<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the three months ended December 31, 1998
Commission file number 0-23403
HOLT'S CIGAR HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 51-0350003
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12270 TOWNSEND ROAD, PHILADELPHIA, PA 19154
-------------------------------------------
(Address, including zip code, of registrant's principal executive offices)
(215) 676-8778
--------------
(Registrant's telephone number, including area code)
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 Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No _
Indicate the number of shares outstanding of each of the Issuer's
classes of common stock as of the latest practicable date.
Class: Common
Outstanding at February 12, 1999: 6,003,096
<PAGE> 2
<TABLE>
<CAPTION>
HOLT'S CIGAR HOLDINGS, INC.
AND SUBSIDIARIES
INDEX TO FORM 10-Q
Page
----
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Balance Sheets as of December 31, 1998 (Unaudited)
and March 31, 1998 3
Consolidated Statements of Operations for the
Three Months ended December 31, 1998 and 1997 4
Consolidated Statements of Operations for the
Nine Months ended December 31, 1998 and 1997 5
Consolidated Statements of Stockholders' Equity for the
Nine Months ended December 31, 1998 6
Consolidated Statements of Cash Flows for the
Nine Months ended December 31, 1998 and 1997 7
Notes to Consolidated Financial Statements 8-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 12
Item 6. Exhibits and Reports of Form 8-K 13
SIGNATURES 14
</TABLE>
2
<PAGE> 3
<TABLE>
<CAPTION>
HOLT'S CIGAR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1998 March 31, 1998
----------------- --------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash $ 5,191,654 $ 4,074,276
Investment securities-held to maturity 4,260,016 4,096,361
Accounts receivable (net of allowance for doubtful accounts of $120,000
at December 31, 1998 and March 31, 1998) 2,028,621 1,319,141
Inventory 4,845,276 3,456,597
Deferred income taxes 161,000 161,000
Prepaid expenses and other current assets 605,946 402,863
----------- -----------
Total current assets 17,092,513 13,510,238
Investment securities - held to maturity 8,147,480 7,948,760
Property and equipment, net 1,441,925 1,456,567
Deferred income taxes 9,100 9,100
Other assets, net 826,713 815,837
----------- -----------
Total assets $27,517,731 $23,740,502
=========== ===========
Current liabilities:
Accounts payable $ 917,131 $ 657,424
Due to related party 714,890 534,157
Accrued expenses and other current liabilities 173,401 240,570
Income taxes payable 1,043,307 521,100
----------- -----------
Total current liabilities 2,848,729 1,953,251
----------- -----------
Commitments
Stockholders' equity:
Preferred stock, $.001 par value, 1,000,000 shares authorized,
none issued -- --
Common stock, $.001 par value, 25,000,000 shares authorized, 6,003,096
shares issued and outstanding 6,003 5,770
Additional paid-in capital 19,014,300 17,640,851
Retained earnings 6,215,569 4,225,522
----------- -----------
25,235,872 21,872,143
Treasury stock, 99,825 shares at cost (491,626) --
Stock purchase loans (75,244) (84,892)
----------- -----------
Total stockholders' equity 24,669,002 21,787,251
----------- -----------
Total liabilities and stockholders' equity $27,517,731 $23,740,502
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
3
<PAGE> 4
<TABLE>
<CAPTION>
HOLT'S CIGAR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended December 31, 1998 and 1997
1998 1997
---- ----
<S> <C> <C>
Net sales $9,315,079 $8,591,984
Cost of goods sold 4,953,374 4,759,196
--------- ---------
Gross profit 4,361,705 3,832,788
Operating expenses 2,574,108 2,135,227
--------- ---------
Income from operations 1,787,597 1,697,561
Other income 340,025 34,600
------- ------
Income before income taxes 2,127,622 1,732,161
Provision for income taxes 855,409 619,618
------- -------
Net income $1,272,213 $1,112,543
========== ==========
Net income per share (basic and diluted) $0.22 $0.24
===== =====
Weighted average number of shares - basic 5,831,249 4,603,000
========= =========
Weighted average number of shares - diluted 5,834,474
=========
Pro forma income data: (I)
Income before income taxes, as reported $1,732,161
Pro forma amortization of goodwill 3,000
-----
Pro forma income before income taxes 1,729,161
Pro forma provision for income taxes 691,664
-------
Pro forma net income $1,037,497
==========
Pro forma net income per share (basic and diluted) $0.23
=====
Pro forma weighted average number of shares 4,603,000
=========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
- ----------
(I) Pro forma amounts are not presented for the quarter ended December 31,
1998, as the Company's reorganization occurred in November 1997.
4
<PAGE> 5
<TABLE>
<CAPTION>
HOLT'S CIGAR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Nine Months Ended December 31, 1998 and 1997
1998 1997
---- ----
<S> <C> <C>
Net sales $24,874,319 $22,016,387
Cost of goods sold 13,569,424 12,078,075
---------- ----------
Gross profit 11,304,895 9,938,312
Operating expenses 6,555,035 5,029,381
--------- ---------
Income from operations 4,749,860 4,908,931
Other income 751,175 67,915
------- ------
Income before income taxes 5,501,035 4,976,846
Provision for income taxes 2,137,306 1,272,618
--------- ---------
Net income $3,363,729 $3,704,228
========== ==========
Net income per share (basic and diluted) $0.58 $0.88
===== =====
Weighted average number of shares (basic and diluted) 5,785,015 4,214,443
========= =========
Pro forma income data: (I)
Income before income taxes, as reported $4,976,846
Pro forma amortization of goodwill 9,000
-----
Pro forma income before income taxes 4,967,846
Pro forma provision for income taxes 1,987,138
---------
Pro forma net income $2,980,708
==========
Pro forma net income per share (basic and diluted) $0.71
=====
Pro forma weighted average number of shares 4,214,443
=========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
- ----------
(I) Pro forma amounts are not presented for the nine months ended December 31,
1998, as the Company's reorganization occurred in November 1997.
5
<PAGE> 6
<TABLE>
<CAPTION>
HOLT'S CIGAR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED DECEMBER 31, 1998
Additional Stock
Common Paid-In Retained Treasury Purchase
Stock Capital Earnings Stock Loans Total
----- ------- -------- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1998 $5,770 $17,640,851 $ 4,225,522 $ -- $(84,892) $21,787,251
Net Income 3,363,729 3,363,729
Purchase of Common Stock (481,978) (481,978)
Return of Stock (9,648) 9,648 --
Stock Dividend 233 1,373,449 (1,373,682) --
------ ----------- ----------- --------- -------- -----------
Balance at December 31, 1998 $6,003 $19,014,300 $ 6,215,569 $(491,626) $(75,244) $24,669,002
====== =========== =========== ========= ======== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE> 7
<TABLE>
<CAPTION>
HOLT'S CIGAR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
---- ----
<S> <C> <C>
Cash Flows from operating activities:
Net Income $ 3,363,729 $ 3,704,228
Adjustments to reconcile net income to net cash provided by operations:
Increase in allowance for doubtful accounts -- 65,500
Depreciation and amortization 208,477 105,680
(Increase) decrease in:
Investments (362,375) --
Accounts receivable (709,480) (225,151)
Inventory (1,388,679) (735,033)
Prepaid expenses and other current assets (203,083) (100,882)
Increase (decrease) in:
Accounts payable and due to related party 440,440 (241,161)
Accrued expenses and other current liabilities (67,169) 399,616
Income taxes payable 522,207 567,244
----------- -----------
Net cash provided by operating activities 1,804,067 3,540,041
----------- -----------
Cash flows from investing activities:
Purchase of company stock (481,978) --
Purchase of property, equipment and other assets (204,711) (722,762)
Proceeds from (advances on) loan receivable - officer -- 23,396
----------- -----------
Net cash used in investing activities (686,689) (699,366)
----------- -----------
Cash flows from financing activities:
Payments on long-term debt -- (3,461,881)
Proceeds from issuance of common stock -- 17,902,500
Expenses paid in connection with common stock offering -- (570,909)
Stockholder distributions -- (3,667,000)
Proceeds from long-term debt -- 3,150,000
----------- -----------
Net cash provided by (used in) financing activities -- 13,352,710
----------- -----------
Net increase in cash 1,117,378 16,193,385
Cash -- beginning of period 4,074,276 515,520
----------- -----------
Cash -- end of period $ 5,191,654 $16,708,905
=========== ===========
Supplemental disclosures:
Interest paid $ -- $ 46,137
----------- ===========
Income taxes paid $ 2,045,268 $ 683,151
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
7
<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) Basis of Presentation
The consolidated financial statements included herein include the accounts of
Holt's Cigar Holdings, Inc. and its wholly owned subsidiaries ("the Company").
The Company is engaged in the wholesale and retail sale of premium cigars and
cigar-related accessories.
These financial statements have been prepared by management without audit but in
accordance with generally accepted accounting principals applicable to interim
financial statements. These financial statements should be read in conjunction
with the more complete disclosures contained in the audited consolidated
financial statements and notes thereto for the year ended March 31, 1998
contained in the Company's Annual Report on Form 10-K. The accompanying
financial statements reflect, in the opinion of management, all adjustments
necessary for a fair presentation of the interim financial statements. In the
opinion of management, all such adjustments are of a normal and recurring
nature. The results of operations for the nine months ended December 31, 1998
and 1997 are not necessarily indicative of the operating results to be expected
for a full year.
(2) Management Estimates
The preparation of these consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of expenses during
the reported period and related disclosures.
(3) Adoption of Recently Issued Accounting Standard
The Company adopted Statement of Financial Accounting Standards No. 128
"Earnings Per Share" (SFAS No. 128) for the period ended March 31, 1998 and
December 31,1998, as required. This statement requires companies to present
basic earnings per share, and if applicable, diluted earnings per share.
Comparable prior periods have been restated in accordance with the standard's
transition provisions.
In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 130 (SFAS 130), which establishes rules
for reporting and displaying all changes in shareholders' equity, such as
unrealized gains or losses on available for sale securities transaction
adjustments, and certain changes in minimum pension liabilities. The statement
is effective for the Company, April 1, 1998. Since the Company has no elements
of other comprehensive income at December 31, 1998, no separate presentation of
comprehensive income has been made in these financial statements.
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
131 (SFAS 131), Disclosures about Segments of an Enterprise and Related
Information, which is effective for years beginning after December 15, 1997.
SFAS 131 establishes standards for the way that public businesses report
information about operating segments in annual financial statements and requires
that those businesses report selected information about operating segments in
interim financial reports. It also establishes standards for related disclosures
about products and services, geographic areas, and major customers. The Company
will adopt the new requirements for the fiscal year ending March 31, 1999, which
will require retroactive application. The Company has not completed its review
of this standard and has not determined the impact its adoption will have on the
Company's financial statements.
(4) Equity Offering
In November 1997, the Company completed its reorganization and an initial public
offering of 1,750,000 shares of its common stock. The net proceeds to the
Company, after deducting underwriting discounts and commissions and expenses
were $17,031,500. The net proceeds were recorded as an increase to additional
paid in capital and common stock. The proceeds were used, in part, to retire
long-term debt and short-term debt to fund the stockholder distribution made in
conjunction with the reorganization.
8
<PAGE> 9
(5) Income Taxes
Revised income taxes for the three-month period ended December 31, 1997. The
Company inadvertently understated the Income Tax Expense for the Third Quarter
of the Fiscal Year Ended March 31,1998 by $222,812 in its Quarterly Report on
Form 10-Q for the Period Ended December 31, 1997. The Income Tax Expense was
reported as $396,806 instead of $619,618. Accordingly, Net Income for the Three
Month Period ended December 31, 1997 was overstated in an equal amount, and was
reported as $1,335,355 instead of $1,112,543. However, Net Income per Share
(Basic and Diluted) was not impacted and was correctly reported as both were
calculated on a pro forma basis and not based upon the actual Net Income for
such period. The Income Tax Expense for the Nine-Month period Ended December 31,
1997 was correctly stated. The Company does not believe that this reporting
understatement was material as it did not impact the Net Income per Share
reported for this, or any other period. The Income Tax Expense for the Three
Months Ended December 31, 1997 is correctly reported herein for comparison
purposes.
(6) Pro Forma Information
Pro Forma Income Taxes
On November 24, 1997, the Company terminated the S Corporation status of Ashton
Distributors, Inc. (one of the wholly owned subsidiaries) and converted it to a
C Corporation status. As an S Corporation, the net income of this entity for
federal and state income tax purposes was taxable directly to the Company's
shareholder. The Company's future earnings will be subject to corporate income
taxes.
The proforma provision for income taxes represents the income tax provisions
that would have been reported had the Company been a C Corporation in the prior
period.
Pro Forma Net Income Per Share
The computation of pro forma earnings per share is based on the weighted average
number of outstanding common shares during the period plus common stock
equivalents, if dilutive. The Company has certain stock options (for 482,000
shares) outstanding with exercise prices less than the current market price for
which the controlling stockholder has agreed that upon exercise of any such
options he will contribute to the capital of the Company one share of common
stock for each share purchased pursuant to those options, thereby reducing his
ownership interest.
9
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis contains certain forward-looking
statements. These forward-looking statements do not constitute historical facts
and involve risks and uncertainties. Actual results could differ materially from
those referred to in the forward-looking statements due to a number of factors.
For information concerning factors that could cause actual results to differ
materially from the information contained herein, reference is made to the
information under the heading "Risk Factors" in the Company's Registration
Statement on Form S-1 (Registration No. 333-36263) dated November 24, 1997 and
information in the Company's Annual Report on Form 10-K for the year ended March
31, 1998 as filed with the Securities and Exchange Commission.
RESULTS OF OPERATIONS
The following table sets forth, as a percentage of net sales, certain items in
the Company's statement of operations for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31 December 31
-------------------- --------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 53.2 55.4 54.6 54.9
---- ---- ---- ----
Gross profit 46.8 44.6 45.4 45.1
Operating expenses 27.6 24.9 26.4 22.8
---- ---- ---- ----
Income from operations 19.2 19.7 19.0 23.3
Other income 3.6 .4 3.0 .3
--- -- --- --
Income before income taxes 22.8% 20.1% 22.0% 22.6%
==== ==== ==== ====
</TABLE>
THREE MONTHS ENDED DECEMBER 31, 1998 COMPARED TO THREE MONTHS ENDED DECEMBER 31,
1997
NET SALES. Net sales increased approximately $723,000 or 8.4% from $8.6 million
in Fiscal 1998 to $9.3 million in Fiscal 1999. This increase is a result of an
11.6% increase in net sales of premium cigars and a 27.3% (or $192,000) decrease
in net sales of cigar accessories. The retail division increased by 16.1%
overall. Within the retail division, the mail order group showed growth of 58.9%
but the retail store group showed a decline in sales of 25.7%. Management
believes that the performance in the mail order group was due to the increases
in our proprietary mailing lists and additional mailings during the quarter. The
decrease in retail store sales is due primarily to the many new competitive
retail stores that have opened in the Philadelphia, PA region and across the
country. The wholesale division sales were level during the third quarter. This
is a result of the proliferation of discontinued and non-established brands
still clogging cigar retailers' shelves.
GROSS PROFIT. Gross profit increased approximately $529,000 or 13.8% from $3.8
million in Fiscal 1998 to $4.3 million in Fiscal 1999. Gross profit, as a
percentage of net sales was 46.8% for Fiscal 1999 and 44.6% for Fiscal 1998.
This increase of 2.2% was the result of a favorable mix within the Ashton brand.
OPERATING EXPENSES. Operating expenses increased approximately $439,000 or 20.6%
from $2.1 million in Fiscal 1998 to $2.5 million in Fiscal 1999. As a percentage
of net sales, operating expenses increased from 24.9% in Fiscal 1998 to 27.6% in
Fiscal 1999. This increase is primilary the result of the addition of the Ashton
national sales force and the increased regional and national advertising
campaign during November and December.
OTHER INCOME. Other income increased by approximately $305,000. This is a result
of the Company investing the majority of the proceeds from its public offering
in marketable securities.
10
<PAGE> 11
NINE MONTHS ENDED DECEMBER 31, 1998 COMPARED TO NINE MONTHS ENDED DECEMBER 31,
1997
NET SALES. Net sales increased approximately $2.9 million or 13.0% from $22.0
million in Fiscal 1998 to $24.9 million in Fiscal 1999. Net sales increased
primarily as a result of a $3.4 million increase in net sales of premium cigars
from $20.2 million for Fiscal 1998 to $23.5 million for Fiscal 1999. The
wholesale division sales accounted for 52.7% of the increase, the retail
division decrease accounted for (31.0%) of the increase, and the mail order
division accounted for 78.3% of the increase. The wholesale division sales grew
by 15%, retail stores sales decreased by 16.1% and mail order sales grew by
34.4%.
GROSS PROFIT. Gross profit increased approximately $1.4 million or 13.8% from
$9.9 million in Fiscal 1998 to $11.3 million in Fiscal 1999. Gross profit, as a
percentage of net sales were 45.4% for Fiscal 1999 and 45.1% for Fiscal 1998.
This increase of .3% was the result of a favorable mix within the Ashton brand.
OPERATING EXPENSES. Operating expenses increased approximately $1.5 million or
30.3% from $5.0 million in Fiscal 1998 to $6.5 million in Fiscal 1999. As a
percentage of net sales, operating expenses increased from 22.8% in Fiscal 1998
to 26.4% in Fiscal 1999. This increase is primarily a result of increased staff
and salaries, plus the implementation of the Company's national sales force, an
advertising program for the holiday season and a new cooperative advertising
program within the wholesale division.
OTHER INCOME. Other income increased by approximately $683,000. This is a result
of the Company investing the majority of the proceeds from its public offering
in marketable securities.
LIQUIDITY AND CAPITAL RESERVES
The Company has historically financed its business through a combination of cash
generated from operations and bank debt. Net cash provided by operations for the
nine months ended December 31,1998 and 1997 of $1,814,000 and $3,540,000,
respectively, consisted primarily of net income and increases in accounts
payable and income taxes payable, offset by increases in accounts receivable and
inventory.
On October 24, 1997, Ashton Distributors, Inc. declared a distribution of $2.7
million to Robert G. Levin, its shareholder and Chairman of the Board, Chief
Executive Officer and President of the Company, such amount being estimated to
equal the accumulated but undistributed earnings of Ashton Distributors, Inc. as
of the date of the Offering which have been or will be taxed to Mr. Levin.
Ashton Distributors, Inc. borrowed this amount from a Bank pursuant to a demand
note due no later than December 1, 1997 with interest accruing at the rate of
6%. This note was guaranteed by Mr. Levin and was repaid with the proceeds of
the Offering.
The Company has a $4,000,000 line of credit with a Bank with borrowings
thereunder accruing at the bank's prime rate. At December 31, 1998, the Company
had no borrowings under the line of credit.
The Company believes that cash generated from its operating activities and
available bank borrowings along with proceeds from its initial public offering
of common stock will be sufficient to fund its operations and expansion programs
for the foreseeable future.
IMPACT OF INFLATION
The Company does not believe that inflation has had a material impact on its net
sales or results of operations.
YEAR 2000 COMPLIANCE
The Company response to the so-called "Y2K Problem", pertaining to the
processing of date data at the turn of the century, includes assessing and
documenting the current status of the Company's Y2K compliance and the costs of
such compliance; establishing goals and schedules for Y2K compliance; and
implementing detailed plans so that both information technology systems and
non-information technology devices (including equipment-related embedded
computers, infrastructural and communication systems) are reviewed and the
necessary changes made prior to December 31, 1999. The Company's Y2K compliance
efforts are being directed by an outside consultant who is working under Company
supervision and control.
As of the date of the filing of this Form 10-Q, the Company has begun to
inventory, replace and/or modify its existing software systems. Because the
Company, similar to all other customers, is vulnerable to third parties'
noncompliance, the Company conducted a review of its software vendor's own Year
2000 compliance. All the Company's major software vendors have reported to the
Company that they are materially Y2K compliant. The Company expects to complete
a comprehensive analysis of its overall compliance prior to June 30, 1999 and to
have implemented all material modifications prior to December 31, 1999.
11
<PAGE> 12
Because many of the Company's hardware and software systems are less than three
year old and may be upgraded, the Company expects that its total expenditures to
address Y2K issues will not be material to its overall results of operations.
Although the Company believes, based upon currently available information, that
its Y2K compliance program will be adequate to forestall any material adverse
effect upon the Company, its future results of operations, liquidity and capital
resources, there can be no assurances that the Year 2000 problem will not
materially so adversely impact the Company. Specifically, the Company may
encounter problems with customer ordering, invoicing and collection, as well as
with product manufacturer and shipment. The Company is in the process of
developing contingency plans to address those potential problems should its
compliance program prove to be inadequate. These plans may include increasing
safety stock and manually executing computer system functions.
PART II OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
(d) The Company filed a Registration Statement on Form S-1 with the
Securities and Exchange Commission (Registration No. 333-36263
for the Sale of Common Stock in the Company's initial public
offering (the "Offering"). The Company registered 1,750,000
shares of Common Stock. The effective date of the registration
Statement was November 24, 1997. The Offering commenced on
November 25, 1997 and was terminated after the sale of all
securities registered. The managing underwriters for the Offering
were Prudential Securities Incorporated and Janney Montgomery
Scott, Inc. The aggregate price to the public of the 1,750,000
shares of Common Stock registered was $19,250,000. The Company
completed the Offering, selling all 1,750,000 shares of Common
Stock registered for the aggregate-offering price of $19,250,000.
The Company incurred the following expenses in connection with
the issuance and distribution of its Common Stock in the
Offering:
Underwriting Discounts and Commissions $1,347,500
Other Expenses 871,000
----------
Total Expenses $2,218,500
==========
All payments of expenses were direct or indirect payments to
persons other than directors or officers of the Company or their associates,
persons owning ten percent or more of any class of equity securities of the
Company, or affiliates of the Company, except for $20,000 payable to Cogen
Sklar, LLP, an accounting firm in which Harvey W. Grossman, a director of the
Company is a principal.
The Company used the net proceeds of the Offering ($17,031,500
after deducting total expenses set forth above) for the following purposes:
Repayment of outstanding bank indebtedness $ 3,352,000
Payment of S Corporation Distribution 240,000
Increase inventory of premium cigars 520,000
Introduction of new premium cigars 115,000
Purchase of equipment 863,300
Temporary investments 11,941,200
-----------
Total $17,031,500
===========
12
<PAGE> 13
The payment with respect to the S Corporation Distribution was made to Robert G.
Levin, a shareholder owning more that 10% of the Common Stock of the Company and
the Chairman of the Board, Chief Executive Officer and President and a director
of the Company. Payment of $2,700,000 of the outstanding bank indebtedness was
in satisfaction of a loan to the Company to fund a distribution to Mr. Levin of
undistributed earnings of Ashton Distributors, Inc. prior to the reorganization
of the Company undertaken on November, 19,1997 in contemplation of the initial
public offering of the Company's Common Stock on November 24, 1997. All other
payments were direct or indirect payments to persons other than directors or
officers of the Company or their associates, persons owning ten percent or more
of any class of equity securities of the Company, or affiliates of the Company.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
27.1 Financial Data Schedule
99.1 Financial Statements and accompanying Notes
incorporated by reference from the Company's
Registration Statement on Form S-1 (Registration No.
333-36263) pursuant to Rule 12b-23 (a) (3)
99.2 Risk factors incorporated by reference from the Company's
Registration Statement on Form S-1(Registration No.
333-36263) pursuant to Rule 12b-23 (a) (3)
b. The Company did not file any reports on File 8-K during the three
months ended December 31, 1998.
13
<PAGE> 14
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.
HOLT'S CIGAR HOLDINGS, INC.
/S/ ROBERT G. LEVIN
---------------------------------------
ROBERT G. LEVIN, PRESIDENT AND CHAIRMAN
/S/ JERRY L. COX
---------------------------------------
JERRY L. COX, CHIEF FINANCIAL OFFICER
DATE: FEBRUARY 12, 1999
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEET, CONSOLIDATED STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH 10-Q.
</LEGEND>
<CIK> 0001045549
<NAME> HOLT'S CIGAR HOLDINGS, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1.000
<CASH> 5,191,654
<SECURITIES> 12,407,496
<RECEIVABLES> 2,148,261
<ALLOWANCES> 120,000
<INVENTORY> 4,845,276
<CURRENT-ASSETS> 17,092,513
<PP&E> 1,626,091
<DEPRECIATION> 184,166
<TOTAL-ASSETS> 27,517,731
<CURRENT-LIABILITIES> 2,848,729
<BONDS> 0
0
0
<COMMON> 6,003
<OTHER-SE> 24,662,999
<TOTAL-LIABILITY-AND-EQUITY> 27,517,731
<SALES> 9,315,079
<TOTAL-REVENUES> 0
<CGS> 4,953,374
<TOTAL-COSTS> 4,953,374
<OTHER-EXPENSES> 2,574,108
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,127,622
<INCOME-TAX> 855,409
<INCOME-CONTINUING> 1,272,213
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,272,213
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0.22
</TABLE>
