U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2004.
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ______________________ to _____________________.
Commission file number: 0-32137
-------
ALEC BRADLEY CIGAR CORPORATION
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
FLORIDA 65-0701352
--------------------------------------------------------------------------------
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
3400 S.W. 26th Terrace, Suite A-1, Dania, Florida 33313
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (954) 321-5991
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 report(s), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
As of May 17, 2004, there were 4,499,777 shares of Common Stock, par
value $.0001 per share, outstanding.
I N D E X
Page
----
Part I. Financial Information. 3
---------------------
Item 1. Financial Statements (Unaudited). 3
Condensed Balance Sheets 3
Condensed Statements of Operations 4
Condensed Statement of Changes in Shareholders' Equity 5
Condensed Statements of Cash Flows 6
Notes to the Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 9
Item 3. Controls and Procedures. 10
Part II. Other Information. 11
-----------------
Item 1: Legal Proceedings 11
Item 2: Changes in Securities and Use of Proceeds 11
Item 3: Defaults upon Senior Securities 11
Item 4: Submission of Matters to a vote of Securities Holders 11
Item 5: Other Information 11
Item 6: Exhibits and Reports on Form 8-K 11
2
PART I: FINANCIAL INFORMATION
---------------------
ITEM 1. Financial Statements (Unaudited)
--------------------------------
ALEC BRADLEY CIGAR CORP.
CONDENDSED BALANCE SHEETS
March 31, December 31,
2004 2003
----------- ------------
(Unaudited)
ASSETS
------
Current Assets:
Cash and cash equivalents $ 70,509 $ 108,361
Accounts receivable 103,824 144,946
Inventory 269,014 328,068
Prepaid expenses -- 69,005
---------- -----------
Total Current Assets 443,347 650,380
Furniture and Equipment, net -- 1,215
Trademarks and Other Assets, net 2,202 2,577
---------- -----------
Total Assets $ 445,549 $ 654,172
========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities
Accounts payable and accrued expenses $ 105,646 $ 391,880
Accrued income taxes payable 100,000 31,550
---------- -----------
Total Current Liabilities 205,646 423,430
---------- -----------
Shareholders' Equity
Common stock, $0.0001 par value, 30,000,000
shares authorized, 4,499,777 shares issued and outstanding 450 450
Additional paid-in capital 73,510 73,510
Retained Earnings 165,943 156,782
---------- -----------
Total Shareholders' Equity 239,903 230,742
---------- -----------
Total Liabilities and Shareholders' Equity $ 445,549 $ 654,172
========== ===========
The accompanying notes are an integral part of these financial statements.
3
ALEC BRADLEY CIGAR CORP.
CONDENSED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 2004 and 2003
(Unaudited)
Three Months Ended March 31,
2004 2003
---------- ----------
NET SALES $ 375,075 $ 467,106
Cost of goods sold 209,918 253,647
---------- ----------
GROSS PROFIT 165,157 213,459
---------- ----------
Operating Expenses
Selling expenses 53,936 58,311
General and administrative expenses 102,060 85,974
---------- ----------
Total operating expenses 155,996 144,285
---------- ----------
INCOME BEFORE PROVISION FOR INCOME TAXES 9,161 69,174
Provision for income taxes -- 12,300
---------- ----------
Net Income $ 9,161 $ 56,874
========== ==========
Earnings per share - basic and diluted $ 0.002 $ 0.01
========== ==========
Weighted average number of common
shares outstanding - basic and diluted 4,499,777 4,484,777
========== ==========
The accompanying notes are an integral part of these financial statements.
4
ALEC BRADLEY CIGAR CORP.
CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
Common Stock
----------------------- Additional Total
Number $0.0001 Paid-in Accumulated Shareholders'
of shares Par Value Capital Deficit Equity
--------- ---------- ----------- ----------- -------------
Balance at December 31, 2001 4,844,777 $ 448 $ 459,597 $ (381,516) $ 78,529
Issuance of stock in exchange for services 415,000 42 19,458 -- 19,500
Net Income -- -- -- 38,112 38,112
---------- ---------- ---------- ---------- ----------
Balance at December 31, 2002 4,899,777 $ 490 $ 479,055 $ (343,404) $ 136,141
Redemption of stock (400,000) (40) 40 -- --
Adjustment for termination of
Subchapter S election (Note 5) (405,585) 405,585 --
Net Income -- -- -- 94,601 94,601
---------- ---------- ---------- ---------- ----------
Balance at December 31, 2003 4,499,777 $ 450 $ 73,510 $ 156,782 $ 230,742
Net Income -- -- -- 9,161 9,161
---------- ---------- ---------- ---------- ----------
Balance at March 31, 2004 4,499,777 450 73,510 165,943 239,903
========== ========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
5
ALEC BRADLEY CIGAR CORP.
STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2004 and 2003
(Unaudited)
Three Months Ended March 31,
2004 2003
---------- ----------
Cash Flows From Operating Activities
Net Income $ 9,161 $ 56,874
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,590 1,950
Changes in current assets and liabilities:
Accounts receivable 41,122 (35,277)
Inventory 59,054 158,916
Prepaid expenses 69,005 19,512
Accounts payable (289,525) (238,295)
Accrued income taxes payable (28,259) 13,306
Directors' loans and advances -- 15,000
--------- ---------
Net Cash Used in Operating Activities (137,852) (8,014)
--------- ---------
Cash flows From Investing Activities
Net cash Used in Investing Activities -- --
--------- ---------
Cash flows From Financing Activities
Proceeds from bank line of credit 100,000 --
--------- ---------
Net cash provided by Financing Activities 100,000 --
--------- ---------
Net Decrease in Cash and Cash Equivalents (37,852) (8,014)
Cash and Cash Equivalents - Beginning of Period $ 108,361 $ 46,012
--------- ---------
Cash and Cash Equivalents - Ending of Period $ 70,509 $ 37,998
========= =========
The accompanying notes are an integral part of these financial statements.
6
Alec Bradley Cigar Corporation
Notes to Financial Statements (Unaudited)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - Alec Bradley Cigar Corporation (the "Company"), a Florida
corporation, was organized in July 1996. The Company imports and distributes
cigars domestically, with offices located in Plantation, Florida.
Basis of Accounting - The financial statements are prepared using the accrual
basis of accounting where revenues are recognized upon shipment of merchandise
to the customer and expenses are recognized in the period in which they are
incurred. This basis of accounting conforms to accounting principles generally
accepted in the United States of America.
Earnings per Common Share - Basic and diluted earnings per common share are
based on the weighted average number of shares outstanding of 4,499,777 and
4,484,777 for the three months ended March 31, 2004 and 2003, respectively.
There are no common stock equivalents or other dilutive items in the
aforementioned periods presented.
Estimates - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect certain
reported amounts and disclosures. Accordingly, actual results could differ from
those estimates.
Interim Financial Statements - The accompanying interim unaudited financial
information has been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted pursuant to such rules and regulations, although management
believes that the disclosures are adequate to make the information presented not
misleading. In the opinion of management, all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the financial position
of the Company as of March 31, 2004, and the results of its operations and cash
flows for the nine and three months ended March 31, 2004 and 2003, have been
included. The results of operations of such interim period are not necessarily
indicative of the results of the full year.
NOTE 2 - COMMITMENTS AND CONTINGENCIES
Credit Facility - In March 2004, the Company established a revolving credit
facility with a financial institution in the amount of $100,000. The credit
facility bears interest on funds outstanding at a daily rate of 2.0% above
Prime, as defined, not to exceed 7.5%. The credit facility matures and is due
and payable in full in March 2005.
7
Alec Bradley Cigar Corporation
Notes to Financial Statements (Unaudited)
Lease - In March 2004, the Company agreed to occupy new office and warehouse
facilities under the terms of a three year non-cancelable operating lease
agreement. Future minimum payments under this non-cancelable lease are as
follows as of December 31, 2003:
Year Amount
----- -------------
2004 $ 27,000
2005 $ 36,000
2006 $ 36,000
2007 $ 9,000
-------------
Total minimum lease payments $ 108,000
=============
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
General
Alec Bradley Cigar Corporation (the "Company") was organized under the
laws of the State of Florida on July 15, 1996. The Company is an importer and
distributor of cigars. The Company primarily sells to two types of customers:
1. Distributors, including but not limited to wine and liquor
wholesalers; and
2. Retailers, including but not limited to tobacco shops, convenience
stores, bars, restaurants and country clubs.
Management's discussion and analysis contains various forward-looking
statements. These statements consist of any statement other than a recitation of
historical fact and can be identified by the use of forward-looking terminology
such as "may," "expect," "anticipate," "estimate" or "continue" or use of
negative or other variations or comparable terminology.
The Company cautions that these statements are further qualified by
important factors that could cause actual results to differ materially from
those contained in the forward-looking statements, that these forward-looking
statements are necessarily speculative, and there are certain risks and
uncertainties that could cause actual events or results to differ materially
from those referred to in such forward-looking statements.
The following discussion should be read in conjunction with the
information contained in the financial information and the notes thereto
appearing elsewhere in this report.
Fiscal Three Months ending March 31, 2004 Compared to Fiscal Three Months
ending March 31, 2003
Revenues
Revenues for three months of 2004 were $375,075, a decrease of
approximately $92,000, or 19.7% from $467,106 for 2003. Management believes that
the decrease was attributable to poor winter conditions across the country
during the first quarter of 2004 as compared to 2003. As many states prohibit
smoking indoors, such winter conditions deterred consumers from smoking cigars
and therefore decreased sales. The Company's gross profit decreased for 2004 as
compared to 2003 to $165,157, a decrease of approximately $48,300, or 22.6%,
from $213,459. Gross profit, as a percentage of sales were 44.0% and 45.7%
respectively for the three month periods ending March 31, 2004 and 2003. The
decrease in gross profit dollars was directly attributable to the decrease in
sales (units and dollars).
Selling Expenses
Selling expenses for 2004 were $53,936, a decrease of approximately
$4,400, or 7.5%, from $58,311 in 2003. Selling expenses include all compensation
and related benefits for the sales personnel and advertising and promotional
costs. Selling expenses represented 14.4% of revenues in 2004, compared to 12.5%
in 2003. The decrease was primarily attributable to decreases in commission
expense of approximately $6,400 and advertising of approximately $3,500 and
offset by increase in freight of approximately $4,000 and trade show expenses of
$1,500.
9
General and administrative expenses
General and administrative expenses for 2004 were $102,060, an increase
of approximately $16,100, or 18.7%, from $85,974 in 2003. General and
administrative expenses primarily include salaries, supplies, and general
operating expenses. The increase in general and administrative expenses is
primarily attributable to the increases in rent of $5,000, payroll and related
costs of $3,500, office expenses of $5,000 and insurance of 1,300. General and
administrative expenses represented 27.2% of revenues in 2004, compared to 18.4%
in 2003.
Liquidity and Capital Resources
During 2004, cash utilized by operations was $137,852 and primarily
resulted from decreases in accounts payable of $289,525, taxes payable of
$28,259. This was partially funded by decreases in accounts receivable of
$41,122, inventory of $59,054 and prepaid expenses of $69,005, income from
operations plus the effect of non-cash items (depreciation expense). The
Company's cash balance as of March 31, 2004 decreased by approximately $37,900
from December 31, 2003 to $70,509.
The Company's working capital was approximately $237,700 at March 31,
2004, compared to approximately $227,000 at December 31, 2003. The increase in
working capital was primarily attributable to the Company profits for the three
month period ended March 31, 2004 of $9,161 plus the effect of net of non-cash
items (depreciation expense) of $1,590.
The Company has negotiated a new line of credit with its bank.
Management believes that the cash generated from the Company's operations and
the existing credit terms will be adequate to support its short-term cash
requirements for capital expenditures and maintenance of working capital.
ITEM 3. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
As of the end of the period covered by this report, the Company carried
out an evaluation of the effectiveness of the design and operation of its
disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. This
evaluation was done under the supervision and with the participation of the
Company's Principal Executive Officer and Principal Financial Officer. Based
upon that evaluation, the Principal Executive Officer and Principal Financial
Officer concluded that the Company's disclosure controls and procedures are
effective in gathering, analyzing and disclosing information needed to satisfy
the Company's disclosure obligations under the Exchange Act.
CHANGES IN INTERNAL CONTROLS
There were no significant changes in the Company's internal controls or
in other factors that could significantly affect those controls since the most
recent evaluation of such controls.
10
PART II: OTHER INFORMATION
-----------------
ITEM 1: Legal Proceedings
None.
ITEM 2: Changes in Securities and Use of Proceeds
None.
ITEM 3: Defaults upon Senior Securities
None.
ITEM 4: Submission of Matters to a vote of Securities Holders
None.
ITEM 5: Other Information
None.
ITEM 6: Exhibits and Reports on Form 8-K
(a) Exhibits required by Item 601 of Regulation S-B
16.1 Letter from Former Independent Accountant (previously filed
on Form 8-K dated March 27, 2003
31.1 302 Certification (CEO)
31.2 302 Certification (Principal Financial Officer)
32.1 906 Certification (CEO)
32.2 906 Certification (Principal Financial Officer)
(b) Reports on Form 8-K
None.
11
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.
ALEC BRADLEY CIGAR CORPORATION
By: /s/ Alan Rubin
---------------------------------------
Alan Rubin, Principal Executive Officer
and Principal Financial Officer
DATED: May 17, 2004
12