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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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<S> <C>
FOR THE QUARTER ENDED COMMISSION FILE NUMBER
March 31, 2000 0-29414
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ProductExpress.Com eBusiness Services, Inc.
(formerly: Premium Cigars International Ltd.)
(Exact name of small business issuer as specified in its charter)
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<S> <C>
Arizona 86-0846405
(state or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
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15849 North 77th Street
Scottsdale, Arizona 85260
(Address of principal office) (Zip code)
Registrant's telephone number, including area code: (480) 922-8887
Securities registered pursuant to Section 12(b) of the Act:
No par value common stock
Securities registered pursuant to Section 12(g) of the Act:
No par value common stock
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter periods 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
As of March 31, 2000 there were 5,774,709 shares of ProductExpress.Com eBusiness
Services, Inc. common stock, no par value outstanding.
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INDEX
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PART I - FINANCIAL INFORMATION
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Item 1 - Financial Statements ................................................... 3
Condensed Balance Sheet (Unaudited) as of March 31, 2000 ........................ 3
Condensed Statement of Operations (Unaudited) for the three and three months
ended March 31, 2000 and 1999 ................................................... 4
Condensed Statement of Changes in Stockholder Equity (Deficit) for the three
months ended March 31, 2000 ..................................................... 5
Condensed Statement of Cash Flows (Unaudited) for the three and three months
ended March 31, 2000 and 1999 ................................................... 6
Notes to Condensed Financial Statements ......................................... 7
Special Note Regarding Forward-Looking Statements ............................... 10
Item 2 - Management's Discussion and Analysis or Plan of Operation .............. 12
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings ...................................................... 15
Item 2 - Changes in Securities and Use of Proceeds .............................. 15
Item 3 - Defaults Upon Senior Securities ........................................ 17
Item 4 - Submission of Matters to a Vote of Security Holders .................... 17
Item 5 - Other Information ...................................................... 17
Item 6 - Exhibits and Reports on Form 8-K ....................................... 18
SIGNATURES .............................................................................. 19
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ProductExpress.com eBUSINESS SERVICES, INC.
CONDENSED BALANCE SHEET
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<CAPTION>
March 31st,
2000
------------
(Unaudited)
ASSETS
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Current Assets:
Cash and cash equivalents $ 11,026
Available for sale securities 11,000
Accounts receivable - trade, net 9,986
Inventory, net 3,718
Other current assets 5,543
------------
Total Current Assets 41,273
------------
Property and Equipment, net 253,626
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Other Assets:
Other assets 29,753
------------
29,753
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$ 324,652
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses 1,123,222
------------
Total current liabilities 1,123,222
------------
Commitments and Contingencies --
------------
Stockholders' Equity:
Common stock - no par value, 10,000,000 shares
authorized 5,774,709 issued and outstanding 9,381,845
Unrealized Gain (Loss) on Available for Sale Securities (42,000)
Accumulated deficit (10,138,415)
------------
Total Stockholders' Equity (798,570)
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$ 324,652
============
</TABLE>
The accompanying notes are an integral part of the
condensed financial statements
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ProductExpress.com eBUSINESS SERVICES
CONDENSED STATEMENTS OF OPERATIONS
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<CAPTION>
Three Months Ended
March 31,
----------------------------
2000 1999
----------- -----------
(Unaudited) (Unaudited)
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Net Sales $ 41,493 $ 1,317,687
Cost of Sales 38,798 963,110
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Gross Profit 2,695 354,577
Selling, General and Administrative 229,618 976,871
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Loss from Operations (226,923) (622,294)
Other Income (Expense) 18 (3,640)
----------- -----------
Net Loss $ (226,905) $ (625,934)
=========== ===========
Basic Loss per Share $ (0.05) $ (0.17)
=========== ===========
Weighted Average Number of Shares Outstanding 4,729,851 3,678,425
=========== ===========
</TABLE>
The accompanying notes are an integral part of the
condensed financial statements
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ProductExpress.com eBUSINESS SERVICES, INC.
STATEMENT OF CHANGES IN STOCKHOLDER EQUITY (DEFICIT)
FOR THE THREE MONTHS ENDED MARCH 31, 2000
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<CAPTION>
Additional Common
Common Stock Paid-In Stock
Shares Amount Capital Warrants
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Balance at December 31, 1999 4,491,092 $ 8,995,586 $150,000 $ 1,710
Issuance of common stock 780,000 $ 195,000
Issuance of common stock for
services 158,190 $ 39,550
Net loss for the three months
ended March 31, 2000
----------- ----------- -------- -----------
Balance at March 31, 2000 5,429,282 $ 9,230,136 150,000 $ 1,710
Unrealized Loss Total
on Available for Accumulated Stockholder's
Sale Securities Deficit Equity(Deficit)
<S> <C> <C> <C>
Balance at December 31, 1999 ($ 42,000) (9,911,511) (806,215)
Issuance of common stock $ 195,000
Issuance of common stock for
services $ 39,550
Net loss for the three months
ended March 31, 2000 (226,905) (226,905)
----------- ----------- -----------
Balance at March 31, 2000 ($ 42,000) (10,138,416) (798,570)
</TABLE>
The accompanying notes are an integral part of the
condensed financial statements
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ProductExpress.com eBUSINESS SERVICES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
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Three Months Ended
March 31, 2000
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2000 1999
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(Unaudited) (Unaudited)
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Cash flows from operating activities:
Net loss $(226,905) $(625,934)
Adjustments to reconcile net loss to net cash provided by
(used for) operating activities:
Depreciation and amortization 37,194 251,660
Stock issued for services 39,550
(Increase) decrease in accounts receivable 38,292 111,253
(Increase) decrease in inventories (55,870)
Increase (decrease) in accounts payable and accrued expenses (65,300) 253,687
Net change in other assets and liabilities (9,305) (47,838)
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Net cash provided by (used for) operating activities (186,474) (113,042)
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Cash flows from investing activities:
Purchase of humidors (64,283)
Purchase of equipment (1,596) (7,053)
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Net cash provided by (used for) investing activities (1,596) (71,336)
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Cash flows from financing activities:
Net proceeds from issuance of common stock 195,000 136,000
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Net cash provided by financing activities 195,000 136,000
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Effect of exchange rate changes on cash and cash equivalents -- 20,936
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Net increase (decrease) in cash and cash equivalents 6,930 (27,442)
Cash and cash equivalents, beginning of period 4,096 168,216
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Cash and cash equivalents, end of period $ 11,026 $ 140,774
========= =========
</TABLE>
The accompanying notes are an integral part of the
condensed financial statements
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ProductExpress.com eBUSINESS SERVICES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. PRESENTATION OF INTERIM INFORMATION
In the opinion of the management of ProductExpree.com eBusiness Services, Inc.
(the "Company"), the accompanying condensed financial statements include all
normal adjustments considered necessary to present fairly the financial position
as of March 31, 2000, and the results of operations for the three months ended
March 31, 2000 and 1999, and cash flows for the three months ended March 31,
2000 and 1999. Interim results are not necessarily indicative of results for a
full year.
The condensed financial statements and notes are presented as permitted by the
instructions to Form 10-QSB, and therefore do not contain certain information
included in the Company's audited consolidated financial statements and notes
for the year ended December 31, 1999.
2. FINANCIAL STATEMENTS
The condensed statements of operations and cash flows include all the accounts
of the Company.
3. ISSUANCE OF STOCK
During the first quarter of 2000, the Company issued 780,000 restricted shares
of its common stock for a total of $195,000. In addition, the Company has
reached agreements with certain suppliers of goods and services to issue stock
in lieu of payment for services rendered or goods delivered.
4. NASDAQ LISTING
The securities of the Company are now trading on the NASDAQ OTC Bulletin Board
under the symbol PXPS.OB.
5. CONTINGENCIES
One of the conditions of the Purchase Agreement for the sale of Can-Am specified
that the buyer would not be responsible for past provincial tobacco taxes that
were subsequently assessed against Can-Am based on a different method of
calculation than had been historically used by Can-Am. On July 30, 1999 Can-Am
was notified by the Alberta Treasury that it was being assessed back taxes in
the amount of CAN $247,500 (approximately US $165,000) for the period April 1997
through April 1999. At the same time, the Alberta Treasury has
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submitted a claim in the amount of CAN $60,000 (approximately US $40,000)
against the Tobacco Tax Bond. The Company is the indemnitor on this bond.
In December of 1999, the issuer of the bond notified the Company that it had
paid the bond despite the protests of the Company that the assessment was not
valid. On January 11, 2000 the bond issuer made a formal demand to the Company
for repayment of the bond in the amount of $40,926. The company does not agree
with the assessment and intends to vigorously contest it. The company has
reserved in its December 31, 1999 financial statements for the entire amount of
the bonds in Canada (approximately US$218,000) as a potential liability if
efforts of protest are not successful.
In January of 2000, the Company was informed that Can-Am had defaulted on its
lease agreement for office and warehouse space in Vancouver, BC and that the
landlord was looking to the Company to make good on the lease as the executor of
the lease. As part of the contract for the purchase of Can-Am, ULTC assumed all
liabilities for the lease. The Company disagrees with the landlord's
interpretation and intends to contest it. No provision for possible payments
under the lease have been made in the accompanying financial statements.
In January 2000, the Company was notified that it was in default of its lease
obligations for its copiers due to non-payment and the entire balance owing
under the lease was due and payable. The Company is withholding payment due to
poor quality issue in regards to a rebuilt drum that was installed on a new
machine and service agreements for toner supplies and repair that have not been
honored. The Company expects to be able to negotiate a satisfactory settlement
with the leasing company.
PROP 65. During 1998 PCI, among many other companies and individuals including
PCI customers, Southland and Mobil, received Notices of alleged Violations of
Proposition 65, a California law which requires warning labels on or at the
place of sale or use of certain cancer causing products including cigars. These
notices were delivered by a California lawyer named Morse Mehrban on behalf of
his clients, purported public interest organization named Consumer Cause, Inc.
and Consumer Advocacy Group, Inc., and an individual named Reuben Yeroushalmi.
They have been followed by lawsuits in the Superior Court of Los Angeles County,
California. Under Proposition 65 such lawsuits may be brought by a "private
attorney general". The lawsuits demand compliance with Proposition 65 and seek
penalties of $2,500 per day per location of each alleged violation which could
total man millions of dollars plus attorneys fees and costs of suit. PCI has
taken the position it did not violate the law and is not subject to penalties.
Nonetheless, after receipt of the notice, PCI took steps to insure compliance.
Then PCI ceased distribution of cigars. Southland and Mobil demanded that PCI
defend and indemnify them from these claims. PCI has refused. PCI joined with
other defendants in a successful challenge to the original lawsuits. That result
is on appeal. In 1999, Plaintiffs served new notices and filed new lawsuits,
which have been stayed pending the outcome of the appeal. Regardless of the
outcome of the appeal, PCI continues to be subject to potential exposure to
plaintiffs' claims. Pursuant to the agreement between Southland and PCI,
Southland has requested that it be indemnified for these claims. PCI has
countered that Southland has claims against it for products other than PCI's in
violation of Proposition 65,
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and Southland is defending those claims. Mobil has not made a similar
indemnification request, and based on the agreement between Mobil and PCI, Mobil
probably cannot claim any indemnification rights. PCI is not currently exploring
the possibility of settling with Mr. Mehrban any of the claims against PCI and
its former customers, including Mobil and Southland. In the meantime, PCI has
and continues to retained California counsel to defend the cases brought against
it. The claim is ongoing as of March 31, 2000.
6. SUBSEQUENT EVENT
In December 1999, the Company was notified that it was being terminated as a
supplier of PrimeTime(TM) effective January 1, 2000. In addition, the Company
received a request from legal counsel representing the Brown and Williamson
Tobacco to cease selling Prime Time cigars under the Prime Time name because
they felt that it infringed upon a registered product of theirs called "Prime."
The Company believes that with the cessation of selling PrimeTime cigarillos
that it is in compliance with the request from Brown & Williamson Tobacco.
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Special Note Regarding Forward-looking Statements
Some of the statements contained in this report discuss future
expectations, contain projections of results of operations or financial
condition or state other "forward-looking" information. Those statements are
subject to known and unknown risks, uncertainties and other factors that could
cause the actual results to differ materially from those contemplated by the
statements. The forward-looking information is based on various factors and was
derived using numerous assumptions. Important factors that may cause actual
results to differ from forward-looking statements and projections include, for
example:
- failure of ProductExpress.com to obtain and maintain ongoing fulfillment
contracts sufficient enough to keep the operations ongoing;
- failure of ProductExpress.com's independent authorized representatives(20+)
to sell website design, orders online processing, web site hosting, and
online/offline generated fulfillment services sufficient to keep the
operations ongoing;
- any decision by major fulfillment service accounts to discontinue our
fulfillment services for them and/or their manufacturers;
- failure of others products that we intend to sell in our distribution
channels, particularly new products such as Renditions(TM) Fragrances,
Americas Acid Free Coffee, and ATM Scrip machines, and the PAID CARD debit
card to be accepted and have a lasting presence in the marketplace;
- our ability to maintain an adequate capital position and a sufficient cash
flow as we replace old products and add retail stores and new products;
- our ability to raise additional capital to enable us to maintain sufficient
working capital for operating activities;
- our ability to obtain funding to enable us to payoff prior debts;
- any decision by major retail chains to not sell our future products or to
place our future products or countertop units in a disadvantageous location
within their stores;
- a decline in the popularity of the Products we intend to sell in the future
and/or possible adverse public opinion against the future products;
- interruptions in the availability of our Products that we place into our
distribution channels;
- changes in government regulations, tax rates, the manner of tax calculation
and collection, including any recalculation of taxes due from prior
operations that are currently under dispute in the Provinces of Canada, and
similar matters relating to our products, including any trademark
infringement issues from prior operations, in particular the PrimeTime
trademark that was applied for and later assigned to the manufacturer, as
it relates to a cease and desist letter from Brown & Williamson's Prime(TM)
cigarettes trademark, and including any restriction on the self-service
nature of merchandising displays and marketing promotions particularly any
retroactive application of such changes;
- our ability to negotiate and maintain favorable distribution arrangements
with our customers;
- the effect of changing economic conditions;
- the risk of any significant uninsured loss from settlement dealing with
Proposition 65;
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- our ability to get consignment of quality Products at favorable prices and
the effect on Product prices and availability, of weather and other
conditions in the countries that import Products to the U.S.; and
- other risks which may be described in our future filings with the SEC. We
do not promise to update forward-looking information to reflect actual
results or changes in assumptions or other factors that could affect those
statements.
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ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
You must read the following discussion on the financial condition and results of
operations of ProductExpress.com eBusiness Services, Inc. in conjunction with
the condensed financial statements, including the notes elsewhere in this Form
10-QSB filing. Historical results are not necessarily an indicator of trends in
operating results for any future period.
As a direct distributor of cigar products to over 15,000 Convenience Stores and
a tracking database for over 50,000 SKU's, the Company has built an
infrastructure that provides high speed fulfillment of products to retailers and
other consumers. The Company has modified it's business plan to include
providing fulfillment services to other companies. In particular, it feels that
there is a significant opportunity in offering the Company's services to
e-commerce based businesses as solutions to their customer and delivery
problems. In order to develop this new business activity, the Company is doing
business exclusively as "Product Express.com eBusiness Services, Inc." As a
result of recognizing the value of the core competency of fulfillment, the
Company has also been developing an additional business opportunity in the
creation of a delivery system outside the main facility which is designed to
provide retail grocers on National level online order system for pickup or home
delivery utilizing our ability to process orders and payment from any web site
and convert the order to shipping instructions that can be printed in other
facilities, or the customer's warehouse or stores. It is anticipated that this
will be expanded upon in the first and second quarter of 2000. The Company
operates primarily in one business segment and has a December 31 fiscal year.
RESULTS OF OPERATIONS
COMPARISON OF THE FIRST QUARTER OF 2000 WITH THE FIRST QUARTER OF 1999
Net sales for the quarter ended March 31, 2000 decreased by $1,276,194 versus
the same period last year, a 97% decrease. All of the decrease is due to the
discontinuance of the Prime Time product and other tobacco products, which was
terminated at December 31, 1999. All revenues from 1999 were from tobacco
products, which the Company no longer distributes. Starting in January 2000, the
Company has focused on fulfillment contracts that have started to build momentum
and volume, and the launching of new products into our channels of distribution
that are currently in beta testing.
Gross profit margin was 6.5% for the quarter ended March 31, 2000 versus 27% for
the quarter ended March 31, 1999. The reduced gross profit margin of 20.5% is
due to the transition of our core business activity from the sale of Prime Time
cigarillos to the obtaining of fulfillment contracts for Web based businesses.
The cost of the warehouse, data entry, and 1-800 inbound call center operations
lowered the gross margins from the gross profit margin model that the Company
uses as a guideline to bid and operate under. The Company will have lower than
expected gross profit margins, until the contracts for fulfillment that have
been
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signed and are currently being fulfilled build momentum and volume and the
contracts that are in negotiations are brought on to offset the cost of the
warehouse, data processing space, and lower the cost of manning the 1-800
inbound call center.
Selling, general and administrative expenses for the quarter ended March 31,2000
decreased $747,253 or 77% from the same period one year ago. The reduction of
expenses was due to the staffing reductions implemented during 1999. As the
Company builds fulfillment and new product launch volume, the selling expense is
expected to remain in step with sales volume and the gross profit margin model.
This is due to a commissioned sales staff for both fulfillment and new product
sales that is built into the gross profit margin model that is used for bidding
fulfillment and accepting new products for our distribution channels. General
and administrative expenses have also been accounted for in the gross profit
margin model for bidding, and as volume builds these expenses will have a lower
effect on gross profit margin.
The Company is focused on utilizing and expanding our automated systems as
volume increases to keep our employee base at a minimum. In addition, the
Company is utilizing and will continue to expand its outsourced strategic
alliance partnerships that can provide necessary functions that the Company
would normally have to develop and staff for. These strategic partners are
either paid as a percentage of the gross profit margin or are held to a fixed
ongoing price that is within our gross profit margin framework that keeps the
gross profit margins at or near the gross profit margin model that will bring
the Company to profitability.
Executive Management has made a commitment to only add staff and build an
employee base of salaried and hourly employees as a last resort on an absolute
as needed basis, and only, unless and until, all other outsourced methods,
percentage of piece work or percentage of gross profits methods, have been
utilized first, to maintain the gross profit margin model to bring the Company
to profitability as soon as the contracts for fulfillment that the Company has,
and is in negotiations for, build enough volume to cover the fixed overhead.
LIQUIDITY AND CAPITAL RESOURCES
The Company used $186,474 for operating activities for the first three months of
2000. The net loss of $226,905 was reduced by non-cash expenses for depreciation
and amortization of $37,194
Management has determined that there is a tremendous opportunity and value in
our core competencies as a high-speed order and fulfillment center. Our unique
distribution system that we have developed for the convenience store industry is
very efficient and valuable. In November we hired an individual with expertise
in logistics to develop a full set of fulfillment services. In addition, we
entered into a number of strategic alliances with people and companies involved
in e-commerce for the purpose of becoming authorized agents. These agents direct
clients to the Company who are in need of fulfillment solutions. We have begun
to provide product fulfillment for others, and we do not anticipate any further
significant capital expenditures beyond a modest investment to enhance our
existing systems. Should the volume of business exceed our current
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capacity, we will need to lease additional warehouse space and invest in
additional equipment such as flow racking.
In December of 1999, the Company was notified that it was being terminated as a
supplier of Prime Time effective January 1, 2000. Prime Time has been the
Company's dominant source of revenue for the past year. The Company has been
working for several months developing new revenue sources through fulfillment
services; however, to date the amount of revenue derived from fulfillment
services has been minimal. Management believes it is close to completing
fulfillment contracts that will replace the revenue from Prime Time. However, we
cannot assure you that we will be able to replace the revenue in time to allow
us to continue to operate without raising additional capital to fund current
operations.
We invested nearly $600,000 in capital additions during 1998 as we developed our
infrastructure and moved into our new facility. We do not anticipate any
significant capital expenditures for the foreseeable future beyond those
discussed above.
The Company has incurred substantial operating losses since inception. As of
December 31, 1999 the Net Operating Loss carry forward was approximately
$7,900,000. We expect to incur another substantial operating loss for the
current year. The Net Operating Loss carry forward may be attractive to another
company wishing to offset its own tax liability.
Due to the loss of our primary revenue source from the sale of Prime Time and
the time it takes to replace the revenue stream, we cannot assure you that that
we can generate sufficient revenues to provide the cash flow necessary to meet
our ongoing working capital needs or to repay prior existing trade indebtedness.
We raised $136,000 during the first quarter of 1999 through the issuance of
additional shares of the Company's common stock. The Board of Directors
authorized the issuance of additional shares and warrants for up to an
additional $925,000 at a price of $0.25 per share in September 1999. During the
fourth quarter of 1999, and the first quarter of 2000, we raised $135,000 and
$195,000, respectively, through sale of the Company's stock. In April and May
2000, we raised an additional $85,000 through the sale of Company's stock and
short term debt. It is anticipated that there will be a need to raise additional
capital in the second quarter of 2000.
YEAR 2000 READINESS
The Company has not experienced any significant problems during January 2000 due
to Y2K issues. It was determined in early January that our voice mail system was
not Y2K compliant and the system is currently being upgraded. We do not believe
there has been a significant impact to our business stemming from the problems
with our voice mail.
At this time we do not anticipate any further significant issues relating to
Y2K, although there can be no assurances that this will be the case.
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PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
PROP 65. During 1998 PCI, among many other companies and individuals including
PCI customers, Southland and Mobil, received Notices of alleged Violations of
Proposition 65, a California law which requires warning labels on or at the
place of sale or use of certain cancer causing products including cigars. These
notices were delivered by a California lawyer named Morse Mehrban on behalf of
his clients, a purported public interest organization named Consumer Cause, Inc.
and Consumer Advocacy Group, Inc., and an individual named Reuben Yeroushalmi.
They have been followed by lawsuits in the Superior Court of Los Angeles County,
California. Under Proposition 65 such lawsuits may be brought by a "private
attorney general". The lawsuits demand compliance with Proposition 65 and seek
penalties of $2,500 per day per location of each alleged violation which could
total many millions of dollars plus attorneys fees and costs of suit. PCI has
taken the position it did not violate the law and is not subject to penalties.
Nonetheless, after receipt of the notice, PCI took steps to insure compliance.
Then PCI ceased distribution of cigars. Southland and Mobil demanded that PCI
defend and indemnify them from these claims. PCI has refused. PCI joined with
other defendants in a successful challenge to the original lawsuits. That result
is on appeal. In 1999, Plaintiffs served new notices and filed new lawsuits,
which have been stayed pending the outcome of the appeal. Regardless of the
outcome of the appeal, PCI continues to be subject to potential exposure to
plaintiffs' claims. Pursuant to the agreement between Southland and PCI,
Southland has requested that it be indemnified for these claims. PCI has
countered that Southland has claims against it for products other than PCI's in
violation of Proposition 65, and Southland is defending those claims. Mobil has
not made a similar indemnification request, and based on the agreement between
Mobil and PCI, Mobil probably cannot claim any indemnification rights. PCI is
not currently exploring the possibility of settling with Mr. Mehrban any of the
claims against PCI and its former customers, including Mobil and Southland. In
the meantime, PCI has and continues to retain California counsel to defend the
cases brought against it. The claim is ongoing as of March 31, 2000. JUDGMENT.
On March 1, 2000 a judgment was entered against PCI in favor of Stadia Colorado
Corp. in the amount of $6,555.56 regarding an indebtedness for a labeling
machine that PCI claimed did not work properly and tried to return to the
manufacturer. The judgment has been paid.
Item 2 - Changes in Securities and Use of Proceeds
(a) Sale of Unregistered Securities, Warrant Grants, and Settlement of
Debt for Equity in the first quarter of 2000
On January 5, 2000, the Board of Directors of PCI approved the
reauthorization of their authorization to the sale of common shares (restricted
as to Rule 144 for a minimum of one year), granting of warrants (restricted as
to Rule 144 for a
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minimum of one year), in conjunction with those shares, and the settlement
of debt for common shares (restricted as to Rule 144 for a minimum of one
year), at the same per share and strike price for warrants of $.25 with an
adjustment of 650,000 authorized shares converted to warrants, leaving a
balance of authorized common shares (restricted as to Rule 144 for a
minimum of one year) available to sell at the beginning of 2000 at
2,488,000 and warrants at 1,370,000. Through the filing of this annual
report sales of restricted shares, grants of restricted warrants in
conjunction of those shares, and the settlement of debt for restricted
shares under Sections 4(2) and 4(6) of the Securities Act, as amended, as
follows:
- On January 6, 2000 Darrin J. Fedder paid for 100,000 restricted shares at a
purchase price of $0.25 per share, plus one warrant (call price of $0.25)
for every two shares.
- On January 6, 2000 George Cattermole paid for 40,000 restricted shares at a
purchase price of $0.25 per share, plus one warrant (call price of $0.25)
for every two shares.
- On January 17, 2000 Stephen T. Sullivan,P.C. accepted 49,206 restricted
shares at a purchase price of $0.25 per share as partial settlement of the
PCI debt owed him.
- On January 26, 2000 Shangent Tool accepted 80,200 restricted shares at a
purchase price of $0.25 per share as the final settlement of the PCI debt
owed them.
- On January 31, February 14, 18, 25, March 14, and April 11, 2000 George
Simon Trust paid for 100,000, 100,000, 200,000, 100,000, 100,000, and
60,000 restricted shares, respectively, at a purchase price of $0.25 per
share, plus one warrant (call price of $0.25) for every two shares. An
additional 140,000 restricted shares has been committed for at a purchase
price of $0.25 per share, plus one warrant (call price of $0.25) for every
two shares, due by May 1, 2000. George T. Simon Esq. is an independent
Member of the Board.
- On February 22, 2000 Dan Goldman accepted 5,000 restricted shares as a
final settlement of the PCI debt owed him for the sale of CAN-AM and the
release of our Web Site from his hosting service. Dan Goldman was a founder
of PCI.
- On March 14, 2000 Stringfellow Attorneys accepted 60,008 restricted shares
at a purchase price of $0.25 per share as a settlement to date of the PCI
debt owed him.
- On March 17, 2000 Topper Cigar Company Inc. accepted 36,804 restricted
shares at a purchase price of $0.25 per share as the final settlement of
the PCI debt owed.
- On March 28, and April 7, 2000 Jim McCanlies Family Trust/IRA paid for
40,000 and 40,000 restricted shares at a purchase price of $0.25 per share,
plus one warrant (call price of $0.25) for every two shares.
- On April 8, 2000 Michael Hatch accepted 18,179 restricted shares at a
purchase price of $0.25 per share as the final settlement of the PCI debt
owed him.
- On April 10, 2000 Robert King paid for 40,000 restricted shares at a
purchase price of $0.25 per share, plus one warrant (call price of $0.25)
for every two shares.
- On April 12, 2000 L. G. Zangani accepted 14,220 restricted shares at a
purchase price of $0.25 per share as the final settlement of the PCI debt
owed him.
16
<PAGE> 17
(b) Use of Proceeds.
As of December 31, 1998 all proceeds of the Initial Public Offering
had been used. Proceeds from the sale of Unregistered Securities in
private transactions with accredited investors have been used for
ongoing operations of the Company during the transition period, and
the settlement of past debt. All proceeds from the Company's initial
public offering have been expended as set forth in the Company's Form
10-KSB for the year ended December 31, 1998.
Item 3 - Defaults upon Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
Name Change, PCI began doing business as ProductExpress.com eBusiness Services
in June 1999, and received a majority stockholder approval by proxy to
officially change its name from Premium Cigars International, Ltd. to
ProductExpress.comeBusiness Services, Inc., and to change its symbol on the
NASDAQ OTCBB from PCIG to PREX or some other available symbol, on April 10, 2000
via proxy vote of the shareholders. PREX was not available, so the new symbol is
PXPS, and the change took place on April 24, 2000.
Item 5 - Other Information
Changes in Officers and Directors. As previously disclosed in the Company's
Form 8-K dated September 27, 1999, Colin Jones resigned as Director and Gary J.
Sherman was appointed as Chairman of the Company's Board of Directors. As
previously disclosed in the Company's Form 8-K filing dated November 9, 1999,
Scott I. Lambrecht resigned as President and CEO. On November 9, 1999, Greg P.
Lambrecht resigned as a Director of the Company. On December 3, 1999, Brendan
McGuinness resigned as Vice President of Sales and Chief Operating Officer. On
December 4, 1999, Steven A. Lambrecht was appointed as Chief Executive
Officer.and Gary J. Sherman as President. In January 2000 George T. Simon Esq.
agreed to serve on the Board of Directors as an independent director, pending
shareholder approval.
Termination of Supplier Agreement. As previously disclosed in the Company's
Form 8-K dated September 27, 1999, the Company entered into a new agreement for
the sale and distribution of Prime Time. In December of 1999, the Company was
notified that the agreement was being terminated as of January 1, 2000 and the
Company would no longer be a distributor of Prime Time.
17
<PAGE> 18
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Name Method of Filing
------ ------------ ----------------
<S> <C> <C>
3.1 Articles of Incorporation *
3.2 Amended and Restated Bylaws, Adopted May 8, 1998 **
4.1 Specimen Common Stock Certificate ***
4.2 Description of Rights of Security Holders ****
27.1 Financial Data Schedule Exhibit filed herewith
99.1 "Underwriting" section of Registration ****
Statement on Form SB-2
</TABLE>
* Incorporated by reference to Exhibit 3.1 of
Registration Statement on Form SB-2 (file no. 333-29985)
declared effective on August 21, 1997.
** Incorporated by reference to Exhibit 3.2 of the
Form 10-QSB filed by the Registrant for the quarter
ending June 30, 1998.
*** Incorporated by reference to Exhibit 4.2 of
Registration Statement on Form SB-2 (file no. 333-29985)
declared effective on August 21, 1997.
**** Incorporated by reference to pages 56-57 of
Registration Statement on Form SB-2 (file no. 333-29985)
declared effective on August 21, 1997.
(b) Reports on Form 8-K
Form 8-K filed by the Company on September 27, 1999 disclosing
Boston Stock Exchange delisting, Board of Director appointments and resignations
and new distributor agreement for Prime Time.
Form 8-K filed by the Company on November 9, 1999 disclosing the
resignation of the President and CEO.
18
<PAGE> 19
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
<TABLE>
PREMIUM CIGARS INTERNATIONAL, LTD.
(Registrant)
<S> <C>
/s/ Gary Sherman Date: May 30, 2000
----------------------
Gary Sherman
Chairman and President
/s/ Steven A. Lambrecht Date: May 30, 2000
----------------------
Steven A. Lambrecht
Chief Executive Officer and Secretary
Member of Board
</TABLE>
19
<PAGE> 20
Exhibit Index
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Name Method of Filing
------ ------------ ----------------
<S> <C> <C>
3.1 Articles of Incorporation *
3.2 Amended and Restated Bylaws, Adopted May 8, 1998 **
4.1 Specimen Common Stock Certificate ***
4.2 Description of Rights of Security Holders ****
27.1 Financial Data Schedule Exhibit filed herewith
99.1 "Underwriting" section of Registration ****
Statement on Form SB-2
</TABLE>
* Incorporated by reference to Exhibit 3.1 of
Registration Statement on Form SB-2 (file no. 333-29985)
declared effective on August 21, 1997.
** Incorporated by reference to Exhibit 3.2 of the
Form 10-QSB filed by the Registrant for the quarter
ending June 30, 1998.
*** Incorporated by reference to Exhibit 4.2 of
Registration Statement on Form SB-2 (file no. 333-29985)
declared effective on August 21, 1997.
**** Incorporated by reference to pages 56-57 of
Registration Statement on Form SB-2 (file no. 333-29985)
declared effective on August 21, 1997.
20
