UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarter Ended Commission File Number
--------------------- ----------------------
September 30, 1999 0-29414
PREMIUM CIGARS INTERNATIONAL, LTD.
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Arizona 86-0846405
- ------------------------------- ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
15849 North 77th Street
Scottsdale, Arizona 85260
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(Address of principal office, including 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 September 30, 1999, there were 3,939,092 shares of Premium Cigars
International, Ltd. common stock, no par value outstanding.
<PAGE>
INDEX
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements...................................... 3
Condensed Consolidated Balance Sheet (Unaudited) as of
September 30, 1999................................................. 3
Condensed Consolidated Statement of Operations (Unaudited) for the
three and nine months ended September 30, 1999 and 1998 ........... 4
Condensed Consolidated Statement of Cash Flows (Unaudited) for the
three and nine months ended June 30, 1999 and 1998 ................ 5
Notes to Condensed Consolidated Financial Statements............... 6
Special Note Regarding Forward-Looking Statements.................. 9
Item 2 - Management's Discussion and Analysis or Plan of
Operation................................................. 10
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings......................................... 13
Item 2 - Changes in Securities and Use of Proceeds................. 14
Item 3 - Defaults Upon Senior Securities........................... 14
Item 4 - Submission of Matters to a Vote of Security Holders....... 14
Item 5 - Other Information......................................... 14
Item 6 - Exhibits and Reports on Form 8-K.......................... 15
SIGNATURES.................................................................. 16
2
<PAGE>
PREMIUM CIGARS INTERNATIONAL, LTD.
CONDENSED BALANCE SHEET
September 30,
1999
------------
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 8,936
Available for sale securities 16,000
Accounts receivable - trade, net 74,160
Inventory, net 61,075
Other current assets (Note 4) 91,653
-----------
Total Current Assets 251,824
-----------
Property and Equipment, net 407,023
-----------
Other Assets:
Other assets 49,698
-----------
49,698
-----------
$ 708,545
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses 908,706
-----------
Total current liabilities 908,706
-----------
Commitments and Contingencies (Note 9) --
-----------
Stockholders' Equity:
Common stock - no par value, 10,000,000 shares
authorized, 3,939,092 shares issued and outstanding 8,992,796
Unrealized Gain (Loss) on Available for Sale Securities (9,000)
Accumulated deficit (9,183,957)
-----------
Total Stockholders' Equity (200,161)
-----------
$ 708,545
===========
The accompanying notes are an integral part
of the condensed financial statements
3
<PAGE>
PREMIUM CIGARS INTERNATIONAL, LTD.
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- --------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net Sales $ 1,029,571 $ 2,000,622 $ 3,595,857 $ 5,264,226
Cost of Sales 691,114 1,452,290 2,584,386 3,997,059
----------- ----------- ----------- -----------
Gross Profit 338,457 548,332 1,011,471 1,267,167
Selling, General and Administrative 535,621 1,256,315 2,662,524 3,766,479
Loss on sale of subsidiary (Note 7) 1,200,638
Writedown of cigar humidor program (Note 8) 1,017,524
Severance Packages (Note 3) 395,173
----------- ----------- ----------- -----------
Loss from Operations (197,164) (707,983) (3,869,215) (2,894,485)
Other Income (Expense) (14,162) 33,883 (30,841) 128,796
----------- ----------- ----------- -----------
Net Loss $ (211,326) $ (674,100) $(3,900,056) $(2,765,689)
=========== =========== =========== ===========
Basic Loss per Share $ (0.05) $ (0.19) $ (1.02) $ (0.80)
=========== =========== =========== ===========
Weighted Average Number of Shares Outstanding 3,939,092 3,469,092 3,832,279 3,469,092
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part
of the condensed financial statements
4
<PAGE>
PREMIUM CIGARS INTERNATIONAL, LTD.
CONDENSED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
---------------------------
1999 1998
----------- -----------
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net loss $(3,900,056) $(2,765,689)
Adjustments to reconcile net loss to net cash
provided by (used for) operating activities:
Depreciation and amortization 511,656 548,911
Loss on sale of subsidiary 1,200,638 --
Writedown of cigar humidor program 1,017,524 --
Stock issued for services 18,497 --
Net change in other assets and liabilities 541,697 (963,292)
----------- -----------
Net cash provided by (used for) operating
activities (610,044) (3,180,070)
----------- -----------
Cash flows from investing activities:
Purchase of humidors (64,283) (718,158)
Purchase of equipment (7,877) (486,691)
Proceeds from sale of subsidiary 375,000 --
Proceeds from sale of equipment 11,924 --
Proceeds from sale of available for sale
securities -- 3,339,734
----------- -----------
Net cash provided by (used for) investing
activities 314,764 2,134,885
----------- -----------
Cash flows from financing activities:
Net proceeds from issuance of common stock 136,000 --
----------- -----------
Net cash provided by financing activities 136,000 --
----------- -----------
Effect of exchange rate changes on cash and
cash equivalents -- (21,968)
----------- -----------
Net increase (decrease) in cash and cash equivalents (159,280) (1,067,153)
Cash and cash equivalents, beginning of period 168,216 1,264,365
----------- -----------
Cash and cash equivalents, end of period $ 8,936 $ 197,212
=========== ===========
The accompanying notes are an integral part
of the condensed financial statements
5
<PAGE>
PREMIUM CIGARS INTERNATIONAL, LTD.
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. PRESENTATION OF INTERIM INFORMATION
In the opinion of the management of Premium Cigars International, LTD. (the
"Company"), the accompanying condensed financial statements include all normal
adjustments considered necessary to present fairly the financial position as of
September 30, 1999, and the results of operations for the three months and nine
months ended September 30, 1999 and 1998, and cash flows for the nine months
ended September 30, 1999 and 1998. 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, 1998.
2. FINANCIAL STATEMENTS
The condensed statements of operations and cash flows include the accounts
of the Company and its wholly-owned subsidiary through the date of sale of the
subsidiary (see Note 7). All significant intercompany accounts and transactions
have been eliminated. Subsequent to the date of sale, the condensed financial
statements include the accounts of the Company only.
3. SEVERANCE PACKAGES
There were no severance packages paid to employees or officers of the
Company in 1999.
4. RELATED PARTY TRANSACTIONS
The company has notes receivable from two former directors and shareholders
of the Company in the aggregate amount of $86,225. The notes, which bear
interest at 6%, were originally due on March 31,1999. The independent members of
the Company's board of directors approved an extension for the repayment of
these notes to September 30, 1999. As consideration for this extension, the
interest rate was increased from 6% to 10% during the extension period. The
Company's board of directors granted an additional extension of time to
September 30, 2000 in consideration for deferred board fees. Accrued interest as
of September 30, 1999 is $19,832. The total of the notes receivable plus accrued
interest is included in other current assets in the Company's condensed balance
sheet.
5. ISSUANCE OF STOCK
During the first quarter of 1999, the Company issued 370,000 restricted
shares of its common stock for a total of $136,000. As more fully discussed in
the notes to the Company's 1998 audited financial statements included in its
6
<PAGE>
1998 Form 10-KSB, the proceeds include the sale of 100,000 shares of stock for
an initial price per share of $.01 to its financial public relations provider.
The sale was subject to certain performance criteria being met; if the criteria
were met the provider had the option to pay between $.99 and $1.49 per share as
additional consideration in exchange for the removal of a restrictive legend. If
the performance criteria were not met, the Company could elect to repurchase the
shares at their original issue price. In September of 1999, the Company agreed
to issue the full 100,000 shares of stock to the provider in lieu of payment for
services rendered by the provider to the Company.
The Company issued an additional 100,000 restricted shares in connection
with the sale of its wholly-owned subsidiary (see Note 8).
The Company has issued an additional 660,000 shares of restricted stock for
cash since October 1, 1999. 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.
6. NASDAQ DELISTING
On May 11, 1999 the Company was notified by the NASDAQ Listing
Qualifications Panel that its shares would be delisted as of the close of
trading that day. The securities of the Company are now trading on the OTC
Bulletin Board.
7. SALE OF CAN-AM
On or about June 2, 1999, the Company finalized the sale of all of its
shares in its wholly owned subsidiary, Can-Am International Investments, Corp.
("Can-Am"), to Ultimate Cigars, Corp. ("ULTC"), a publicly traded company, for
$375,000. In connection with the sale of Can-Am, the Company and ULTC exchanged
100,000 shares of each other's common stock. Additionally, the Company has
entered into an option agreement with ULTC (the "Option") pursuant to which ULTC
has the option to acquire additional shares for a total of up to 50% of the
Company's issued and outstanding stock for a payment of $2,500,000 and all
outstanding shares of ULTC's common stock not owned by the Company. The Option
is subject to the approval of the shareholders for both the Company and ULTC.
The option expired on September 24, 1999.
In connection with the sale, the Company has also been granted a purchase
discount of up to $125,000 on a product currently in development by ULTC, which
would be sold by the Company.
8. WRITEDOWN OF CIGAR HUMIDOR PROGRAM
Due to declining demand for its humidified cigar program, the Company has
discontinued the program in virtually all of the stores in which it had placed
humidors. The cost to write-off the abandoned humidors and discontinued or
unsalable product was charged against operations during the three months ended
June 30, 1999.
7
<PAGE>
9. 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
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. No provision for
the repayment has been made in the accompanying financial statements.
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 quality issue and service agreements, and it expects to be able to
negotiate a satisfactory settlement with the leasing company.
10. 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."
8
<PAGE>
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:
* our ability to secure new fulfillment customers;
* our ability to maintain an adequate capital position and a sufficient cash
flow as we add new fulfillment customers;
* our ability to obtain funding to enable us to maintain sufficient working
capital for operating activities and capital acquisitions;
* the possibility of retroactive assessment of taxes by Canadian authorities
based on new methodologies for which we have agreed to indemnify the buyer
of our former Canadian subsidiary;
* our ability to negotiate and maintain favorable distribution arrangements
with our shippers;
* the effect of changing economic conditions;
* the risk of any significant uninsured loss from settlement dealing with
Proposition 65; 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.
9
<PAGE>
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 Premium Cigars International, LTD. ("PCI") in
conjunction with PCI's 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, PCI 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 has started doing business as
"Product Express.com." 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. It is anticipated that this will be
expanded upon in the first quarter of 2000. The Company operates primarily in
one business segment and has a December 31 fiscal year.
RESULTS OF OPERATIONS
COMPARISON OF THE THIRD QUARTER OF 1999 WITH THE THIRD QUARTER OF 1998
Net sales for the quarter ended September 30, 1999 decreased by $971,000
versus the same period last year, a 49% decrease. Virtually all of the decrease
($988M) is due to the sale of our Canadian subsidiary in June of 1999. Although
U.S. sales were flat versus last year, the mix has shifted almost entirely to
PrimeTime and away from cigars.
Gross profit margin was 33% for the quarter ended September 30, 1999 versus
27% for the quarter ended September 30, 1998. The improvement is due to the sale
of our Canadian subsidiary, whose margins were historically lower than our U.S.
operations. Margins in the United States held steady despite the heavy
introductory efforts in launching PrimeTime.
Selling, general and administrative expenses for the quarter ended
September 30, 1999 decreased $721,000 or 57% from the same period one year ago.
In addition to the sale of its Canadian subsidiary which accounted for $308M of
the decrease, SG&A has declined due to staff cuts that were implemented during
the first three quarters of 1999 (in recognition of the declining importance of
the Company's in-store humidor program), as well as an overall decrease in
infrastructure spending that was ongoing during 1998.
10
<PAGE>
Other income for the quarter ended September 30, 1999 declined from the
previous year because the prior year amount consisted mainly of interest income
from short-term investments which were purchased with a portion of the net
proceeds from the Company's initial public offering. The current year expense
also reflects interest expense from the factoring of the Company's accounts
receivable.
COMPARISON OF THE FIRST NINE MONTHS OF 1999 WITH THE FIRST NINE MONTHS OF 1998
Net sales for the nine months ended September 30, 1999 decreased by
$1,668,000 versus the same period one year ago, a 32% decrease. Most of the
decrease is attributable to declining sales at our former Canadian subsidiary
which was sold in June 1999; also, year ago results included nine months of
Canadian operations versus five months for the current year. Sales in the United
States were down 6% versus one year ago; however, revenue has steadily increased
during the current year as the company continued rolling out its new flavored
cigar PrimeTime. This was offset by a steep decline in sales via the company's
now mostly discontinued in-store humidor program.
Gross profit margin was 28% for the nine months ended September 30, 1999
versus 24% for the nine months ended September 30, 1998. The margin improvement
is attributable to a much lower margin in the United States during the first
quarter of 1998 due to nonrecurring expenditures for consolidating warehouse
space and inspecting inventory for possible damage, as well as the continuing
trend towards more efficient warehousing and shipping operations throughout 1998
and into 1999. The sale of our lower-margin Canadian subsidiary also contributed
to the margin improvement.
Selling, general and administrative expenses for the nine months ended
September 30, 1999 decreased $1,104,000 or 29% from the same period one year
ago. Excluding the cost of the introductory PrimeTime marketing spending that
was charged off as account acquisition costs during the second quarter of 1999,
SG&A decreased $1,305,000, or 35% from the comparable period one year ago. In
addition to the sale of our Canadian subsidiary in June of 1999, SG&A has
declined due to staff cuts that were implemented during the first quarter of
1999 (in recognition of the declining importance of the Company's in-store
humidor program), as well as an overall decrease in infrastructure spending that
was ongoing during 1998.
As discussed in our previous 10-KSB filings, we took a one-time charge in
the first quarter of 1998 to reflect the cost of severance packages for previous
management.
Other income for the nine months ended September 30, 1999 declined from the
previous year because the prior year amount consisted mainly of interest income
from short-term investments which were purchased with a portion of the net
proceeds from the Company's initial public offering. The current year expense
also reflects interest expense from the factoring of the Company's accounts
receivable.
11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company used $610,000 for operating activities for the first nine
months of 1999. The net loss of $3,900,000 was reduced by non-cash expenses for
depreciation and amortization of $512,000, $1,200,000 for the loss on the sale
of its Canadian subsidiary and $1,000,000 for the write-down of its humidors and
cigars.
As part of Management's efforts to restructure the Company, unprofitable
investments in our Canadian subsidiary and the in-store cigar humidor program
were either divested or severely curtailed. Canadian operations were hampered by
a difficult operating environment due to increasing legislative pressure that
affected cigar packaging and humidor placement within retail outlets. Combined
with a downward trend in cigar consumption and the likely inability to be able
to place its PrimeTime countertop control units on the front counters,
Management determined that the best course of action was to eliminate any future
cash drain resulting from the Canadian operations. In early June, the Company
finalized the sale of its Canadian subsidiary for $375,000 in cash, plus an
exchange of 100,000 shares of stock with the buyer.
The downward trend in cigar sales plus a surplus of inventory led
Management to conclude that no further investment was justified in the in-store
humidor program. Efforts to dispose of our discontinued inventory met with
limited success; only through substantial markdowns were we able to move some of
this inventory. Although most of the stores have now dropped the in-store
humidor program, we were able to place PrimeTime in the majority of these
stores. The cost to write off the investment in the humidors and write-down the
discontinued cigar inventory and packaging materials was shown as a charge
against current operations for the three months ended June 30, 1999.
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. Therefore, we hired an individual with
a 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. As we begin to provide product fulfillment for others, we do not
anticipate any significant capital expenditures beyond a modest investment to
enhance our existing systems. Should the volume of business exceed our current
capacity, we will need to lease additional warehouse space and invest in
additional equipment such as forklifts and 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.
12
<PAGE>
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, 1998 the Net Operating Loss carryforward was approximately
$5,300,000. We expect to incur another substantial operating loss for the
current year. The Net Operating Loss carryforward 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 shares. The Board of Directors
has authorized the issuance of additional shares and warrants for up to an
additional $925,000 at a price of $0.25 per share. During the fourth quarter of
1999 and January 2000, we have raised an additional $165,000 through sale of the
Company's stock. We raised an additional $375,000 from the sale of our Canadian
subsidiary. It is anticipated that there will be a need to raise additional
capital in the first quarter of 2000. The Company has received a number of
indications of interest from accredited individuals.
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.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
PROP 65. PCI and Southland have received a notice of violations of
Proposition 65, a California regulation which requires warning labels on certain
cancer causing products, from a California attorney, Morse Mehrban. PCI believes
it is currently in compliance with Proposition 65. A new notice was submitted to
PCI following the dismissal of the prior civil suit brought by Mr. Merhban,
which was dismissed without prejudice for improper notice. It is expected that
Mr. Mehrban will re-file a lawsuit against PCI. With respect to the lawsuit
filed against Southland, the complaint indicates that the lawsuit covers a vast
quantity of products other than PCI's products. Accordingly, PCI has determined
not to retain California counsel to defend these claims on behalf of Southland.
If Mr. Mehrban files suit against PCI, PCI will retain California counsel to
defend the claims brought against it.
OTHER. PCI has received service of two lawsuits filed against it by
creditors of the Company in the aggregate amount of approximately $15,000. PCI
has filed responses disputing the amounts of these claims.
13
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ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS
(a) None.
(b) None.
(c) Sale of Unregistered Securities.
The Company sold a total of 100,000 shares of unregistered common
stock during the first quarter of 1999 to Ultimate Cigar Corp. as more
fully described in Item 5 of our June 30, 1999 Form 10-QSB filing.
(d) Use of Proceeds.
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
None.
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
January 24, 2000, Steven A. Lambrecht was appointed as interim Chief Financial
Officer.and Gary J. Sherman as interim Chief Executive Officer.
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.
14
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ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Exhibit Name Method of Filing
------ ------------ ----------------
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 ****
----------
* 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.
15
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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.
PREMIUM CIGARS INTERNATIONAL, LTD.
(Registrant)
/s/ Gary Sherman Date: February 18, 2000
- --------------------------------------
Gary Sherman
Chairman and President
/s/ Steven A. Lambrecht Date: February 18, 2000
- --------------------------------------
Steven A. Lambrecht
Chief Executive Officer and Secretary
Member of Board
16
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 8,936
<SECURITIES> 16,000
<RECEIVABLES> 74,160
<ALLOWANCES> 18,742
<INVENTORY> 61,075
<CURRENT-ASSETS> 251,824
<PP&E> 407,023
<DEPRECIATION> 235,474
<TOTAL-ASSETS> 708,545
<CURRENT-LIABILITIES> 908,706
<BONDS> 0
0
0
<COMMON> 8,992,796
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 708,545
<SALES> 3,595,857
<TOTAL-REVENUES> 0
<CGS> 2,584,386
<TOTAL-COSTS> 4,880,686
<OTHER-EXPENSES> 30,841
<LOSS-PROVISION> 38,578
<INTEREST-EXPENSE> 28,168
<INCOME-PRETAX> (3,900,056)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,900,056)
<EPS-BASIC> (1.02)
<EPS-DILUTED> 0
</TABLE>
