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 June 30, 1999

                                                        OR

o  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 -  12,402,015  shares as of August 11, 1999.

<PAGE>

                                        800-JR 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 June 30, 1999 and 1998 and the Six-Month Periods ended
     June 30, 1999 and 1998 (Unaudited)........................................3
   Consolidated Balance Sheets as of June 30, 1999 (Unaudited) and
     December 31, 1998 ........................................................4
   Consolidated Statements of Cash Flows for the Six-Month Periods ended
     June 30, 1999 and 1998 (Unaudited)........................................5
   Notes to Consolidated Financial Statements (Unaudited)......................6

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


Part II - Other Information

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

Item 2.  Change in Securities and Use of Proceeds.............................14

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

<PAGE>

                                        800-JR Cigar, Inc. and Subsidiaries

                                         Consolidated Statements of Income
                                                    (Unaudited)

                              (In thousands, except share and per share amounts)

<TABLE>
<CAPTION>

                                             Three-month period                Six-month period
                                               ended June 30                    ended June 30
                                      ------------------------------------------------------------------
                                            1999            1998             1999            1998
                                      ------------------------------------------------------------------



<S>                                        <C>             <C>              <C>             <C>
Net sales                                  $78,798         $70,042          $151,619        $132,238
Cost of goods sold                          65,519          56,360           125,513         105,992
                                      ------------------------------------------------------------------
Gross profit                                13,279          13,682            26,106          26,246

Operating expenses:
   Selling                                   1,944           1,460             3,900           2,810
   General and administrative expenses       6,396           5,363            12,612          10,329
   Depreciation and amortization               536             418             1,025             785
                                      ------------------------------------------------------------------
Income from operations                       4,403           6,441             8,569          12,322

Other income (expense):
   Interest expense                           (207)           (337)             (462)           (707)
   Interest income                             148             512               392             911
   Rental income                                40              41                80              83
   Other, net                                  (68)             14              (139)             27
                                      ------------------------------------------------------------------
Income before income taxes                   4,316           6,671             8,440          12,636

Provision for income taxes                   1,707           2,731             3,385           5,164
                                      ==================================================================
Net income                                $  2,609        $  3,940         $   5,055      $    7,472
                                      ==================================================================

Per share data
Earnings per share - basic                $    .21        $    .31         $     .40       $     .59
                                      ==================================================================
Earnings per share - diluted              $    .21        $    .31         $     .40       $     .58
                                      ==================================================================
Weighted average shares outstanding
     -basic                                  12,402          12,750            12,501          12,750
                                      ==================================================================
Weighted average shares outstanding
     -diluted                                12,402          12,833            12,501          12,854
                                      ==================================================================

See accompanying notes.
</TABLE>

<PAGE>

                                        800-JR Cigar, Inc. and Subsidiaries

                                            Consolidated Balance Sheets

                                                  (In thousands)

<TABLE>
<CAPTION>
                                                        June          December
                                                      30, 1999        31, 1998
                                               ---------------------------------
Assets                                              (Unaudited)      (Audited)
Current assets:
<S>                                                   <C>            <C>
   Cash and cash equivalents                          $   12,063     $    12,759
   Short-term investments                                  3,919           5,719
   Accounts receivable, net                                3,468           2,568
   Merchandise inventory                                  44,178          49,056
   Prepaid expenses and other current assets               3,996           4,712
   Loans receivable - affiliates and other associated
     entities                                                940             685
   Deferred tax asset                                        972           1,183
                                               ---------------------------------
Total current assets                                      69,536          76,682

Property, equipment and improvements, at cost,
     net of accumulated depreciation and amortization     29,210          27,614
Other assets                                                 380             376
                                               =================================
Total assets                                          $   99,126     $   104,672
                                               =================================

Liabilities and stockholders' equity Current liabilities:
   Current portion of distribution notes payable to
     stockholders                                     $    7,933     $     7,933
   Accounts payable                                       12,063          16,238
   Accrued expenses                                        2,424           1,864
                                              ----------------------------------
Total current liabilities                                 22,420          26,035

Distribution notes payable to stockholders, less current
   portion                                                 1,000           4,967
                                               ---------------------------------
Total liabilities                                         23,420          31,002

Commitments and contingencies

Stockholders' equity:
   Common stock                                              128             128
   Additional paid-in capital                             52,768          52,751
   Retained earnings                                      27,121          22,066
                                               ---------------------------------
                                                          80,017          74,945
   Less treasury stock, at cost                          (4,311)         (1,275)
                                               ---------------------------------
Total stockholders' equity                                75,706          73,670
                                               ---------------------------------
Total liabilities and stockholders' equity            $   99,126     $   104,672
                                               =================================

See accompanying notes.
</TABLE>

<PAGE>

                              August 11, 1999800-JR Cigar, Inc. and Subsidiaries

                                     Consolidated Statements of Cash Flows
                                                  (Unaudited)

                                                  (In thousands)

<TABLE>
<CAPTION>
                                                            Six-month period
                                                              ended June 30
                                                         1999              1998
                                            ------------------------------------

Cash flows from operating activities
<S>                                                   <C>               <C>
Net income                                            $   5,055         $  7,472
Adjustments to reconcile net income to net cash
   provided by operating activities:
     Depreciation and amortization                        1,025              785
     Provision for uncollectible accounts                    60
     Deferred income taxes                                  211               21
     Changes in operating assets and liabilities:
       Accounts receivable                                (960)            (644)
       Merchandise inventory                             4,878           (2,961)
       Prepaid expenses and other current assets            716              427
       Other assets                                         (4)            (149)
       Accounts payable and accrued expenses             (3,615)           2,710
                                            ------------------------------------
Net cash provided by operating activities                 7,366            7,661

Cash flows from investing activities
Purchase of short-term investments                                       (3,325)
Proceeds from sales of short-term investments             1,800
Purchase of property and equipment                      (2,621)          (3,492)
Loans (extended to) repaid by affiliates and other
  associated entities                                      (255)             166
                                            ------------------------------------
Net cash used in investing activities                   (1,076)          (6,651)

Cash flows from financing activities
Purchase of treasury stock                              (3,036)
Proceeds from issuance of Common Stock                       17
Payments on distribution notes                          (3,967)          (3,967)
                                            ------------------------------------
Net cash used in financing activities                   (6,986)          (3,967)
                                            ------------------------------------

Net decrease in cash and cash equivalents                 (696)          (2,957)
Cash and cash equivalents at beginning of period         12,759           16,572
                                            ------------------------------------
Cash and cash equivalents at end of period              $12,063          $13,615
                                            ====================================

Supplemental disclosures of cash flow information
Interest paid                                          $    400        $     659
                                            ====================================

Income taxes paid                                      $  1,886         $  5,067
                                            ====================================

See accompanying notes.
</TABLE>

<PAGE>

                              August 11, 1999800-JR Cigar, Inc. and Subsidiaries

                                    Notes to Consolidated Financial Statements
                                                    (Unaudited)
                                     (In thousands, except per share amounts)

                                                   June 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 June 30, 1999 and 1998 and the  six-month  periods ended June 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.

<PAGE>

                              August 11, 1999800-JR Cigar, Inc. and Subsidiaries

                                    Notes to Consolidated Financial Statements
                                              (Unaudited) (continued)
                                     (In thousands, except per share amounts)


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       Six-month period
                                         ended June 30           ended June 30
                                      1999          1998      1999          1998
                                 -----------------------------------------------

Numerator:
<S>                                  <C>          <C>       <C>          <C>
 Net income                          $ 2,609      $ 3,940   $ 5,055      $ 7,472
                                 ===============================================

Denominator:
 Denominator for basic earnings per
  share - weighted-average shares     12,402       12,750    12,501       12,750

 Effect of dilutive securities - stock
  options                                  -           83         -          104
                                  ----------------------------------------------

Denominator for diluted earnings per
 share - adjusted weighted-average
 shares and assumed conversion        12,402       12,833    12,501       12,854
                                  ==============================================

Basic earnings per share             $   .21      $   .31   $   .40      $   .59
                                  ==============================================

Diluted earnings per share           $   .21      $   .31   $   .40      $   .58
                                  ==============================================
</TABLE>

4.  Initial Public Offering

Effective June 26, 1997,  the Company sold 3,450,000  shares of its common stock
at a price of $17 per share in an initial public  offering.  Net proceeds of the
Offering,   after  deducting   underwriting   discounts  and  commissions,   and
professional fees aggregated  $53,270.  As of June 30, 1999, the proceeds of the
Offering  had been used for the  following  purposes:  (i) to repay  outstanding
indebtedness  of $7,300,  (ii) $6,000 for the relocation and design of specialty
stores, (iii) $10,500 for a new discount outlet store and warehouse distribution
center,  (iv) the quarterly  principal  payment of distribution  notes of $7,900
through  June 30,  1998,  (v)  payment of signing  bonuses  in  connection  with
long-term  service  agreement,  (vi)  $3,000 for the  upgrade  of the  Company's
information systems,  (vii) interest payments of $1,400 through June 30, 1998 on
the Distribution  Notes,  (viii) $770 for the expansion of retail selling space,
and (ix) $14,900 for working capital and general corporate purposes.

<PAGE>

                              August 11, 1999800-JR Cigar, Inc. and Subsidiaries

                                    Notes to Consolidated Financial Statements
                                              (Unaudited) (continued)
                                     (In thousands, except per share amounts)


5.  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 June 30, 1999.

6.  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 June 30, 1999 and December 31, 1998, the Company had purchased
450,400 shares and 114,500 shares, respectively, at a cost of $4,311 and $1,275,
respectively.

7.  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.

<PAGE>

                                        800-JR Cigar, Inc. and Subsidiaries

                                    Notes to Consolidated Financial Statements
                                              (Unaudited) (continued)
                                     (In thousands, except per share amounts)


7.  Segment Reporting (continued)

The Company's operations by business segment for the three months ended June 30,
1999 and 1998 and the six-month periods ended June 30, 1999 and 1998 are as
follows:

<TABLE>
<CAPTION>

                                 Three-month period        Six-month period
                                   ended June 30            ended June 30
                                 1999          1998       1999          1998
                            ----------------------------------------------------

Net sales
<S>                             <C>           <C>       <C>            <C>
  Retail                        $40,131       $37,100   $  76,469      $  69,586
  Wholesale                      38,667        32,942      75,150         62,652
                            ----------------------------------------------------
Total consolidated net sales    $78,798       $70,042    $151,619       $132,238
                            ====================================================

Segment net income
  Retail                       $    463      $    728    $  1,452      $   1,514
  Wholesale                       2,513         3,242       4,237          6,040
                            ----------------------------------------------------
Total segment net income          2,976         3,970       5,689          7,554

Reconciling item
  Corporate net loss              (367)          (30)       (634)           (82)
                            ----------------------------------------------------
Total consolidated net income  $  2,609      $  3,940    $  5,055      $   7,472
                            ====================================================
</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.

<PAGE>

                               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 use of the
proceeds of the Offering by the Company;  (v) the Company's  ability to identify
and address Year 2000 issues; and (vi) 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 June 30, 1999 Compared to Three-Month Period Ended June
30, 1998

Net sales were $78.8 million and $70.0  million for the second  quarters of 1999
and 1998,  respectively,  an increase  of $8.8  million or 12.5%.  Retail  sales
increased  8.2 % to $40.1  million  for the  second  quarter  of 1999 from $37.1
million for the second  quarter of 1998.  The  increase in retail  sales was due
primarily to a $5.1 million,  or 44.7%  increase in discount  outlet store sales
resulting  from the  opening of the  Burlington  discount  outlet  store,  which
commenced  operations  during  the  fourth  quarter  of  1998.  Wholesale  sales
increased  17.4% to $38.7  million  for the  second  quarter  of 1999 from $32.9
million over the same period in the prior year. The increase in wholesale  sales
was due to a $5.9 million or 31.7% increase in  cash-and-carry  cigarette sales.
Although  the Company  experienced  an increase in unit volume for cigar  sales,
both retail and wholesale sales  increases were partially  offset by a reduction
in cigar  sales  resulting  from  price  reductions  due to the  current  market
condition.

Gross profit was $13.3 million and $13.7 million for the second quarters of 1999
and 1998,  respectively,  a decrease of $0.4 million or 2.9%. As a percentage of

<PAGE>

net sales,  gross profit  decreased to 16.9% for the second quarter of 1999 from
19.5% for the second  quarter of 1998,  primarily  due to an  increase  in lower
margin cigarette sales and a general price reduction for premium cigars.

Selling,  general and administrative ("S, G & A") expenses were $8.3 million and
$6.8 million for the second quarters of 1999 and 1998, respectively, an increase
of $1.5  million  or 22.2%.  As a  percentage  of net  sales,  S, G & A expenses
increased  to 10.6% for the  second  quarter  of 1999  from 9.7% for the  second
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 and the  expansion of retail  stores along with the
development of an Internet Site.

Income from operations was $4.4 million and $6.4 million for the second quarters
of 1999 and 1998,  respectively,  a  decrease  of $2.0  million  or 31.6%.  As a
percentage of net sales, income from operations decreased to 5.6% for the second
quarter of 1999 from 9.2% for the second  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 second  quarters of 1999 and
1998,  respectively,  a  decrease  of  $0.1  million.  Other  income,  primarily
interest,  was $0.1 million and $0.6 million for the second quarters of 1999 and
1998, respectively.  The decrease was primarily due to a reduction in short-term
investments.

Income before income taxes was $4.3 million and $6.7 million for the second
quarters of 1999 and 1998, respectively, a decrease of $2.4 million or 35.3%.

As a result of the foregoing,  the Company had net income of $2.6 million in the
second  quarter of 1999,  compared  to net income of $3.9  million for the first
quarter of 1998, a decrease of $1.3 million or 33.8%.

Six-month Period Ended June 30, 1999 Compared to Six-Month Period Ended June 30,
1998

Net sales were $151.6  million and $132.2  million for the first  six-months  of
1999 and 1998, respectively, an increase of $19.4 million or 14.7%. Retail sales
increased  9.9 % to $76.5  million for the first  six-months  of 1999 from $69.6
million for the first  six-months of 1998.  The increase in retail sales was due
primarily to a $9.8 million,  or 42.8%  increase in discount  outlet store sales
resulting from the Burlington Discount Outlet Store, which commenced  operations
in the fourth quarter of 1998.  Wholesale sales increased 20.0% to $75.2 million
for the first  six-months of 1999 from $62.7 million over the same period in the
prior year. The increase in wholesale  sales was due to a $13.0 million or 36.8%
increase in cash-and-carry  cigarette sales. Although the Company experienced an
increase  in unit  volume  for cigar  sales,  both  retail and  wholesale  sales
increases  were  partially  offset by a reduction in cigar sales  resulting from
price reductions due to the current market condition.

Gross profit was $26.1  million and $26.2  million for the first  six-months  of
1999 and 1998, respectively, a decrease of $0.1 million or 1.0%. The decrease in

<PAGE>

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 17.2% for the first six-months of 1999 from
19.8% for the first six-months of 1998.

Selling, general and administrative ("S, G & A") expenses were $16.5 million and
$13.1  million  for the  first  six-months  of 1999 and 1998,  respectively,  an
increase of $3.4 million or 25.7%. 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  existing  retail  stores.  As a
percentage  of net  sales,  S,G&A  expenses  increased  to 10.9%  for the  first
six-months of 1999 from 9.9% for the first six-months of 1998.

Income  from  operations  was $8.6  million  and  $12.3  million  for the  first
six-months of 1999 and 1998, respectively,  a decrease of $3.7 million or 30.5%.
As a percentage of net sales,  income from operations  decreased to 5.7% for the
first six-months of 1999 from 9.3% for the first  six-months of 1998,  primarily
due to a reduction in gross margins and higher S,G&A costs.

Interest  expense was $0.5 million and $0.7 for the first six-months of 1999 and
1998, respectively.  Other income, primarily interest, was $0.3 million and $1.0
million for the first  six-months of 1999 and 1998,  respectively.  The decrease
was primarily due to a reduction in short-term investments.

Income before income taxes was $8.4 million and $12.6 million for the first
six-months of 1999 and 1998, respectively, a decrease of $4.2 million or 33.2%

As a result of the foregoing,  the Company had net income of $5.1 million in the
first  six-months of 1999,  compared to net income of $7.5 million for the first
six-months of 1998, a decrease of $2.4 million or 32.3%.

Liquidity and Capital Resources

As of June 30, 1999, the Company had working  capital of $47.1 million  compared
to $50.6  million at December 31, 1998.  Working  capital as of June 30, 1999 is
comprised  primarily of cash and cash  equivalents of $12.1 million,  short-term
investments  of $3.9  million,  accounts  receivable  of $3.5  million and $44.2
million of  inventory  offset by $14.5  million of accounts  payable and accrued
expenses and $7.9 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.

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.  The first payment of principal and

<PAGE>

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
June 30, 1999, the Company  repurchased 127,900 shares of its outstanding common
shares at an average  price of $9.32  raising the total  shares  repurchased  to
450,400 at an average cost of $9.57 as of June 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 developed a plan to modify
non-critical  data  processing  systems and other data  sensitive  equipment  to
prepare  for Year 2000.  The  Company  has  completed  approximately  80% of the
required modifications of non-critical data processing systems and will complete
the balance by September  30, 1999.  The Company does not expect the total costs
associated with these products will be significant.

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.

<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 2.  Change in Securities and Use of Proceeds

Securities Act Rule 229.463  ("Rule 463") required  issuers to report on Form SR
their use of proceeds,  following an initial public offering, within ten days of
the  first  three  months  following  the  effective  date  of the  registration
statement,  and every six months  thereafter,  until the application of all such
proceeds was  complete.  Effective  September  2, 1997,  pursuant to Release No.
34-38850,  the Securities and Exchange  Commission  ("SEC")  amended Rule 463 to
eliminate  Form SR and now  requires  a  first-time  registrant  to  report  the
application  of proceeds in each of its periodic  Exchange Act reports until the
application of such proceeds is complete.

The  information   provided  below  represents  a  reasonable  estimate  of  the
cumulative  application,  through June 30, 1999,  of the net proceeds of $53,270
which were received  following the Company's initial public offering on June 26,
1997:

New warehouse and discount outlet store                                  $10,500
Relocation and design of specialty stores                                  6,000
Upgrade of information systems and graphics                                3,000
Reduction of bank debt and mortgages                                       7,300
Payment of Distribution Notes and interest                                 9,300
Payment of employment bonuses`                                             1,500
Working capital and general corporate use                                 14,900
Expansion of retail selling space                                            770


Except  for  payments  described  in  the  following  sentence,  the  cumulative
application of the net offering  proceeds listed above represent direct payments
to others.  Except for the payment of the Distribution  Notes to shareholders of
Predecessor  Companies  referred to in the table above, no payments were made to
directors or officers or to their  associates  except for  payments  made in the
ordinary  course of  business  which  include,  but may not be  limited  to, the
payment  of  officer  salaries  and  bonuses,   fringe  benefits,  and  expenses
reimbursements  or compensation  paid to directors for their attendance at board
meetings  or  for  their  service  provided  to  the  Company  under  consulting
arrangements, if any.

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
June 30, 1999.

<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: August 12, 1999      By:__/s/ Lewis I. Rothman_________________________
                              Lewis I. Rothman, Chairman and President



Date: August 12, 1999      By:__/s/ Michael E. Colleton_______________________
                               Michael E. Colleton, Chief Financial Officer