<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
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.)
8305 N.W. 27th STREET, MIAMI, FLORIDA
(Address of principal executive offices)
33122
(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:
5,130,169 shares as of November 18, 1997
Page 1 of 9
<PAGE> 2
CARIBBEAN CIGAR COMPANY AND SUBSIDIARIES
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1997 1997
------------ ------------
UNAUDITED
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 79,824 $ 2,896,620
Accounts receivable 1,194,360 1,080,952
Due from related parties 21,509 58,314
Inventory 6,204,047 4,482,469
Prepaid expenses and other receivables 2,237,463 1,416,563
------------ ------------
Total current assets 9,727,203 9,934,918
Property and equipment (net) 2,509,180 2,235,608
Deposits and other assets 167,530 159,755
------------ ------------
$ 12,403,913 $ 12,330,281
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,694,353 $ 1,474,243
Accrued expenses and taxes payable 344,012 157,299
Loans payable - officers and directors 249,700 --
------------ ------------
Total current liabilities 2,288,065 1,631,542
------------ ------------
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; June 30, 1997 issued and
outstanding - 5,130,169; March
31, 1997 - issued and
outstanding - 5,126,218 5,130 5,126
Capital in excess of par value 11,384,054 11,359,862
Accumulated deficit (1,273,336) (666,249)
------------ ------------
10,115,848 10,698,739
------------ ------------
$ 12,403,913 $ 12,330,281
============ ============
</TABLE>
The accompanying notes are an integral part hereof.
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<PAGE> 3
CARIBBEAN CIGAR COMPANY AND SUBSIDIARIES
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
1997 1996
----------- -----------
<S> <C> <C>
Sales $ 3,031,686 $ 1,272,307
Cost of goods sold 1,633,379 885,688
----------- -----------
Gross profit 1,398,307 386,619
----------- -----------
Operating expenses:
Selling expenses 975,966 338,057
General and administrative expenses 1,040,719 324,471
----------- -----------
2,016,685 662,528
----------- -----------
(618,378) (275,909)
----------- -----------
Other income (expense):
Interest income 11,291 --
Interest expense -- (1,074)
----------- -----------
11,291 (1,074)
----------- -----------
Net loss $ (607,089) $ (276,983)
=========== ===========
Loss per common share $ (.12) $ (.08)
=========== ===========
Weighted average number of shares
Outstanding 5,128,852 3,540,880
=========== ===========
</TABLE>
The accompanying notes are an integral part hereof.
Page 3 of 9
<PAGE> 4
CARIBBEAN CIGAR COMPANY AND SUBSIDIARIES
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (607,089) $ (276,983)
Adjustments to reconcile net loss to
net cash used by operating
activities:
Depreciation and amortization 183,695 30,170
Write-off of inventory 30,000 --
Write-off of leasehold improvements 122,483 --
Amortization of unearned compensation -- 6,353
Common stock issued for services 24,196 --
(Increase) in accounts receivable (103,408) (137,517)
(Increase) in inventory (1,751,578) (266,619)
(Increase) in prepaid expenses and
other receivables (820,900) (579,048)
(Increase) in deposits and other assets (6,594) (68,003)
Increase in accounts payable 220,110 188,664
Increase in accrued expenses and taxes
payable 186,713 122,551
----------- -----------
Net cash used by operating activities (2,522,430) (980,432)
----------- -----------
Cash flows from investing activities:
Additions to property and equipment (579,691) (202,664)
Trademark costs (1,180) --
----------- -----------
Net cash used by investing activities (580,871) (202,664)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock -- 645,722
Advances from officers and directors 249,700 --
Repayment of advances to related
parties 36,805 --
----------- -----------
Net cash provided by financing activities 286,505 645,722
----------- -----------
Net decrease in cash (2,816,796) (537,374)
Cash at beginning of period 2,896,620 748,801
----------- -----------
Cash at end of period $ 79,824 $ 211,427
=========== ===========
Supplemental information:
Cash paid for interest $ -- $ 1,074
=========== ===========
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 SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1997
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 June 30, 1997, and the results of its operations and cash flows
for the three months ended June 30, 1997 and 1996. 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, 1997 included in its Annual Report filed on
Form 10-KSB, file no. 0-28728, which was filed on June 30, 1997. The results of
operations for the period ended June 30, 1997 are not necessarily indicative of
operating results for the full year.
1. INCOME (LOSS) PER SHARE:
Income (loss) per share for the three months ended June 30, 1997 and 1996
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 April 1997, the Company granted each of the six members of its Board of
Directors options to purchase 2,500 shares of the Company's common stock
pursuant to the provisions of its Long Term Incentive Stock Option Plan.
In addition, in May 1997, 3,951 shares of its common stock were issued in
exchange for services rendered to the Company.
3. On June 20, 1997, the Company borrowed $250,000 from five of its directors.
In connection with such borrowing, the Company issued (a) its 8% subordinated
promissory notes due July 1, 1998 in the aggregate principal amount of $250,000,
and (b) five-year warrants to purchase an aggregate of 187,500 share of Common
Stock at $6.18 per share. The notes were repaid from the proceeds of the Finova
credit facility.
4. On August 28, 1997, the Company entered into a credit facility with Finova
Capital Corporation (the "Finova Credit Facility"). Under the terms of the
Finova Credit Facility, the Company can borrow up to a maximum of $3,000,000,
subject to limitations based upon eligible accounts receivable and inventory.
The Finova Credit Facility expires in two years and bears interest at prime plus
2.5% per annum. As of September 30, 1997, the Company had borrowed approximately
$1,700,000 under the facility.
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<PAGE> 6
CARIBBEAN CIGAR COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
THREE MONTHS ENDED JUNE 30,1997 AND 1996
The results of operations as previously filed on Form 10-QSB for the three
months ended June 30, 1997 have been amended to reflect the following
adjustments:
<TABLE>
<S> <C>
Cost of goods sold, as previously reported $1,497,004
Adjustment for additional wages payable 100,000
Adjustment for additional expenses 36,375
----------
Cost of goods sold, as amended $1,633,379
==========
Selling expenses, as previously reported $ 706,151
Adjustment for additional advertising expenses 221,170
Adjustment for additional selling expenses 48,645
----------
Selling expenses, as amended $ 975,966
==========
General and administrative expenses, as previously reported $ 708,557
Adjustment for provision for plant closing 222,483
Adjustment for additional legal fees 109,679
----------
General and administrative expenses, as amended $1,040,719
==========
</TABLE>
THREE MONTHS ENDED JUNE 30, 1997 AND 1996
The results of operations for the three months ended June 30, 1997 are not
comparable with the results of operations for the three months ended June 30,
1996. Although the Company had begun the production of its own brand of cigars
in January 1996, it had not fully expanded its retail and wholesale distribution
operation until after the completion of its initial public offering in August
1996.
The Company's sales for the three months ended June 30, 1997 were approximately
$3,031,700, representing an increase of 138.3% from the Company's sales for the
three months ended June 30, 1996 which were approximately $1,272,300. This
increase is primarily due to the opening of an additional five retail stores and
a manufacturing facility in the Dominican Republic, and an increase in the
wholesale distribution of its own and other tobacco and related products, The
combined sales of the retail stores for the three months ended June 30, 1997
were approximately $574,600 as compared to approximately $345,000 for the three
months ended June 30, 1996. The remaining sales of approximately $2,457,100 or
81.0% of sales were attributable to wholesale sales.
Cost of goods sold increased to approximately $1,633,400 for the three months
ended June 30, 1997 as compared to approximately $885,700 for the three months
ended June 30, 1996. This represented an increase of approximately 84.4% and
was primarily a result of the increase in the volume of sales.
Gross profit increased to approximately $1,398,300 or 46.1% of sales for the
three months ended June 30, 1997 as compared to a gross profit of approximately
Page 6 of 9
<PAGE> 7
$386,600 or 30.4% of sales for the three months ended June 30, 1996. The
increase in gross profit reflects improved margins from the manufacture of the
Company's cigars in its Dominican Republic facility, the opening of five
additional retail facilities, and increased wholesale distribution of cigars and
related products.
Selling expenses increased to approximately $976,000 for the three months ended
June 30, 1997 as compared to approximately $338,100 for the comparable period of
1996. This represents an increase of 188.7%. The increase in selling expenses
reflects the increase in marketing and advertising expenses associated with the
building of brand awareness for the Company's premium cigars, and an increase in
its sales force. Selling expenses for the three months ended June 30, 1997
consisted primarily of salaries of approximately $140,000, rents of
approximately $54,600, advertising and promotional costs of approximately
$409,000, shipping costs of approximately $140,000 and other costs of
approximately $232,200.
General and administrative expenses increased to approximately $1,040,700 as
compared to approximately $324,500 for the three months ended June 30, 1996.
This represents an increase of 220.7% and is attributable to the increase in the
volume of the Company's operations and includes salaries and related costs of
approximately $300,000, professional fees of approximately $211,400, insurance
costs of approximately $47,000, travel costs of approximately $86,800, provision
for the closing of the former Miami cigar factory of approximately $222,000 and
other costs of approximately $183,500.
The Company incurred no interest expense for the three months ended June 30,
1997 as compared to interest expense of $1,074 in the three months ended June
30, 1996. During the period ended June 30, 1997 the Company earned
approximately $11,300 in interest income as a result of investing funds from
its initial public offering in August 1996.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1997 the Company had working capital of $7,439,100. The Company's
current ratio as of June 30, 1997 was approximately 4.3 to 1 as compared to
approximately 6.1 to 1 at March 31, 1997. The decrease in the Company's current
ratio is primarily attributable to the $2,800,000 decrease in cash and cash
equivalents. The Company has expended approximately $2,500,000 to finance its
tobacco-growing program in the Dominican Republic and to build raw tobacco
inventory levels for its production facility. At June 30, 1997, the Company had
cash of $80,000. In order to meet its immediate cash requirements, on June 20,
1997, the Company borrowed $250,000 from five of its directors. The notes were
repaid with proceeds from the Finova Credit Facility (which is described below).
As of July 1997, the Company ceased production of cigars in its Miami facility
and transferred the entire production of its products to its facilities in the
Dominican Republic and Indonesia. This will result in a substantial reduction in
the cost of manufacturing of its premium cigars as well as increased
productivity. The Company moved into a new 32,000 square foot distribution
facility in Miami in September 1997 and committed approximately $400,000 towards
the costs of this facility.
On August 28, 1997, the Company entered into a credit facility with Finova
Capital Corporation. Under the terms of the Finova Credit Facility, the Company
can borrow up to a maximum of $3,000,000, subject to limitations based upon
eligible accounts receivable and inventory. The Finova Credit Facility expires
Page 7 of 9
<PAGE> 8
in two years and bears interest at prime plus 2.5% per annum. As of September
30, 1997, the Company had borrowed approximately $1,700,000 under the facility.
Due to the limitations on the amount the Company can borrow under the Finova
Credit Facility and the need for additional funding, the Company is pursuing
additional funding to help cover the costs of completing some of its projects
and providing additional working capital. The failure to obtain such funding
could have a material adverse effect upon the Company's liquidity.
Statements in this Form 10QSB that are not descriptions of historical facts may
be forward looking statements that are subject to risks and uncertainties.
Actual results could differ materially from those currently anticipated due to a
number of factors.
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 19, 1997
CARIBBEAN CIGAR COMPANY
/S/ EDWARD C. WILLIAMS
-----------------------
Edward C. Williams
Chief Financial Officer
Page 8 of 9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 79,824
<SECURITIES> 0
<RECEIVABLES> 1,184,360
<ALLOWANCES> 0
<INVENTORY> 6,204,047
<CURRENT-ASSETS> 9,727,203
<PP&E> 2,509,180
<DEPRECIATION> 0
<TOTAL-ASSETS> 12,403,913
<CURRENT-LIABILITIES> 2,288,065
<BONDS> 0
0
0
<COMMON> 5,130
<OTHER-SE> 10,110,718
<TOTAL-LIABILITY-AND-EQUITY> 12,403,913
<SALES> 3,031,686
<TOTAL-REVENUES> 3,031,686
<CGS> 1,833,379
<TOTAL-COSTS> 2,016,685
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (11,291)
<INCOME-PRETAX> 0
<INCOME-TAX> (607,087)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (607,087)
<EPS-PRIMARY> (.12)
<EPS-DILUTED> 0
</TABLE>
