SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark one)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 2000
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to _________________
Commission File No. 33-26828
WINDSOR CAPITAL CORP.
-----------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in its Charter)
Delaware 58-1921737
--------------------------- ----------------------
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification Number)
801 North Congress Avenue
Boynton Beach, Florida 33426
--------------------------- -----------------
(Address of Principal Executive Offices) (Zip Code)
Issuer's Telephone Number, Including Area Code: (561) 763-5533
Check whether the issuer (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 (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
YES __X__ NO _____
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 9,999,053 shares of common
stock, $.001 par value per share were outstanding as of December 13, 2000.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
WINDSOR CAPITAL CORP.
CONDENSED BALANCE SHEET
October 31, 2000
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Current assets
Cash and cash equivalents $ 1,909
Receivables 2,001
Merchandise inventories 89,792
-------------
Total current assets 93,702
Property and equipment, net 4,924
-------------
$ 98,626
=============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Accounts payable $ 303,755
Accrued salaries, bonuses and employee benefits 5,428
Other accrued expenses 85,400
-------------
Total current liabilities 394,583
-------------
Stockholders' equity (deficiency):
Preferred stock, $0.01 par value; 10,000,000 shares
authorized; no shares issued and outstanding
--
Common stock, $0.001 par value; 25,000,000 shares
authorized; 9,999,053 shares issued and outstanding 9,999
Additional paid in capital 3,788,421
Stock subscription receivable (1,400)
Accumulated deficit (4,092,977)
-------------
Total stockholders' equity (deficiency) (295,957)
-------------
$ 98,626
=============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
WINDSOR CAPITAL CORP.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
October 31, 2000 October 31, 1999 October 31, 2000 October 31, 1999
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Sales $ 197,237 $ 659,863 $ 1,210,116 $ 2,328,487
Costs of goods sold 147,925 437,334 800,065 1,491,869
------------- ------------- ------------- -------------
Gross profit 49,312 222,529 410,051 836,618
Selling, general and
administrative expenses 178,815 406,563 830,811 1,346,041
Loss on disposition of stores 46,009 -- 126,555 --
------------- ------------- ------------- -------------
Operating loss (175,512) (184,034) (547,315) (509,423)
Other income -- 13,540 14,414 51,061
------------- ------------- ------------- -------------
Net loss $ (175,512) $ (170,494) $ (532,901) $ (462,114)
============= ============= ============= =============
Income (loss) per common
share, basic and diluted $ (.02) $ (.02) $ (.05) $ (.05)
============= ============= ============= =============
Weighted average common
shares outstanding 9,999,053 9,999,053 9,999,053 9,999,053
============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
WINDSOR CAPITAL CORP.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
October 31,
2000 1999
--------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (532,901) $ (462,114)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 25,114 54,000
Loss on abandonment of stores 126,556 --
Change in assets and liabilities:
Receivables 26,457 8,461
Merchandise inventories 363,661 375,227
Prepaid expenses and other current assets 703 (6,735)
Deposits and other assets -- (2,036)
Accounts payable (12,670) (33,941)
Accrued salaries, bonuses and employee benefits (10,219) 11,135
Other accrued expenses (36,421) (14,579)
--------------------------------
Net cash used in operating activities (49,720) (70,582)
--------------------------------
Cash and cash equivalents at beginning of period 51,629 102,870
--------------------------------
Cash and cash equivalents at end of period $ 1,909 $ 32,288
================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
WINDSOR CAPITAL CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. Organization and Basis of Presentation
The Company is a mall-based specialty retailer, which operates one
in-line store in a South Florida mall under the name "Smoker's Gallery." This
store carries a wide range of tobacco products and accessories, including
cigars, pipes and pipe tobacco, as well as upscale non-tobacco-related gift
items ("gentlemen's accessories"). Until April 27, 2000, the Company operated
six such stores. On April 27, 2000, one store was closed as a result of the
termination of its lease. In addition, due to adverse business conditions, the
Company ceased operations at four other unprofitable stores on May 28, July 4,
October 22, and October 28, 2000, respectively, and abandoned its property and
equipment at those locations to the respective landlords. See Part II, Item 5
"Other Information".
In addition, until June 1998, the Company owned and operated 14 kiosks
under the name "Simply Cigars" in malls located in Connecticut, Illinois,
Maryland, Massachusetts, Michigan and Ohio. These stores sold hand-rolled
premium cigars, cigar-related items and gentlemen's accessories. Most of the
Simply Cigars kiosks proved unprofitable, and in May 1998, the Company decided
to terminate its Simply Cigars operations. In early June 1998, the Company
closed two kiosks, and in August 1998, the Company sold three other kiosks. In
September 1998, the Company entered into an agreement to sell its remaining nine
kiosks; however, the prospective buyer failed to close. In November 1998, the
Company filed suit against the prospective buyer and, due to the lack of
alternatives, surrendered eight of the remaining nine kiosks to the respective
landlords in order to limit its liability for ongoing lease expenses as well as
to avoid additional operating losses. The final kiosk, which was not subject to
an ongoing lease, was sold. See Part II, Item 1 "Legal Proceedings".
The interim financial information included herein is unaudited. In the
opinion of management, such unaudited information reflects all adjustments,
consisting only of normal recurring accruals and other adjustments as disclosed
herein, necessary for a fair presentation of the unaudited information.
Results of interim periods are not necessarily indicative of results
expected for the full year.
2. Summary of Significant Accounting Policies
Revenue Recognition
Revenue from sales of products is generally recognized upon delivery to
customers. The Company has established programs, which, under certain
conditions, enable customers to return products. The Company
establishes liabilities for estimated returns and allowances at the
time of delivery to customers.
<PAGE>
2. Summary of Significant Accounting Policies (continued)
Merchandise Inventories
Merchandise inventories are stated at the lower of cost or market. Cost
is determined using the average cost method.
Property and Equipment
Property and equipment is stated at cost. Depreciation on property and
equipment is provided on the straight-line method over the estimated
useful lives of the assets. Maintenance and repairs are charged to
expense as incurred; improvements and betterments are capitalized. Upon
the retirement or sale of property and equipment, the accounts are
relieved of the cost and accumulated depreciation, and any resulting
gains or losses are recognized.
Income Taxes
The Company provides for income taxes pursuant to the provisions of
SFAS No. 109, "Accounting for Income Taxes". Deferred income taxes are
determined based upon differences between financial reporting and tax
bases of assets and liabilities and are measured using the enacted tax
rates and laws that will be in effect when the differences are expected
to reverse. Deferred tax assets are also established for future tax
benefits of loss and credit carryforwards. Valuation allowances are
established for deferred tax assets when it is more likely than not
that such amounts will not be realized.
3. Going Concern Consideration
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. The Company has experienced recurring
losses from operations, generated negative cash flows from operations of $49,720
during the nine month period ended October 31, 2000, and at October 31, 2000,
the Company's liabilities exceeded its assets by $295,957. In addition, as
further discussed in Note 4, the Company is subject to certain contingencies,
which, if not favorably resolved, could have a significant negative impact on
its future cash flows. The Company continues to seek to reduce operating
expenses through reductions in corporate overhead. In addition, the Company is
considering seeking sources of funds through additional capital contributions or
through additional financing. The Company is also pursuing either the sale of
its remaining Smoker's Gallery retail store or its prompt closure and is
attempting to diversify its revenues away from solely tobacco-related products
through business opportunities outside of the tobacco industry. Finally, as also
discussed in Note 4, the Company has attempted to mitigate the potential
financial impact of any contingencies, which may not be favorably resolved.
<PAGE>
In the absence of achieving profitable operations, obtaining additional
debt or equity financing, concluding successful negotiations for the sale or
closure of its remaining Smoker's Gallery retail outlet, or successfully
diversifying its revenues away from solely tobacco-related products through
business opportunities outside of the tobacco industry, the Company may not have
sufficient funds to continue operations in Fiscal 2001.
4. Contingencies
On September 15, 1998, the Company entered into an Operating Agreement
and an Asset Purchase Agreement (collectively, the "Agreements") with Tropical
Republic, Inc. ("Tropical"), under which the responsibility for the operations
and expenses of the Company's then remaining nine Simply Cigars kiosks was
turned over to Tropical at various dates during September 1998, with the sale of
the kiosks to Tropical at an aggregate price of $130,000 scheduled to close in
October 1998. Tropical failed to close on the sale and failed to pay a
substantial portion of the operating expenses owed the Company under the
Agreements. On November 18, 1998, the Company filed suit in Broward County,
Florida, Circuit Court for breach of the Agreements against Tropical and its
principal James Joiner ("Joiner"), who personally guaranteed Tropical's
obligations under the Agreements.
In its complaint, the Company seeks damages in excess of $165,716: (i)
$120,000 for the balance owed on the purchase price after crediting Tropical's
$10,000 deposit; (ii) $45,716 for unpaid operating expenses accrued by Tropical
during its operation of the kiosks through October 31, 1998; and (iii) an
unspecified amount for potential liability to landlords under lease agreements
which extend past October 31, 1998.
Tropical and Joiner have answered the Complaint and denied liability
based on alleged misrepresentations by the Company concerning Simply Cigars'
business. In addition, the defendants have filed a counterclaim for rescission
of the Agreements and unspecified damages. The Company believes that its claims
are meritorious and the defendants' defenses and counterclaims are without
merit; however, there can be no assurance that the Company will prevail in this
litigation or that, if it obtains a judgment, it will be able to collect the
judgment.
As a result of Tropical's breach of the Agreements and the
unprofitability of the Simply Cigars business, the Company had no realistic
alternative but to surrender eight of its nine remaining kiosks to the
respective landlords as of November 1, 1998, in order to limit its liability for
ongoing lease expenses as well as to pay accrued rent through October 31, 1998,
which Tropical had agreed but failed to pay. The final kiosk, which was not
subject to an ongoing lease, was sold for $5,000. By surrendering these kiosks,
the Company obtained releases from future lease liability for all kiosk
locations except for the kiosks located at the Montgomery and Annapolis,
Maryland malls. Such future lease liability approximated $376,425 as of November
1, 1998: 27 months at $5,300 per month with respect to Montgomery; and 51 months
at $4,575 per month with respect to Annapolis. In November 1998, the Maryland
landlord threatened legal action against the Company; however, the Company is
unaware of the commencement of any such action and there has been no further
legal pressure by the landlord. The Company believes that it
<PAGE>
will be able to avoid at least a substantial portion of any future lease
liability to the Maryland landlord by asserting a credit equal to the fair
market rental value of the premises including the kiosks. Further, under the
Agreements with Tropical and Joiner, the Company believes that Tropical and
Joiner are fully responsible for any liability of the Company to the Maryland
landlords; however, there can be no
4. Contingencies (continued)
assurance that the Company will not be materially adversely affected if
litigation is brought by the Maryland landlord.
On May 10, 2000, the Florida Department of Revenue ("FDR") concluded a
sales tax audit of the Smoker's Gallery Sawgrass Mall store for the period
September 1, 1994 to August 31, 1999. The FDR asserted that, as a result of the
audit, the Company owes approximately $31,300 in back taxes, interest and
penalties. The Company believes that most, if not all, of the FDR assessment is
improper because it is principally based on out-of-state and gift certificate
sales, for which no sales tax should be due. The Company is engaged in
negotiations with the FDR in an attempt to successfully settle the pending
assessment. If a prompt settlement cannot be reached, the Company intends to
vigorously dispute the assessment and file an administrative appeal. There can
be no assurance, however, that a favorable settlement will be reached or that
any appeal will be successful.
On June 30, 2000, the Company received a letter from attorneys
representing The Falls Shopping Center Associates LLC (the "Falls Mall"), the
landlord of the unprofitable store whose operations the Company ceased on May
28, 2000, requesting payment of approximately $584,500 for alleged damages in
the form of rent and other charges through the end of the lease term (December
31, 2006). The lease was held in the name of the Company's now-defunct
subsidiary, The Falls Tobacconist, Inc.; however, the Company guaranteed the
lease. The Company believes that it properly and timely rescinded the guarantee.
Further, the Company believes that it is entitled to avoid at least a portion of
any future lease liability to the Falls Mall by asserting a credit equal to the
fair market rental value of the premises, including the store fixtures.
Nonetheless, there can be no assurance that the Company will not be materially
adversely affected if litigation is brought by the Falls Mall.
On July 19, 2000, the Company's subsidiary, Galleria Tobacconists, Inc.
("GTI"), received a notice of default from Keystone-Florida Property Holdings
Corp. ("Keystone"), the landlord of the unprofitable Galleria Mall store whose
operations the Company ceased on July 4, 2000, requesting immediate payment of
approximately $11,900 for unpaid rent as well as continued payment of monthly
rent through the end of the lease term (January 31, 2007). Keystone has not made
any claim against the Company (which did not guarantee the lease) and GTI has no
material assets. The Company believes that GTI will be able to avoid at least a
portion of any future lease liability to Keystone by asserting a credit equal to
the fair market rental value of the premises, including the store fixtures.
There can be no assurance that the Company will not be materially adversely
affected if litigation is brought by Keystone against the Company.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
Except for historical information contained herein, certain matters set
forth in this Form 10-QSB are "forward looking", within the meaning of the
federal securities laws, and involve a number of risks and uncertainties that
could cause future results to differ materially from these statements and
trends. These forward-looking statements include, among others, statements
relating to the Company's business plan. This plan assumes, among other things,
that the Company will be able to promptly close or sell its remaining
unprofitable outlet and will be able to successfully diversify its revenues away
from solely tobacco-related products through business opportunities outside of
the tobacco industry. Many known and unknown risks, uncertainties and other
factors, including general economic conditions and risk factors detailed from
time to time in the Company's Securities and Exchange Commission filings, may
cause these forward-looking statements to be incorrect, and may cause actual
results to be materially different from any future results.
Results of Operations
The following table sets forth certain items expressed in percentages of
revenues for the periods indicated:
<TABLE>
<CAPTION>
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
October 31, October 31, October 31, October 31,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of revenues 75.0% 66.3% 66.1% 64.1%
-------------------------------------------------------------
Gross profit 25.0% 33.7% 33.9% 35.9%
Selling, general and administrative
expenses 90.7% 61.6% 68.7% 57.9%
Loss on disposition of stores 23.3% 0.0% 10.5% 0.0%
-------------------------------------------------------------
Operating loss (89.0)% (27.9)% (45.3)% (22.0)%
Other income 0.0% 2.1% 1.2% 2.2%
-------------------------------------------------------------
Net loss (89.0)% (25.8)% (44.1)% (19.8)%
=============================================================
</TABLE>
<PAGE>
For the quarter ended October 31, 2000, the Company's same store sales
were down 34% from the same period in 1999. For the nine months ended October
31, 2000, the Company's same store sales were down 27% from the same period in
1999. The Company believes that this decline in sales is due to a general
decline in same store sales experienced throughout the retail tobacconist
industry. The Company believes that this general decline is due primarily to the
greatly increased number of retail outlets competing for premium cigar sales as
well as a decline in the demand for premium cigars. The Company has been
materially adversely affected by the decline in its same store sales.
For the three and nine months ended October 31, 2000, the Company
reported net losses of $175,512 and $532,902, respectively. For the three and
nine months ended October 31, 1999, the Company reported net losses of $170,494
and $462,114, respectively. Revenue for the three months ended October 31, 2000
and 1999 amounted to $197,237 and $659,863, respectively. Revenue for the nine
months ended October 31, 2000 and 1999 amounted to $1,210,116 and $2,328,487,
respectively. These decreases in revenue were due to the decline in Smoker's
Gallery same stores sales and the closure of five of the Company's Smoker's
Gallery stores in fiscal 2001.
Gross profit for the three months ended October 31, 2000 and 1999
amounted to $49,312 (25.0% of sales) and $222,529 (33.7% of sales),
respectively. Gross profit for the nine months ended October 31, 2000 and 1999
amounted to $410,051(33.9% of sales) and $836,618 (35.9% of sales),
respectively. These decreases are attributable to increased promotional
discounts and other price reductions being offered to customers which were
exacerbated by the closure of five of the Company's Smoker's Gallery stores in
fiscal 2001.
Total selling, general and administrative expenses ("SG&A"), decreased
from $406,563 for the three months ended October 31, 1999 to $178,815 for the
three months ended October 31, 2000, a 56% decrease. This decrease is due mainly
to reductions in corporate overhead and related store expenses, including a
decrease in salaries and wages of approximately $115,000 and rent expense of
approximately $39,000. Total selling, general and administrative expenses
decreased from $1,346,041 for the nine months ended October 31, 1999 to $830,811
for the nine months ended October 31, 2000, a 38% decrease. This decrease is
also due mainly to reductions in corporate overhead and related store expenses,
including a decrease in salaries and wages of approximately $356,000 and rent
expense of approximately $116,000.
Financial Condition, Liquidity and Capital Resources
At October 31, 2000, the Company had a working capital deficiency of
$300,881 and has experienced recurring losses from operations and generated
negative cash flows from operations of $49,720 during the nine months ended
October 31, 2000. In addition, as further discussed in Part II, Item 1 "Legal
Proceedings", the Company is subject to certain contingencies which, if not
favorably resolved, could have a significant negative impact on its future cash
flows. The Company continues to seek to reduce operating expenses through
reductions in corporate overhead. In addition, the Company is considering
seeking sources of funds through additional capital contributions or through
additional financing. . The Company is also pursuing either the sale of its
remaining Smoker's Gallery retail store or its prompt closure and is attempting
to diversify its revenues away from solely tobacco-related products through
business opportunities outside of the tobacco industry. Finally, as also
discussed in Part II, Item 5 "Other Information", the Company has attempted to
mitigate the potential financial impact of any contingencies which may not be
favorably resolved.
<PAGE>
In the absence of achieving profitable operations, obtaining additional
debt or equity financing, concluding successful negotiations for the sale or
closure of its remaining Smoker's Gallery retail outlet, or successfully
diversifying its revenues away from solely tobacco-related products through
business opportunities outside of the tobacco industry, the Company may not have
sufficient funds to continue operations in Fiscal 2001.
Net cash used in operating activities decreased 30% in the nine months
ended October 31, 2000 to $49,720 from $70,582 for the nine months ended October
31, 1999. This decrease is due primarily due to (i) an increase in non-cash
losses, i.e. loss on abandonment of stores and depreciation expense, ($151,670,
for the nine months ended October 31, 2000 vs. $54,000 for the nine months ended
October 31, 1999), and (ii) a decrease in cash used to reduce accounts payable
($12,670 for the nine months ended October 31, 2000 versus $33,941 for the nine
months ended October 31, 1999) offset by the increase in the net loss ($532,901
for the nine months ended October 31, 2000 versus $462,114 for the nine months
ended October 31, 1999).
Impact of the Year 2000
The Company used commercial software that was upgradeable to a
commercially available version that was Year 2000 compliant. The total costs
associated with required modifications to become Year 2000 compliant were not
material to the Company's financial position, results of operations or cash
flows.
The Company relies on third parties, particularly on third party
suppliers for its inventory. The Company has not experienced, nor does it
anticipate failure of third party suppliers to deliver inventory to the
Company's stores that could adversely affect store sales.
The failure to correct a yet unknown material Year 2000 problem could
result in an interruption in, or failure of, certain normal business activities
or operations. Such failures could materially adversely affect the Company's
results of operations, liquidity and financial condition. The Company will
continue to monitor its mission-critical computer applications and those of its
third party suppliers and vendors throughout the year 2000 to ensure that any
latent Year 2000 matters that may arise are addressed promptly.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
a. Windsor Capital Corp. v. Tropical Republic, Inc., and James
Joiner
On September 15, 1998, the Company entered into an Operating Agreement
and an Asset Purchase Agreement (collectively, the "Agreements") with Tropical
Republic, Inc. ("Tropical"), under which the responsibility for the operations
and expenses of the Company's then remaining nine Simply Cigars kiosks was
turned over to Tropical at various dates during September 1998, with the sale of
the kiosks to Tropical at an aggregate price of $130,000 scheduled to close in
October 1998. Tropical failed to close on the sale
<PAGE>
and failed to pay a substantial portion of the operating expenses owed the
Company under the Agreements. On November 18, 1998, the Company filed suit in
Broward County, Florida, Circuit Court for breach of the Agreements against
Tropical and its principal James Joiner ("Joiner"), who personally guaranteed
Tropical's obligations under the Agreements.
In its complaint, the Company seeks damages in excess of $165,716: (i)
$120,000 for the balance owed on the purchase price after crediting Tropical's
$10,000 deposit; (ii) $45,716 for unpaid operating expenses accrued by Tropical
during its operation of the kiosks through October 31, 1998; and (iii) an
unspecified amount for potential liability to landlords under lease agreements
which extend past October 31, 1998.
Tropical and Joiner have answered the Complaint and denied liability
based on alleged misrepresentations by the Company concerning Simply Cigars'
business. In addition, the defendants have filed a counterclaim for rescission
of the Agreements and unspecified damages. The Company believes that its claims
are meritorious and the defendants' defenses and counterclaims are without
merit; however, there can be no assurance that the Company will prevail in this
litigation or that, if it obtains a judgment, it will be able to collect the
judgment.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
As a result of Tropical's breach of the Agreements and the
unprofitability of the Simply Cigars business, the Company had no realistic
alternative but to surrender eight of its nine remaining kiosks to the
respective landlords as of November 1, 1998, in order to limit its liability for
ongoing lease expenses as well as to pay accrued rent through October 31, 1998,
which Tropical had agreed but failed to pay. The final kiosk, which was not
subject to an ongoing lease was sold. By surrendering these kiosks, the Company
obtained releases from future lease liability for all kiosk locations except for
the kiosks located at the Montgomery and Annapolis, Maryland malls. Such future
lease liability approximates $376,425 as of November 1, 1998: 27 months at
$5,300 per month with respect to Montgomery; and 51 months at $4,575 per month
with respect to Annapolis. In November 1998, the Maryland landlord threatened
legal action against the Company; however, the Company is unaware of the
commencement of any such action, and no further communications have been
received from the landlord. The Company believes that it will be able to avoid
at least a substantial portion of any future lease liability to the Maryland
landlord by asserting a credit equal to the fair market rental value of the
premises including the kiosks. Further, under the Agreements with Tropical and
Joiner, the Company believes that Tropical and Joiner are fully responsible
<PAGE>
for any liability of the Company to the Maryland landlords; however, there can
be no assurance that the Company will not be materially adversely affected if
litigation is brought by the Maryland landlord.
On May 10, 2000, the Florida Department of Revenue ("FDR") concluded a
sales tax audit of the Smoker's Gallery Sawgrass Mall store for the period
September 1, 1994 to August 31, 1999. The FDR asserted that, as a result of the
audit, the Company owes approximately $31,300 in back taxes, interest and
penalties. The Company believes that most, if not all, of the FDR assessment is
improper because it is principally based on out-of-state and gift certificate
sales, for which no sales tax should be due. The Company is engaged in
negotiations with the FDR in an attempt to successfully settle the pending
assessment. If a prompt settlement cannot be reached, the Company intends to
vigorously dispute the assessment and file an administrative appeal. There can
be no assurance, however, that a favorable settlement will be reached or that
any appeal will be successful.
On June 30, 2000, the Company received a letter from attorneys
representing The Falls Shopping Center Associates LLC (the "Falls Mall"), the
landlord of the unprofitable store whose operations the Company ceased on May
28, 2000, requesting payment of approximately $584,500 for alleged damages in
the form of rent and other charges through the end of the lease term (December
31, 2006). The lease was held in the name of the Company's now-defunct
subsidiary, The Falls Tobacconist, Inc.; however, the Company guaranteed the
lease. The Company believes that it properly and timely rescinded the guarantee.
Further, the Company believes that it is entitled to avoid at least a portion of
any future lease liability to the Falls Mall by asserting a credit equal to the
fair market rental value of the premises, including the store fixtures.
Nonetheless, there can be no assurance that the Company will not be materially
adversely affected if litigation is brought by the Falls Mall.
On July 19, 2000, the Company's subsidiary, Galleria Tobacconists, Inc.
("GTI"), received a notice of default from Keystone-Florida Property Holdings
Corp. ("Keystone"), the landlord of the unprofitable Galleria Mall store whose
operations the Company ceased on July 4, 2000, requesting immediate payment of
approximately $11,900 for unpaid rent as well as continued payment of monthly
rent through the end of the lease term (January 31, 2007). Keystone has not made
any claim against the Company (which did not guarantee the lease) and GTI has no
material assets. The Company believes that GTI will be able to avoid at least a
portion of any future lease liability to Keystone by asserting a credit equal to
the fair market rental value of the premises, including the store fixtures.
There can be no assurance that the Company will not be materially adversely
affected if litigation is brought by Keystone against the Company.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
27. Financial Data Schedule for the quarterly period ended
October 31, 2000.
b) Reports on Form 8-K
During the quarter ended October 31, 2000, no Form 8-K reports
were filed by the Company.
<PAGE>
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.
Windsor Capital Corp.
---------------------
(Registrant)
Date: December 13, 2000 by:/s/ Alan Cornell
-------------------
Chief Executive Officer
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. EXHIBIT DESCRIPTION
----------- -------------------
27 Financial Data Schedule
