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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-21081
CARIBBEAN CIGAR COMPANY
(Exact name of registrant as specified in its charter)
Florida 65-0613303
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
6265 S.W. Eighth Street, Miami, Florida
(Address of principal executive offices)
33144
(Zip Code)
(305) 267-3911
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes No X
--- ---
State the number of shares outstanding of each issuer's classes of
common equity, as of the latest practicable date:
5,324,998 shares as of September 10, 1996
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PART I
Item 1. Financial Statements
CARIBBEAN CIGAR COMPANY
CONDENSED BALANCE SHEETS
ASSETS
June
30, March 31,
1996 1996
---------- ----------
(Unaudited)
Current assets:
Cash $ 211,427 $ 748,801
Accounts receivable 169,390 31,873
Note receivable from stockholder 18,000 18,000
Inventory 646,085 379,466
Prepaid expenses and other receivables 603,941 24,893
---------- ----------
Total current assets 1,648,843 1,203,033
Property and equipment (net) 604,663 432,169
Deposits and other assets 91,203 23,200
---------- ----------
$2,344,709 $1,658,402
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Accounts payable $ 406,932 $ 218,268
Accrued expenses and taxes payable 218,774 96,223
---------- ----------
Total current liabilities 625,706 314,491
---------- ----------
Due to stockholder 49,621 49,621
---------- ----------
Commitments and contingencies -- --
Stockholders' equity:
Preferred stock, $.01 par value; 2,000,000 shares
authorized, none issued and outstanding -- --
Common stock, $.001 value; 10,000,000 shares
authorized; June 30, 1996 - issued and outstanding - 3,586,269; March 31,
1996 - issued
and outstanding - 3,408,369 3,586 3,408
Capital in excess of par value 2,498,489 1,852,945
Accumulated deficit (827,726) (550,743)
---------- ----------
1,674,349 1,305,610
Unearned compensation (4,967) (11,320)
---------- ----------
1,669,382 1,294,290
---------- ----------
$2,344,709 $1,658,402
========== ==========
The accompanying notes are an integral part hereof.
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CARIBBEAN CIGAR COMPANY
CONDENSED STATEMENTS OF OPERATIONS
Three Months Ended
June 30,
----------------------------
1996 1995
---------- ----------
Sales $1,272,307 $ 119,235
Cost of goods sold 885,688 94,467
---------- ----------
Gross profit 386,619 24,768
---------- ----------
Selling expenses 338,057 25,986
General and administrative expenses 324,471 24,536
Interest expense 1,074 --
---------- ----------
663,602 50,522
---------- ----------
Net (loss) $ (276,983) $ (25,754)
========== ==========
Loss per common share $ (.08) $ (.01)
========== ==========
Weighted average number of shares outstanding 3,408,944 3,408,944
========== ==========
The accompanying notes are an integral part hereof.
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CARIBBEAN CIGAR COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
Three Months Ended
June 30,
-------------------------
1996 1995
--------- --------
Cash flows from operating activities:
Net (loss) $(276,983) $(25,754)
Adjustments to reconcile net (loss) to net
cash provided (used) by operating activities:
Depreciation and amortization 30,170 2,447
Amortization of unearned compensation 1,757 --
Cancellation of stock issued for compensation (904) --
Common stock issued for compensation 36,000 --
(Increase) in accounts receivable (137,517) (579)
(Increase) in inventory (266,619) (12,320)
(Increase) in prepaid expenses and other receivables (579,048) --
(Increase) in deposits and other assets (68,003) --
Increase in accounts payable 188,664 9,560
Increase in accrued expenses and taxes payable 122,551 1,775
--------- --------
Net cash (used) by operating activities (949,932) (24,871)
--------- --------
Cash flows from investing activities:
Additions to property and equipment (202,664) (1,075)
--------- --------
Net cash (used) by investing activities (202,664) (1,075)
--------- --------
Cash flows from financing activities:
Proceeds from issuance of common stock 615,222 --
Advances from stockholder -- 25,946
--------- ---------
Net cash provided by financing activities 615,222 25,946
--------- ---------
Net (decrease) in cash (537,374) --
Cash at beginning of period 748,801 250
--------- ---------
Cash at end of period $ 211,427 $ 250
========= =========
Supplemental information:
Cash paid for interest $ 1,074 $ --
Cash paid for federal income tax -- --
The accompanying notes are an integral part hereof.
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CARIBBEAN CIGAR COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1996
In the opinion of management, the accompanying unaudited condensed
financial statements contain all adjustments (consisting only of normal
recurring adjustments) necessary to present fairly the financial position
of the company as of June 30, 1996, and the results of its operations and
cash flows for the three months ended June 30, 1996 and 1995. Such
financial statements have been condensed in accordance with the applicable
regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted. It is suggested that these
condensed financial statements be read in conjunction with the company's
audited financial statements and notes thereto for the year ended March
31, 1996 included in its Form SB2 filed in July 1996. The results of
operations for the three months ended June 30, 1996 are not necessarily
indicative of the operating results for the full year.
1. (Loss) per Share:
(Loss) per share for the three months ended June 30, 1996 and 1995
is based upon the weighted average number of shares of common stock
outstanding during the period. The calculation gives retroactive effect
(as if to inception of the company) to those shares issued to founders at
par value. Additionally, stock and stock options issued during fiscal 1996
have been treated as outstanding since October 3, 1994 (inception), the
dilutive effective of which was computed using the treasury stock method.
2. On August 6, 1996, the company an initial public offering of its Common
Stock and warrants. The net proceeds of the offering were approximately
$8,800,000.
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Item 2. Management's Discussion and Analysis of Financial Conditions and
Results of Operations
RESULTS OF OPERATIONS
PERIODS ENDED JUNE 30, 1996 AND 1995
The results of operations for the three months ended June 30, 1996 are not
readily comparable with the results of operations for the three months ended
June 30, 1995. During the three months ended June 30, 1995, the company's sole
business was the operation of one retail store in Key Largo, Florida. This was
operated as a sole proprietorship, and sold cigars and other products
manufactured by others. In approximately January 1996, the company commenced
manufacturing cigars, and established distribution channels to premium tobacco
stores.
The company's sales for the three months ended June 30, 1996 were approximately
$1,272,300, representing an increase of 967% from the company's sales for the
three months ended June 30, 1995, which were approximately $119,200. This
increase is attributed to the increase in manufacturing volume, the opening of a
second store in Miami Beach, Florida, and the wholesale distribution of its
cigars and other products. The primary source of revenue for 1995 was from
retail sales at the Key Largo store, as compared to the two stores and factory
sales in 1996. The combined sales of these stores was approximately $344,800 or
28% of total sales. The remaining sales of $927,500 or 72% of revenue, was
attributable to wholesale sales from the company's cigar factory.
Gross profit increased to approximately $386,600, or approximately 30% of sales,
for the three months ended June 30, 1996 as compared to approximately $24,800,
or approximately 21% of sales in the three months ended June 30, 1995, an
increase of 1458%. The increase in gross margin reflects (i) the commencement of
manufacturing and wholesale distribution in January 1996; and (ii) the opening
of a second retail store in Miami Beach, Florida.
Selling expenses for the three months ended June 30, 1996 were approximately
$320,300 as compared to approximately $26,000 for the three months ended June
30, 1995, representing a 1200% increase. The increase in selling expenses
reflects the expanded nature of the company's operations, coupled with the
advertising and promotional expense associated with the creation of three
national brands of cigars. During the three months ended June 30, 1996, the
company expanded its retail base with the opening of a second store and the
commencement of a wholesale marketing effort. During the three months ended June
30, 1995, the company had only modest selling expenses relating to its one
retail store in Key Largo.
General and administrative expenses for the three months ended June 30, 1996
were approximately $324,500 as compared to approximately $24,500 for the
comparable period of 1995. This represented an increase of approximately 1224%.
This increase is due to the expanded nature of the company's operations and
includes approximately $151,000 for salaries and related costs; professional
fees including costs related to the development of the company's information
systems of approximately $67,000; insurance costs of approximately $32,000, and
other costs of approximately $74,500.
Interest expense was approximately $1,074 for the three months ended June 30,
1996 as compared to no interest for the comparable period of 1995.
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As a result of the foregoing factors, the company sustained losses of
approximately $277,000, or $.08 per share, for 1996, as compared with a loss of
approximately $26,000, or $.01 per share, for the three months ended June 30,
1995.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996, the company had working capital of approximately $1,023,000.
Since its inception, it has sustained losses of approximately $827,000. Its
operations through June 30, 1996 were funded principally through a $250,000 loan
from investors in October 1995, and the sale of Common Stock during the period
from December 1995 through May 1996, which raised gross proceeds of
approximately $2,385,000, which was used for working capital and other corporate
purposes.
In April 1996, the company entered into an agreement for the future purchase of
tobacco at an estimated cost of $525,000, of which $300,000 has been deposited.
Subsequent to June 30, 1996, the company paid an additional $150,000 towards
this commitment. The company anticipates expansion of its retail operations and
plans to open approximately five retail locations in the next twelve months.
On August 6, 1996, the company completed an initial public offering of its
Common Stock and warrants. The company received net proceeds of the offering of
approximately $8,800,000.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: September 12, 1996 Caribbean Cigar Company
/s/ Thomas R. Dilk
------------------------
Thomas R. Dilk
Chief Financial Officer
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