FORM 10-Q

                                    SECURITIES AND EXCHANGE COMMISSION

                                          WASHINGTON, D.C. 20549

(Mark One)

|X|  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 1999

                                                    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: 0-22675

                                            800-JR CIGAR, INC.

                       Delaware                                   52-2022117
            (State or other jurisdiction of                    (I.R.S. Employer
            incorporation or organization)                   Identification No.)

                301 Route 10 East, Whippany, New Jersey 07981, USA (973)884-9555

                                              Not applicable
(Former name, former address, and former fiscal year, if changed since last
report)

         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  (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 ____

                                (APPLICABLE ONLY TO CORPORATE REGISTRANTS)

         Indicate the number of shares  outstanding of each of the  registrant's
classes of common stock, as of the latest practicable date.

       Common Stock, $.01 par value - 12,752,146 shares as of November 10, 1999.

<PAGE>

                                  800-J.R. Cigar, Inc. and Subsidiaries

                                            Index to Form 10-Q

 PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS                                               PAGE

Consolidated Statements of Income for the Three-Month Periods
     ended September 30, 1998 and 1999 (Unaudited) and the Nine-Month Periods
     ended September 30, 1998 and 1999 (Unaudited).............................3

Consolidated Balance Sheets as of December 31, 1998 (Audited) and
     September 30, 1999 (Unaudited)............................................4

Consolidated Statements of Cash Flows for the Nine-Month Periods ended
     September 30, 1998 and 1999 (Unaudited)...................................5

Notes to Consolidated Financial Statements.....................................6

Item 2.  Management's Discussion and Analysis of Financial Condition
   and Results of Operations..................................................10

Item 3.  Quantitative and Qualitative Disclosure About Market Risk............13

PART II - OTHER INFORMATION

Item 1.  Legal Proceedings....................................................14

Item 6.  Exhibits and Reports on Form 8-K.....................................14
Signatures....................................................................15

<PAGE>

                                  800-J.R. Cigar, Inc. and Subsidiaries

                                    Consolidated Statements of Income
                                               (Unaudited)

                            (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>

                               THREE-MONTH PERIOD              Nine-month period
                               ENDED SEPTEMBER 30             ended September 30
                           ---------------------------- ------------------------
                              1999          1998            1999            1998
                           -----------------------------------------------------
<S>                         <C>           <C>            <C>            <C>
Net sales                   $79,871       $73,177        $231,491       $205,414
Cost of goods sold           65,978        58,274         191,492        164,266
                          ---------------------------- -------------------------
Gross profit                 13,893        14,903          39,999         41,148

Operating expenses:
  Selling                     1,651         1,522           5,551          4,332
  General and administrative
   expenses                   6,603         5,896          19,215         16,225
  Depreciation and amortization 557           350           1,582          1,135
                            ----------------------------------------------------
Income from operations        5,082         7,135          13,651         19,456

Other income (expense):
  Interest expense            (176)         (311)           (638)        (1,019)
  Interest income               275           443             667          1,355
  Rental income                  41            42             121            125
  Other, net                   (99)            13           (238)             40
                            ---------------------------- -----------------------
Income before income taxes    5,123          7,322         13,563         19,957

Provision for income taxes    2,054          2,987          5,439          8,152
                            ----------------------------------------------------
Net income                 $  3,069       $  4,335      $   8,124       $ 11,805
                            ====================================================

Per share data:
  Earnings per share - basic   $ .25         $ .34         $  .65       $   .93
                            ============================ =======================
  Earnings per share - diluted $ .25         $ .34         $  .65       $   .92
                            ============================ =======================
  Weighted average shares
   outstanding - basic        12,291        12,733         12,430         12,744
                            ============================ =======================
  Weighted average shares
   outstanding - diluted      12,291        12,733         12,430         12,813
                            ============================ =======================

SEE ACCOMPANYING NOTES.
</TABLE>
                                                                               3

<PAGE>

                                  800-J.R. Cigar, Inc. and Subsidiaries

                                       Consolidated Balance Sheets

                                              (IN THOUSANDS)
<TABLE>
<CAPTION>

                                                      SEPTEMBER        December
                                                      30, 1999        31, 1998
                                                   -----------------------------
Assets                                               (Unaudited)      (Audited)
Current assets:

<S>                                                  <C>            <C>
  Cash and cash equivalents                         $   12,942     $    12,759
  Investments in marketable securities                   4,544           5,719
  Accounts receivable, net                               1,999           2,568
  Merchandise inventory                                 42,092          49,056
  Prepaid expenses and other current assets              5,117           4,712
  Loans receivable - affiliates and other
   associated entities                                     862             685
  Deferred tax asset                                       837           1,183
                                                   -----------------------------
Total current assets                                     68,393           76,682

Property, equipment and improvements, at cost,
  net of accumulated depreciation and amortization       31,398           27,614
Other assets                                                412              376
                                                    ----------------------------
                                                       $100,203         $104,672

                                                    ============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Current portion of distribution notes payable
   to stockholders                                    $   6,950          $ 7,933
  Accounts payable                                       12,543           16,238
  Accrued expenses                                        2,480            1,864
                                                    ----------------------------
  Total current liabilities                              21,973           26,035

  Distribution notes payable to stockholders,
   less current portion                                     -              4,967
                                                    ----------------------------
Total liabilities                                        21,973           31,002

Commitments and contingencies

Stockholders' equity:
  Common stock                                              128              128
  Additional paid-in capital                             52,779           52,751
  Retained earnings                                      30,190           22,066
                                                    ----------------------------
                                                         83,097           74,945
  Less treasury stock, at cost                          (4,867)          (1,275)
                                                    ----------------------------
Total stockholders' equity                               78,230           73,670
                                                    ----------------------------
                                                       $100,203        $ 104,672
                                                    ============================

SEE ACCOMPANYING NOTES.
</TABLE>
                                                                               4

<PAGE>

                                  800-J.R. Cigar, Inc. and Subsidiaries

                                  Consolidated Statements of Cash Flows
                                               (Unaudited)

                                              (IN THOUSANDS)
<TABLE>
<CAPTION>

                                                              NINE-MONTH PERIOD
                                                             ENDED SEPTEMBER 30
                                                             1999           1998
                                                   -----------------------------
Cash flows from operating activities

<S>                                                       <C>            <C>
Net income                                                $  8,124       $11,805
Adjustments to reconcile net income to net cash provided
   by operating activities:
    Depreciation and amortization                            1,582         1,135
    Provision for uncollectible accounts                        90            72
    Deferred income taxes                                      346            31
    Changes in operating assets and liabilities:
      Accounts receivable                                      479       (1,212)
      Merchandise inventory                                  6,964       (6,590)
      Prepaid expenses and other current assets              (405)         (463)
      Other assets                                            (36)         (133)
      Accounts payable and accrued expenses                (3,079)         5,349
                                                   -----------------------------
Net cash provided by operating activities                   14,065         9,994

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of marketable securities                 1,175         2,499
Purchase of property and equipment                         (5,366)       (5,982)
Loans (extended to) repaid by affiliates and other
  associated entities                                        (177)           189
                                                   -----------------------------
Net cash used in investing activities                      (4,368)       (3,294)

CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of treasury stock                                 (3,592)         (900)
Proceeds from issuance of common stock                         28
Payments on distribution notes                             (5,950)       (5,950)
                                                   -----------------------------
Net cash used in financing activities                      (9,514)       (6,850)
                                                   -----------------------------

Net increase (decrease) in cash and cash equivalents          183          (150)
Cash and cash equivalents at beginning of period           12,759         16,572
                                                   -----------------------------
Cash and cash equivalents at end of period                $12,942        $16,422
                                                   =============================

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid                                            $    527       $    937
                                                   =============================
Income taxes paid                                        $  3,499       $  7,552
                                                   =============================

SEE ACCOMPANYING NOTES.
</TABLE>
                                                                               5

<PAGE>

                                   800-JR Cigar, Inc. and Subsidiaries

                                Notes to Consolidated Financial Statements
                                               (Unaudited)
                                 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

                                            September 30, 1999

1.  Unaudited Financial Statements

The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting  principles for interim financial information
and with  the  instructions  to Form  10-Q and  Rule  10-01 of  Regulation  S-X.
Accordingly, they do not include all of the information and footnote disclosures
normally included in complete financial  statements  prepared in accordance with
generally  accepted  accounting  principles.  For further  information,  such as
significant  accounting policies followed by the Company,  refer to the notes to
the  Company's  audited  consolidated  financial  statements  for the year ended
December 31, 1998.

In the opinion of management,  the unaudited  financial  statements  include all
necessary  adjustments  (consisting  of normal,  recurring  accruals) for a fair
presentation of the financial position, results of operations and cash flows for
the interim  periods  presented.  The results of operations for the  three-month
periods  ended  September  30, 1999 and 1998 and the  nine-month  periods  ended
September  30, 1999 and 1998,  are not  necessarily  indicative of the operating
results to be expected for a full year.

2.  Basis of Presentation

800-JR Cigar,  Inc. ("800-JR Cigar") was incorporated in Delaware in March 1997.
In  connection  with  800-JR  Cigar's  initial  public  offering  of stock  (the
"Offering")  on June 26, 1997, the former  principals of a predecessor  group of
companies  contributed  to  800-JR  Cigar  all of the  outstanding  stock in the
entities  that  comprise the  predecessor  group of  companies,  in exchange for
9,300,000 shares of common stock of 800-JR Cigar.

All significant intercompany balances and transactions have been eliminated.

                                                                               6

<PAGE>

                                   800-JR Cigar, Inc. and Subsidiaries

                                Notes to Consolidated Financial Statements
                                         (Unaudited) (continued)
                                 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

                                            September 30, 1999

3.  COMPUTATION OF BASIC AND DILUTED EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per
share:

<TABLE>
<CAPTION>
                                  THREE-MONTH PERIOD           Nine-month period
                                 ENDED SEPTEMBER 30           ended September 30
                                1999          1998           1999          1998
                            -------------------------- -------------------------
Numerator:

<S>                           <C>           <C>            <C>           <C>
 Net income                   $  3,069      $  4,335       $  8,124      $11,805
                             ========================== ========================
Denominator:
 Denominator for basic earnings
  per share - weighted-average
   shares                       12,291        12,733         12,430       12,744

 Effect of dilutive securities
  - stock options                  -             -              -             69
                             -------------------------- ------------------------

 Denominator for diluted earnings
  per share - adjusted
   weighted-average shares
    and assumed conversion      12,291        12,733         12,430       12,813
                             ========================== ========================

 Basic earnings per share     $    .25    $      .34     $      .65    $     .93
                             ========================== ========================

 Diluted earnings per share   $    .25    $      .34     $      .65    $     .92
                             ========================== ========================
</TABLE>

Common stock  equivalents are excluded from the calculation of diluted  earnings
per share for the three month periods ended  September 30, 1999 and 1998 and for
the  nine  month  period  ended  September  30,  1999 as their  effect  would be
anti-dilutive.

4.  Revolving Credit Facility

The Company has a $20 million revolving Credit Facility which expires on May 31,
2000.  Borrowings  under this  facility are  unsecured  and bear interest at the
bank's  prime rate minus  1/2% or, at the option of the  Company,  1.5% over the
London Interbank Offered Rate (LIBOR).  There were no amounts  outstanding under
this facility at September 30, 1999.

                                                                               7

<PAGE>

                                   800-JR CIGAR, INC. AND SUBSIDIARIES

                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                         (UNAUDITED) (CONTINUED)
                                (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

                                            SEPTEMBER 30, 1999

5.  Stock Repurchase Plan

On August 25, 1998, the Board of Directors  approved the repurchase of up to $10
million  of the  Company's  common  stock  from time to time  subject  to market
conditions.  Purchases can be made in the open market or in privately negotiated
transactions.  At September  30, 1999 and  December  31,  1998,  the Company had
purchased 503,400 shares and 114,500 shares,  respectively,  at a cost of $4,867
and $1,275, respectively.

6.  Segment Reporting

The  Company has two  segments  determined  by type of  customer  and made up of
retail and wholesale  operations.  The Company's  retail  division sells cigars,
tobacco  products,  cigarettes,  fragrances and other merchandise to the general
public through direct mail order,  cigar stores, and discount outlet stores. The
Company's   wholesale   division   sells  cigars  and  cigarettes  to  wholesale
distributors through the wholesale mail order and wholesale cigarette operations
located within the Company's  discount outlet stores.  The Company operates only
throughout the United States.

The reportable  segments are each managed separately because the Company markets
these segments of the business  separately.  Although revenues of the retail and
wholesale  divisions are further monitored based upon marketing and distribution
channel, overall profitability is measured only at the retail/wholesale level.

The  Company  evaluates  performance  based on  profit or loss.  The  accounting
policies  of the  reportable  segments  are the same as those  described  in the
summary of  significant  accounting  policies.  The accounting for the assets of
each segment is the same as in consolidation.

                                                                               8

<PAGE>

                                   800-JR CIGAR, INC. AND SUBSIDIARIES

                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                         (UNAUDITED) (CONTINUED)
                                 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

                                            SEPTEMBER 30, 1999

6.  SEGMENT REPORTING (CONTINUED)

The  Company's  operations  by  business  segment  for the  three  months  ended
September 30, 1999 and 1998 and the nine-month  periods ended September 30, 1999
and 1998 are as follows:
<TABLE>
<CAPTION>

                                THREE-MONTH PERIOD           Nine-month period
                                ENDED SEPTEMBER 30           ended September 30
                                 1999          1998           1999          1998
                            -------------------------- -------------------------
NET SALES

<S>                          <C>           <C>            <C>           <C>
  Retail                       $40,145       $41,652       $116,615     $111,237
  Wholesale                     39,726        31,525        114,876       94,177
                            -------------------------- -------------------------
Total consolidated net sales   $79,871       $73,177       $231,491     $205,414
                            ========================== =========================

SEGMENT NET INCOME
  Retail                     $     961     $     297     $   2,413    $    1,809
  Wholesale                      2,253         4,116         6,490        10,156
                            -------------------------- -------------------------
  Total segment net income       3,214         4,413         8,903        11,965

RECONCILING ITEM
  Corporate net loss             (145)          (78)          (779)        (160)
                            -------------------------- -------------------------
  Total consolidated net income $ 3,069      $ 4,335      $   8,124     $ 11,805
                            ========================== =========================
</TABLE>

There has been no  material  change in total  assets by segment  from the amount
disclosed in the annual report on Form 10-K at December 31, 1998.

                                                                               9

<PAGE>

PART I.
                               MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                                        CONDITION AND RESULTS OF OPERATIONS

This  report  contains  certain  "forward-looking  statements."Those  statements
appear in a number of places in this report and include statements regarding the
intent,  belief or current  expectations  of the Company,  its directors and its
officers with respect to, among other things: (i) trends affecting the Company's
financial  condition  or results of  operations;  (ii) the  Company's  financing
plans; (iii) the Company's  business and growth  strategies;  (iv )the Company's
ability to identify and address Year 2000 issues;  and (v) the  declaration  and
payment  of  dividends.  Prospective  investors  are  cautioned  that  any  such
forward-looking  statements are not guarantees of future performance and involve
risks and uncertainties and that actual results may differ materially from those
projected in the forward-looking statements as a result of various factors.

General.

The  Company is one of the largest  distributors  and  retailers  of tobacco and
tobacco related  products in North America.  The Company operates in a large and
highly fragmented industry  characterized by multiple and relatively undeveloped
channels of  distribution.  With its 29-year history in the cigar industry,  the
Company has  established  itself as an important  participant in the movement of
tobacco products from  manufacturers to the customers.  Manufacturers  value the
Company's  ability  to  perform  distribution,   credit,  customer  support  and
marketing  functions,  which  would  otherwise  be  the  responsibility  of  the
manufacturer.  Customers  value  the  Company's  extensive  variety  of  tobacco
products  and rapid order  fulfillment  and benefit  from  advantageous  pricing
derived   through  the  Company's   volume  buying  as  a  direct  importer  and
distributor.

Three-month Period Ended September 30, 1999 Compared to Three-Month Period Ended
September 30, 1998

Net sales were $79.9  million and $73.2  million for the third  quarters of 1999
and 1998,  respectively,  an  increase  of $6.7  million or 9.2%.  Retail  sales
decreased  3.6 % to $40.1  million  for the third  quarter  of 1999  from  $41.7
million for the third  quarter of 1998.  The  decrease  in retail  sales was due
primarily  to a $3.1  million,  or 17.5%  decrease in direct mail order  cigars,
offset by sales  generated by the new Burlington  outlet store.  Wholesale sales
increased  26.1% to $39.7  million  for the third  quarter  of 1999  from  $31.5
million over the same period in the prior year. The increase in wholesale  sales
was  due  primarily  to a $9.0  million  or  55.2%  increase  in  cash-and-carry
cigarette sales.

Gross profit was $13.9 million and $14.9 million for the third  quarters of 1999
and 1998,  respectively,  a decrease of $1.0 million or 6.8%. As a percentage of
net sales,  gross profit  decreased to 17.4% for the third  quarter of 1999 from
20.4% for the third  quarter  of 1998,  primarily  due to an  increase  in lower
margin cigarette sales and a general price reduction for premium cigars.

                                                                              10

<PAGE>

Selling,  general and administrative ("S, G & A") expenses were $8.3 million and
$7.4 million for the third quarters of 1999 and 1998, respectively,  an increase
of $0.8  million  or 11.3%.  As a  percentage  of net  sales,  S, G & A expenses
increased  to 10.4%  for the  third  quarter  of 1999  from  10.2% for the third
quarter of 1998 primarily due to increased  staffing and other costs  associated
with the  Company's  new  discount  outlet  store and  warehouse  operations  in
Burlington,  North  Carolina,  opened in October 1998,  and the expansion of two
discount outlet stores in North Carolina.

Income from  operations was $5.1 million and $7.1 million for the third quarters
of 1999 and 1998,  respectively,  a  decrease  of $2.0  million  or 28.8%.  As a
percentage of net sales, income from operations  decreased to 6.4% for the third
quarter  of 1999 from 9.8% for the third  quarter  of 1998,  primarily  due to a
decrease in gross margins and higher S, G & A costs.

Interest  expense was $0.2 and $0.3  million for the third  quarters of 1999 and
1998, respectively, a decrease of $0.1 million. The decrease in interest expense
was due to a reduction in the distribution notes payable to stockholders.  Other
income,  primarily  interest,  was $0.2  million and $0.4  million for the third
quarters of 1999 and 1998,  respectively.  The decrease was  primarily  due to a
reduction in short-term investments.

Income before income taxes  was $5.1  million  and $7.3  million  for the third
quarters of 1999 and 1998, respectively, a decrease of $2.2 million or 30.0%.

As a result of the foregoing,  the Company had net income of $3.1 million in the
third  quarter of 1999,  compared  to net income of $4.3  million  for the third
quarter of 1998, a decrease of $1.2 million or 29.2%.

Nine-month Period Ended September 30, 1999 Compared to Nine-Month Period Ended
September 30, 1998

Net sales were $231.5  million and $205.4  million for the first  nine-months of
1999 and 1998, respectively, an increase of $26.1 million or 12.7%. Retail sales
increased 4.8% to $116.6  million for the first  nine-months of 1999 from $111.2
million for the first  nine-months of 1998. The increase in retail sales was due
primarily to a $10.8 million,  or 28.4% increase in discount  outlet store sales
resulting from the Burlington Discount Outlet Store, which commenced  operations
in the fourth  quarter of 1998.  This  increase was  partially  offset by a 9.8%
decrease in mail order sales.  Wholesale sales increased 22.0% to $114.9 million
for the first nine-months of 1999 from $94.2 million over the same period in the
prior year. The increase in wholesale sales was due primarily to a $22.0 million
or 42.6% increase in cash-and-carry cigarette sales.

Gross profit was $40.0  million and $41.1 million for the first  nine-months  of
1999 and 1998, respectively, a decrease of $1.1 million or 2.8%. The decrease in
gross  profit  was  primarily  due to an  increase  in the sale of lower  margin
cigarettes and a general price reduction for premium cigars.  As a percentage of
net sales,  gross profit  decreased to 17.3% for the first  nine-months  of 1999
from 20.0% for the first nine-months of 1998.

                                                                              11

<PAGE>

Selling, general and administrative ("S, G & A") expenses were $24.8 million and
$20.6  million  for the first  nine-months  of 1999 and 1998,  respectively,  an
increase of $4.2 million or 20.3%. The increase in S,G&A expenses was related to
increased staffing and other costs associated with the new discount outlet store
and warehouse in Burlington,  North Carolina,  which commenced operations in the
fourth quarter of 1998 and the expansion of two discount  outlet stores in North
Carolina.  As a percentage of net sales,  S,G&A expenses  increased to 10.6% for
the first nine-months of 1999 from 10.0% for the first six-months of 1998.

Income  from  operations  was  $13.7  million  and $19.5  million  for the first
nine-months of 1999 and 1998, respectively, a decrease of $5.8 million or 29.8%.
As a percentage of net sales,  income from operations  decreased to 5.9% for the
first nine-months of 1999 from 9.5% for the first nine-months of 1998, primarily
due to a reduction in gross margins and higher S,G&A costs.

Interest expense was $0.6 million and $1.0 million for the first  nine-months of
1999 and 1998,  respectively.  The  decrease  in  interest  expense was due to a
reduction in the  distribution  notes  payable to  stockholders.  Other  income,
primarily interest,  was $0.6 million and $1.5 million for the first nine-months
of 1999 and 1998,  respectively.  The decrease in interest  income was primarily
due to a reduction in short-term investments.

Income before income taxes was $13.6  million  and $20.0  million for the first
nine-months of 1999 and 1998, respectively, a decrease of $6.4 million or 32.0%

As a result of the foregoing,  the Company had net income of $8.1 million in the
first nine-months of 1999, compared to net income of $11.8 million for the first
nine-months of 1998, a decrease of $3.7 million or 31.2%.

Liquidity and Capital Resources

As of  September  30,  1999,  the Company had working  capital of $46.4  million
compared to $50.6 million at December 31, 1998.  Working capital as of September
30, 1999 is comprised  primarily of cash and cash  equivalents of $12.9 million,
short-term  investments  of $4.5 million,  accounts  receivable of $2.0 million,
$42.1 million of inventory and $5.1 million of prepaid and other current  assets
offset by $15.0  million of  accounts  payable  and  accrued  expenses  and $7.0
million of the current portion of the distribution notes.

The Company has available a short term,  unsecured  line of credit in the amount
of $20.0  million  through May 31, 2000 with  interest at either the bank's base
rate minus 50 basis points or an increment over LIBOR, at the Company's  option.
There  were no  amounts  outstanding  under the  Company's  line of credit as of
September 30, 1999.

On June 6, 1997,  the  Company  issued  notes in the  aggregate  amount of $23.8
million to shareholders of the predecessor companies, representing the estimated
cumulative  undistributed  earnings of the predecessor  companies which operated
under Subchapter "S"of the Internal Revenue Service code. The notes have a fixed
interest  rate of 7.0% and  require  quarterly  payments  in  aggregate  of $2.0
million plus interest through June 1, 2000.

                                                                              12

<PAGE>

The first  payment of principal  and interest  was made  effective  September 1,
1997.  In  addition,  on June 6, 1997,  the  Predecessor  Companies  also issued
additional Distribution Notes to shareholders of the Predecessor Companies for a
nominal amount. On December 31, 1997, the initial principal amount was increased
to $1.0 million, the maximum allowable. The additional Distribution Notes mature
on June 1, 2000 and bear interest at the rate of 7.0% per annum.  The holders of
the notes have agreed to subordinate payment of principal and interest to senior
lenders if required by credit agreements. The existing credit agreement does not
require  subordination in the event of default under the terms and conditions of
the agreement.

The repurchase of up to $10.0 million of the Company's common stock was approved
by the Board of Directors  subject to market  conditions.  In the quarter  ended
September 30, 1999,  the Company  repurchased  53,000 shares of its  outstanding
common shares at an average price of $10.50 raising the total shares repurchased
to 503,400 at an average cost of $9.67 as of September 30, 1999.

The  Company  anticipates  that it will be able  to  satisfy  its  ongoing  cash
requirements  for  the  foreseeable  future,  primarily  with  cash  flows  from
operations,  and cash and short-term  investments,  supplemented as necessary by
borrowings under its existing line of credit.

Year 2000

During  1995,  the  Company  purchased  versions  of its  principal  information
technology  software packages,  which have been certified as Year 2000 compliant
by the  respective  software  vendors.  The  Company  has  completed  all of the
required modifications of non-critical data processing systems.

The  Company  has also made  inquiries  of its  significant  vendors and service
providers to determine  the extent to which  interfaces  with such  entities are
vulnerable to Year 2000 issues. Most of those contacted have indicated that they
have begun implementing Year 2000 readiness programs.  The Company is continuing
to  follow-up  with  significant  vendors  and  service  providers  that did not
initially respond, or whose responses were deemed unsatisfactory.

Based upon its current  state of readiness,  the Company  believes that the Year
2000 issue  will not pose  significant  operational  problems  for the  Company.
However,  if all Year 2000 issues are not properly  identified,  there can be no
assurance  that the Year 2000 issue  will not  materially  adversely  impact the
Company's results of operations or adversely affect the Company's  relationships
with customers, vendors, or others. Additionally, there can be no assurance that
the Year 2000 issues of other  entities will not have a material  adverse impact
on the Company's systems or results of operations.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

The Company does not trade in derivative  financial  instruments.  The Company's
revolving  line of credit bears  interest at a variable  rate (prime minus 1/2%)
and,  therefore,  the Company is subject to  market-risk in the form of interest
rate fluctuations.

                                                                              13

<PAGE>

Part II.  Other Information

Item 1.  Legal Proceedings

The  Company  is not  presently  involved  in any legal  proceedings  which,  if
determined  adversely  to the  Company,  would  have a  material  effect  on the
Company.

Item 6.  Exhibits and Reports on Form 8-K

The Company did not file any reports on Form 8-K during the three months ended
September 30, 1999.

                                                                              14

<PAGE>

                                               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.

                                            800-JR CIGAR, INC.

DATE: NOVEMBER 9, 1999                      BY:_/S/ LEWIS I. ROTHMAN____________
                                              - --------------------
                                        Lewis I. Rothman, Chairman and President

DATE: NOVEMBER 9, 1999                      BY:_/S/ MICHAEL E. COLLETON_________
                                                -----------------------
                                    Michael E. Colleton, Chief Financial Officer