes.

In April 1996, the Company entered into an agreement for the future
purchase of tobacco at an estimated cost of $525,000, of which $300,000 has been
deposited as of the date of this Prospectus. The Company anticipates expansion
of its retail operations and plans to open approximately five retail locations
in the next twelve months. The Company believes that the net proceeds from the
sale of the Common Stock and Warrants pursuant to this Prospectus together with
the sales of its products will be sufficient to fund its operations for the
balance of fiscal 1997 and for fiscal 1998, and that it will have sufficient
cash resources to finance its commitments pending the successful completion of
this Offering.

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BUSINESS

INTRODUCTION

The Company is a vertically integrated manufacturer, distributor and
retailer of premium cigars. The Company's cigars are hand produced, using fine
aged tobacco and traditional rolling techniques. The cigars are sold under the
premium brand names of Signature Collection by Santiago Cabana, Havana Classico
and Calle Ocho. The Company also markets three flavored cigars -- Rum Runner,
West Indies Vanilla and Island Amaretto, which use premium tobacco and are
flavored with rum, vanilla and amaretto extracts.

The Company commenced operations in 1994 when Kevin Doyle, president of the
Company, opened a cigar store in Key Largo, Florida. In early 1996, the Company
opened a second retail store in the South Beach section of Miami, Florida. A
third retail store in Key West, Florida is presently under construction and is
scheduled to be opened in August 1996. The Company's cigar stores sell its
cigars as well as other premium cigars and related products. The Company also
sells its cigars at its factory store in Miami, Florida.

In early 1995, the Company took two steps to expand its operations beyond
the one retail store in Key Largo. The first step was the development of a
unique tobacco blend that became the foundation of the Company's first cigar
line, Signature Collection (then known as Santiago Cabana). The second step was
the lease of a manufacturing facility at which a staff of full-time master
craftsmen were hired to hand-roll cigars. The factory is designed after a
traditional Cuban cigar factory. Such factories utilize a hand-made
manufacturing process, which effects the manner in which tobacco leaves are
processed, aged and made into cigars. The Company's factory has a current
capacity to produce approximately 1.5 million premium cigars per year.

PRODUCT LINES

Premium Brands

Premium cigars are generally defined according to three criteria: (i) the
cigars are made completely by hand; (ii) the cigars consist of long-filler
tobacco; and (iii) the cigars retail at a price range from $1 to more than $20
each.

Hand-rolled cigars consist of three different categories of tobacco -- the
filler is the tobacco in the cigar, the binder is the leaf that binds the filler
together and the wrapper is the tobacco leaf that wraps around the rolled
tobacco and finishes the cigar. A premium cigar uses only long-filler tobacco,
binders and wrappers that are composed solely of tobacco leaf. Long-filler
tobacco consists of half tobacco leaves rolled up whereas short-filler tobacco
consists of smaller pieces of tobacco, including the portions of the long-filler
tobacco which are cut and discarded in producing premium cigars. The quality of
a premium cigar is based on the quality of the tobacco used for the filler,
binder and wrapper. Cigars that are not premium cigars typically use short-
filler, and may be wholly or partially manufactured by machine.

The Company has developed and markets a full line of premium cigars, which
are sold under the brand names of Signature Collection, Havana Classico and
Calle Ocho. Each of these cigars is offered in eight sizes and ring gauges and
sells at retail prices ranging from $4.95 to $17.00, depending on the size with
an average price between $6.00 to $8.00. Each brand of premium cigars is a blend
of premium selected tobaccos. Such tobaccos are combined according to
brand-specified formulas to create the cigar. In the Company's premium cigars,
the wrapper, binder and filler are natural tobacco leaf and is formulated by the
Company to meet the tastes of premium cigar buyers. The tobaccos for each cigar
are grown in up to five countries, including the Dominican Republic, Nicaragua,
Honduras, Ecuador and Mexico. The cigar wrapper is a different premium tobacco
leaf.

Signature Collection, which is the Company's first cigar, was introduced in
September 1995. Havana Classico was introduced in December 1995, and Calle Ocho
was introduced in April 1996. The Company intends to develop additional lines of
premium cigars as part of the expansion of its marketing and manufacturing
operations. These lines may be designed to sell at retail at prices lower than
its present lines in an attempt to expand its customer base.

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Flavored Brands

In addition to the premium brands, the Company also offers three flavored
cigars -- Rum Runner, a rum-flavored cigar, West Indies Vanilla, a
vanilla-flavored cigar, and Island Amaretto, an amaretto-flavored cigar. The
flavorings in these cigars are extracts, which are purchased by the Company.
These cigars use premium tobacco, however, the tobacco is short-filler which is
generated from the manufacture of the premium cigar brands. Each of the flavored
cigars is offered in three sizes and sells at retail prices in the $2.00 to
$2.50 range. The Company intends to introduce new flavors, sizes, and packaging
for its flavored cigars.

Private Label and Custom Brands

The Company also offers certain of its existing cigar lines, as well as
cigars manufactured by others, to the private label market. This market consists
of organizations, such as mass market retailers, hotels, restaurants and clubs,
and special events. The Company's sales to the private label market through
March 31, 1996 have been almost exclusively sales of cigars manufactured by
others. At present, the Company is negotiating with additional suppliers and
customers to expand its private label operations, although no assurance can be
given that the Company will be successful in these efforts. The Company believes
that it will continue to purchase cigars manufactured by others as they become
available on the open market, from time to time. The Company is not party to any
purchase agreements for such cigars, which are purchased on a spot basis as
needed.

THE MARKET

The Company believes that there is an increasing market for cigars.
Industry reports show that worldwide cigar sales increased in 1994 for the first
time since 1970. Cigar sales in 1970 amounted to just under 8 billion cigars.
The number of cigars sold decreased significantly and, in 1994, cigar sales were
approximately 2.3 billion cigars. Although sales in the United States are still
much lower than they were in the 1970s and 1980s (due, in significant part, to a
well-developed anti-smoking movement and smoking restrictions), sales in 1995
increased approximately 28% from 1994 to nearly 2.6 billion cigars. It is
estimated that cigar sales in the United States amount to more than $1 billion
at the retail level.

The Company believes, based on estimates from the Cigar Association of
America, that the market for premium cigars is currently growing. According to
industry statistics, sales of premium cigars account for approximately 6.5% of
the United States cigar market. The number of premium cigars sold has increased
each year since 1991, and sales of premium cigars in 1995 represented a 30.6%
increase of the number sold in 1994. The Company is seeking to take advantage of
this trend, however, no assurance can be given that the trend will continue or
that the Company will benefit from any growth in the premium cigar market.

MARKETING

Wholesale Distribution

The Company sells its premium cigars to tobacco stores and tobacco
departments of retail stores that sell a range of premium cigars and tobacco
products. The Company also sells certain of its existing cigar lines, as well as
premium cigars manufactured by others, for the private label market. This market
consists of organizations, such as mass market retailers, hotels, restaurants
and clubs, and sponsors of special events, which would sell the cigars either
under their own brand name or a brand name developed by the Company.

The Company does not have a significant marketing staff and most of its
sales to date have resulted from favorable press, advertising in the trade press
and customer response to the Company's cigars. The Company intends to expand its
wholesale distribution following completion of this Offering by (a) implementing
a marketing program directed at premium tobacco stores both within and outside
the United States through the use of both commission salespersons and
independent distributors, (b) marketing newly developed premium cigars
manufactured by the Company and premium cigars manufactured by others to the
private label market, and (c) introducing additional lines of premium cigars and
marketing such cigars as well as its flavored cigars through additional
distribution channels.

Retail

The Company's retail stores are located in the South Florida resort areas
and are designed to attract the attention of both the tourist and the premium
cigar smoker. To differentiate the Company's retail shops from

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<PAGE> 25

other high-end tobacco stores, the Company is reintroducing the roller to the
buyer by providing each shop with an on-site roller. The Company believes that
the experience of seeing a cigar being constructed is something few consumers
have experienced. During the earlier part of this century, most cigars were sold
in drugstore-type shops where an on-site roller produced and immediately sold
his or her cigars. Each shop's on-site master cigar craftsman provides customers
with an entertaining and educational experience.

The initial store, in Key Largo, was opened in October 1994 by Mr. Kevin
Doyle, president of the Company, under the name Caribbean Cigar Factory. In
March 1996, the Company opened its second store in the South Beach section of
Miami Beach, Florida. The third store, which is under construction, is scheduled
to open in August 1996 in Key West, Florida. The retail stores sell, in addition
to the Company's cigars, other premium cigars brands and related products.
Retail sales of cigars are comprised of Company manufactured brands
(representing approximately 65% of sales) and cigars manufactured by others
(representing approximately 35% of sales).

The Company's retail stores provide the Company with both sales of cigars
and tobacco products as well as names for inclusion on the Company's mailing
list. The Company intends to use its mailing list to distribute catalogs, the
first of which is scheduled for the second half of 1996, direct mail
solicitations and a monthly newsletter, which would include any information
relating to new and potential products. The Company intends to expand its mail
order business through the purchase and use of available mailing lists which the
Company believes are targeted to premium cigar smokers.

Following the completion of this Offering, the Company intends to expand
its retail operations through the opening of additional retail stores, both in
South Florida and in other cities in the United States in which it believes
there is a local market for premium cigars. In particular, the Company intends
to open 3 stores in the fall or winter of 1996 and 2 additional stores by mid
1997.

Advertising and Promotions

The Company supports both the wholesale and retail distribution of its
cigars through advertising in numerous publications, including Cigar Aficionado,
Tobacconist, Smokeshop and Smoke magazines, along with general circulation
publications oriented to the type of person who, the Company believes, would
smoke premium cigars. In this connection, the Company intends to use other
marketing techniques that have been identified as contributing to the increased
interest in premium cigars, including, but not limited to, the sponsorship of
cigar evenings at hotels, restaurants and clubs throughout the United States.
The Company intends to expand its advertising and marketing through promotions
distributed at point of sale and through direct mail. The Company also
participates in trade shows throughout the United States.

PRODUCTION AND MANUFACTURING

Each of the Company's three premium cigar brands is hand rolled at the
Company's manufacturing facility in Miami, Florida. The manufacturing process
for premium cigars includes the selection, purchase and aging of the tobacco and
the hand rolling of the cigars. The tobacco is selected by the Company based
upon the flavor and quality of the tobacco. The availability and quality of
tobacco varies from season to season as a result of such factors as weather
conditions and the demand for the tobacco. As a result of the difference in
taste between different lots, the Company is continuously reformulating the
tobaccos in its premium cigars in order to maintain a consistent taste.

The taste of the cigar is based on the quality and blend of the tobacco.
The Company's premium cigars use a blend of imported fine aged tobaccos. After
tobacco is grown, it is typically aged for a period of between 18 months to two
years. This aging process releases ammonia, which is naturally occurring in
tobacco, and is believed to reduce the overall nicotine content in the tobacco.
The time period for aging has been substantially reduced in recent months due to
the high demand for tobacco worldwide.

The particular tobacco blend for each of the Company's cigars is formulated
from two to four different tobaccos. The Company's premium cigars use
long-filler tobacco from the Dominican Republic, Nicaragua, Honduras, Ecuador
and Mexico. The production process begins as each type of tobacco leaf is placed
in different boxes at the roller's desk, and the roller is given the formula for
the cigar he or she is making. The roller takes the leaves and presses them
together in their hand; then places the leaves on a binder leaf (a flat elastic
leaf of tobacco). The roller then rolls them together into a "bunch," cuts them
to the appropriate length

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and places them in the bottom half of a wooden mold. After setting the upper
half of the mold in place, the entire box is put into a screw press. The press
operator will usually break down the press once, turn the "bunch" inside the
mold and then re-box and press the "bunch" again. The total pressing time is
approximately one hour. The roller removes the "bunch" and wraps it with the
wrapper leaf (a supple, very elastic leaf that has been cut in half). Keeping
constant pressure on the "bunch" and the wrapper, the cigar maker rolls the leaf
around the "bunch" and applies a bit of vegetable glue to bond the wrapper leaf
together at the head. This prevents the cigar from unraveling. Supervisors
inspect cigars by hand. They feel them for weight and for hard spots (which can
cause an uneven burn). In addition, the cigars are weighed in bunches of 50 to
ensure consistency in weight. If the inspector finds any variations in the
cigar's quality, consistency or weight he will reject the cigars. The completed
cigars are then aged for at least 30 days. The finished cigars are then packed
in the Company's Spanish cedar cigar boxes, and shipped to customers or retail
outlets.

The Company's flavored cigars are manufactured from short-filler tobacco
using a proprietary flavoring process. The cigars are made by using tobacco
generated from the manufacture of the premium cigar brands. This tobacco is then
combined, flavored and sold through the Company's wholesale, retail and mail
order channels.

The Company organized a wholly-owned subsidiary in the Cayman Islands under
the name Caribbean Cigar Company (Cayman) Limited (the "Cayman Subsidiary") to
conduct the Company's anticipated offshore manufacturing operations. The Company
believes the Dominican Republic is an excellent location for the expansion of
its manufacturing operations based on a number of factors, including, the
availability of an economical labor pool, access to tobacco and advantageous tax
treatment. The Company, through the Cayman Subsidiary, is negotiating to lease
production facilities in the Dominican Republic, however, no assurance can be
given that the Company will be able to negotiate a lease or manufacture cigars
to the Company's standards. In the event that the Company is not successful in
establishing a manufacturing facility in the Dominican Republic, it will seek,
with no assurance of success, to establish such a facility in another country in
which the Company believes there is a substantial and economical labor pool. The
Company also intends to expand the factory in Miami, Florida in order to
increase the number of rollers in production and to create a larger facility for
the Company's administration and marketing staff.

RAW MATERIALS

The Company uses tobaccos from the Dominican Republic, Nicaragua, Honduras,
Ecuador and Mexico, and the Company does not believe that it is dependent upon
any single source for tobacco. Each buying season, the Company analyzes and
evaluates the tobacco producing markets worldwide. The Company seeks to source,
to the extent available, aged leaf that can be blended and matched to the taste
profile of the Company's cigars. The Company has no long-term commitment to
purchase tobacco. In addition, the Company has purchased and has allocated a
percentage of the proceeds of this Offering for, tobacco for future delivery.

The Company, and the cigar industry in general, has recently experienced
shortages in certain types of natural wrapper and filler due to the increase in
demand for tobacco for premium cigars. Although the shortages have not
materially impacted cigar production, no assurances can be made that future
shortages will not have an adverse effect on the Company. In view of both the
potential shortages and the recent practices of certain suppliers of selling
tobacco before it is fully aged, the Company intends to use a portion of the
proceeds of the Offering to purchase tobacco for future use as well as for
current inventory. See "Use of Proceeds." The Company believes that by
purchasing tobacco for future use, the Company can be in a better position both
to age the tobacco, which improves the taste, and to reduce the risks of tobacco
shortages.

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COMPETITION

The tobacco industry in general, including the cigar industry, is dominated
by a small number of companies which are well known to the public. The Company
believes that, as a manufacturer of premium cigars, it competes with a smaller
number of domestic and foreign companies that specialize in premium cigars and
certain larger companies that maintain premium cigar lines, including
Consolidated Cigar, Culbro Corporation and General Cigar Company. However, the
market for premium cigars constitutes a small portion of the cigar market. The
Company believes that smokers of premium cigars purchase cigars based on the
perceived quality of the tobacco and the taste profile of the cigar. The process
of producing premium cigars is not patented, but is based on the know-how and
experience of master craftsmen who can identify and purchase the tobacco and
roll the tobacco into premium cigars. The principal characteristics that
differentiate one premium cigar from another are the quality of the tobacco in
the cigar, the quality of the tobacco used as a cigar wrapper and the quality of
the rolling. Cigars are a natural product, therefore the taste profile of cigars
is not uniform and tastes are subject to change. No assurance can be given as to
the market for the Company's cigars in the future or the ability of the Company
to compete successfully or market its cigars successfully.

GOVERNMENT REGULATION; TOBACCO INDUSTRY LITIGATION

The tobacco industry, in general has been subject to regulation by Federal,
state and local governments, and recent trends have been toward increased
regulation. Such regulations include labeling requirements, limitations on
advertising and prohibition of sales to minors, laws restricting smoking from
public places including offices, office buildings, restaurants and other eating
establishments. Because the tobacco for the Company's cigars is hand rolled, the
Company's factory may become subject to increased regulation under Federal and
state health and safety regulations. In addition, cigars have been subject to
excise taxation at the Federal, state and local level, and such taxation may
increase in the future. Tobacco products are especially likely to be subject to
increases in excise taxation because of the detrimental effects of tobacco on
the health of both smokers and others who inhale secondary smoke. No assurance
can be given that future regulations and tax policies will not have a material
adverse affect upon the ability of cigar companies, including the Company, to
generate revenue and profits.

Excise Taxes. Effective January 1, 1991, the federal excise tax rate on
large cigars (weighing more than three pounds per thousand cigars) was increased
to 10.625%, capped at $25.00 per thousand cigars, and again increased to 12.75%,
capped at $30.00 per thousand cigars, effective January 1, 1993. However, the
base on which the federal excise tax is calculated was lowered effective January
1, 1991 to the manufacturer's selling price, net of the federal excise tax and
certain other exclusions. The excise tax on pipe tobacco increased effective
January 1, 1993 to $0.675 per pound. The federal excise tax on little cigars
(weighing less than three pounds per thousand cigars) increased from $0.75 per
thousand cigars to $0.9375 per thousand cigars effective January 1, 1991. The
excise tax on little cigars increased to $1.125 per thousand cigars effective
January 1, 1993. The Company does not believe that the current level of excise
taxes will have a material adverse effect on the Company's business, but there
are no assurances that additional increases will not have a material adverse
effect on the Company's business.

Cigars and pipe tobacco are also subject to certain state and local taxes.
Deficit concerns at the state level continue to exert pressure to increase
tobacco taxes. Since 1964, the number of states that tax cigars has risen from
six to forty-one. Since 1988, the following eleven states have enacted excise
taxes on cigars, where no prior tax had been in effect: California, Connecticut,
New Jersey, New York, North Carolina, Ohio, Rhode Island, Illinois, Missouri,
Michigan and South Dakota. State excise taxes generally range from 2% to 75% of
the wholesale purchase price. In addition, the following seven states have
increased existing taxes on large cigars since 1988: Arkansas, Idaho, Iowa,
Maine, New York, North Dakota and Washington. The following five states tax
little cigars at the same rates as cigarettes: California, Connecticut, Iowa,
Oregon and Tennessee. Except for Tennessee, all of these states have increased
their cigarette taxes since 1988.

State cigar excise taxes are not subject to caps similar to the federal
cigar excise tax, therefore, although the Company does not believe that state
excise taxes have a material adverse effect on the Company's business, there are
no assurances that increases in such state excise taxes or new state excise
taxes will not in the future have a material adverse effect on the Company's
business.

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Health Regulations. Cigar manufacturers, like other producers of tobacco
products, are subject to regulation in the U.S. at the federal, state and local
levels. Together with changing public attitudes toward smoking, a constant
expansion of smoking regulations since the early 1970s has been a major cause
for the decline in consumption. Moreover, the trend is toward increasing
regulation of the tobacco industry.

In recent years, a variety of bills relating to tobacco issues have been
introduced in the Congress of the United States, including bills that would have
prohibited the advertising and promotion of all tobacco products and/or
restricted or eliminated the deductibility of such advertising expenses; set a
federal minimum age of 18 years for use of tobacco products; increased labelling
requirements on tobacco products to include, among other things, addiction
warnings and lists of additives and toxins; modified federal preemption of state
laws to allow state courts to hold tobacco manufacturers liable under common law
or state statutes; and shifted regulatory control of tobacco products and
advertisements from the Federal Trade Commission to the U.S. Food and Drug
Administration (the "FDA"). In addition, in recent years, there have been
proposals to increase tobacco excise taxes. In some cases, hearings were held,
but only one of these proposals was enacted, namely, that states, in order to
receive full funding for federal substance abuse block grants, establish a
maximum age of 18 years for the sale of tobacco products along with an
appropriate enforcement program. The law requires that states report on their
enforcement efforts. Future enactment of the other bills may have an adverse
effect on the sales or operations of the Company.

In addition, the majority of states restrict or prohibit smoking in certain
public places and restrict the sale of tobacco products to minors. Such places
where the majority of states have prohibited smoking include: any public
building designated as non-smoking; elevators; public transportation;
educational facilities; health care facilities; restaurants and workplaces.
Local legislative and regulatory bodies have also increasingly moved to curtail
smoking by prohibiting smoking in certain buildings or areas or by requiring
designated "smoking" areas. In a few states, legislation has been introduced,
but has not passed, which would require all little cigars sold in those states
to be "fire-safe" little cigars, i.e., cigars which extinguish themselves if not
continuously smoked. Passage of this type of legislation and any other related
legislation could have a materially adverse effect on the Company's cigar
business because of the technological difficulties in complying with such
legislation. There is currently an effort by the federal Consumer Product Safety
Commission to establish such standards for cigarettes. The enabling legislation,
as originally proposed, included little cigars. However, little cigars were
deleted due to the lack of information on fires caused by these products.

Although federal law has required health warnings on cigarettes since 1965,
there is no federal law requiring that cigars or pipe tobacco carry such
warnings. However, California requires "clear and reasonable" warnings to
consumers who are exposed to chemicals known to the state to cause cancer or
reproductive toxicity, including tobacco smoke and several of its constituent
chemicals. Violations of this law, Proposition 65, can result in a civil penalty
not to exceed $2,500 per day for each violation. Although similar legislation
has been introduced in other states, no action has been taken.

During 1988, 26 manufacturers of tobacco products, including the largest
mass-marketers of cigars, entered into a settlement of legal proceedings filed
against them pursuant to Proposition 65. Under the terms of the settlement, the
defendants agreed to label retail packages or containers of cigars, pipe
tobaccos and other smoking tobaccos other than cigarettes manufactured or
imported for sale in California with the following specified warning label:
"This Product Contains/Produces Chemicals Known To The State of California To
Cause Cancer, And Birth Defects or Other Reproductive Harm." Although the
settlement of the Proposition 65 litigation by its terms only impacts
California, it is not practical for national cigar manufacturers to confine
their warning labels to cigars earmarked for sale in California. Consequently,
since 1988, most cigars sold in the United States carry cancer warning labels.

The U.S. Environmental Protection Agency (the "EPA") has recently published
a report with respect to the respiratory health effects of passive smoking,
which report concluded that widespread exposure to environmental tobacco smoke
presents a serious and substantial public health impact. In June 1993, Philip
Morris and five other representatives of the tobacco manufacturing and
distribution industries filed suit against the EPA seeking a declaration that
the EPA does not have the statutory authority to regulate environmental tobacco
smoke, and that, in view of the available scientific evidence and the EPA's
failure to follow its own

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guidelines in making the determination, the EPA's final risk assessment was
arbitrary and capricious. The litigation is still pending.

The FDA has proposed rules to regulate cigarettes and smokeless tobacco in
order to protect minors. Although the FDA has defined cigarettes in such a way
as to include little cigars, the ruling does not directly impact large cigars.
However, once the FDA has successfully exerted authority over any one tobacco
product, the practical impact would be felt by manufacturers of any tobacco
product. If the FDA is successful, this may have long-term repercussions on the
large cigar industry.

Tobacco Industry Litigation. Historically, the cigar industry has not
experienced material health-related litigation, and, to date, the Company has
not been the subject of any material health-related litigation. However,
litigation against leading United States cigarette manufacturers seeking
compensatory and, in some cases, punitive damages for cancer and other health
effects alleged to have resulted from cigarette smoking is pending.

Several states have sued tobacco companies seeking to recover the monetary
benefits paid under Medicaid to treat residents allegedly suffering from
tobacco-related illnesses. Florida and Massachusetts have enacted statutes
permitting suit against the tobacco companies to recoup such Medicaid costs, and
recently, one defendant has entered into a settlement with such plaintiff
states, which provides that the settling defendant will, among other things, pay
a portion of its profits in the future to the plaintiff. Under the Florida
statute, many of the tobacco companies' traditional defenses, such as assumption
of risk, are vitiated. The statute also permits the state to establish causation
(that smoking causes cancer, heart disease and other ailments) through the use
of purely statistical evidence. The tobacco companies have filed suit
challenging the Florida law as unconstitutional.

A class action suit, Castano v. American Tobacco, et al. has been filed in
federal district court in New Orleans against the entire cigarette industry. On
February 17, 1995, the district court granted plaintiffs' motion for class
certification with regard to the liability issues of fraud, breach of warranty
(express or implied), intentional tort, negligence and strict liability as well
as the issues of consumer protection and punitive damages. The court defined the
class as "all nicotine-dependent persons in the United States," "the estates,
representatives, and administrators of these nicotine-dependent cigarette
smokers," and "the spouses, children, relatives and 'significant others' of
these nicotine-dependent cigarette smokers as their heirs or survivors." The
court defined "nicotine-dependent" to mean "all cigarette smokers who have been
diagnosed by a medical practitioner as nicotine-dependent; and/or all regular
cigarette smokers who were or have been advised by a medical practitioner that
smoking has had or will have adverse health consequences who thereafter do not
or have not quit smoking." In May 1996, the Fifth Circuit Court of Appeals
reversed a Louisiana district court's certification of a nationwide class
consisting essentially of nicotine dependent cigarette smokers. Notwithstanding
the dismissal, new class actions asserting claims similar to those in Castano
have recently been filed in certain states. To date, two pending class actions
against major cigarette manufacturers have been certified. The first case is
limited to Florida citizens allegedly injured by their addiction to cigarettes;
the other is limited to flight attendants alledgedly injured through exposure to
secondhand smoke.

In another decision, Cipollone v. Liggett Group, Inc., 112 S. Ct. 2608
(1992), the United States Supreme Court held that certain federal legislation
applicable specifically to cigarette manufacturers preempts claims based on
failure to warn consumers about the health hazards of smoking, but does not
preempt claims based on express warranty, misrepresentation and fraud, or
conspiracy. Although the Company believes that the effect of the Cipollone
decision, which involved cigarette smoking, will not have a material adverse
effect on the operations of the Company, there can be no assurance of what the
ultimate effect, if any, of the Cipollone decision or the pending cigarette
industry litigation, or cigarette and tobacco regulation, will be on the cigar
industry or the Company. Although there are numerous differences between the
cigar industry and the cigarette industry, the outcome of pending and future
cigarette litigation may encourage various parties to bring suits on various
grounds against cigar industry participants. While it is impossible to quantify
what effect, if any, any such litigation may have on the Company, the Company
can give no assurance that such litigation would not have a material adverse
effect on the operations of the Company.

26
<PAGE> 30

OSHA Regulations. The federal Occupational Safety and Health
Administration (OSHA) has proposed an indoor air quality regulation covering the
workplace that seeks to eliminate nonsmoker exposure to environmental tobacco
smoke. Under the proposed regulation, smoking must be banned entirely from the
workplace or restricted to designated areas of the workplace that meet certain
criteria. The proposed regulation covers all indoor workplaces under OSHA
jurisdiction, including, for example, private residences used as workplaces,
hotels and motels, private offices, restaurants, bars and vehicles used as
workplaces. The tobacco industry is challenging the proposed OSHA regulation on
legal, scientific and practical grounds. It also contends that the proposed
regulation ignores reasonable alternatives. There is no guaranty, however, that
this challenge will be successful. Although the Company does not believe that
the proposed OSHA regulation would have a material adverse effect on the cigar
industry or the Company, there are no assurances that such regulation would not
adversely impact the Company.

Immigration Laws. The Company, like all employers in the United States, is
obligated, pursuant to the Immigration Reform and Control Act of 1986 (the
"IRCA"), to verify that its employees are authorized to work in the United
States. The Company believes that its employees are authorized to work in the
United States, although the Company may have in the past unknowingly violated
some of the technical verification requirements under the IRCA. The Company has
taken affirmative steps to insure that it is in compliance with its obligations
under the IRCA and does not believe that immigration regulations or the
Company's actions with respect to such regulations should have a material
adverse effect on the business of the Company, although there are no assurances
that they will not in the future.

The Company believes that it is compliance with applicable immigration
regulations. However, the Company also believes that as the Company expands its
operations, it will need to hire more employees in its manufacturing process and
that a significant percent of skilled tobacco rollers were born (and may still
live) outside the United States, including Cuba. To the extent that the
immigration laws either prohibit or restrict immigration from Cuba or other
tobacco growing countries, the Company's ability to grow may be impaired. The
Company is seeking to protect against such risk by the proposed establishment of
an offshore manufacturing facility. The growth of the tobacco industry has
increased the difficulties faced by tobacco manufacturers in general and United
States based production facilities in particular.

INTELLECTUAL PROPERTY RIGHTS

The Company has filed applications with the United States Patent and
Trademark Office for its three brands of premium cigars, its three brands of
flavored cigars and certain other names which the Company is considering for new
brands. The Company has not yet received responses from the Patent and Trademark
Office, and no assurance can be given that the Company will receive trademarks
for any or all of its brands. The Company has no patents on its cigars or
manufacturing process.

Consolidated Cigar owns a registration for CABANAS cigars. Consolidated
Cigar has alleged that the Company's prior use of Santiago Cabana brand name
infringes Consolidated Cigar's trademark. The Company does not believe that it
has infringed Consolidated Cigar's trademark. The Company has modified the
Santiago Cabana brand name to Signature Collection by Santiago Cabana and only
uses the SC logo in this connection. Although no assurance can be given, the
Company believes that this modification has satisfied the claim of Consolidated
Cigar.

LEGAL PROCEEDINGS.

The Company is not a party to any pending lawsuits, which, in the
aggregate, will have a material adverse effect on the Company's financial
position.

FACILITIES.

The Company leases its corporate offices and manufacturing facilities
located in the Little Havana section of Miami, Florida pursuant to a lease which
expires in 2000. The present annual rent, which is subject to certain standard
escalation provisions, is approximately $70,284. The Company has leases for
retail stores pursuant to which it pays an annual rental of approximately
$192,800. These leases expire in 1998 for Key

27
<PAGE> 31

Largo, Florida, 1998 for the South Beach section of Miami Beach , Florida, 2001
for Key West, Florida and 2001 for Coconut Grove, Florida.

The Company believes that its manufacturing and retail facilities are
adequate for its present needs. However, the Company intends to lease additional
space for manufacturing facilities outside the United States and to establish
additional retail stores. See "Business -- Production and Manufacturing" and
"Business -- Marketing." The Company believes that additional space will be
available at commercially reasonable rents.

EMPLOYEES

At April 30, 1996, the Company had 90 full time employees, of which eight
were executive and administrative, three were sales and marketing and 79 were
manufacturing. None of the Company's employees are represented by a labor union
and the Company believes that employee relations are good.

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<PAGE> 32

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The executive officers and directors of the Company are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
----------------------------------- --- ------------------------------------------------
<S> <C> <C>
Kevin Doyle........................ 37 President, Chief Executive Officer and Director
Thomas R. Dilk..................... 50 Treasurer, Chief Financial Officer and Director
Eric S. Kamisher................... 37 Secretary and Director
Luciano R. Nicasio................. 39 Director
</TABLE>

Mr. Kevin Doyle has been president, chief executive officer and a director
of the Company since its organization in October 1994. From June 1987 through
November 1995, Mr. Doyle was an air traffic controller in Miami, Florida. From
1983 until 1994, Mr. Doyle was involved in the cigar business on a part-time
basis as a wholesaler and retailer. During this period, Mr. Doyle developed
relationships in the tobacco industry, some of which have been developed into
formal relationships by the Company.

Mr. Thomas R. Dilk has been chief financial officer and a director of the
Company since October 1995. From February 1991 to October 1995, Mr. Dilk was
vice president and chief financial officer for Wave Systems Corporation. For two
years prior thereto, he was a business consultant providing analytical services
to emerging growth companies. In 1981, Mr. Dilk was a founder of POP Radio
Corp., of which he was executive vice president until April 1989.

Mr. Eric S. Kamisher has been secretary and a director of the Company since
March 1996. He is of counsel to the law firm of Esanu Katsky Korins & Siger,
which is counsel to the Company. Mr. Kamisher does not receive a salary for his
duties as secretary of the Company. From 1986 through the present, Mr. Kamisher
has practiced law in New York City and Stamford, Connecticut, specializing in
the areas of corporate and securities law.

Mr. Luciano R. Nicasio has been a director of the Company since June 1996.
From 1978 to June 1996, Mr. Nicasio was an officer of Bankers Trust Company,
where he most recently served as a Managing Director with Bankers Trust New York
Corporation and as Co-head of International Equities Sales and Trading with BT
Securities Corporation. Mr. Nicasio recently established a private international
investment advisory firm located in New York City, Stamford, Connecticut and
London, England.

Within 90 days of the date of this Prospectus the Company will appoint a
second independent director to the Board of Directors and, thereafter, will
maintain at least two independent directors on the Board.

REMUNERATION

Set forth below is information concerning the Company's chief executive
officer during the fiscal years ended March 31, 1996 and 1995. No other officers
received remuneration of $100,000 or more during either of such fiscal years.

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION (AWARDS)
ANNUAL COMPENSATION --------------------------------
FISCAL ------------------- RESTRICTED STOCK OPTIONS, SARS
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARDS (DOLLARS) (NUMBER)
- --------------------------------------- ------ -------- ------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
Kevin Doyle............................ 1996 $102,000 -- -- --
President and Chief Executive Officer 1995 -- -- -- --
</TABLE>

Mr. Doyle has a three-year employment agreement, which commenced on January
1, 1996, pursuant to which he receives a base salary of $102,000. In addition,
he is eligible to receive bonuses at the discretion of the Board of Directors.
Mr. Doyle shall be entitled to participate in any and all pension, health,
deferred compensation or any other similar plan which are made to all employees.

Mr. Dilk has a one-year agreement, which commenced on November 1, 1995,
which provides for compensation at the annual rate of $80,000. Until the date
the Company shall have received at least

29
<PAGE> 33

$5,000,000 from one or more private or public debt or equity financings (the
"Financing Date"), the Company is to pay such compensation in shares of common
stock valued at $1.25 per share, which was greater than the fair market value
per share at the date of the agreement. After the Financing Date, compensation
will be paid in cash. As of March 31, 1996, the Company had issued 32,000 shares
of common stock to the chief financial officer under this agreement. The
agreement also provides for the grant of an option to purchase 100,000 shares of
common stock at $1.50 per share, exercisable from the Financing Date until
November 2001.

1996 LONG TERM INCENTIVE PLAN

In May 1996, the Company adopted, by action of the Board of Directors and
stockholders, the 1996 Long-Term Incentive Plan (the "Plan"). The Plan does not
have an expiration date. The Plan is authorized for 500,000 shares of Common
Stock. If shares subject to an option under the Plan cease to be subject to such
option, or if shares awarded under the Plan are forfeited, or otherwise
terminate without a payment being made to the participant in the form of stock,
such shares will again be available for future distribution under the Plan.

Awards under the Plan may be made to key employees, including officers of
and consultants to the Company, its subsidiaries and affiliates. The Plan
imposes no limit on the number of officers and other key employees to whom
awards may be made; however, no person shall be entitled to receive in any
fiscal year awards which would entitle such person to acquire more than 3% of
the number of shares of common stock outstanding on the date of grant.

The Plan will be administered by a committee of no less than two
disinterested directors to be appointed by the board (the "Committee"). Any
member or alternate member of the Committee shall not be eligible to receive
options or stock under the Plan (except as to the automatic grant of options to
directors) or under any plan of the Company or any of its affiliates. The
Committee has broad discretion in determining the persons to whom stock options
or other awards are to be granted, the terms and conditions of the award,
including the type of award, the exercise price and term and the restrictions
and forfeiture conditions. If no committee is appointed, the functions of the
committee shall be performed by the board of directors.

The Committee will have the authority to grant the following types of
awards under the Plan: incentive or non-qualified stock options; stock
appreciation rights; restricted stock; deferred stock; stock purchase rights
and/or other stock-based awards. The Plan is designed to provide the Committee
with broad discretion to grant incentive stock-based rights.

NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN

In June 1996, the Company adopted the Non-Employee Directors Stock Option
Plan (the "Non-Employee Directors Plan") authorized to grant stock options to
purchase up to 100,000 shares of Common Stock. As of the date of this
Prospectus, the Company has granted 15,000 options under the Non-Employee
Directors Plan.

Each non-employee director shall receive stock options to purchase up to
5,000 shares of Common Stock upon election to the Board of Directors. Initial
option grants under the Non-Employee Directors Plan vest upon grant. Each
non-employee director shall also receive stock options to purchase 2,500 shares
of Common Stock on an annual basis. Annual option grants vest 25% after each
three-month period following grant. The exercise price of options granted under
the Non-Employee Directors Plan may not be less than 100% of the fair market
value of the Common Stock of the Company on the date of grant (as determined
pursuant to the Non-Employee Directors Plan). Each option granted under the
Non-Employee Directors Plan will be exercisable for a period of ten years from
the date of grant.

CERTAIN TRANSACTIONS

In connection with the organization of the Company in October 1995, the
Company issued an aggregate of 1,820,750 and 638,250 shares of Common Stock for
nominal consideration to Messrs. Kevin Doyle and Michael Risley, respectively.
Subsequently, Mr. Risley transferred 80,000 shares to a non-affiliate of the

30
<PAGE> 34

Company. In addition, Mr. Doyle transferred the assets and liabilities of the
Cigar Factory to the Company. The assets consisted of cash, inventory, leasehold
improvements, and deposits amounting in total to approximately $65,500. The
liabilities assumed consisted of trade payables and accrued expenses of
approximately $15,900 and advances made by Mr. Doyle of approximately $32,220.
Mr. Doyle received a note from the Company in the amount of $49,621, consisting
of excess of assets over liabilities and advances described above. All assets
were contributed at Mr. Doyle's cost less accumulated depreciation. The Company
believes that the transaction with Mr. Doyle was made on terms no less favorable
to the Company than those available from unaffiliated parties. Messrs. Doyle and
Risley may be deemed founders of the Company.

In connection with a compensation agreement, as of November 1, 1995, Thomas
R. Dilk, chief financial officer and a director of the Company, was issued
options to purchase one hundred thousand (100,000) shares of Common Stock at an
exercise price of $1.50 per share. In addition, Mr. Dilk also purchased 10,000
shares of Common Stock at a price of $1.25 per share in November, 1995. See
"Interim Financings" for information relating to a loan from Mr. Thomas R. Dilk,
chief financial officer and a director of the Company, as part of a financing
with non-affiliated investors.

All future transactions between the Company and its officers, directors and
5% shareholders will be on terms no less favorable than could be obtained from
independent third parties and will be approved by a majority of the independent,
disinterested directors of the Company.

INTERIM FINANCINGS

Subsequent to the organization of the Company, in October 1995, ten
accredited investors lent the Company an aggregate amount of $250,000. The
proceeds from the loan were used for working capital. The loan, plus interest
accruing thereon at a rate of ten percent (10%) per annum, was repayable one
year from the date of the loan. As additional consideration for making the loan,
the investors received one share of Common Stock for every one dollar loaned.
Mr. Thomas R. Dilk, chief financial officer and a director of the Company,
participated in the financing and lent the Company $100,000 on the same terms as
the other investors. Mr. Kamisher, secretary and a director of the Company,
participated in the financing and lent the Company $5,000 on the same terms as
other investors. In March 1996, the Company paid $100,000 of the outstanding
loan principal from the proceeds of a subsequent financing and the remaining
$150,000 principal amount of the loan was converted into 75,000 shares of Common
Stock.

In January 1996, the Company sold an aggregate of 125,000 shares of Common
Stock to two accredited investors at $2.00 per share, for an aggregate purchase
price of $250,000. The proceeds from the sale were used for working capital.

In March, April and May 1996, the Company sold to 80 accredited investors
an aggregate of 606,348 shares of Common Stock for $3.50 per share. The proceeds
from this financing were used to pay $100,000 of the October 1995 loan and for
working capital.

31
<PAGE> 35

PRINCIPAL STOCKHOLDERS

The following table sets forth, as of the date of this Prospectus and as
adjusted to give effect to the sale of the 1,325,000 shares of Common Stock
offered by this Prospectus, the number and percentage of shares of outstanding
Common Stock owned by each person owning at least 5% of the Company's Common
Stock, each director owning stock and all directors and officers as a group:

<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT OF OWNERSHIP
OF BENEFICIAL ------------------------------------
NAME AND ADDRESS(1) OWNERSHIP(2) PRIOR TO OFFERING AFTER OFFERING
- ----------------------------------------------- ----------------- ----------------- --------------
<S> <C> <C> <C>
Kevin Doyle.................................... 1,820,750 50.7% 37.1%
Michael Risley................................. 558,250 15.5% 11.4%
Thomas R. Dilk(3).............................. 320,000 8.9% 6.5%
Eric S. Kamisher(4)............................ 15,000 .4% .4%
Luciano R. Nicasio(5).......................... 7,500 .2% .2%
All directors and officers as a group (4
people)(3)(4)(5)............................. 2,163,250 60.3% 44.0%
</TABLE>

- ---------------
(1) Unless otherwise indicated, the address of each person is c/o Caribbean
Cigar Company, 6265 S.W. Eighth Street, Miami, Florida 33144. There are a
total of 100 recordholders of the Company's Common Stock as of the date of
this Prospectus.

(2) Unless otherwise indicated, each person named has the sole voting and sole
investment power and has direct beneficial ownership of the shares.

(3) Includes 100,000 shares issued upon exercise of options held by Mr. Dilk.

(4) Includes 7,500 shares issued upon exercise of options held by Mr. Kamisher.

(5) Includes 7,500 shares issued upon exercise of options held by Mr. Nicasio.

DESCRIPTION OF SECURITIES

GENERAL

The Company is authorized to issue 2,000,000 shares of Preferred Stock, par
value $.01 per share, and 10,000,000 shares of Common Stock, par value $.001 per
share.

COMMON STOCK

Holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. Holders of Common
Stock are entitled to share in such dividends as the Board of Directors, in its
discretion, may declare from funds legally available. In the event of
liquidation, each outstanding share entitles its holder to participate ratably
in the assets remaining after payment of liabilities. There are 3,586,948 shares
of Common Stock outstanding prior to the Offering, and upon completion of this
Offering, there will be 4,911,948 shares of Common Stock outstanding.

Stockholders have no preemptive or other rights to subscribe for or
purchase additional shares of any class of stock or of any other securities of
the Company, and there are no redemption or sinking fund provisions with regard
to the Common Stock. All outstanding shares of Common Stock are, and those
issuable pursuant to this Prospectus or upon exercise of the Warrants will be
when issued as provided in this Prospectus, validly issued, fully paid, and
nonassessable. Stockholders do not have cumulative voting rights.

PREFERRED STOCK

The Company's Board of Directors is authorized to issue, from time to time
and without further stockholder action, up to 2,000,000 shares of Preferred
Stock in one or more distinct series. The Board of Directors is authorized to
fix the following rights and preferences, among others, for each series: (i) the
rate of dividends and whether such dividends shall be cumulative; (ii) the price
at and the terms and conditions on which shares may be redeemed; (iii) the
amount payable upon shares in the event of voluntary or involuntary liquidation;
(iv) whether or not a sinking fund shall be provided for the redemption or
purchase of shares; (v) the terms and conditions on which shares may be
converted; and (vi) whether, and in what proportion to any other series or
class, a series shall have voting rights other than required by law, and, if
voting rights are

32
<PAGE> 36

granted, the number of voting rights per share. The Company has no plans,
agreements or understandings with respect to the designation of any series or
the issuance of any shares of Preferred Stock. The Company has agreed that for a
period of three years from the date of this Prospectus, it will not create any
series of Preferred Stock or issue any shares of Preferred Stock without the
prior written consent of the Underwriter.

REDEEMABLE COMMON STOCK PURCHASE WARRANTS

The holder of each Warrant issued pursuant to this Offering is entitled,
upon payment of the exercise price of $7.00 per share, to purchase one share of
Common Stock. Unless previously redeemed, the Warrants are exercisable during
the three-year period commencing on the date of this Prospectus. Holders of the
Warrants will only be able to exercise the Warrants if (a) a current prospectus
under the Securities Act relating to the shares of Common Stock issuable upon
exercise of the Warrants is then in effect, and (b) such securities are
qualified for sale or exemption from qualification under the applicable
securities laws of the states in which the various holders of Warrants reside.

The Warrants are subject to redemption by the Company, on not less than 30
nor more than 60 days' written notice, at a price of $.25 per Warrant, if the
average closing price per share of the Common Stock is at least $14.00 per share
for at least 30 consecutive trading days ending within ten (10) days of the date
on which the Warrants are called for redemption. During the one-year period
commencing of the date of this Prospectus, the Warrants may only be redeemed
with the consent of the Underwriter. Holders of Warrants will automatically
forfeit their rights to purchase the shares of Common Stock issuable upon
exercise of such Warrants unless the Warrants are exercised before the close of
business on the business day immediately prior to the date set for redemption.
All of the outstanding Warrants must be redeemed if any are redeemed. A notice
of redemption shall be mailed to each of the registered holders of the Warrants
by first class, postage prepaid, within five business days (or such longer
period to which the Underwriter may consent) after the Warrants are called for
redemption, but no earlier than the thirtieth nor later than the sixtieth day
before the date fixed for redemption. The notice of redemption shall specify the
redemption price, the date fixed for redemption, the place where the Warrant
certificates shall be delivered and the redemption price to be paid, and that
the right to exercise the Warrants shall terminate at 5:00 p.m. (New York City
time) on the business day immediately preceding the date fixed for redemption.
The Warrants can only be redeemed if, on the date the Warrants are called for
redemption, there is an effective registration statement covering the shares of
Common Stock issuable upon exercise of the Warrants.

The Warrants may be exercised upon surrender of the certificate(s) therefor
on or prior to 5:00 p.m. New York City time on the expiration date of the
Warrants or, if the Warrants are called for redemption, the day prior to the
redemption date (as explained above) at the offices of the Company's warrant
agent (the "Warrant Agent") with the form of "Election to Purchase" on the
reverse side of the certificate(s) filled out and executed as indicated,
accompanied by payment of the full exercise price for the number of Warrants
being exercised.

The Warrants contain provisions that protect the holders thereof against
dilution by adjustment of the exercise price in certain events, such as stock
dividends, stock splits, mergers, sale of substantially all of the Company's
assets, and for other extraordinary events.

The Company is not required to issue fractional shares of Common Stock, and
in lieu thereof will make a cash payment based upon the current market value of
such fractional shares. The holder of the Warrants will not possess any rights
as a stockholder of the Company unless and until the holder exercises the
Warrants.

Although the Warrants have a fixed exercise price and a formula for
adjustments in certain events and have a fixed expiration date, it is possible
that in the future the Company may wish to reduce the exercise price or extend
the exercise period. The Company has no plans to and will not, in any way, prior
to this Offering, reduce such price or extend the Warrants. The Company may not
extend the exercise period or reduce the exercise price without the consent of
the Underwriter. Any such change would be effected pursuant to a post-effective
amendment to the registration statement of which this Prospectus is a part or a
new registration statement, and no exercise of the Warrant with amended terms
may be exercised unless and until such post-effective amendment or new
registration statement has been declared effective by the Commission.

33
<PAGE> 37

SHARES ELIGIBLE FOR FUTURE SALE

All of the presently issued and outstanding shares of Common Stock are
"restricted securities" as that term is defined under Rule 144 promulgated under
the Securities Act. Rule 144 governs resales of such restricted securities for
the account of any person (other than an issuer), and restricted and
unrestricted securities for the account of an "affiliate" of the issuer.
Restricted securities generally include any securities acquired directly or
indirectly from an issuer of its affiliates which were not issued or sold in
connection with a public offering registered under the Securities Act. An
affiliate of the issuer is any person who directly or indirectly controls, is
controlled by, or is under common control with, the issuer. Affiliates of the
Company may include its directors, executive officers and person directly or
indirectly owning 10% or more of the outstanding Common Stock. Under Rule 144
unregistered resales of restricted Common Stock cannot be made until it has been
held for two years from the later of its acquisition from the Company or an
affiliate of the Company. Thereafter, shares of Common Stock may be resold
without registration subject to Rule 144's volume limitation, aggregation,
broker transaction, notice filing requirements, and requirements concerning
publicly available information about the Company (the "Applicable
Requirements"). Resales by the Company's affiliates of restricted and
unrestricted Common Stock are subject to the Applicable Requirements. The volume
limitations provide that a person (or persons who must aggregate their sales)
cannot, within any three-month period, sell more than the greater of (i) one
percent of the then outstanding shares, or (ii) the average weekly reported
trading volume during the four calendar weeks preceding each such sale. A person
who is not deemed an "affiliate" of the Company and who has beneficially owned
shares for at least three years would be entitled to sell such shares under Rule
144 without regard to the Applicable Requirements.

If a public market develops for the Company's Common Stock, the Company is
unable to predict the effect that sales made under Rule 144 or other sales may
have on the then prevailing market price of the Common Stock. Of the 3,586,948
presently outstanding shares of Common Stock, no shares of Common Stock will
become eligible for sale pursuant to Rule 144 commencing 90 days after the date
of this Prospectus. Thereafter, at various times throughout the two year period
from the effective date of this Offering, 912,448 shares of Common Stock will
become eligible for sale pursuant to Rule 144.

LIMITATION OF LIABILITY; INDEMNIFICATION MATTERS AND DIRECTORS' AND OFFICERS'
INSURANCE

The Company's Bylaws requires the Company, to the fullest extent permitted
or required by Florida law, to (i) indemnify its directors against any and all
liabilities and (ii) advance any all reasonable expenses, incurred in any
proceeding to which any such director is a party or in which such director is
deposed or called to testify as a witness because he or she is or was a director
of the Company. Generally, Florida statutory law permits indemnification of a
director upon a determination that he or she acted in good faith and in a manner
he or she reasonably believed to be in, or not opposed to, the best interests of
the corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The right to
indemnification granted in the Company's Bylaws is not exclusive of any other
rights to indemnification against liabilities or the advancement of expenses
which a director may be entitled under any written agreement, Board resolution,
vote of stockholders, Florida law or otherwise.

The Company has also entered into agreements with each of its current
directors and executive officers pursuant to which it is obligated to indemnify
those persons to the fullest extent authorized by law and to advance payments to
cover defense costs against an unsecured obligation to repay such advances if it
is ultimately determined that the recipient of the advance is not entitled to
indemnification. The indemnification agreements provide that no advancement of
expenses shall be made (A) if a final adjudication establishes that the
indemnification actions or omissions were material to the cause of action
adjudicated and constitute: (i) a violation of criminal law (unless the
indemnitee had reasonable cause to believe that his or her actions were lawful);
(ii) a transaction from which the indemnitee derived an improper personal
benefit; (iii) an unlawful

34
<PAGE> 38

distribution or dividend under applicable Florida law; or (iv) willful
misconduct or a conscious disregard for the just interest of the Company in a
derivative or shareholder action, (B) liability under Section 16(b) of the
Exchange Act, or (C) if a final decision by a court having jurisdiction in the
matter determines that indemnification is not lawful.

At present, the Company is not aware of any pending or threatened
litigation or proceeding involving a director, officer, employee or agent of the
Company in which indemnification would be required or permitted under the
Company's Bylaws, the indemnification agreements or Florida law.

TRANSFER AGENT AND WARRANT AGENT

The transfer agent for the Common Stock and Warrant Agent for the Warrants
is Continental Stock Transfer & Trust Company, Two Broadway, New York, New York
10004.

35
<PAGE> 39

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, Barron
Chase Securities, Inc. (the "Underwriter") has agreed to purchase from the
Company an aggregate of 1,325,000 Shares of Common Stock ("Shares") and
1,325,000 Warrants (collectively the "Securities").

The Securities are offered by the Underwriter subject to prior sale, when,
as and if delivered to and accepted by the Underwriter and subject to approval
of certain legal matters by counsel and certain other conditions. The
Underwriter is committed to purchase all Securities offered by this Prospectus,
if any are purchased.

The Company has been advised by the Underwriter that the Underwriter
proposes initially to offer the Securities offered hereby to the public at the
offering price set forth on the cover page of this Prospectus. The Underwriter
has advised the Company that the Underwriter proposes to offer the Securities
through members of the National Association of Securities Dealers, Inc.
("NASD"), and may allow a concession, in their discretion, to certain dealers
who are members of the NASD and who agree to sell the Securities in conformity
with the NASD Rules of Fair Practice. Such concessions shall not exceed the
amount of the underwriting discount that the Underwriter is to receive.

The Company has granted to the Underwriter options, exercisable for 45 days
from the date of this Prospectus, to purchase up to an additional 198,750 Shares
and an additional 198,750 Warrants at the public offering price less the
underwriting discount set forth on the cover page of this Prospectus (the "Over-
Allotment Option"). The Underwriter may exercise this option solely to cover
over-allotments in the sale of the Securities being offered by this Prospectus.

Officers and directors of the Company may introduce the Underwriter to
persons to consider this offering and purchase Securities either through the
Underwriter, or through participating dealers. In this connection, officers and
directors will not receive any commissions or any other compensation.

The Company has agreed to pay the Underwriter a commission of ten percent
(10%) of the gross proceeds of the offering (the "Underwriting Discount"),
including the gross proceeds from the sale of the Over-Allotment Option, if
exercised. In addition, the Company has agreed to pay to the Underwriter a non-
accountable expense allowance of three percent (3%) of the gross proceeds of
this Offering, including proceeds from any Securities purchased pursuant to the
Over-Allotment Option. The Underwriter's expenses in excess of the
non-accountable expense allowance will be paid by the Underwriter. To the extent
that the expenses of the Underwriter are less than the amount of the
non-accountable expense allowance received, such excess shall be deemed to be
additional compensation to the Underwriter. The Underwriter has informed the
Company that it does not expect sales to discretionary accounts by the
Underwriter to exceed five percent (5%) of the total number of Securities
offered by the Company hereby.

Prior to the Offering, there has been no public market for the Shares of
Common Stock or Warrants of the Company. Consequently, the initial public
offering price for the Securities, and the terms of the Warrants (including the
exercise price of the Warrants), have been determined by negotiation between the
Company and the Underwriter. Among the factors considered in determining the
public offering price were the history of, and the prospects for, the Company's
business, an assessment of the Company's management, its past and present
operations, the Company's development and the general condition of the
securities market at the time of the offering. The initial public offering price
does not necessarily bear any relationship to the Company's assets, book value,
earnings or other established criterion of value. Such price is subject to
change as a result of market conditions and other factors, and no assurance can
be given that a public market for the Shares and/or Warrants will develop after
the close of the Public Offering, or if a public market in fact develops, that
such public market will be sustained, or that the Shares and/or Warrants can be
resold at any time at the offering or any other price. See "Risk Factors."

At the closing of the Offering, the Company will issue to the Underwriter
and/or persons related to the Underwriter, for nominal consideration, Common
Stock Underwriter Warrants and Warrant Underwriter Warrants (the "Underwriter's
Warrants") to purchase up to 132,500 Shares and 132,500 Warrants ("Underlying
Warrants"). The Underwriter's Warrants will be exercisable for a five year
period commencing on the

36
<PAGE> 40

date of this Prospectus. The initial exercise price of each Common Stock
Underwriter Warrant shall be $10.15 per share (145% of the public offering
price). The initial exercise price of each Warrant Underwriter Warrant shall be
$.18125 per Underlying Warrant (145% of the public offering price). Each
Underlying Warrant will be exercisable for a three (3) year period commencing on
the date of this Prospectus to purchase one Share of Common Stock at an exercise
price of $10.15 per share of Common Stock. The Underwriter's Warrants will not
be transferable for one year from the date of this Prospectus, except (i) to
officers of the Underwriter, and members of the selling group and officers and
partners thereof; (ii) by will; or (iii) by operation of law.

The Underwriter's Warrants contain provisions providing for appropriate
adjustment in the event of any merger, consolidation, recapitalization,
reclassification, stock dividend, stock split or similar transaction. The
Underwriter's Warrants contain net issuance provisions permitting the holders
thereof to elect to exercise the Underwriter's Warrants in whole or in part and
instruct the Company to withhold from the securities issuable upon exercise, a
number of securities, valued at the current fair market value on the date of
exercise, to pay the exercise price. Such net exercise provision has the effect
of requiring the Company to issue shares of Common Stock without a corresponding
increase in capital. A net exercise of the Underwriter's Warrants will have the
same dilutive effect on the interests of the Company's shareholders as will a
cash exercise. The Underwriter's Warrants do not entitle the holders thereof to
any rights as a shareholder of the Company until such Underwriter's Warrants are
exercised and shares of Common Stock are purchased thereunder.

The Underwriter's Warrants and the securities issuable thereunder may not
be offered for sale except in compliance with the applicable provisions of the
Securities Act of 1933. The Company has agreed that if it shall cause a
post-effective amendment, a new registration statement, or similar offering
document to be filed with the Commission, the holders shall have the right, for
seven years from the date of this Prospectus, to include in such registration
statement or offering statement the Underwriter's Warrants and/or the securities
issuable upon their exercise at no expense to the holders. Additionally, the
Company has agreed that, upon request by the holders of 50% or more of the
Underwriter's Warrants and Registrable Securities during the period commencing
one year from the date of this Prospectus and expiring four years thereafter,
the Company will, under certain circumstances, register the Underwriter's
Warrants and/or any of the securities issuable upon their exercise.

The Company has also agreed that if the Company participates in any merger,
consolidation or other such transactions which the Underwriter has brought to
the Company during a period of five years after the closing of this offering,
and which is consummated after the closing of this offering (including an
acquisition of assets or stock for which it pays, in whole or in part, with
Shares or other securities), or if the Company retains the services of the
Underwriter in connection with any merger, consolidation or other such
transaction, then the Company will pay for the Underwriter's services an amount
equal to 5% of up to one million dollars of value paid or received in the
transaction, 4% of the next million dollar of such value, 3% of the next million
dollars of such value, 2% of the next million dollars of such value and 1% of
the next million dollars and of all such value above $4,000,000.

The Company has agreed to indemnify the Underwriter against any costs or
liabilities incurred by the Underwriter by reasons of misstatements or omissions
to state material facts in connection with the statements made in the
Registration Statement and the Prospectus. The Underwriter has in turn agreed to
indemnify the Company against any liabilities by reason of misstatements or
omissions to state material facts in connection with the statements made in the
Registration Statement, based on information relating to the Underwriter and
furnished in writing by the Underwriter. To the extent that this section may
purport to provide exculpation from possible liabilities arising from the
federal securities laws, in the opinion of the Commission, such indemnification
is contrary to public policy and therefore unenforceable.

The foregoing is a summary of the principal terms of the agreements
described above and does not purport to be complete. Reference is made to copies
of each such agreement which are filed as exhibits to the Registration
Statement. See "Additional Information."

37
<PAGE> 41

LEGAL MATTERS

Esanu Katsky Korins & Siger, 605 Third Avenue, New York, New York 10158,
counsel for the Company, have given their opinion as to the authorization and
valid issuance of the shares of Common Stock and Warrants comprising the
Securities offered by this Prospectus. David A. Carter, P.A., 355 West Palmetto
Park Rd., Boca Raton, Florida 33432 is acting as counsel for the Underwriter in
connection with this Offering.

EXPERTS

The financial statements of the Company included in this Prospectus have
been audited by Grant Thornton LLP, independent certified public accountants, as
stated in their report appearing herein, and are included in reliance on their
report given on the authority of that firm as experts in accounting and
auditing.

ADDITIONAL INFORMATION

A Registration Statement on Form SB-2 relating to the securities offered
hereby has been filed by the Company with the Securities and Exchange
Commission. This Prospectus does not contain all of the information set forth in
such Registration Statement. For further information with respect to the Company
and to the securities offered hereby, reference is made to such Registration
Statement, including the exhibits thereto. Statements contained in this
Prospectus as to the content of any contract or other document referred to are
not necessarily complete, and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference.

38
<PAGE> 42

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Certified Public Accountants................................... F-2
Balance Sheets....................................................................... F-3
Statements of Operations............................................................. F-4
Statements of Stockholders' Equity................................................... F-5
Statements of Cash Flows............................................................. F-6
Notes to Financial Statements........................................................ F-7
</TABLE>

F-1
<PAGE> 43

REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS

Board of Directors
Caribbean Cigar Company

We have audited the accompanying balance sheets of Caribbean Cigar Company
as of March 31, 1996 and 1995, and the related statements of operations,
stockholders' equity and cash flows for the year ended March 31, 1996 and the
six month period from October 3, 1994 (inception) through March 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and 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 Caribbean Cigar Company as
of March 31, 1996 and 1995, and the results of their operations and their cash
flows for the year ended March 31, 1996 and the six month period from October 3,
1994 (inception) through March 31, 1995, in conformity with generally accepted
accounting principles.

GRANT THORNTON LLP

Miami, Florida
May 15, 1996

F-2
<PAGE> 44

CARIBBEAN CIGAR COMPANY

BALANCE SHEETS
MARCH 31,

<TABLE>
<CAPTION>
1996 1995
---------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash............................................................. $ 748,801 $ 250
Accounts receivable.............................................. 31,873 --
Note receivable from stockholder................................. 18,000 --
Inventory........................................................ 379,466 8,303
Prepaid expenses and other current assets........................ 24,893 --
---------- --------
Total current assets..................................... 1,203,033 8,553
PROPERTY AND EQUIPMENT, NET........................................ 432,169 12,821
DEPOSITS AND OTHER ASSETS.......................................... 23,200 2,685
---------- --------
$1,658,402 $ 24,059
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable................................................. $ 218,268 $ 9,072
Accrued expenses................................................. 96,223 --
---------- --------
Total current liabilities................................ 314,491 9,072
DUE TO STOCKHOLDER................................................. 49,621 26,759
COMMITMENTS
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value;
2,000,000 shares authorized, none issued or outstanding........ -- --
Common stock, $.001 par value; 10,000,000 shares authorized,
3,408,369 shares issued and outstanding....................... 3,408 --
Capital in excess of par value................................... 1,852,945 --
Accumulated deficit.............................................. (550,743) (11,772)
---------- --------
1,305,610 (11,772)
Unearned compensation............................................ (11,320) --
---------- --------
Total stockholders' equity............................... 1,294,290 (11,772)
---------- --------
$1,658,402 $ 24,059
========== ========
</TABLE>

The accompanying notes are an integral part of these statements.

F-3
<PAGE> 45

CARIBBEAN CIGAR COMPANY

STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1996 AND THE
SIX MONTH PERIOD FROM OCTOBER 3, 1994 (INCEPTION) THROUGH MARCH 31, 1995

<TABLE>
<CAPTION>
1996 1995
--------- --------
<S> <C> <C>
Sales............................................................... $ 820,950 $ 88,332
Cost of goods sold.................................................. 592,258 51,953
--------- --------
Gross profit................................................... 228,692 36,379
Selling expenses.................................................... 384,818 40,893
General and administrative expenses................................. 338,208 7,258
Interest expense.................................................... 27,253 --
--------- --------
750,279 48,151
--------- --------
Net Loss.................................................. $(521,587) $(11,772)
========= ========
Loss per share...................................................... $ (0.16) $ (0.00)
========= ========
</TABLE>

The accompanying notes are an integral part of these statements.

F-4
<PAGE> 46

CARIBBEAN CIGAR COMPANY

STATEMENT OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
--------------------- PAID-IN ACCUMULATED UNEARNED
SHARES PAR VALUE CAPITAL DEFICIT COMPENSATION TOTAL
--------- --------- ---------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Net loss for the six month
period ending March 31,
1995...................... -- $ -- $ -- $ (11,772) $ -- $ (11,772)
--------- ------ ---------- ---------- --------- ----------
Balance as of March 31,
1995...................... -- -- -- (11,772) -- (11,772)
Common stock issued upon
incorporation............. 2,459,000 2,459 -- -- -- 2,459
Common stock issued for
services.................. 8,850 9 20,766 -- -- 20,775
Common stock issued in
connection with debt
financing................. 250,000 250 24,750 -- -- 25,000
Common stock issued as
compensation.............. 55,500 55 52,494 -- (11,320) 41,229
Sale of common stock........ 135,000 135 262,365 -- -- 262,500
Conversion of debt financing
to common stock, net...... 75,000 75 141,150 -- -- 141,225
Common stock issued through
private placement, net.... 425,019 425 1,351,420 -- -- 1,351,845
Payment due to owner of
predecessor company....... -- -- -- (17,384) -- (17,384)
Net loss for year ended
March 31, 1996............ -- -- -- (521,587) -- (521,587)
--------- ------ ---------- ---------- --------- ----------
Balance as of March 31,
1996...................... 3,408,369 $ 3,408 $1,852,945 $(550,743) $(11,320) $1,294,290
========= ====== ========== ========== ========= ==========
</TABLE>

The accompanying notes are an integral part of this statement.

F-5
<PAGE> 47

CARIBBEAN CIGAR COMPANY

STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED MARCH 31, 1996 AND THE
SIX MONTH PERIOD FROM OCTOBER 3, 1994 (INCEPTION) THROUGH MARCH 31, 1995

<TABLE>
<CAPTION>
1996 1995
---------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss......................................................... $ (521,587) $(11,772)
Adjustments to reconcile net loss to net cash provided by (used
in) operating activities:
Depreciation.................................................. 21,896 2,121
Common stock issued as compensation........................... 41,230 --
Common stock issued for services.............................. 20,775 --
Amortization of debt issuance costs........................... 16,225 --
(Increase) in accounts receivable and note receivable from
stockholder.................................................. (49,873) --
(Increase) in inventory....................................... (371,163) (8,303)
(Increase) in prepaid expenses and other current assets....... (24,893) --
(Increase) in deposits and other assets....................... (20,515) (2,685)
Increase in accounts payable.................................. 209,196 9,072
Increase in accrued expenses.................................. 96,223 --
---------- --------
Net cash used in operating activities.................... (582,486) (11,567)
---------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment.............................. (438,797) (14,942)
---------- --------
Net cash used in investing activities.................... (438,797) (14,942)
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from stockholder........................................ 5,478 26,759
Proceeds from convertible debt................................... 250,000 --
Principal repayment of convertible debt.......................... (100,000) --
Proceeds from issuance of common stock........................... 1,614,356 --
---------- --------
Net cash provided by financing activities................ 1,769,834 26,759
---------- --------
Net increase in cash............................................... 748,551 250
Cash at beginning of period........................................ 250 --
---------- --------
Cash at end of year................................................ $ 748,801 $ 250
========== ========
Supplemental Disclosure of Cash Flow Information
Cash paid during the year for interest........................... $ 10,840 $ --
========== ========
Non cash investing and financing activities........................
</TABLE>

During March, 1996, the Company issued 75,000 shares of Common Stock in
exchange for the cancellation of $150,000 in outstanding debt obligations.

The accompanying notes are an integral part of these statements.

F-6
<PAGE> 48

CARIBBEAN CIGAR COMPANY

NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996 AND 1995

NOTE 1 -- BASIS OF PRESENTATION

Caribbean Cigar Company (a Florida corporation) (the "Company") is a
vertically integrated manufacturer, distributor and retailer of high quality,
hand rolled, premium cigars operating in South Florida.

The Company's predecessor, Caribbean Cigar Factory ("Cigar Factory"), was a
sole proprietorship operated by the current President of the Company. From the
commencement of operations in October 1994, through September 1995, the Cigar
Factory operated a retail tobacco store in Key Largo, Florida. In September
1995, the assets and liabilities of the Cigar Factory were acquired and assumed
by the Company in exchange for 1,820,750 shares of the Company's Common Stock
and issuance of a promissary note as described in Note 7. The assets and
liabilities were recorded on the books of the Company at the predecessor's net
book value. Such assets consisted of cash ($2,770), inventory ($35,100), fixed
assets ($24,150) and deposits ($3,480). The liabilities assumed consisted
primarily of trade and other accounts payable ($15,900) and an obligation to the
sole proprietor ($32,220).

The accompanying financial statements present operations of the Company and
the Cigar Factory from October 1994, as if it was a single entity.

The Company, and the cigar industry in general, have recently experienced
shortages in certain types of natural wrapper and filler due to the increase in
demand for tobacco for premium cigars. Although the shortages have not
materially impacted cigar production, no assurance can be made that future
shortages will not have an adverse effect on the Company.

NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents

The Company considers all highly liquid investments with maturities of
three months or less at the time of purchase to be cash equivalents.

Inventory

Inventory consists of tobacco, hand rolled cigars, cigars purchased from
various other distributors as well as cigar accessories. Inventory is stated at
the lower of cost (first-in, first-out method) or market. Inventories are
comprised of the following:

<TABLE>
<CAPTION>
1996 1995
-------- ------
<S> <C> <C>
Raw materials.................................................... $ 39,651 $ --
Finished goods................................................... 339,815 8,303
-------
-
--------
$379,466 $8,303
======== ========
</TABLE>

Property and Equipment

Property and equipment has been recorded at cost. Depreciation and
amortization are provided for in amounts sufficient to relate the cost of
depreciable assets to their estimated operating service lives using
straight-line methods. Leasehold improvements are amortized over the lesser of
their estimated service life or the life of the lease. The range of estimated
lives for financial reporting purposes are as follows:

<TABLE>
<S> <C>
Leasehold improvements................................................ 2 to 5 years
Equipment............................................................. 7 years
Furniture and fixtures................................................ 5 to 7 years
</TABLE>

F-7
<PAGE> 49

CARIBBEAN CIGAR COMPANY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Income Taxes

The Company provides for income taxes based on income reported for
financial reporting purposes. Certain charges to earnings differ as to timing
from those deducted for tax purposes, this relates primarily to uniform
capitalization. The tax effect of these differences are to be reflected as
deferred income taxes.

Private Placement Fees

Costs incurred by the Company in connection with the sale of equity
securities are charged to paid-in capital. Included in accounts payable at March
31, 1996 is $65,525, relating to commissions owed to a broker from the private
placement of certain equity securities.

Deferred Rent Liability

The Company provides for rent expense by straight-lining future minimum
rental payments over the terms of the respective lease agreements. For leases
with scheduled rent increases which are fixed in amount, this creates a
difference between rent expense recorded by the Company and amounts currently
due. The difference between these amounts is reflected in accrued expenses as a
deferred rent liability.

Loss Per Share

Loss per share for the year ended March 31, 1996 and the six months from
October 3, 1994 (inception) to March 31, 1995, are based upon the weighted
average number of shares of common stock outstanding during the period, which
was $3,255,135 and $3,228,764, respectively. The calculation gives retroactive
effect (as if to inception of the Cigar Factory) to those shares issued to
founders at par value. Additionally, stock and stock options issued during
fiscal 1996 have been treated as outstanding since October 3, 1994 (inception),
the dilutive effect of which was computed using the treasury stock method.

Stock Options

Options granted by the Company are accounted for under APB 25, "Accounting
for Stock Issued to Employees," and related interpretations. In November 1995,
the Financial Accounting Standards Board issued Statement No. 123, "Accounting
for Stock-Based Compensation," which will require additional proforma
disclosures for companies that will continue to account for employee stock
options under the intrinsic value method specified in APB 25. The Company plans
to continue to apply APB 25 and the only effect of adopting Statement 123 in
fiscal 1997 will be the new disclosure requirement.

Fair Value of Financial Instruments

The carrying value of cash, receivables, and accounts payable approximate
the fair value due to the short-term maturities of these instruments.

Use of Estimates

In preparing financial statements in conformity with Generally Accepted
Accounting Principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

F-8
<PAGE> 50

CARIBBEAN CIGAR COMPANY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 3 -- PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Leasehold improvements......................................... $124,100 $ 10,234
Machinery and equipment........................................ 136,750 --
Furniture and fixtures......................................... 118,720 4,708
-------- --------
379,570 14,942
Accumulated depreciation....................................... (24,018) (2,121)
-------- --------
355,552 12,821
Construction in progress....................................... 76,617 --
-------- --------
$432,169 $ 12,821
======== ========
</TABLE>

NOTE 4 -- DEBT FINANCING

In October 1995, at or about the time of organization of the Company, the
Company issued 10% notes in the aggregate principal amount of $250,000 and as
additional consideration to the lenders, issued 250,000 shares of common stock
to the lenders. The Company valued such stock at $.10 per share, which was
determined by the Board of Directors to be the fair value at the date of
issuance. The issue of such shares was amortized using the effective interest
method, over the term of the notes. These notes were to mature upon the earlier
of one year or the receipt of $500,000 from the sale of additional debt or
equity securities. In March 1996, certain lenders converted a total of $150,000
of such notes into 75,000 shares of the Company's common stock. For notes which
were converted into common stock, the unamortized portion of the debt issue
discount was recorded as a reduction in paid-in capital. The remaining principal
amounts and accrued interest was paid in March 1996, with the proceeds from the
sale of common stock.

NOTE 5 -- ACCRUED LIABILITIES

Accrued liabilities is comprised of the following items at:

<TABLE>
<CAPTION>
3/31/96
--------
<S> <C>
Payroll.................................................................. $54,974
Professional fees........................................................ 35,000
Deferred rent liability.................................................. 6,249
--------
$96,223
=======
</TABLE>

NOTE 6 -- COMMITMENTS

Lease Commitments

The Company leases office and retail facilities under noncancelable,
operating leases. The lease agreements provide for certain minimum fixed rental
increases and/or increases based upon changes in the consumer price index. The
agreements also contain options to extend the term of the lease. Future minimum
annual lease commitments at March 31, 1996, are approximately as follows:

Rent expense was approximately $47,000 and $5,300 in fiscal 1996 and 1995,
respectively.

F-9
<PAGE> 51

CARIBBEAN CIGAR COMPANY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Employment and Compensation Agreements

The Company has agreements with its key officers and employees which
provide for certain levels of base compensation and non-compete covenants. The
agreements provide for aggregate compensation at the annual rate of $274,000
during the fiscal year ended March 31, 1997.

The Company's compensation agreement with its chief financial officer
provides for compensation at the annual rate of $80,000, which is included in
the aggregate compensation set forth in the previous paragraph. Until the date
the Company shall have received at least $5,000,000 from one or more private or
public debt or equity financings (the "Financing Date"), the Company is to pay
such compensation in shares of common stock valued at $1.25 per share, which was
greater than the fair market value per share at the date of the agreement
(November 1995). After the Financing Date, compensation will be paid in cash. As
of March 31, 1996, the Company had issued 32,000 shares of common stock to the
chief financial officer under this agreement. The agreement also provides for
the grant of an option to purchase 100,000 shares of common stock at $1.50 per
share, exercisable from the Financing Date until November 2001.

NOTE 7 -- RELATED PARTY TRANSACTIONS

In addition to those transactions discussed in Notes 5 and 9, in March
1996, the Company loaned $18,000 to an employee of the Company who is also a
principal stockholder. The note is due on demand and bears interest at a rate of
10% per annum.

The amount due to stockholder represent advances of $32,237 to Caribbean
Cigar Factory by its founder, who is currently the Company's largest individual
stockholder. This amount also includes the accumulated earnings of the
predecessor company of $17,384 through the date on which the net assets were
acquired by the Company, as discussed in Note 1. The obligation, which is due on
demand after April 1, 1997, bears interest at a rate of 10%.

NOTE 8 -- INCOME TAXES

No provision for income taxes has been recorded in the accompanying
financial statements as the Company has incurred losses since incorporation. No
income tax provision is provided for the period prior to incorporation, since
the Cigar Factory was operating as a sole proprietorship.

Deferred tax assets and liabilities result principally from temporary
differences in the recognition of revenues and expenses for tax and financial
reporting purposes. The tax effect of such deductible current and noncurrent
temporary differences at March 31, 1996, was $18,750 and $207,240, respectively.
The current deferred tax asset at March 31, 1996, is primarily the result of
differences in inventory capitalization between tax and financial reporting. The
noncurrent deferred tax asset at March 31, 1996 represents the tax effect of net
operating loss carryforwards for federal and state purposes. The Company has
provided a 100% valuation allowance against such assets as management believes
that it is more likely than not that the benefits will not be realized. There
were no deferred tax assets or liabilities at March 31, 1995.

The Company has net operating loss carryforwards for federal and state
purposes of approximately $550,700. The net operating losses will expire in the
year 2011. Certain provisions of the tax law may limit the net operating loss
carryforwards available for use in any given year in the event of an ownership
change as defined in the tax code. There have already been significant changes
in stock ownership; however, an ownership change has not occurred which would
cause the net operating loss carryover to be limited.

NOTE 9 -- STOCKHOLDERS' EQUITY

The following summarizes and describes the issuance of common stock as
detailed in the Statement of Stockholders' Equity:

Upon incorporation and in connection with the transfer of net assets of the
Cigar Factory (see Note 1), the Company issued a total of 2,458,000 shares to
the founders of the Company which was recorded at the par value of the stock.

F-10
<PAGE> 52

CARIBBEAN CIGAR COMPANY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

See Note 4 -- Debt Financing, which describes the issuance of common stock
in connection with certain financing as well as the conversion of such debt to
common stock of the Company.

See Note 6 -- Commitments which described the agreement entered into with
the Company's Chief Financial Officer for payment of compensation in the form of
common stock.

The Company has issued common stock to certain key employees which vests
upon their completion of one year of service with the Company after the issue
date. For the 20,500 shares issued in October 1995, such stock was valued at
$.10 per share. In March 1996, an additional 3,000 shares were issued which were
valued at $3.50 per share. Should the employee leave the Company prior to
vesting, then the stock is forfeited. The fair value of the common stock, as
defined above has been reflected as compensation expense, to the extent earned,
in the accompanying financial statements. The unearned portion of such amounts
is reflected as a reduction in stockholder's equity in the accompanying balance
sheet.

In November 1995, the Company sold 10,000 shares of common stock to its
Chief Financial Officer for $1.25 per share. In January 1996, the Company sold a
total of 125,000 shares of common stock to unrelated investors at $2.00 per
share.

During the year, the Company issued common stock to unrelated parties in
exchange for certain services provided to the Company. In November 1995, 3,000
shares were issued to the Company's former attorney which was valued at $0.10
per share. In February 1996, a total of 5,850 shares, valued at $3.50 per share,
were issued to various parties for services provided in connection with the
private placement as well as development of certain software programs.

Beginning in February 1996 and through March 31, 1996, the Company has sold
425,019 shares of common stock through a private placement of such securities.
The offering price of such stock was $3.50 per share and has resulted in net
proceeds of approximately $1,352,000.

NOTE 10 -- STOCK OPTIONS

In January 1996, the Company issued an option for the purchase of 125,000
shares of common stock in exchange for certain consulting and advisory services.
No expense was recorded in connection with this transaction as the option price
of $1.25 per share equaled or exceeded the fair market value on the date of the
grant.

In March 1996, the Company issued an option for the purchase of 8,000
shares at $4.20 per share, which exceeded the fair market value on the date of
the grant. The option was issued in consideration for certain consulting
services provided to the Company.

F-11
<PAGE> 53

CARIBBEAN CIGAR COMPANY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 11 -- SEGMENT INFORMATION

During fiscal 1996, the Company had two operating segments consisting of
retail operations and manufacturing and distribution. During fiscal 1995, the
Company operated a retail store.

<TABLE>
<CAPTION>
RETAIL MANUFACTURING GENERAL
OPERATIONS DISTRIBUTION CORPORATE ELIMINATIONS TOTAL
---------- ------------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Sales and transfers
To unaffiliated customers........... $ 544,307 $ 276,643 -- -- $ 820,950
To other segments................... -- 83,082 -- (83,082) --
-------- ---------- ---------- -------- ----------
544,307 359,725 -- (83,082) 820,950
Operating profit (loss)............... 120,647 (276,773) (365,461) -- (521,587)
-------- ---------- ---------- -------- ----------
Identifiable Assets................... 372,100 462,402 823,900 -- 1,658,402
======== ========== ========== ======== ==========
Depreciation and Amortization......... 10,700 8,996 2,200 -- 21,896
======== ========== ========== ======== ==========
Capital Expenditures.................. 205,978 179,419 53,400 -- 438,797
======== ========== ========== ======== ==========
</TABLE>

NOTE 12 -- SUBSEQUENT EVENTS

Subsequent to March 31, 1996, the Company entered into a letter of intent
with an underwriter for an initial public offering.

In April 1996, the Company arranged an agreement for the purchase of
approximately $525,000 worth of tobacco during the upcoming year. In connection
with this arrangement, as of the date of this Prospectus the Company has placed
a $300,000 deposit for the purchase of such tobacco.

In May 1996, the Company formed a wholly-owned subsidiary in the Cayman
Islands under the name Caribbean Cigar Company (Cayman) Limited.

F-12
<PAGE> 54

[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 55

[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 56
Artwork

Upper left hand corner
Cigar rolling technique

Upper right hand corner
Tabacco press

Middle photo
Cigar inventory

Lower left hand corner
Bundle of cigars

Lower right hand corner
Cigar rolling process

<PAGE> 57

------------------------------------------------------
------------------------------------------------------

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED ON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR BY THE UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION WAS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE CIRCUMSTANCES OF THE COMPANY OF THE FACTS HEREIN
SET FORTH SINCE THE DATE OF THIS PROSPECTUS.

------------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
The Offering.......................... 4
Summary of Financial Information...... 5
Risk Factors.......................... 6
Dilution.............................. 13
Use of Proceeds....................... 14
Capitalization........................ 16
Selected Financial Information........ 17
Management's Discussion and Analysis
of Results of Operations............ 18
Business.............................. 20
Management............................ 28
Certain Transactions.................. 29
Interim Financings.................... 31
Principal Stockholders................ 32
Description of Securities............. 32
Underwriting.......................... 36
Legal Matters......................... 38
Experts............................... 38
Additional Information................ 38
Index to Financial Statements......... F-1
</TABLE>

------------------------------

UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS) ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THE DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS
IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING
AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------

1,325,000
SHARES OF
COMMON STOCK

1,325,000
REDEEMABLE
COMMON STOCK
PURCHASE WARRANTS
[CARIBBEAN CIGAR COMPANY LOGO]
------------------------------

PROSPECTUS
------------------------------
[BARRON CHASE SECURITIES LOGO]

7700 W. CAMINO REAL
SUITE 200
BOCA RATON, FLORIDA 33433

(561) 750-6081

ATLANTA, GEORGIA
BEVERLY HILLS, CALIFORNIA
BOSTON, MASSACHUSETTS
CHICAGO, ILLINOIS
CLEARWATER, FLORIDA
DALLAS, TEXAS
DENVER, COLORADO
EAST BOCA RATON, FLORIDA
HOOPESTON, FLORIDA
MIAMI, FLORIDA
MIDDLETOWN, NEW JERSEY
MINNEAPOLIS, MINNESOTA
OKLAHOMA CITY, OKLAHOMA
PHOENIX, ARIZONA
SARASOTA, FLORIDA
TAMPA, FLORIDA
TULSA, OKLAHOMA
, 1996
------------------------------------------------------
------------------------------------------------------
<PAGE> 58

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Reference is made to Paragraphs 6 and 7 of the Underwriting Agreement
(Exhibit 1.1) with respect to indemnification of the Company and the
Underwriter.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, offices or 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 Securities 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 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 hereunder, 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 Securities Act and will be governed by
the final adjudication of such issue.

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

<TABLE>
<S> <C>
SEC registration fee.................................................... $ 8,357.50
NASD registration fee................................................... 3,021.00
Nasdaq listing fee...................................................... 9,753.70
Printing and engraving.................................................. 100,000.00**
Accountants' fees and expenses.......................................... 70,000.00**
Legal fees.............................................................. 125,000.00**
Transfer agent's and warrant agent's fees and expenses.................. 10,000.00**
Blue Sky fees and expenses.............................................. 21,000.00**
Underwriter's non-accountable expense allowance......................... 325,701.00
Miscellaneous........................................................... 20,000.00**
----------
Total................................................................... $692,833.20**
==========
</TABLE>

- ---------------
* To be supplied by amendment.

** Estimated

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES

Set forth below is information concerning the issuance by the Company of
its securities since its organization in September 1995. All securities issued
are restricted securities and the certificates bear restrictive legends.

II-1
<PAGE> 59

(a) In connection with its organization in September 1995, the Company
issued 1,820,750 shares of Common Stock to Kevin Doyle and 638,250 shares of
Common Stock to Michael Risley for nominal consideration:

(b) In October 1995, the Company issued shares of Common Stock to the
following employees and service providers of the Company for nominal
consideration:

<TABLE>
<CAPTION>
NAME SHARES
---------------------------------------------------------------------------- ------
<S> <C>
Jeffrey Klein............................................................... 3,000
Chris Stamford*............................................................. 20,000
Bob Michaels*............................................................... 1,000
Alvaro Alonzo*.............................................................. 1,000
Bob Curtis.................................................................. 500
Diego Betancourt*........................................................... 1,000
</TABLE>

- ---------------
* Forfeited under terms of restricted grants.

(i) Mr. Dilk's salary of $80,000 per year is payable in shares of
Common Stock, issued at $1.25 per share. As of May 15, 1996, 48,000 shares
were issued to Mr. Dilk pursuant to this agreement; and

(ii) The Company issued 10,000 shares of Common Stock to Thomas R.
Dilk at the price of $1.25 per share.

(d) From September through December 1995, the Company issued its 10%
Promissory Notes in the principal amount of $250,000. In connection with such
loans, the Company issued 250,000 shares of Common Stock for $.10 per share. The
issuance of the notes and Common Stock was exempt from the registration
requirements of the Securities Act pursuant to Section 4(2) thereof.

Set forth below is information relating to the notes and shares of Common
Stock issued in connection with such interim financing:

<TABLE>
<CAPTION>
NAME PRINCIPAL OF NOTE NUMBER SHARES
----------------------------------------------------- ----------------- ----------------
<S> <C> <C>
Thomas R. Dilk....................................... $ 100,000 100,000
Tony Kamen........................................... 75,000 75,000
George Markelson..................................... 25,000 25,000
Edward D. Arioli Revocable Living Trust.............. 10,000 10,000
Janet Kenning........................................ 5,000 5,000
Donna Millar......................................... 5,000 5,000
Eric S. Kamisher..................................... 5,000 5,000
Douglas Zindulka..................................... 5,000 5,000
John Banta........................................... 5,000 5,000
Charles Spina........................................ 15,000 15,000
</TABLE>

(e) In January 1996, the Company issued an aggregate of 125,000 shares of
Common Stock for $2.00 per share. The sale of the Common Stock was exempt from
the registration requirements of the Securities Act pursuant to Section 4(2)
and/or 4(6) and Rule 506 of the Commission. Set forth below is information
relating to the issuance of the shares of Common Stock:

<TABLE>
<CAPTION>
NAME SHARES PRICE PER SHARE
------------------------------------------------------------- ------ ---------------
<S> <C> <C>
The Athena Fund Ltd. ........................................ 65,000 2.00
Harbinger Partners, L.P. .................................... 35,000 2.00
Robert Vaughn................................................ 25,000 2.00
</TABLE>

II-2
<PAGE> 60

(f) Pursuant to a January 1996 agreement between the Company and Mark
DeVuyst, 25% of Mr. DeVuyst's compensation as a consultant is payable in shares
of Common Stock, at the rate of $3.50 per share. As of June 30, 1996, 4,100
shares were issued to Mr. DeVuyst pursuant to this agreement.

(g) In March 1996, the Company issued 1,000 and 2,000 shares of Common
Stock to each of Charles Cauley and Andres Siverio, respectively, both employees
of the Company, for nominal consideration. The shares issued to Charles Cauley
were subsequently forfeited under terms of restricted grants.

(h) In March 1996, the Company issued 75,000 shares of Common Stock at
$2.00 per share in exchange for cancellation of promissory notes in the
principal amount of $150,000, which are described in Paragraph (d) of this Item
26. The remaining $100,000 in notes were repaid. The sale of the Common Stock
was exempt from the registration requirements of the Securities Act pursuant to
Section 4(2) and/or 4(6) and Rule 506 of the Commission. Set forth below is
information relating to the issuance of the shares of Common Stock:

<TABLE>
<CAPTION>
NAME SHARES PRICE PER SHARE
------------------------------------------------------------ ------- ---------------
<S> <C> <C>
Thomas R. Dilk.............................................. 50,000 2.00
George Markelson............................................ 12,500 2.00
Edward D. Arioli Revocable Living Trust..................... 5,000 2.00
Donna Millar................................................ 2,500 2.00
Eric S. Kamisher............................................ 2,500 2.00
John Banta.................................................. 2,500 2.00
</TABLE>

(i) In February through May 1996, the Company issued an aggregate of
606,348 shares of Common Stock for $3.50 per share for the aggregate
consideration of $2,122,218. The sale of the Common Stock was exempt from the
registration requirements of the Securities Act pursuant to Section 4(2) and/or
4(6) and Rule 506 of the Commission. Set forth below is information relating to
the issuance of the shares of Common Stock:

<TABLE>
<CAPTION>
NAME SHARES PRICE PER SHARE
------------------------------------------------------------ ------- ---------------
<S> <C> <C>
Edward D. Arioli Revocable Living Trust..................... 7,000 3.50
James W. Forsythe Jr........................................ 1,428 3.50
Timothy J. Horan............................................ 2,857 3.50
Harbinger Partners, LP...................................... 10,000 3.50
The Athena Fund, Ltd. ...................................... 20,000 3.50
Merv Adelson Trust.......................................... 8,000 3.50
The Mosbacher Trust......................................... 5,000 3.50
Fairbanks Partners, L.P. ................................... 2,000 3.50
Rhino Fund, Ltd. ........................................... 18,000 3.50
Common Fund Hedged Equity Fund.............................. 12,000 3.50
Carlos Gonzales............................................. 7,000 3.50
Frederic Powers............................................. 2,857 3.50
Christopher Powers.......................................... 2,857 3.50
Stephen Powers.............................................. 2,857 3.50
William J. Hickey........................................... 2,857 3.50
Antonio A. Cabral, Jr. and Rosario V. Cabral................ 2,000 3.50
Sally D. Price.............................................. 2,000 3.50
Judith L. Leahy............................................. 1,000 3.50
Joseph L. DeMarzo........................................... 1,428 3.50
David Portnoy............................................... 32,143 3.50
Mark Raymer................................................. 2,000 3.50
Maroons Partnership......................................... 3,571 3.50
Ralph Giorgio............................................... 7,000 3.50
David Heiss................................................. 1,900 3.50
Robert A. Cervoni........................................... 3,500 3.50
U.S. Clearing Corp. FBO John P. Nolan IRA Rollover Account
#117-95023-13............................................. 1,600 3.50
</TABLE>

II-3
<PAGE> 61

<TABLE>
<CAPTION>
NAME SHARES PRICE PER SHARE
------------------------------------------------------------ ------- ---------------
<S> <C> <C>
U.S. Clearing Corp. FBO Steven S. Gladstone IRA Rollover
Account #117-95016-12..................................... 10,500 3.50
U.S. Clearing Corp. FBO Robert G. Weppler IRA Rollover
Account #117-95032-12..................................... 3,500 3.50
U.S. Clearing Corp. FBO Timothy McDonald IRA Rollover
Account #117-95022-14..................................... 3,500 3.50
U.S. Clearing Corp. FBO Barry Small IRA Rollover Account
#117-95027-19............................................. 3,500 3.50
Donald E. Weeden IRA Rollover Trust......................... 3,500 3.50
Lincoln Trust Co, Custodian FBO Nora D. Kimball............. 5,714 3.50
Kenneth Alan Horowitz....................................... 3,500 3.50
Michael J. Daly Jr.......................................... 7,000 3.50
William M. Merkler.......................................... 4,500 3.50
Thomas H. Reynolds.......................................... 1,429 3.50
Paul Di Biasio.............................................. 14,000 3.50
Arrabel R. Sykes............................................ 4,286 3.50
Hope Murphy................................................. 4,286 3.50
Harris Barton............................................... 3,429 3.50
Le Dinh Can................................................. 14,000 3.50
James P. Snow............................................... 2,857 3.50
John O'Neil................................................. 2,800 3.50
Frank S. Cagio.............................................. 1,000 3.50
William Tonyes.............................................. 14,293 3.50
Jibs Equities............................................... 10,000 3.50
Penn Footwear Retirement Trust.............................. 10,000 3.50
Stephen J. Dresnik, M.D. ................................... 7,000 3.50
James K. Slusser............................................ 7,500 3.50
Arthur Gronbach............................................. 3,500 3.50
Stephen B. Olore............................................ 7,000 3.50
Markus O. Bohi.............................................. 3,571 3.50
Scott T. Pilling............................................ 3,571 3.50
Mary L. Orians.............................................. 5,000 3.50
Jerry Lowery................................................ 5,000 3.50
Mathers Associates.......................................... 15,000 3.50
Jack Gilbert................................................ 7,000 3.50
Kenneth L. Atwell Revocable Trust........................... 3,000 3.50
Randy Gavlik and Kim Gavlik................................. 3,000 3.50
Anita Visbal................................................ 21,000 3.50
G.B. Conley................................................. 7,000 3.50
Jay Matthew................................................. 7,143 3.50
Robert M. Rubin............................................. 10,000 3.50
Richard Oakley.............................................. 3,500 3.50
Teddy Struhl................................................ 7,143 3.50
Walter A. Fox IRA........................................... 3,642 3.50
Jerry Lowery................................................ 5,000 3.50
Joseph Guttman and Lieve Guttman............................ 8,571 3.50
Yitz Grossman............................................... 14,286 3.50
Donald Silpe & Linda Silpe.................................. 10,000 3.50
Dante Greco................................................. 10,000 3.50
Edward D. Arioli............................................ 14,286 3.50
Sparakis Nickos............................................. 28,571 3.50
</TABLE>

II-4
<PAGE> 62

<TABLE>
<CAPTION>
NAME SHARES PRICE PER SHARE
------------------------------------------------------------ ------- ---------------
<S> <C> <C>
Eleftherios Kougentakis..................................... 14,286 3.50
Michael G. Theodoroveakos................................... 10,000 3.50
Robert Scannell............................................. 35,000 3.50
Eugene Capel................................................ 2,000 3.50
Stanley Wirtheim............................................ 600 3.50
Paramount Acquisition....................................... 33,729 3.50
(j) In February 1996, the Company issued 2,000 shares of Common Stock for $3.50 per share
to each of Scott Maddux and the Jansken Group for consulting services rendered.
</TABLE>

ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(A) EXHIBITS

<TABLE>
<C> <S>
1.1(1) Form of Underwriting Agreement.
1.2(1) Form of Selected Dealer Agreement.
3.1(1) Restated Certificate of Incorporation, as amended.
3.2(1) By-Laws
4.1(1) Form of Underwriter Warrant Agreement between Registrant and Underwriter to which
the form of Underwriter Warrant Certificate is included as an exhibit.
4.2(1) Form of Warrant Agreement among the Registrant and Continental Stock Transfer &
Trust Company, as Warrant Agent, to which the form of Redeemable Common Stock
Purchase Warrant is included as an exhibit.
4.3(1) Speciman Common Stock Certificate.
4.4 Speciman Warrant Certificate
5.1 Opinion of Esanu Katsky Korins & Siger.
10.1(1) Employment Agreement dated January 1, 1996, between the Registrant and Kevin
Doyle.
10.2(1) Compensation Agreement dated November 1, 1995 between the Registrant and Thomas
R. Dilk.
10.3(1) 1996 Long-Term Incentive Plan.
10.4(1) Form of Subscription Agreement relating to the 1996 Private Placement.
10.5(1) Form of Redeemable Common Stock Purchase Warrant (included in Exhibit 4.2).
10.6(1) Form of Underwriter's Warrant to purchase Warrants (included in Exhibit 4.1).
10.7(1) Form of M/A Agreement between the Registrant and the Underwriter.
10.8 Non-Employee Director Stock Option Plan
11.1 Computation of Earnings per Share
24.1(1) Consent of Grant Thornton LLP (See Page II-8)
24.3(1) Consent of Esanu Katsky Korins & Siger (included in Exhibit 5.1).
25.1(1) Powers of attorney (included on Signature Page)
27.1(1) Financial Data Schedule.
</TABLE>

- ---------------
(1) Previously filed.

(2) To be filed by amendment.

(B) FINANCIAL STATEMENT SCHEDULES

None

II-5
<PAGE> 63

ITEM 28. UNDERTAKINGS

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;

(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;

(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) For determining liability under the Securities Act, to treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.

(3) To remove from the registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.

(4) To provide to the underwriter at the closing specified in the
underwriting agreement certificates in such denominations and registered in
such names as required by the underwriter to permit prompt delivery to each
purchaser.

(5) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officer or 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 Securities 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 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 hereunder, 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 Securities Act and will be governed by the final adjudication of such
issue.

(6) For determining any liability under the Securities Act, to treat
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the issuer under Rule 424(b)(I), or (4) or 497(h)
under the Securities Act as part of this registration statement as of the
time the Commission declared it effective.

(7) For determining any liability under the Securities Act, to treat
each post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration
statement, and that offering of the securities at that time as the initial
bona fide offering of those securities.

II-6
<PAGE> 64

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, as
amended, the Registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Miami, State of Florida on this the 25th day of July, 1996

CARIBBEAN CIGAR COMPANY

By: /s/ KEVIN DOYLE
-------------------------------
Kevin Doyle, President

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment to this registration statement has been signed by the following
persons on behalf of the Registrant and in the capacities and on the dates
indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------- ------------------------------------ --------------
<C> <S> <C>
/s/ KEVIN DOYLE Chairman of the Board, Chief July 25, 1996
- ------------------------------------- Executive Officer and Director
Kevin Doyle (Principal Executive Officer)

/s/ THOMAS R. DILK Chief Financial Officer and Director July 25, 1996
- ------------------------------------- (Principal Financial and
Thomas R. Dilk Accounting Officer)

/s/ ERIC S. KAMISHER Director July 25, 1996
- -------------------------------------
Eric S. Kamisher

/s/ LUCIANO NICASIO Director July 25, 1996
- -------------------------------------
Luciano Nicasio

</TABLE>

II-7
<PAGE> 65

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We have issued our report dated May 15, 1996, accompanying the financial
statements of Caribbean Cigar Company contained in Amendment No. 1 to the Form
SB-2 Registration Statement and Prospectus. We consent to the use of the
aforementioned report in the Registration Statement and Prospectus, and to the
use of our name as it appears under the caption "Experts."

GRANT THORNTON LLP

Miami, Florida

July 24, 1996

II-8
<PAGE> 66

EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ---------------------------------------------------------------------- ------------
<C> <S> <C>
1.1(1) Form of Underwriting Agreement........................................
1.2(1) Form of Selected Dealer Agreement.....................................
3.1(1) Restated Certificate of Incorporation, as amended.....................
3.2(1) By-Laws...............................................................
4.1(1) Form of Underwriter Warrant Agreement between Registrant and
Underwriter to which the form of Underwriter Warrant Certificate is
included as an exhibit................................................
4.2(1) Form of Warrant Agreement among the Registrant and Continental Stock
Transfer & Trust Company, as Warrant Agent, to which the form of
Redeemable Common Stock Purchase Warrant is included as an exhibit....
4.3(1) Speciman Common Stock Certificate.....................................
4.4 Speciman Warrant Certificate..........................................
5.1 Opinion of Esanu Katsky Korins & Siger................................
10.1(1) Employment Agreement dated January 1, 1996, between the Registrant and
Kevin Doyle...........................................................
10.2(1) Compensation Agreement dated November 1, 1995 between the Registrant
and Thomas R. Dilk....................................................
10.3(1) 1996 Long-Term Incentive Plan.........................................
10.4(1) Form of Subscription Agreement relating to the 1996 Private
Placement.............................................................
10.5(1) Form of Redeemable Common Stock Purchase Warrant (included in Exhibit
4.2)..................................................................
10.6(1) Form of Underwriter's Warrant to purchase Warrants (included in
Exhibit 4.1)..........................................................
10.7(1) Form of M/A Agreement between the Registrant and the Underwriter......
10.8 Non-Employee Director Stock Option Plan...............................
11.1 Computation of Earnings Per Share.....................................
24.1(1) Consent of Grant Thornton LLP (See Page II-8).........................
24.3(1) Consent of Esanu Katsky Korins & Siger (included in Exhibit 5.1)......
25.1(1) Powers of attorney (included on Signature Page).......................
27.1(1) Financial Data Schedule...............................................
</TABLE>

- ---------------
(1) Previously filed.

(2) To be filed by amendment.

<PAGE> 1
Exhibit 4.4

WA [CARIBBEAN CIGAR COMPANY LOGO] Warrants

VOID AFTER , 1999 OR EARLIER UPON REDEMPTION. CUSIP 141834 11 9

REDEEMABLE COMMON STOCK PURCHASE WARRANT

This certifies that FOR VALUE RECEIVED

or registered assigns (the "Registered Holder") is the owner of the number of
Common Stock Purchase Warrants ("Warrants") specified above. Each Warrant
initially entitles the Registered Holder to purchase, subject to the terms and
conditions set forth in this Certificate and the Warrant Agreement (as
hereinafter defined), one (1) fully paid and nonassessable share of Common
Stock, par value $.001 per share ("Common Stock"), of Caribbean Cigar Company,
a Florida corporation (the "Company"), at any time prior to the Expiration Date
(as hereinafter defined), upon presentation of the Subscription Form on the
reverse hereof duly executed, at the corporate office of Continental Stock
Transfer & Trust Company, as Warrant Agent, or its successor (the "Warrant
Agent"), accompanied by payment of $ , subject to adjustment as provided in
the Warrant Agreement (as hereinafter defined) (the "Purchase Price") in lawful
money of the United States of America in cash or by official bank or certified
check made payable to the order of the Company.

This Warrant Certificate and each Warrant represented hereby are issued
pursuant to and are subject in all respects to the terms and conditions set
forth in the Warrant Agreement (the "Warrant Agreement"), dated as of ,
1996, by and among the Company, the Warrant Agent and Barron Chase Securities,
Inc. (the "Representative").

In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price or the number of shares of Common Stock subject
to purchase upon the exercise of each Warrant represented hereby are subject to
modification or adjustment.

Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional shares of Common Stock will be issued. In
the case of the exercise of less than all the Warrants represented hereby, the
Company shall cancel this Warrant Certificate upon the surrender hereof and
shall execute and deliver a new Warrant Certificate or Warrant Certificates of
like tenor, which the Warrant Agent shall countersign, for the balance of such
Warrants.

The term "Expiration Date" shall mean 5:00 P.M. (New York City time)
on , 1999 or earlier upon redemption as hereinafter provided. If such
date shall in the State of New York be a holiday or a day on which the banks
are authorized to close, then the Expiration Date shall mean 5:00 P.M. (New
York City time) the next following day which in the State of New York is not a
holiday or a day on which banks are authorized to close. Under certain
circumstances as provided in the Warrant Agreement, the period during which
the Warrant may be exercised may be extended.

The Company shall not be obligated to deliver any securities pursuant
to the exercise of this Warrant unless a registration statement under the
Securities Act of 1933, as amended, with respect to such securities is
effective. The Company has covenanted and agreed that it will file a
registration statement and will use its best efforts to cause the same to
become effective and to keep such registration statement current while any of
the Warrants are outstanding. This Warrant shall not be exercisable by a
Registered Holder in any state where such exercise would be unlawful.

This Warrant Certificate is exchangeable, upon the surrender hereof by
the Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to
represent such number of Warrants as shall be designated by such Registered
Holder at the time of such surrender. Upon payment by the Registered Holder of
any tax or other governmental charge imposed in connection therewith, for
registration or transfer of this Warrant Certificate at such office, a new
Warrant Certificate or Warrant Certificates representing an equal aggregate
number of Warrants will be issued to the transferee in exchange therefor,
subject to the limitations provided in the Warrant Agreement.

Prior to the exercise of any Warrant represented hereby, the Registered
Holder shall not be entitled to any rights of a stockholder of the Company,
including, without limitation, the right to vote or to receive dividends or
other distributions, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided in the Warrant Agreement.

Commencing , 1997, or earlier with the consent of the
Representative, this Warrant may be redeemed at the option of the Company, at a
redemption price of $.25 per Warrant at any time, provided the Market Price (as
defined in the Warrant Agreement) for the Common Stock issuable upon exercise
of such Warrant shall equal or exceed 200% of the Purchase Price during the
thirty (30) days ending within ten (10) days of the date the Warrants are
called for redemption. Notice of redemption shall be given not later than the
thirtieth (30th) day nor earlier than the sixtieth (60th) day before the date
fixed for redemption, all as provided in the Warrant Agreement. On and after
5:00 P.M. (New York City time) on the business day immediately preceding the
date fixed for redemption, the Registered Holder shall have no rights with
respect to this Warrant except to receive the $.25 per Warrant upon surrender
of this Certificate. This Warrant may only be called for redemption if, on the
date the Warrant is called for redemption, the issuance of the shares of Common
Stock upon exercise of this Warrant, is subject to a current and effective
registration statement.

Prior to due presentment for registration or transfer hereof, the
Company and the Warrant Agent may deem and treat the Registered Holder as the
absolute owner hereof and of each Warrant represented hereby (notwithstanding
any notations of ownership or writing hereon made by anyone other than a duly
authorized officer of the Company or the Warrant Agent) for all purposes and
shall not be affected by any notice to the contrary.

This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York applicable to agreements
executed and to be performed wholly within such State.

This Warrant Certificate is not valid unless countersigned by the
Warrant Agent.

IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed, manually or in facsimile by two of its officers thereunto duly
authorized and a facsimile of its corporate seal to be imprinted hereon.

Dated: CARIBBEAN CIGAR COMPANY

By: By:
Caribbean Cigar Company
Eric Kamisher Corporate Seal Kevin Doyle
1995
Secretary Florida President

Countersigned:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY,
(Jersey City, NJ) as Warrant agent

By Authorized Officer

<PAGE> 2

TRANSFER FEE: $4.00 PER CERTIFICATE ISSUED
SUBSCRIPTION FORM

To be Executed by the Registered Holder in Order to Exercise Warrants

The undersigned Registered Holder hereby irrevocably elects to exercise
_____________ Warrants represented by this Warrant Certificate, and to purchase
the securities issuable upon the exercise of such Warrants, and requests that
certificates for such securities shall be issued in the name of

PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER

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(please print or type name and address)

and be delivered to

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(please print or type name and address)

and if such number of Warrants shall not be all the Warrants evidenced by
this Warrant Certificate, that a new Warrant Certificate for the balance of
such Warrants be registered in the name of, and delivered to, the Registered
Holder at the address stated below.

The undersigned represents that the exercise of the within Warrant was
solicited by a member of the National Association of Securities Dealers, Inc.
If not solicited by an NASD member, please write "unsolicited" in the space
below. Unless otherwise indicated by listing the name of another NASD member
firm, it will be assumed that the exercise was solicited by Barron Chase
Securities, Inc.

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Dated: (Name of NASD Member (if other than Barron
Chase Securities, Inc.)

X
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Address

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Taxpayer Identification Number

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Signature Medallion Guaranteed

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ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Warrants

FOR VALUE RECEIVED,
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PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
hereby sells, assigns and transfers unto

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(please print or type name and address)

of the Warrants represented by this Warrant Certificate, and
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hereby irrevocably constitutes and appoints Attorney
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to transfer this Warrant Certificate on the books of the Company, with full
power of substitution in the premises.

Dated: X
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Signature Medallion Guaranteed

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THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO
THE NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND
MUST BE GUARANTEED BY A COMMERCIAL BANK OR TRUST COMPANY OR A MEMBER FIRM OF
THE AMERICAN STOCK EXCHANGE, NEW YORK STOCK EXCHANGE, PACIFIC STOCK EXCHANGE OR
MIDWEST STOCK EXCHANGE.

<PAGE> 1
Exhibit 5.1

July 25, 1996

03059-01

Securities and Exchange Commission
450 Fifth Street N.W.
Washington, D.C. 20549

Re: Caribbean Cigar Company
File No. 333-44415
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Gentlemen:

We refer to the above-captioned registration statement on Form SB-2
(the "Registration Statement") under the Securities Act of 1933, as amended
(the "Act"), filed by Caribbean Cigar Company, a Florida corporation (the
"Company"), with the Securities and Exchange Commission.

Terms defined in the Registration Statement and not otherwise defined
in this Opinion shall have the same meanings in this Opinion as in the
Registration Statement.

We have examined the originals or photocopies or certified copies of
such records of the Company, certificates of officers of the Company and public
officials, and other documents as we have deemed relevant and necessary as a
basis for the opinion hereinafter expressed. In such examination, we have
assumed the genuineness of all signatures, the authenticity of all documents
submitted to us as certified copies or photocopies and the authenticity of the
originals of such latter documents.

Based on our examination mentioned above, we are of the opinion that
the Common Stock and the Redeemable Common Stock Purchase Warrants (the
"Warrants") being registered to be sold by the Company pursuant to the
Registration Statement are duly authorized, and that the Common Stock and
Warrants, when sold in the manner described in the Registration Statement and
the Common Stock, when issued upon exercise of the Warrants, will be legally
and validly issued, fully paid and nonassessable.

<PAGE> 1
Exhibit 10.8

CARIBBEAN CIGAR COMPANY

1996 Non-Employee Directors Stock Option Plan

1. PURPOSE. The purpose of the Caribbean Cigar Company 1996 Non-Employee
Directors Stock Option Plan (the "Plan") is to enable Caribbean Cigar Company
(the "Company") to attract, retain and reward independent directors for
services to the Company and its Subsidiaries by providing for the grant of
options to such persons.

2. ADMINISTRATION. The Plan shall be administered by a Committee of not
less than two Disinterested Persons, who shall be appointed by the Board and
who shall serve at the pleasure of the Board. The Committee shall have the
authority to administer the Plan and, in such connection, to make such
determinations, not inconsistent with the provisions of the Plan, as it may
deem appropriate.

3. STOCK SUBJECT TO PLAN.

(a) The total number of shares of Stock reserved and available for
distribution under the Plan shall be one hundred thousand (100,000) shares of
Common Stock. Such shares may consist, in whole or in part, of authorized and
unissued shares or treasury shares. If any shares of Common Stock that have
been optioned cease to be subject to an Option, such shares shall again be
available for distribution in connection with future awards under the Plan.

(b) In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, stock split, stock distribution, reverse
split, combination of shares or other change in corporate structure affecting
the Stock, such substitution or adjustment shall be made in the aggregate
number of shares reserved for issuance under the Plan, in the number and option
price of shares subject to outstanding Options granted under the Plan, in the
number and purchase price of shares subject to outstanding Options.

4. ELIGIBILITY AND GRANT.

(a) On the date that each non-employee director shall first be elected
to the board, such individual shall receive a non-qualified option to purchase
five thousand (5,000) shares of Common Stock at an exercise price per share
equal to the greater of the fair market value on the date of grant or the par
value of the Common Stock. Such option shall have a term of ten (10) years and
be exercisable immediately upon issuance.

(b) On April 1 or each year, commencing with April 1, 1997, each
director who is a non-employee director on such date, shall be granted
nonqualified options to purchase two thousand five hundred (2,500) shares of
Common Stock (or such lesser number of shares of Common Stock as remain
available for grant at such date under the Plan, divided by the number of
non-management directors at such date). Such Option shall have an exercise
price per share equal to the greater of the fair market value on the date of
grant or the par value of the Common Stock. Such options shall have a term of
ten (10) years, and shall be exercisable as to 625 shares on the first day of
the July, October, January and April immediately following the date of grant.

(c) Payment of the exercise price shall be paid by cash or certified or
bank check or personal check, provided, that if payment is made by personal
check, the Option shall not be deemed exercised until the proceeds of the check
are collected. Payment may also be made by delivery of shares of Common Stock
having a value equal to the exercise price of the Option being exercised.

(d) The provisions of this Plan may not be amended more than one (1)
time in any six (6) month period other than to comport with changes in the Code
or the Employee Retirement Income Security Act ("ERISA") or the rules
thereunder.

<PAGE> 2
(e) The term "non-employee director" means a director of the Company
who is not otherwise employed by the Company or any subsidiary for compensation.
An individual who is elected as an officer, but does not receive compensation
for such services shall be deemed a non-employee director.

5. UNFUNDED STATUS OF PLAN.

The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Company, nothing contained in this Plan shall
give any such participant or optionee any rights that are greater than those of
a general creditor of the Company. In its sole discretion, the Committee may
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver Stock or payments in lieu of or with respect
to awards under this Plan; provided, however, that, unless the Committee
otherwise determines with the consent of the affected participant, the existence
of such trusts or other arrangements shall be consistent with the "unfunded"
status of the Plan.

6. GENERAL PROVISIONS.

(a) The Committee may require each person purchasing shares pursuant to
a Stock Option or other award under the Plan to represent to and agree with the
Company in writing that the optionee or participant is acquiring the shares
without a view to distribution thereof. The certificates for such shares may
include any legend which the Committee deems appropriate to reflect any
restrictions on transfer. All certificates or shares of Stock or other
securities delivered under the Plan shall be subject to such stock-transfer
orders and other restrictions as the Committee may deem advisable under the
rules, regulations, and other requirements of the Commission, any stock
exchange upon which the Stock is then listed, and any applicable Federal or
state securities law, and the Committee may cause a legend or legends to be put
on any such certificates to make appropriate reference to such restrictions.

(b) Nothing contained in this Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to stockholder
approval if such approval is required; and such arrangements may be either
generally applicable or applicable only in specific cases.

(c) Neither the adoption of the Plan nor the grant of any award
pursuant to the Plan shall confer upon any director of the Company any right to
continued service as a director or employment with the Company or a Subsidiary
or Affiliate, as the case may be, nor shall it interfere in any way with the
right of the Company or a Subsidiary or Affiliate to terminate the employment
of any such person at any time.

(d) No later than the date as of which an amount first becomes
includible in the gross income of the participant for Federal income tax
purposes with respect to any award under the Plan, the participant shall pay to
the Company, or make arrangements satisfactory to the Committee regarding the
payment of, any Federal, state, or local taxes of any kind required by law to
be withheld with respect to such amount. Unless otherwise determined by the
Committee, withholding obligations may be settled with Stock, including Stock
that is part of the award that gives rise to the withholding requirement. The
obligations of the Company under the Plan shall be conditional on such payment
or arrangements and the Company and its Subsidiaries or Affiliates shall, to
the extent permitted by law, have the right to deduct any such taxes from any
payment of any kind otherwise due to the participant.

7. EFFECTIVE DATE OF PLAN.

The Plan shall be effective as of the date the Plan is approved by the
Board, subject to the approval of the Plan by a majority of the votes cast by
the holders of the Company's Common Stock at the next annual or special meeting
of stockholders. Any grants made under the Plan prior to such approval shall be
effective when made (unless otherwise specified by the Committee at the time of
grant), but shall be conditioned on, and subject to, such approval of the Plan
by such stockholders.

<PAGE> 3
8. TERM OF PLAN.

Options may be granted pursuant to the Plan, until this Plan shall be
terminated, but awards granted prior to such termination may extend beyond that
date.

<PAGE> 1
Exhibit 11.1

EXHIBIT 11

Shares
Outstanding 03/31/96 03/31/95
----------- -------- --------
<S> <C> <C> <C>
Shares issued to founders(1) 2,459,000 2,459,000 2,459,000
Shares issued to others(2) 949,369 690,256 663,885
--------- ------------ -----------
3,408,369 3,149,256 3,122,885
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Stock options(2) 133,000 105,879 105,879
--------- ------------ -----------
Weighted Average Shares 3,255,135 3,228,764
------------ -----------

Net loss $(521,587.00) $(11,772.00)
Net loss per share $ (0.16) (0.00)

</TABLE>

(1) Common stock issued to founders is treated as outstanding since inception
(October 3, 1994).
(2) Common stock and stock options which are issued during fiscal 1996, are
treated as outstanding since inception (October 3, 1994). The number
of said shares deemed outstanding was computed using the treasury stock
method.