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, 2005.
( ) 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
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ALEC BRADLEY CIGAR CORPORATION
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(Exact name of registrant as specified in its charter)
FLORIDA 65-0701352
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State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
3400 S.W. 26th Terrace, Suite A-1, Dania, Florida 33312
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(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 13, 2005, there were 4,499,777 shares of Common Stock, par value
$.0001 per share, outstanding.
I N D E X
Page
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Part I. Financial Information.
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Item 1. Financial Statements (Unaudited). 3
Condensed Balance Sheets 3
Condensed Statements of Operations 4
Condensed Statements of Cash Flows 5
Notes to the Condensed Financial Statements 6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 8
Item 3. Controls and Procedures. 9
Part II. Other Information. 10
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Item 1: Legal Proceedings 10
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds 10
Item 3: Defaults upon Senior Securities 10
Item 4: Submission of Matters to a vote of Securities Holders 10
Item 5: Other Information 10
Item 6: Exhibits 10
Signature 11
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PART I: FINANCIAL INFORMATION
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ITEM 1. Financial Statements (Unaudited)
ALEC BRADLEY CIGAR CORP.
CONDENDSED BALANCE SHEETS
March 31, December 31,
2005 2004
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(Unaudited)
ASSETS
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Current Assets:
Cash and cash equivalents $ 205,895 $ 113,617
Accounts receivable, net 131,499 134,037
Inventory 53,152 170,590
Prepaid expenses and other current assets 100,610 101,328
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Total Current Assets 491,156 519,572
Furniture and Equipment, net 14,616 14,888
Intangible assets 7,117 7,412
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Total Assets $ 512,889 $ 541,872
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LIABILITIES AND SHAREHOLDERS' EQUITY
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Current Liabilities:
Accounts payable and accrued expenses $ 137,470 $ 105,475
Note payable - related party 89,353 120,474
Income taxes payable 2,416 11,495
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Total Current Liabilities 229,239 237,444
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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 209,690 230,468
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Total Shareholders' Equity 283,650 304,428
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Total Liabilities and Shareholders' Equity $ 512,889 $ 541,872
==================== ===================
The accompanying notes are an integral part of these financial statements.
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ALEC BRADLEY CIGAR CORP.
CONDENSED STATEMENTS OF OPERATIONS
Three Months Ended March 31,
2005 2004
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(Unaudited) (Unaudited)
NET SALES $ 412,565 $ 375,075
Cost of goods sold 234,717 209,918
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GROSS PROFIT 177,848 165,157
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Operating Expenses
Selling expenses 81,985 53,936
General and administrative expenses 116,640 102,060
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Total operating expenses 198,625 155,996
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INCOME BEFORE PROVISION FOR INCOME TAXES (20,777) 9,161
Provision for income taxes --- ---
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Net Income (loss) $ (20,777) $ 9,161
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Earnings per share - basic and diluted $ (0.005) $ 0.002
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Weighted average number of common
shares outstanding - basic and diluted 4,499,777 4,499,777
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The accompanying notes are an integral part of these financial statements.
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ALEC BRADLEY CIGAR CORP.
STATEMENTS OF CASH FLOWS
Three Months Ended March 31,
2005 2004
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(Unaudited) (Unaudited)
Cash Flows From Operating Activities:
Net Income (loss) $ (20,777) $ 9,161
Adjustments to reconcile net income to net
cash provided by operating activities:
Allowance for doubtful accounts --
Depreciation and amortization 927 1,590
Changes in current assets and liabilities:
Accounts receivable 2,538 41,122
Inventory 117,438 59,054
Prepaid expenses 718 69,005
Accounts payable and accrued expenses 31,994 (289,525)
Accrued income taxes payable (9,079) (28,259)
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Net Cash Provided by (Used in) Operating Activities 123,759 (137,852)
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Cash Flows from Investing Activities:
Purchase of trademarks and other assets (360) --
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Net Cash Used in Investing Activities (360) --
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Cash Flows from Financing Activities:
Proceeds from bank line of credit -- 100,000
Proceeds from shareholder loan (31,121) --
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Net cash provided by Financing Activities (31,121) 100,000
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Net Decrease in Cash and Cash Equivalents 92,278 (37,852)
Cash and Cash Equivalents - Beginning of Period $ 113,617 $ 108,361
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Cash and Cash Equivalents - End of Period $ 205,895 $ 70,509
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The accompanying notes are an integral part of these financial statements.
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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 Dania, 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 for the
three months ended March 31, 2005 and 2004, 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 interim financial statements presented herein
have been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission ("SEC"). 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. The interim
financial statements should be read in conjunction with the Company's annual
financial statements, notes and accounting policies included in the Company's
annual report on Form 10-KSB for the year ended December 31, 2004 as filed with
the SEC. In the opinion of management, all adjustments (consisting only of
normal recurring adjustments) which are necessary to provide a fair presentation
of financial position as of March 31, 2005 and the related operating results and
cash flows for the interim period presented have been made. The results of
operations, for the period presented are not necessarily indicative of the
results to be expected for the year.
NOTE 2 - RELATED PARTY TRANSACTION
The Company has negotiated with its major suppliers to obtain extended credit
terms for new products being developed through these suppliers. In addition,
during the first quarter of 2004 the Company established a line of credit of
$100,000 with a local bank to provide for additional cash flow needs. This
credit line has been replaced by a credit facility provided by the Company's
major stockholder in excess of $150,000. Additionally, the new credit facility
interest rate is lower than the bank facility (5.0% vs. prime plus 2% not less
than 7.5%).
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NOTE 3 - 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 an annual 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. The balance of the revolving credit as of
March 31, 2005 is zero.
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 March 31, 2005:
Year Amount
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2005 $ 27,000
2006 $ 36,000
2007 $ 9,000
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Total minimum lease payments $ 72,000
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
General
Alec Bradley Cigar Corporation (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.
Results of Operations
Three months ending March 31, 2005 Compared to March 31, 2004
Revenues
Revenues for three months of 2005 were $412,565, an increase of
$37,490, or 10.0% from $375,075 for 2004. This was attributable to the milder
weather conditions across the country during the first quarter of 2005 as
compared to 2004. Due to indoor smoking restrictions throughout the country
which requires many cigar smokers to smoke outdoors, cigar smokers are less
likely to smoke outdoors (and purchase cigars) when weather conditions are
unfavorable. The company's gross profit increased for 2005 as compared to 2004
to $177,848, an increase of $12,691, or 7.6%, from $165,157. Gross profit, as a
percentage of sales was 43.1% and 44.0% respectively for the three-month periods
ending March 31, 2005 and 2004. The increase in gross profit dollars was
directly attributable to the increase in sales (units and dollars).
Selling Expenses
Selling expenses for 2005 were $81,985, an increase of $28,049, or 52%,
from $53,936 in 2004. Selling expenses include all compensation and related
benefits for the sales personnel and advertising and promotional costs. Selling
expenses represented 19.9% of revenues in 2005, compared to 14.4% in 2004. The
increase was primarily attributable to increases in commission expense of $5,996
and advertising of $22,850.
8
General and Administrative Expenses
General and administrative expenses for 2005 were $116,640, an increase
of $14,580, or 14.3%, from $102,060 in 2004. 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 professional fees of $8,610, rent of $4,612, and travel of $3,434
and partially offset by reductions in payroll and related costs of $3,000.
General and administrative expenses represented 28.3% of revenues in 2005,
compared to 27.2% in 2004.
Liquidity and Capital Resources
The Company had a net loss of $20,777 for the three months ended March
31, 2005. The loss is primarily attributable to an increase in general and
administrative expenses and selling expenses as described above.
The Company's cash balance as of March 31, 2005 increased by $92,278
from December 31, 2004 to $205,895. During the first quarter of 2005 cash
provided by operations was approximately $123,800 as compared to ($137,852)
during the first quarter of 2004. The increase in net cash primarily resulted
from decreases in inventory of $117,438, accounts receivable of $2,538, and
increases in accounts payable of $31,994. This was partially offset by decreases
in taxes payable of $9,079, and loss from operations plus the effect of non-cash
items (depreciation expense).
The Company's working capital was approximately $262,000 at March 31,
2005, compared to approximately $282,200 at December 31, 2004. The decrease in
working capital was primarily attributable to the Company's repayment of related
party loans, loss of approximately $20,800 less the effect of net of non-cash
items (depreciation expense) of $927.
During the fourth quarter of 2004, The Company negotiated a loan with
its principal shareholder. Management believes that the cash generated from the
Company's operations and the existing credit terms will be adequate to support
its cash requirements for capital expenditures and maintenance of working
capital for the next 12 months.
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.
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PART II: OTHER INFORMATION
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ITEM 1: Legal Proceedings
None.
ITEM 2: Unregistered Sales of Equity 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
(a) Exhibits required by Item 601 of Regulation S-B
31.1 302 Certification (CEO)
31.2 302 Certification (Principal Financial Officer)
32.1 906 Certification (CEO)
32.2 906 Certification (Principal Financial Officer)
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned.
ALEC BRADLEY CIGAR CORPORATION
By: /s/ Alan Rubin
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Alan Rubin, Principal Executive
Officer and Principal Financial Officer
DATED: May 13, 2005
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