CARIBBEAN CIGAR CO, SB-2, 1996-08-13

CARIBBEAN CIGAR CO
SB-2, 1996-08-13
CIGARETTES

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<PAGE> 1

As filed with the Securities and Exchange Commission on August 13, 1996

Registration No. 333-

Securities and Exchange Commission
Washington, D.C. 20549

Form SB-2

Registration Statement under the Securities Act of 1933

Caribbean Cigar Company
(Exact name of registrant as specified in its charter)
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Florida 2121 65-0613303
(State or jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Classification Code Number) Identification No.)
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6265 S.W. Eighth Street, Miami, FL 33144 (305) 267-3911

(Address, including zip code, and telephone number, including area code, of
registrant's principal executive officer)

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:
Eric S. Kamisher, Esq.
Asher S. Levitsky P.C.
Esanu Katsky Korins & Siger
605 Third Avenue
New York, New York 10158
(212) 953-6000
Fax: (212) 953-6899

Approximate date of proposed sale to the public: As soon as practical on or
after the effective date of this Registration Statement.
If any securities being registered on this Form are to be offered on a delayed
or continuous basis pursuant to Rule 415 under the Securities Act, check the
following box. [x]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
Calculation of Registration Fee
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M a x i m u m
Offering Maximum
Amount to be Price Per Aggregate Registration
Title of each class of securities to be registered Registered Share(1) Offering Price Fee
-------------------------------------------------- ------------ ----- -- -------------- -------------
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Common Stock, par value $.001 per share 1,056,348 Shs. $10.50 $11,091,654.00 $3,824.71

=================================================================================================================================

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(1) Estimated solely for purposes of computation of the registration fee
pursuant to Rule 457, based on the closing price of the Common Stock
on the Nasdaq SmallCap Market on August 9, 1996 of $10.50 per share.

The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.

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CARIBBEAN CIGAR COMPANY

CROSS-REFERENCE SHEET

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FORM SB-2 ITEM NUMBER AND CAPTION LOCATION OF CAPTION IN PROSPECTUS
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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 . . . . . . . . . . . . . . . . . . *
5. Determination of Offering Price . . . . . . . . . . Outside Front Cover Page; Price Range
of Common Stock

6. Dilution . . . . . . . . . . . . . . . . . . . . . . *
7. Plan of Distribution . . . . . . . . . . . . . . . . Outside Front Cover Page; Selling
Stockholders
8. Legal Proceedings . . . . . . . . . . . . . . . . . *
9. Directors, Executive Officers, Promoters and Control Management; Principal Stockholders
Persons . . . . . . . . . . . . . . . . . . . . . .

10. Security Ownership of Certain Beneficial Owners and Principal Stockholders; Certain
Management . . . . . . . . . . . . . . . . . . . . . Transactions
11. Description of the Securities . . . . . . . . . . . Description of Securities
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 Management's Discussion and Analysis of
Operations . . . . . . . . . . . . . . . . . . . . . Financial Conditions and 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;
Price Range of Common Stock

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 . . . . . . . . . . . . . . Selling Stockholders
</TABLE>

_________________________
* Omitted because item is inapplicable or answer is in the negative.

<PAGE> 3
PROSPECTUS SUBJECT TO COMPLETION DATED AUGUST 13, 1996

Caribbean Cigar Company

1,056,348 shares of Common Stock, par value $.001 per share

The 1,056,348 shares of Common Stock to be sold by certain selling
stockholders (the "Selling Stockholders") of Caribbean Cigar Company (the
"Company") may be sold from time to time commencing November 30, 1997, or
earlier with the consent of Barron Chase Securities, Inc., the underwriter of
the Company's initial public offering ("Barron Chase"). The Company will not
receive any proceeds from the sale of such shares by the Selling Stockholders.
The cost of the registration of the securities for the Selling Stockholders,
estimated at approximately $15,000, is being borne by the Company.

Each of the Selling Stockholders has advised the Company that the sale
of the shares of Common Stock may be effected by such Selling Stockholder from
time to time in transactions (which may include block transactions) by or for
the account of the Selling Stockholders in the over-the-counter market,
including the Nasdaq SmallCap Market, on the Boston Stock Exchange or in
negotiated transactions, a combination of such methods of sale or otherwise.
Sales may be made at fixed prices which may be changed, at market prices or in
negotiated transactions, a combination of such methods of sale or otherwise,
and securities may be transferred by gift.

Selling Stockholders may effect such transactions by selling their
securities directly to purchasers, through broker- dealers acting as agents for
the Selling Stockholders or to broker-dealers who may purchase shares as
principals and thereafter sell the securities from time to time in the
over-the-counter market, in negotiated transactions or otherwise. Such
broker-dealers, if any, may receive compensation in the form of discounts,
concessions or commissions from the Selling Stockholders and/or the purchasers
from whom such broker-dealer may act as agents or to whom they may sell as
principals or otherwise (which compensation as to a particular broker-dealer
may exceed customary commissions).

The Common Stock is listed on The Nasdaq SmallCap Market under the
symbol CIGR and on the Boston Stock Exchange under the symbol HAV.

The Company has informed the Selling Stockholders that the
anti-manipulative rules under the Securities Exchange Act of 1934, Rules 10b-2,
10b-6 and 10b-7, may apply to their sales in the market and has furnished each
of the Selling Stockholders with a copy of these rules. The Company has also
informed the Selling Stockholders of the need for delivery of copies of this
Prospectus.

___________________________

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."

___________________________

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.

The date of this Prospectus is August 13, 1996

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The Company is 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 the calendar year as its fiscal year.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER OF THE COMPANY'S INITIAL
PUBLIC OFFERING MAY EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET
PRICE OF THE COMMON STOCK AT LEVELS ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN
THE OPEN MARKET. SUCH STABILIZATION, IF COMMENCED, MAY BE DISCONTINUED AT ANY
TIME.

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<PAGE> 5
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.

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 at April 30, 1996, 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 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.
See "Certain Transactions." References to the Company, include the Company, its
subsidiary and Cigar Factory unless the context indicates otherwise.

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<PAGE> 6
THE OFFERING

Securities Offered . . . . . . . . . 1,056,348 shares of Common Stock.
Each of the Selling Stockholders has
advised the Company that the sale of
the shares of Common Stock may be
effected from time to time in
transactions (which may include
block transactions) by or for the
account of the Selling Stockholders
in the over-the-counter market, on
the Boston Stock Exchange or in
negotiated transactions, a
combination of such methods of sale
or otherwise. Sales may be made at
fixed prices which may be changed,
at market prices or in negotiated
transactions, a combination of such
methods of sale or otherwise, and
securities may be transferred by
gift.
Risk Factors . . . . . . . . . . . . Purchase of the Securities involves
a high degree of risk, and should be
considered only by investors who can
afford to sustain a loss of their
entire investment. See "Risk
Factors."
Nasdaq Symbols
Common Stock . . . . . . . . . CIGR
Warrants . . . . . . . . . . . CIGRW

Boston Stock Exchange Symbols
Common Stock . . . . . . . . . HAV
Warrants . . . . . . . . . . . HAVW

Common Stock Outstanding
at August 5, 1996: . . . . . . 5,110,698 shares(1)
Warrants Outstanding
at August 5, 1996: . . . . . . 1,523,750 Redeemable Common Stock
Purchase Warrants ("Public
Warrants")(2)

_____________________________

1 Does not include an aggregate of 2,726,250 shares of Common Stock, of
which (a) 500,000 shares may be issued pursuant to the Company's 1996
Long Term Incentive Plan; (b) 100,000 shares may be issued pursuant to
the Company's Non-Employee Stock Option Plan, of which options to
purchase 15,000 shares are outstanding; (c) 1,523,750 shares which may
be issued upon exercise of the Public Warrants; (d) 265,000 shares
which may be issued pursuant to underwriter's warrants issued in
connection with the Company's initial public offering; or (e) 337,500
shares of Common Stock which may be issued pursuant to other
outstanding warrants and options.

2 Does not include warrants that are not publicly traded.

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SUMMARY FINANCIAL INFORMATION

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

FISCAL YEAR INCEPTION
ENDED (OCTOBER 3, 1994) TO
MARCH 31, 1996 MARCH 31, 1995
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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
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MARCH 31, 1996
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Balance Sheet Data:
Working capital . . . . . . . . . . . . . . . . . . . . . . $888,542
Total assets . . . . . . . . . . . . . . . . . . . . . . . 1,658,402

Total liabilities . . . . . . . . . . . . . . . . . . . . . 364,112
Accumulated deficit . . . . . . . . . . . . . . . . . . . . (550,743)
Stockholders' equity . . . . . . . . . . . . . . . . . . . 1,294,290
Net tangible book value per share of Common Stock . . . . . .38
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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 The balance sheet data does not give effect to the receipt by the
Company of approximately $9 million pursuant to its initial public
offering of Common Stock, which was completed in August 1996.

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<PAGE> 8
RISK FACTORS

The purchase of the shares of Common Stock 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.

At March 31, 1996, the Company had working capital of approximately
$888,500. Prior to the Company's initial public offering, the Company's
operations were 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. At March 31, 1996, the Company required significant
additional capital for the expansion of its manufacturing, marketing and retail
operations. In August 1996, the company received proceeds of approximately $9
million in its initial public offering. The Company believes that such net
proceeds will be sufficient to fund its operations at least through July 31,
1997. 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 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

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<PAGE> 9
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

Prior to the Company's initial public offering, the Company marketed
its primary brand product under the name Santiago Cabana. Consolidated Cigar
had 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 was 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."

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 1,523,750 Public Warrants and those set
forth below, there are no outstanding warrants or options. Pursuant to the
Company's 1996 Long-Term Incentive Plan adopted in June 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 Stock Option
Plan adopted in June 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.

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<PAGE> 10
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."

LACK OF EXPERIENCE IN INTERNATIONAL OPERATION

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"

CONTROL BY MANAGEMENT

As of August 5, 1996, approximately 42.5% of the outstanding shares of
Common Stock were owned by the Company's officers and directors, and such
persons may be able to elect all of the directors and will thus be able to
continue to control the Company.

POSSIBLE DELISTING FROM THE NASDAQ STOCK MARKET AND MARKET ILLIQUIDITY

The Company's Common Stock and Public Warrants are included in The
Nasdaq SmallCap Market. If the Company is unable to satisfy Nasdaq's
requirements for continued listing, the Common Stock and Public Warrants may be
delisted from The Nasdaq SmallCap 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 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.

RISKS OF LOW-PRICED STOCKS; PENNY STOCK REGULATIONS

If the Company's securities were delisted from The Nasdaq SmallCap
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 Public Warrants and may affect the ability of
holders of the Common Stock or Public Warrants to sell such securities 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

- 8 -
<PAGE> 11
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 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. In
connection with its initial public offering, the Company has agreed that for a
period of three years from July 30, 1996, the date of the prospectus of such
offering, it will not create any series of Preferred Stock or issue any shares
of Preferred Stock without the prior written consent of the Barron Chase.

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

All of the presently issued and outstanding shares of Common Stock,
other than the 1,523,750 shares issued in the Company's initial public
offering, 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
persons 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.

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, other
than those issued in the Company's initial public offering, no shares of Common
Stock will become eligible for sale pursuant to Rule 144 prior to October 29,
1996. Thereafter, at various times through May 1998, 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, including the Selling
Stockholders, have agreed that they will not sell their shares for 12 months
and 16 months, respectively, from July 30, 1996, without the prior approval of
Barron Chase.

- 9 -
<PAGE> 12
PRICE RANGE OF COMMON STOCK AND PUBLIC WARRANTS

The Company's Common Stock and Public Warrants have been traded on The
Nasdaq SmallCap Market and the Boston Stock Exchange since August 1, 1996. The
trading symbols for the Common Stock and Warrants are CIGR and CIGRW on Nasdaq
and HAV and HAVW on the Boston Stock Exchange. During the period from August
1, 1996 to August 12, 1996, the high and low closing prices on the Nasdaq
SmallCap Market of the Common Stock was $14.00 and $10.125, respectively, and
the high and low closing prices of the Warrants were $6 and $4,
respectively. The closing prices for the Common Stock and Warrants on July 12,
1996, were $10 1/2 and $4 3/4 , respectively.

These quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not represent actual transactions.

As of August 12, 1996, the Company believes that there were
approximately beneficial holders of the Common Stock.

The Company has paid no dividends on its Common Stock since inception,
and does not expect to pay any dividends for the foreseeable future.

- 10 -
<PAGE> 13
CAPITALIZATION

The following table sets forth the capitalization of the Company as of
March 31, 1996, and as adjusted to reflect (a) the sale of the 1,523,750 shares
of Common Stock and 1,523,750 Public Warrants in the Company's initial public
offering in August 1996, (b) the sale of 181,329 shares of Common Stock at
$3.50 per share subsequent to March 31, 1996 and (c) the net effect of other
insignificant Common Stock transactions during the period subsequent to March
31, 1996 through June 30, 1996. Such Common Stock issuances and cancellations
were primarily related to employee compensation.

<TABLE>
<CAPTION>
MARCH 31, 1996
--------------
ACTUAL AS ADJUSTED
---------- -----------
<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
4,911,498 outstanding as adjusted1 . . . . . . . . . . . . 3,408 5,110
-

Additional paid-in capital . . . . . . . . . . . . . . . . . 1,852,945 11,640,271
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . (550,743) (569,839)
Unearned compensation . . . . . . . . . . . . . . . . . . . . . (11,320) (6,724)
-------- -------
Total stockholders' equity . . . . . . . . . . . . . . . . . . 1,294,290 11,068,818
--------- ----------
Total capitalization . . . . . . . . . . . . . . . . . . . . . $1,343,911 $11,118,489
========== ===========

- ----------------------------
</TABLE>

- 11 -
<PAGE> 14
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
MARCH 31, 1996 (OCTOBER 3,
1994) TO
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>

- 12 -
<PAGE> 15
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 change will have a material adverse
effect on the Company's business.

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

- 13 -
<PAGE> 16
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 July 30, 1996. The Company anticipates expansion of its
retail operations and plans to open approximately five retail locations in the
next twelve months. In August 1996, the Company received net proceeds of
approximately $9,000,000 from its initial public offering of Common Stock. The
Company believes that the net proceeds from its initial public offering
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.

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 by Santiago
Cabana, 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.

- 14 -
<PAGE> 17
Signature Collection by Santiago Cabana, which is the Company's first
cigar, was introduced in September 1995. The 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.

Flavored Brands

In addition to the premium brands, the Company also offers three
flavored cigars -- the 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.

- 15 -
<PAGE> 18
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 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 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.

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, by the end of the winter of 1996, the Company intends
to have increased the number of retail stores by 3 and to add 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 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

- 16 -
<PAGE> 19
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 economic 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.

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 complete successfully or market its cigars
successfully.

GOVERNMENT REGULATION; TOBACCO INDUSTRY LITIGATION

- 17 -
<PAGE> 20
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.

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

- 18 -
<PAGE> 21
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 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

- 19 -
<PAGE> 22
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 1966, 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
allegedly 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.

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 in 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

- 20 -
<PAGE> 23
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 Largo, Florida,
1998 for the South Beach section of Miami Beach, 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.

- 21 -
<PAGE> 24

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 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.

The Company intends to appoint a second independent director to the
Board of Directors and, thereafter, will maintain at least two independent
directors on the Board.

Messrs. Dilk and Kamisher are Selling Stockholders. See "Interim
Financings" and "Selling Stockholders." 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)
---------------------
FISC ANNUAL COMPENSATION RESTRICTED OPTIONS, SARS
AL STOCK
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARDS (NUMBER)
--------------------------- ---- ------ ----- ------- --------
(DOLLARS)
---------
<S> <C> <C> <C> <C> <C>
1996 $102,000 -- -- --
Kevin Doyle
President and Chief Executive 1995 -- -- -- --
Officer
</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.

- 22 -
<PAGE> 25
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 $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. If there is a change in control of the Company,
all outstanding stock options granted under the Non-Employee Directors Plan
shall be made in the event of a merger, consolidation, recapitalization,
reclassification, stock split, warrants or rights issuance, stock dividend or
combination of shares.

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<PAGE> 26
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 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 the 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 transactions between the Company and its officers, directors and
5% shareholders subsequent to the Company's initial public offering 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 loans, plus interest
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 loans
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.

- 24 -
<PAGE> 27

PRINCIPAL STOCKHOLDERS

The following table sets forth 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 as of August 5, 1996:

<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
NAME AND ADDRESS(1) OWNERSHIP(2) PERCENT OF
---------------- --------- ----------
OWNERSHIP
---------
<S> <C> <C>
Kevin Doyle . . . . . . . . . . . . . 1,820,750 35.6%
Michael Risley . . . . . . . . . . . 558,250 10.9%
Thomas R. Dilk(3) . . . . . . . . . . 328,000 6.4%
Eric S. Kamisher(4) . . . . . . . . . 15,000 *

Luciano R. Nicasio(5) . . . . . . . 7,500 *

All directors and officers
as a group (four individuals owning 2,171,250 42.5%
stock)(3,4,5) . . . . . . . . . . . .

- -------------------
</TABLE>

* Less than 1%

1 Unless otherwise indicated, the address of each person is c/o
Caribbean Cigar Company, 6265 S.W. Eighth Street, Miami, Florida
33144.

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.

- 25 -
<PAGE> 28
SELLING STOCKHOLDERS

The Selling Stockholders purchased their shares of Common Stock from
the Company during the period from February to May 1996 from the Company.
Pursuant to the subscription agreement pursuant to which they purchased their
shares, the Company agreed to register their shares at the Company's request at
the time of the Company's initial public offering. The Company's initial
public offering was completed on August 6, 1996. In connection with such
offering, each of the Selling Stockholders agreed not to sell his or her shares
before November 30, 1997 without the prior consent of Barron Chase, the
underwriter of the Company's initial public offering. Accordingly, no Selling
Stockholder may sell any of his or her shares of Common Stock pursuant to this
Prospectus prior to November 30, 1997 without the approval of Barron Chase.
Set forth below is information as to the Selling Stockholders as of July 30,
1996.

<TABLE>
<CAPTION>
Names and Shares of Common Percentage of Ownership
-----------------------
Address Stock Being Offered
- ----------- -------------------
<S> <C> <C>
Thomas Dilk 160,000 3.1%
220 East 65th Street
Apartment 3B
New York, NY 10021

Tony Kamen 75,000 1.5%

George Markelson 37,500 *

Janet Kenning 5,000 *

Donna Millar 7,500 *

Eric Kamisher 7,500 *
107 Highland Avenue
Rowayton, CT 06853

Douglas Zindulka 5,000 *

John Banta 15,000 *

Charles Spina 15,000 *

Robert Vaugn 25,000 *

Edward D. Arioli Revocable Living Trust 22,000 *
c/o Edward D. Arioli
1499 W. Palmetto
Suite 310
Boca Raton, FL 33486

James W. Forsythe Jr. 1,428 *
405 Lincoln Avenue
Rutherford, NJ 07070
</TABLE>

- 26 -
<PAGE> 29
<TABLE>
<S> <C> <C>
Timothy J. Horan 2,857 *
1438 Third Avenue
Apartment 26A
New York, NY 10028

Harbinger Partners, LP 45,000 *
4365 Executive Drive
Suite 740
San Diego, CA 92121

The Athena Fund, Ltd 85,000 2%
c/o Lyons Capital Partners
4365 Executive Drive
#740
San Diego, CA 92121

Merv Adelson Trust 8,000 *
c/o Lyons Capital Partners
4365 Executive Drive
#740
San Diego, CA 92121

The Mosbacher Trust 5,000 *
c/o Lyons Capital Partners
4365 Executive Drive
#740
San Diego, CA 92121

Fairbanks Partners, L.P 2,000 *
4365 Executive Drive
Suite 740
San Diego, CA 92121

Rhino Fund, Ltd 18,000 *
c/o Lyunb Capital Partners
4365 Executive Drive
#740
San Diego, CA 92121

Common Fund Hedged Equity Fund 12,000 *
c/o Lyons Capital Partners
4365 Executive Drive
#740
San Diego, CA 92121

Carlos Gonzales 7,000 *
721 Fifth Avenue
New York, NY 10022

Frederic Powers 2,857 *
2 Poccia Circle
Larchmont, NY 10538

Christopher Powers 2,857 *
29 Crawford Road
Harrison, NY 10528

Stephen Powers 2,857 *
8 Murchison Place
</TABLE>

- 27 -
<PAGE> 30
<TABLE>
<S> <C> <C>
White Plains, NY 10605

William J. Hickey 2,857 *
1203 LaGrange Street
Chestnut Hill, MA 02167

Antonio A. Cabral, Jr. and 12,000 *
Rosario V. Cabral
2240 El Camino Del Notre
Encinitas, CA 92024

Sally D. Price 2,000 *
1314 Deep Run Lane
Reston, VA 22090

Judith L. Leahy 1,000 *

Joseph L. DeMarzo 1,428 *
41 Hathaway Lane
White Plains, NY 10605

David Portnoy 32,143 *

Mark Raymer 2,000 *
9621 Lilly Court
Northridge, CA 91325

Maroons Partnership 3,571 *
1835 N. Halsted
Chicago, IL 60614

Ralph Giorgio 7,000 *
271 E. Bradford Avenue
Cedar Grove, NJ

David Heiss 1,900 *
93 West Meadow Road
Wilton, CT 06897

Robert A. Cervoni 3,500 *
12 Talbot Drive
Lake Success, NY 11020

U.S. Clearing Corp. 1,600 *
FBO John P. Nolan
IRA Rollover Account #117-95023-13
32 Point Lookout
Milford, CT 06460

U.S. Clearing Corp. 10,500 *
FBO Steven S. Gladstone IRA Rollover
Account #117-95016-12
158 Clapboard Ridge Road
Greenwich, CT 06831

U.S. Clearing Corp. 3,500 *
FBO Robert G. Weppler IRA Rollover
</TABLE>

- 28 -
<PAGE> 31
<TABLE>
<S> <C> <C>
Account #117-95032-12
c/o Robert G. Weppler
31 Woodland Way
Manhasset, NY 11030

U.S. Clearing Corp. 3,500 *
FBO Timothy McDonald
IRA Rollover Account #117-95022-14
c/o Timothy McDonald
145 Mason Street
Greenwich, CT 06830

U.S. Clearing Corp. 3,500 *
FBO Barry Small
IRA Rollover Account #117-95027-19
c/o Barry Small
5 Northwitton Road
New Canon, CT 06840

Donald E. Weeden IRA Rollover 3,500 *
Trust c/o Donald E. Weeden
85 Middle River Road
Danbury, CT 06811

Lincoln Trust Co, Custodian 5,714 *
FBO Nora D. Kimball
P. O. Box 5831
Denver, CO 80217

Kenneth Alan Horowitz 3,500 *
496 North Lake Way
Palm Beach, FL 33480

Michael J. Daly Jr 7,000 *
12 Burling Avenue
White Plains, NY 10605

William M. Merkler 4,500 *
103 4th Avenue
Belmar, NJ 07719

Thomas H. Reynolds 1,429 *
132 Webbs Hill Road
Stamford, CT 06903

Paul Di Biasio 14,000 *
7857 Heritage Drive
Annandale, VA 22003

Arrabel R. Sykes 4,286 *

Hope Murphy 4,286 *
22 Hamilton Place
Garden City, NY 11530

Harris Barton 3,429 *
1156 Hamilton Avenue
Palo Alto, CA 99301
</TABLE>

- 29 -
<PAGE> 32
<TABLE>
<S> <C> <C>
Le Dinh Can 14,000 *
2518 Glen Meadows Drive
Mesquite, TX 75150

James P. Snow 2,857 *
17220 SW 84th Court
Miami, FL 33157

John O'Neil 2,800 *
322 West 57th Street
New York, NY 10019

Frank S. Cagio 1,000 *
2 Sandborn Street
Staten Island, NY 10312

William Tonyes 14,293 *
30 Elm Street
Dergenfield, NJ 07621

Jib Equities 10,000 *
285 Oldfield Road
Shavertown, PA 18708

Penn Footwear Retirement Trust 10,000 *
c/o Jeff Davidowitz
285 Oldfield Road
Shavertown, PA 18708

Stephen J. Dresnik, M.D 7,000 *
4700 Davis Road
Coral Gables, FL 33143

James K. Slusser 7,500 *
7242 S. Gary Avenue
Tulsa, OK 74136

Arthur Gronbach 3,500 *
10 Castle Hill Road
Bridgewater, CT 06752

Stephen B. Olore 7,000 *
128 Common Street
Walpole, MA 02081

Markus O. Bohi 3,571 *
2487 Prospect Drive
Upland, CA 91784

Scott T. Pilling 3,571 *
919 Woodview Road
Brielle, NJ 08730

Mary L. Orians 5,000 *
2337 Broadvue Avenue
Eustis, FL 32726-5913

Jerry Lowery 5,000 *
1300 Seaside Road SW
</TABLE>

- 30 -
<PAGE> 33
<TABLE>
<S> <C> <C>
Sunset Beach, NC 28468

Mathers Associates 15,000 *
1265 Industrial Highway
Southhampton, PA 18966

Jack Gilbert 7,000 *
15456 Coutolence Road
Magalia, CA 95954

Kenneth L. Atwell Revocable 3,000 *
Trust c/o Carolyn A. Baker, Trustee
Wild Rose
P. O. Box 178
New Castel, NH 03854

Randy Gavlik and Kim Gavlik 3,000 *
4313 S. Chestnut Avenue
Broken Arrow, OK 74011

Anita Visbal 21,000 *
1 Toms Point Lane
#2G
Port Washington, NY 11050

G.B. Conley 7,000 *
4000 Brentwood
Coeur d' Alene, ID 83814

Jay Matthew 7,143 *
130 West 67th Street
New York, New York 10023

Robert M. Rubin 10,000 *
6060 Kings Gate Circle
Delray Beach, FL 33486

Richard Oakley 3,500 *

Teddy Struhl 7,143 *
17891 Lake Estates Drive
Boca Raton, FL 33496

Walter A. Fox IRA 3,642 *
c/o Walter A. Fox
6260 NE 19th Avenue
Ft. Lauderdale, FL 33308

Jerry Lowery 5,000 *
1300 Seaside Road SW
Sunset Beach, NC 28468

Joseph Guttman and Lieve 8,571 *
Guttman
542 N. Cherokee Avenue
Los Angeles, CA 90038
</TABLE>

- 31 -
<PAGE> 34
<TABLE>
<S> <C> <C>
Yitz Grossman 14,286 *
1 Frethorn Drive
Lawrence, NY 11559

Donald Silpe & Linda Silpe 10,000 *
940 S. Ocean Boulevard
Manalapan, FL 33462

Dante Greco 10,000 *

Edward D. Arioli 14,286 *
1499 W. Palmetto
Suite 310
Boca Raton, FL 33486

Sparakis Nickos 28,571 *

Eleftherios Kougentakis 14,286 *

Michael G. Theodoroveakos 10,000 *

Robert Scannell 35,000 *

Eugene Capel 2,000 *

Stanley Wirtheim 600 *

Paramount Acquisition 33,729 *
</TABLE>

__________________

* Less than 1%.

1 Does not include shares of Common Stock issuable upon exercise of any
warrants owned by any of the Selling Stockholders.

The Company will not receive any proceeds from the sale by the Selling
Stockholders of the shares of Common Stock being sold by them.

Each of the Selling Stockholders has advised the Company that the sale
of the shares being sold pursuant ot his Prospectus may be effected from time
to time in transactions (which may include block transactions by or for the
account of the Selling Stockholders) in the over-the-counter market, on the
Boston Stock Exchange or in negotiated transactions, a combination of such
methods of sale or otherwise. Sales may be made at fixed prices which may be
changed, at market prices or in negotiated transactions, a combination of such
methods of sale or otherwise, and securities may be transferred by gift.

Selling Stockholders may effect such transactions by selling their
securities directly to purchasers, through broker-dealers acting as agents for
the Selling Stockholders or to broker-dealers who may purchase shares as
principals and thereafter sell the securities from time to time in the
over-the-counter market, in negotiated transactions or otherwise. Such
broker-dealers, if any, may receive compensation in the form of discounts,
concessions or commissions from the Selling Stockholders

- 32 -
<PAGE> 35
and/or the purchasers from whom such broker-dealer may act as agents or to whom
they may sell as principals or otherwise (which compensation as to a particular
broker-dealer may exceed customary commissions).

Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the Selling Stockholder's securities may
not simultaneously engage in market-making activities with respect to any
securities of the Company during the applicable "cooling-off" period (at least
two and possibly nine business days) prior to the commencement of such
distribution. Accordingly, in the event the underwriter of the Company's
initial public offering is engaged in a distribution of a Selling Stockholder's
securities, it will not be able to make a market in the Company's securities
during the applicable restrictive period. However, such underwriter has not
agreed to and is not obligated to act as broker-dealer in the sale of any
Selling Stockholder's securities and the Selling Stockholders may be required,
and in the event such underwriter is a market-maker, will likely be required,
to sell such securities through another broker-dealer. In addition, each
Selling Stockholder desiring to sell securities will be subject to the
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including without limitation Rules 10b-6 and 10b-7, which
provisions may limit the timing of the purchases and sales of shares of the
Company's securities by such Selling Stockholders.

The Selling Stockholders and broker-dealers, if any, acting in
connection with such sales might be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act and any commission received by
them and any profit on the resale of the securities might be deemed to be
underwriting discount and commissions under the Securities Act.

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 were 3,586,948
shares of Common Stock outstanding prior to the Company's initial public
offering, and currently, there are 5,110,698 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 upon exercise of the Public Warrants will be when so issued, 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 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 prior to July 30, 1999, it will not create any series
of Preferred Stock or issue any shares of Preferred Stock without the prior
written consent of Baron Chase.

REDEEMABLE COMMON STOCK PURCHASE WARRANTS

The holder of each Public Warrant is entitled, upon payment of the
exercise price of $7.00 per share, to purchase one share of Common Stock.
Unless previously redeemed, the Public Warrants are exercisable during the
three-year period

- 33 -
<PAGE> 36
commencing July 30, 1996. Holders of the Public Warrants will only be able to
exercise the Public Warrants if (a) a current prospectus under the Securities
Act relating to the shares of Common Stock issuable upon exercise of the Public
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 Public Warrants reside.

The Public 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
Public 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 Public Warrants are called for
redemption. During the one-year period commencing of the date of the
Prospectus, the Public Warrants may only be redeemed with the consent of the
Underwriter. Holders of Public Warrants will automatically forfeit their
rights to purchase the shares of Common Stock issuable upon exercise of such
Public Warrants unless the Public Warrants are exercised before the close of
business on the business day immediately prior to the date set for redemption.
All of the outstanding Public Warrants must be redeemed if any are redeemed. A
notice of redemption shall be mailed to each of the registered holders of the
Public Warrants by first class, postage prepaid, within five business days (or
such longer period to which the Underwriter may consent) after the Public
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 Public Warrants shall
terminate at 5:00 p.m. (New York City time) on the business day immediately
preceding the date fixed for redemption. The Public Warrants can only be
redeemed if, on the date the Public Warrants are called for redemption, there
is an effective registration statement covering the shares of Common Stock
issuable upon exercise of the Public Warrants.

The Public 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 Public Warrants or, if the Public 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 Public Warrants being exercised.

The Public 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 Public Warrants will not
possess any rights as a stockholder of the Company unless and until the holder
exercises the Public Warrants.

Although the Public 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 reduce such price
or extend the Public Warrants. The Company may not extend the exercise period
or reduce the exercise price without the consent of Barron Chase.

SHARES ELIGIBLE FOR FUTURE SALE

Other than the outstanding shares of Common Stock issued pursuant to
the Company's initial public offering, 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

- 34 -
<PAGE> 37
beneficially owned shares for at least three years would be entitled to sell
such shares under Rule 144 without regard to the Applicable Requirements.

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 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
Public Warrants is Continental Stock Transfer & Trust Company, Two Broadway,
New York, New York 10004.

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 offered pursuant
to this Prospectus.

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

- 35 -
<PAGE> 38
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.

- 36 -
<PAGE> 39
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> 40
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> 41
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> 42
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> 43
CARIBBEAN CIGAR COMPANY

STATEMENT OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
ADDITIONAL
COMMON STOCK PAID-IN ACCUMULATED UNEARNED
------------
SHARES PAR VALUE CAPITAL DEFICIT COMPENSATION TOTAL
------ --------- ------- ------- ------------ -----
<S> <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> 44
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 $--
======= ===
</TABLE>

Non cash investing and financing activities.

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> 45
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 promissory 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). Such assets approximating $65,500 consisted
principally of cash, inventory, leasehold improvements and certain deposits.
The liabilities assumed consisted primarily of trade and other accounts
payable, including an obligation to the sole proprietor of $49,621.

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>

Income Taxes

F-7
<PAGE> 46
CARIBBEAN CIGAR COMPANY

NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996 AND 1995

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.

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 --

</TABLE>
F-8
<PAGE> 47

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:

The Company expects to open additional retail stores as well as expanding the
manufacturing and distribution operations of the Company. In connection with
this growth, the Company will likely enter into additional operating leases for
such facilities. Rent expense was approximately $47,000 and $5,300 in fiscal
1996 and 1995, respectively.

F-9
<PAGE> 48
CARIBBEAN CIGAR COMPANY

NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996 AND 1995

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.

F-10
<PAGE> 49
CARIBBEAN CIGAR COMPANY

NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996 AND 1995

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 2,459,000 shares to
the founders of the Company which was recorded at the par value of the stock.

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.

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.

F-11
<PAGE> 50
CARIBBEAN CIGAR COMPANY

NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996 AND 1995

<TABLE>
<CAPTION>
Retail Manufacturing General
------ ------------- -------
Operations Distribution Corporate Eliminations Total
---------- ------------ --------- ------------ -----
<S> <C> <C> <C> <C> <C>
Sales and transfers
To unaffiliated $544,307 $ 276,643 -- -- $ 820,950
customers

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 10,700 8,996 2,200 -- 21,896
Amortization . . . . . ======== ========= ========= ========= =========

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> 51
[THIS PAGE INTENTIONALLY LEFT BLANK]

<PAGE> 52
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 UNDERWRITERS. 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
Selling Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Description of Securities . . . . . . . . . . . . . . . . . . . . . . . . . 32
Underwriting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Index to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . F-1
</TABLE>

___________________

UNTIL SEPTEMBER 8, 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.

<PAGE> 53
PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS

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 . . . . . . . . . . . . . . . . . . . . . . . . $ 3,824.71
NASD registration fee . . . . . . . . . . . . . . . . . . . . . . . 1,609.17
Nasdaq listing fee . . . . . . . . . . . . . . . . . . . . . . . .
Legal fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000.00**
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000.00**
------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,433.88
- ---------- =============
</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 (other than securities
issued issued in its initial public offering). All such securities are
restricted securities and the certificates bear restrictive legends.

(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 June 30, 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.

II-1
<PAGE> 54
(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>

(f) Pursuant to a February 1996 agreement between the Company and Mark
DeVuyst, 25% of Mr. DeVuyst's compensation as 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:

II-2
<PAGE> 55
<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 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> <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
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

</TABLE>
II-3
<PAGE> 56

<TABLE>

<S> <C> <C>
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 . . . . . . . . . . . . . . . . . . . . . 7,143 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
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
<CAPTION>
NAME SHARES PRICE PER SHARE
---- ------ ---------------
</TABLE>
II-4
<PAGE> 57
<TABLE>
<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
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 . . . . . . . . . . . . . . . . . . . . . 7,143 3.50
</TABLE>
II-5

<PAGE> 58

<TABLE>
<S> <C> <C>
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

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
</TABLE>

(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.

ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(A) EXHIBITS

1.1(1) Form of Underwriting 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 Underwriter Warrant
Certificate is included as an
exhibit.
4.2(1) Form of Warrant Agreement among the
Registrant and Continental Stock
Transfer &

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<PAGE> 59

Trust Company, as Warrant Agent, to
which the form of Redeemable Common
Stock Purchase Warrant is included as an
exhibit.

5.1(2) 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(1) Non-Employee Director Stock Option Plan

24.1 Consent of Grant Thornton LLP (See Page
II-8)
24.3 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. __________

(1) Previously files as an Exhibit in connection with the Company's initial
public offering and incorporated herein by reference.

(2) To be filed by amendment.

(B) FINANCIAL STATEMENT SCHEDULES

None

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.

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<PAGE> 60
(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-8
<PAGE> 61
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 13th day of August, 1996

CARIBBEAN CIGAR COMPANY

By: /s/ Kevin Doyle
Kevin Doyle, President

Pursuant to the requirements of the Securities Act of 1933, as
amended, this registration statement has been signed by the following persons
on behalf of the Registrant and in the capacities and on the dates indicated.
Each person whose signature appears below hereby authorizes Kevin Doyle, Thomas
R. Dilk or either of them acting in the absence of the other, as his true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution for him and in his name, place and stead, in any and all
capacities to sign any and all amendments (including post-effective amendments)
to this registration statement, and to file the same, with all exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission.

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Kevin Doyle Chairman of the Board, Chief August 12, 1996
- -----------------------------------
Kevin Doyle Executive Officer and Director
(Principal Executive Officer)

/s/ Thomas R. Dilk Chief Financial August 12, 1996
- ----------------------------------
Thomas R. Dilk Officer and Director (Principal
Financial and Accounting Officer)

/s/ Eric S. Kamisher Director August 12, 1996
- -----------------------------------
Eric S. Kamisher

/s/ Luciano R. Nicasio Director August 12, 1996
- -----------------------------------
Luciano R. Nicasio
</TABLE>

II-9
<PAGE> 62
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 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
August 9, 1996

II-10