<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission file number 0-21081
CARIBBEAN CIGAR COMPANY
(Exact name of registrant as specified in its charter)
Florida 65-0613303
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
6265 S.W. Eighth Street, Miami, Florida
(Address of principal executive offices)
33144
(Zip Code)
(305) 267-3911
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
State the number of shares outstanding of each issuer's classes of
common equity, as of the latest practicable date:
5,126,218 shares as of November 1, 1996
Page 1 of 9
<PAGE> 2
PART I
Item 1. Financial Statements
CARIBBEAN CIGAR COMPANY AND SUBSIDIARY
CONDENSED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September
30, March 31,
1996 1996
----------- ----------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 8,097,405 $ 748,801
Accounts receivable 313,995 31,873
Note receivable from stockholder 18,000 18,000
Inventory 1,279,326 379,466
Prepaid expenses and other assets 571,347 24,893
----------- ----------
Total current assets 10,280,073 1,203,033
Property and equipment (net) 1,374,096 432,169
Deposits and other assets 161,080 23,200
----------- ----------
11,815,249 1,658,402
=========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Accounts payable $ 1,129,331 $ 218,268
Accrued expenses and taxes payable 245,630 96,223
----------- ----------
Total current liabilities 1,374,961 314,491
----------- ----------
Due to stockholder 49,621 49,621
----------- ----------
Commitments and contingencies - -
Stockholders' equity:
Preferred stock, $.01 par value; 2,000,000 shares
authorized, none issued and outstanding - -
Common stock, $.001 value; 10,000,000 shares authorized; September 30,
1996 - issued and outstanding - 5,115,352; March 31, 1996 - issued
and outstanding - 3,408,369 5,115 3,408
Capital in excess of par value 11,308,234 1,852,945
Accumulated deficit (919,472) (550,743)
----------- ----------
10,393,877 1,305,610
Unearned compensation (3,210) (11,320)
----------- ----------
10,390,667 1,294,290
----------- ----------
$11,815,249 $1,658,402
=========== ==========
</TABLE>
The accompanying notes are an integral part hereof.
Page 2 of 9
<PAGE> 3
CARIBBEAN CIGAR COMPANY AND SUBSIDIARY
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
------------------------------- ----------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Sales $1,729,238 $ 113,677 $3,001,545 $ 232,912
Cost of goods sold 1,180,296 48,453 2,161,079 142,920
---------- ---------- ---------- ----------
Gross profit 548,942 65,224 840,466 89,992
---------- ---------- ---------- ----------
Operating expenses:
Selling expenses 352,224 31,656 662,808 57,642
General and administrative expenses 353,180 16,213 610,029 40,749
---------- ---------- ---------- ----------
705,404 47,869 1,272,837 98,391
---------- ---------- ---------- ----------
Interest income 67,136 - 67,136 -
Interest expense (2,420) (17) (3,494) (17)
---------- ---------- ---------- ----------
64,716 (17) 63,642 (17)
---------- ---------- ---------- ----------
Net income (loss) ($91,746) $17,338 ($368,729) ($8,416)
========== ========== ========== ==========
Income (loss) per common share ($ .02) $ - ($ .08) $ -
========== ========== ========== ==========
Weighted average number of shares
outstanding 5,254,341 3,408,944 4,604,552 3,408,944
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part hereof.
Page 3 of 9
<PAGE> 4
CARIBBEAN CIGAR COMPANY AND SUBSIDIARY
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
September 30,
---------------------------------
1996 1995
---------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) ($ 368,729) ($ 8,416)
Adjustments to reconcile net (loss) to net
cash provided (used) by operating activities:
Depreciation and amortization 82,256 4,894
Amortization of unearned compensation 3,514 -
Cancellation of stock issued for compensation 4,596 -
Common stock issued for compensation 74,666 -
(Increase) in accounts receivable ( 282,122) ( 2,004)
(Increase) in inventory ( 899,860) ( 16,788)
(Increase) in prepaid expenses and other receivables ( 546,454) -
(Increase) in deposits and other assets ( 137,880) -
Increase (decrease) in accounts payable 911,063 ( 1,345)
Increase in accrued expenses and taxes payable 149,407 4,983
----------- ---------
Net cash (used) by operating activities ( 1,009,543) ( 18,676)
Cash flows from investing activities:
Additions to property and equipment ( 1,024,183) ( 13,037)
----------- ---------
Net cash (used) by investing activities ( 1,024,183) ( 13,037)
Cash flows from financing activities:
Proceeds from issuance of common stock 9,382,330 -
Advances from stockholder - 33,027
----------- ---------
Net cash provided by financing activities 9,382,330 33,027
----------- ---------
Net increase (decrease) in cash 7,348,604 1,314
Cash at beginning of period 748,801 250
----------- ---------
Cash at end of period $8,097,405 $ 1,564
=========== =========
Supplemental information:
Cash paid for interest $ 2,420 $ 17
========= =======
Cash paid for income taxes - -
========== =======
</TABLE>
The accompanying notes are an integral part hereof.
Page 4 of 9
<PAGE> 5
CARIBBEAN CIGAR COMPANY AND SUBSIDIARY
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
In the opinion of management, the accompanying unaudited condensed
financial statements contain all adjustments (consisting only of normal
recurring adjustments) necessary to present fairly the financial position of the
company as of September 30, 1996, and the results of its operations and cash
flows for the three and six months ended September 30, 1996 and 1995. Such
financial statements have been condensed in accordance with the applicable
regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted. It is suggested that these condensed financial
statements be read in conjunction with the company's audited financial
statements and notes thereto for the year ended March 31, 1996 included in its
Registration Statements on Form SB-2, file no. 333-04415, which was declared
effective by the Securities and Exchange Commission on July 30, 1996.
The company has reclassified certain operational expenses between
cost of sales and general and administrative expenses incurred for the quarter
ended June 30, 1996. Such changes have been reflected in the totals for the
three and six months ended September 30, 1996.
1. (Loss) per Share:
(Loss) per share for the six months ended September 30, 1996 and 1995
is based upon the weighted average number of shares of common stock
outstanding during the period. The calculation gives retroactive effect
(as if to inception of the company) 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 effective of which was computed using the treasury stock method.
2. In July 1996, the company received net proceeds of $8,800,000 from the
sale of securities in its Initial Public Offering.
Page 5 of 9
<PAGE> 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
The results of operations for the three months ended September 30,
1996 are not readily comparable with the results of operations for the three
months ended September 30, 1995. During the three months ended September 30,
1995, the company's sole business was the operation of one retail store in Key
Largo, Florida. This was operated as a sole proprietorship, and sold cigars and
other products manufactured by others. In approximately January 1996, the
company commenced manufacturing cigars, and established distribution channels to
premium tobacco stores.
The company's sales for the three months ended September 30, 1996
were $1,729,200, representing an increase of 1421% from the company's sales for
the three months ended September 30, 1995, which were $113,700. This increase is
attributed to the increase in manufacturing volume, the opening of three retail
stores located in Miami Beach, Key West, and in the Little Havana section of
Miami, Florida, and the wholesale distribution of its cigars and other products.
The primary source of revenue for the period ending September 30, 1995 was from
retail sales at the Key Largo store, as compared to revenue for the period
ending September 30, 1996 from the company's four retail stores and factory
outlet. The combined sales of these stores was $380,200 or 22% of total sales.
The remaining sales of $1,348,738 or 78% of revenue, was attributable to
wholesale sales from the factory.
Gross profit increased to $549,000, or 32% of sales, for the three
months ended September 30, 1996 as compared to $65,200, or 57% of sales in the
three months ended September 30, 1995, an increase of 742%. The increase in
gross profit reflects (i) the commencement of manufacturing and wholesale
distribution in January 1996; and (ii) the opening of three additional retail
stores in Florida.
Selling expenses for the three months ended September 30, 1996 were
$352,200 as compared to $31,700 for the three months ended September 30, 1995,
representing a 1011% increase. The increase in selling expenses reflects the
expanded nature of the company's operations, coupled with the advertising and
promotional expense associated with the creation of three national brands of
cigars. During the three months ended September 30, 1996, the company expanded
its retail base with the opening of two stores. During the three months ended
September 30, 1995, the company had only modest selling expenses relating to its
one retail store in Key Largo.
General and administrative expenses for the three months ended
September 30, 1996 were $353,200 as compared to $16,200 for the comparable
period of 1995. This represented an increase of 2080%. This increase is due to
the expanded nature of the company's operations and includes $153,000 for
salaries and related costs; professional fees of $16,000; insurance costs of
$12,000; and other costs of $172,000.
Page 6 of 9
<PAGE> 7
Interest expense was $2,400 for the three months ended September 30,
1996 as compared to no interest for the comparable period of 1995. Interest
income was $67,100 for the three months ended September 30, 1996 as a result of
investing the proceeds of the public offering which was completed in August
1996.
As a result of the foregoing factors, the company sustained losses of
$91,700, or $.02 per share, for 1996, as compared with an income of $17,300, or
$- per share, for the three months ended September 30, 1995.
SIX MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
The results of operations for the six months ended September 30, 1996
and 1995 are not readily comparable because of the reasons previously outlined.
The explanations for the variances for the three months ended September 30, 1995
are applicable for the six months as well.
Sales for the six months ended September 30, 1996 were $3,001,500 as
compared to sales of $232,900 for the same period in 1995. This represents an
increase of 1189%.
Gross profits increased to $840,500 or 28% of sales for the six
months ended September 30, 1996 as compared to $90,000 or 39% of sales for the
same period of 1995.
Selling expenses for the six months ended September 30, 1996 were
$662,800 as compared to $57,600 for the comparable period of 1995. The expenses
for the six months period of 1996 consisted primarily of salaries of $133,000;
advertising and promotion of $203,000; rents of $68,000; shipping costs of
$133,000; and other selling costs of $126,000.
General and administrative expenses for the six months ended
September 30, 1996 were $610,000 as compared to $40,700 for the comparable
period of 1995. The expenses for the six months ended September 30, 1996
consisted primarily of salaries of $290,000; professional fees of $71,000;
travel and promotional expenses of $135,000; and other expenses of $114,000.
Interest income increased to $67,000 for the six months ended
September 30, 1996 as compared to no interest income for the comparable period
of 1995. This increase was due to the investment of the proceeds of the public
offering which was completed in August 1996.
Interest expense increased to $3,500 for the six months ended
September 30, 1996 as compared to no interest expense for the six months ended
September 30, 1995.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1996, the company had working capital of $8,905,000,
resulting from the completion of its Initial Public Offering in July 1996, which
raised net proceeds of $8,800,000. The company believes that such net proceeds
will be sufficient to meet its cash requirements for at least one year from the
completion of its Initial Public Offering.
During April 1996, the company entered into agreements for the future
purchases of tobacco at an estimated cost of $1,500,000, of which $450,000 has
been deposited through September 30,
Page 7 of 9
<PAGE> 8
1996. In October and November 1996, the company advanced an additional $250,000
in such deposits. In October 1996, the company opened its fifth retail store in
Coconut Grove, Florida. The company anticipates expansion of its retail
operations and plans to open three additional retail locations in the next
twelve months.
The company plans to begin production of cigars in its new facility
located in the Dominican Republic in December 1996. To date, the company has
expended $500,000 towards the construction of this facility.
The company presently has no other commitments for the purchase of
raw materials and believes it has adequate cash available to fund its
operations.
Page 8 of 9
<PAGE> 9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 12, 1996
Caribbean Cigar Company
-------------------------------
Thomas R. Dilk
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 8,097,405
<SECURITIES> 0
<RECEIVABLES> 313,995
<ALLOWANCES> 0
<INVENTORY> 1,279,326
<CURRENT-ASSETS> 10,280,073
<PP&E> 1,374,096
<DEPRECIATION> 0
<TOTAL-ASSETS> 11,815,249
<CURRENT-LIABILITIES> 1,129,331
<BONDS> 0
0
0
<COMMON> 5,115
<OTHER-SE> 11,308,234
<TOTAL-LIABILITY-AND-EQUITY> 11,815,249
<SALES> 3,001,545
<TOTAL-REVENUES> 3,001,545
<CGS> 2,161,079
<TOTAL-COSTS> 1,272,837
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,494
<INCOME-PRETAX> (368,729)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (368,729)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> 0
</TABLE>
