<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 December 31, 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 February 1, 1997
Page 1 of 9
<PAGE> 2
CARIBBEAN CIGAR COMPANY AND SUBSIDIARY
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
1996 1996
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
------
Current assets:
Cash and cash equivalents $5,443,742 $ 748,801
Accounts receivable 735,992 31,873
Note receivable from stockholder 18,000 18,000
Inventory 2,114,105 379,466
Prepaid expenses and other receivables 950,363 24,893
----------- ----------
Total current assets 9,262,202 1,203,033
Property and equipment (net) 1,732,417 432,169
Deposits and other assets 538,202 23,200
----------- ----------
$11,532,821 $1,658,402
=========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
----------------------------------------
Current liabilities:
Accounts payable $ 630,180 $ 218,268
Accrued expenses and taxes payable 404,386 96,223
----------- ----------
Total current liabilities 1,034,566 314,491
----------- ----------
Due to stockholder 8,313 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;
December 31, 1996 - issued and outstanding - 5,126,218;
March 31, 1996 - issued and outstanding - 3,408,369 5,115 3,408
Capital in excess of par value 11,297,975 1,852,945
Accumulated deficit ( 811,695) ( 550,743)
----------- ----------
10,491,395 1,305,610
Unearned compensation ( 1,453) ( 11,320)
----------- ----------
10,489,942 1,294,290
----------- ----------
$11,532,821 $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 Nine Months Ended
December 31, December 31,
----------------------------- ----------------------
1996 1995 1996 1995
---------- ---------- ---------- --------
<S> <C> <C> <C> <C>
Sales $3,075,356 $ 209,389 $6,076,901 $ 442,301
Cost of goods sold 2,207,164 154,403 4,476,829 298,840
---------- ---------- ---------- ----------
Gross profit 868,192 54,986 1,600,072 143,461
---------- ---------- ---------- ----------
Operating expenses:
Selling expenses 249,631 59,872 803,853 115,997
General and administrative expenses 598,437 121,250 1,208,448 161,999
---------- ---------- ---------- ----------
848,068 181,122 2,012,301 277,996
---------- ---------- ---------- ----------
Interest income 87,653 - 154,789 -
Interest expense - (11,359) ( 3,512) (11,376)
------ ------ --------- ------
87,653 (11,359) 151,277 (11,376)
------ ------ ------- ------
Net income (loss) $107,777 ($137,495) ($260,952) ($145,911)
======= ======= ======= =======
Income (loss) per common share $.02 ($.04) ($.05) ($.04)
==== ==== ==== ====
Weighted average number of shares
outstanding 6,286,197 3,408,944 5,569,355 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>
Nine Months Ended
December 31,
------------------------
1996 1995
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) ($ 260,952) ($145,911)
Adjustments to reconcile net (loss) to net
cash provided (used) by operating activities:
Depreciation and amortization 163,770 11,005
Amortization of stock issuance costs - 5,653
Amortization of unearned compensation 9,867 -
Cancellation of stock issued for compensation ( 4,596) -
Common stock issued for compensation 74,666 -
(Increase) in accounts receivable ( 704,119) ( 18,751)
(Increase) in inventory ( 1,734,639) ( 131,697)
(Increase) in prepaid expenses and other receivables ( 925,470) ( 52,204)
(Increase) in deposits and other assets ( 497,836) ( 9,676)
Increase in accounts payable 411,912 93,664
Increase in accrued expenses and taxes payable 308,163 27,685
---------- --------
Net cash (used) by operating activities (3,159,234) (220,232)
--------- -------
Cash flows from investing activities:
Additions to property and equipment ( 1,463,424) ( 189,464)
Trademark costs ( 17,758) ( - )
------------ ----------
Net cash (used) by investing activities (1,481,182) (189,464)
--------- -------
Cash flows from financing activities:
Proceeds from issuance of common stock 9,376,665 17,599
Advances to stockholder - ( 5,000)
Advances from stockholder - 72,156
Proceeds from convertible debt - 250,000
Repayment of stockholder advances ( 41,308) -
Proceeds of loan - 80,000
---------- --------
Net cash provided by financing activities 9,335,357 414,755
---------- --------
Net increase in cash 4,694,941 5,059
Cash at beginning of period 748,801 250
---------- --------
Cash at end of period $5,443,742 $ 5,309
========== =========
Supplemental information:
Cash paid for interest $ 3,512 $ -
Cash paid for federal income tax - -
</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
DECEMBER 31, 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 December 31, 1996, and the results of its operations
and cash flows for the three and nine months ended December 31, 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 SB2, file no.
333-04415, which was declared effective by the Securities and Exchange
Commission on July 30, 1996.
The Company has reclassified certain expenses between operations and
cost of sales. Such changes have been retroactively reflected in the
totals for the three and nine months ended December 31, 1996.
1. Income (Loss) per Share:
Income (loss) per share for the nine months and three months ended
December 31, 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 DECEMBER 31, 1996 AND 1995
The results of operations for the three months ended December 31, 1996 are not
readily comparable with the results of operations for the three months ended
December 31, 1995. During the three months ended December 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, and sold cigars and other
products manufactured by others. In approximately January 1996, the Company
commenced the manufacture of cigars and the distribution of its cigars to
premium tobacco stores.
The Company's sales for the three months ended December 31, 1996 were
$3,075,400, representing an increase of 1369% from the Company's sales for the
three months ended December 31, 1995, which were $209,389. This increase is
attributed to the increase in manufacturing volume, the opening of four
additional retail stores located in Miami Beach, Key West, Coconut Grove, 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 December 31, 1995 was from retail sales at the Key Largo store, as
compared to revenue for the period ending December 31, 1996 from the Company's
four retail stores and factory outlet. The combined sales of these stores for
the three months ended December 31, 1996 was approximately $495,000 or 16% of
total sales. The remaining sales of $2,580,400 or 84% of revenue, was
attributable to wholesale sales from the factory.
Gross profit increased to $868,200, or 28% of sales, for the three months ended
December 31, 1996 as compared to $55,000, or 26% of sales in the three months
ended September 30, 1995, an increase of 1,479%. The increase in gross profit
reflects (i) the commencement of manufacturing and wholesale distribution in
January 1996; and (ii) the opening of four additional retail stores in Florida.
Selling expenses for the three months ended December 31, 1996 were $249,600 as
compared to $59,900 for the three months ended December 31, 1995, representing
a 317% increase. The increase in selling expenses reflects the expanded nature
of the Company's operations, coupled with the advertising and promotional
expenses associated with the introduction of three national brands of cigars.
During the three months ended December 31, 1996, the Company expanded its
retail base with the opening of one store. During the three months ended
December 31, 1995, the Company had only modest selling expenses relating to its
one retail store in Key Largo, and expenses related to the introduction of its
line of cigars.
General and administrative expenses for the three months ended December 31,
1996 were $598,400 as compared to $121,250 for the comparable period of 1995.
This represented an increase of approximately 394%. This increase is due to
the expanded nature of the Company's operations and includes $238,000 for
salaries and related costs; professional fees of $110,000; insurance costs of
$20,000; and other costs of $230,000.
Page 6 of 9
<PAGE> 7
The Company incurred no interest expense for the three months ended December 31,
1996 as compared to $11,400 in bridge loan interest for the comparable period of
1995. Interest income was $87,700 for the three months ended December 31, 1996
as a result of investing the proceeds of the public offering which was completed
in August 1996.
As a result of the foregoing, the Company had operating income of $108,000, or
$.02 per share, for 1996, as compared with a loss of $137,500, or ($.04) per
share, for the three months ended December 31, 1995.
NINE MONTHS ENDED DECEMBER 31, 1996 AND 1995
The results of operations for the nine months ended December 31, 1996 and 1995
are not readily comparable because of the reasons previously outlined. The
explanations for the variances for the three months ended December 31, 1995 and
1996 are applicable for the nine months as well.
Sales for the nine months ended December 31, 1996 were $6,076,900 as compared
to sales of $442,300 for the same period in 1995. This represents an increase
of 1274%.
Gross profits increased to $1,600,100 or 26% of sales for the nine months ended
December 31, 1996 as compared to $143,500 or 32% of sales for the same period
of 1995.
Selling expenses for the nine months ended December 31, 1996 were $803,900 as
compared to $116,000 for the comparable period of 1995. The expenses for the
nine months period of 1996 consisted primarily of salaries and related costs of
$250,000; advertising and promotion of $275,000; rent of $93,000; and other
selling costs of $186,000.
General and administrative expenses for the nine months ended December 31, 1996
were $1,208,400 as compared to $162,000 for the comparable period of 1995. The
expenses for the nine months ended December 31, 1996 consisted primarily of
salaries and related costs of $561,000; professional fees of $181,000; travel
and promotional expenses of $176,000; and other expenses of $290,000.
Interest income increased to $155,000 for the nine months ended December 31,
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 decreased to $3,500 for the nine months ended December 31,
1996 as compared to $11,400 of bridge loan interest for the nine months ended
December 31, 1995.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1996, the Company had working capital of approximately
$8,228,000, resulting from the completion of its Initial Public Offering in
July 1996, which raised net proceeds of $8,800,000.
At December 31, 1996 the Company had made commitments for both the short-term
and long-term supply of tobacco. During April 1996, the Company entered into an
agreement for the supply of tobacco for which $500,000 has been deposited
through December 31, 1996. The Company has also advanced an additional
$400,000 of a total commitment of $1,750,000 to various tobacco growers for
1997 tobacco crop purchases. In October 1996, the Company opened its fifth
retail store in Coconut Grove, Florida, and in January 1997
Page 7 of 9
<PAGE> 8
opened a store in Ocean Reef, Florida. The Company presently has one store
under construction in Ft. Lauderdale, Florida; has entered into a lease for a
store in Orlando, Florida, and may open additional retail locations within the
next twelve months.
The Company has begun production of cigars in its new facility located in the
Dominican Republic in January 1997. As of February 12, 1997, the Company has
expended $520,000 towards the construction and start-up costs for this
facility.
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: February 12, 1997
CARIBBEAN CIGAR COMPANY
/s/ Thomas R. Dilk
-------------------------------------
Thomas R. Dilk
Chief Financial Officer
Page 9 of 9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 5,443,742
<SECURITIES> 0
<RECEIVABLES> 735,992
<ALLOWANCES> 0
<INVENTORY> 2,114,105
<CURRENT-ASSETS> 9,262,202
<PP&E> 1,732,417
<DEPRECIATION> 0
<TOTAL-ASSETS> 11,532,821
<CURRENT-LIABILITIES> 1,034,566
<BONDS> 0
0
0
<COMMON> 5,115
<OTHER-SE> 10,489,942
<TOTAL-LIABILITY-AND-EQUITY> 11,532,821
<SALES> 6,076,901
<TOTAL-REVENUES> 6,076,901
<CGS> 4,476,829
<TOTAL-COSTS> 2,012,301
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,512
<INCOME-PRETAX> (260,952)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (260,952)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> 0
</TABLE>
