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, 2003.
( ) 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
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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.)
1750 N. W. 65th Avenue, Plantation, Florida 33313
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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 March 31, 2003, there were 4,899,777 shares of Common Stock, par value
$.0001 per share, outstanding.
I N D E X
Page
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Part I. Financial Information. 3
Item 1. Financial Statements (Unaudited). 3
Balance Sheet 3
Statements of Operations 4
Statement of Cash Flows 5
Notes to Combined Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations. 7
Item 3. Controls and Procedures. 8
Part II. Other Information. 9
2
Part I: Financial Information
ITEM 1. FINACIAL STATEMENTS (UNAUDITED)
ALEC BRADLEY CIGAR CORP.
BALANCE SHEET
March 31 December 31
2003 2002
---- ----
(Unaudited)
ASSETS
------
Current Assets:
Cash and cash equivalents $ 37,998 $ 46,012
Accounts receivable 138,901 103,624
Inventory 149,534 308,450
Prepaid expenses 700 20,212
--------- ---------
Total Current Assets 327,133 478,298
--------- ---------
Furniture and Equipment - Net 2,607 4,183
Trademarks and Other Assets 3,702 4,077
--------- ---------
$ 333,442 $ 486,558
========= =========
LIABILITIES AND EQUITY
----------------------
Current Liabilities
Accounts payable $ 112,074 350,369
Income taxes payable 13,354 48
Loan Payable 15,000 --
--------- ---------
Total Current Liabilities 140,428 350,417
--------- ---------
Equity
Common Stock 490 490
Paid in capital 479,055 479,055
Accumulated Deficit (286,531) (343,404)
--------- ---------
Total Equity 193,014 136,141
--------- ---------
$ 333,442 $ 486,558
========= =========
See notes to financial statements.
3
ALEC BRADLEY CIGAR CORP.
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended
March 31,
2003 2002
---- ----
Sales $ 467,106 $ 236,276
Cost of Sales 253,647 142,727
----------- -----------
Gross Profit 213,459 93,549
Operating Expenses
General and administrative 85,974 65,671
Selling 58,311 13,929
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144,285 79,600
----------- -----------
Income from Operations Before Income Taxes 69,174 13,949
Provision for Income Taxes 12,300 2,000
----------- -----------
Net Income $ 56,874 $ 11,949
=========== ===========
Basic net income (loss) per common share $ 0.01 $ 0.00
=========== ===========
Weighted average common shares
outstanding - basic 4,484,777 4,484,777
=========== ===========
See notes to financial statements.
4
ALEC BRADLEY CIGAR CORP.
STATEMENT OF CASH FLOWS
(Unaudited)
Three months ended
March 31,
2003 2002
---- ----
Cash Flows From Operating Activities
Net Income $ 56,874 $ 11,949
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,950 1,950
Changes in current assets and liabilities:
Accounts receivable (35,277) (11,266)
Inventory 158,916 (7,993)
Prepaid expenses 19,512 (5,879)
Accounts payable (238,295) 20,900
Income taxes payable 13,306 (4,914)
Directors' loans and advances 15,000 --
--------- ---------
Net Cash Used in Operating Activities (8,014) 4,747
--------- ---------
Cash flows From Investing Activities
Cash payments for the purchase of property -- (244)
--------- ---------
Net cash flows From Investing Activities -- (244)
Net Decrease in Cash and Cash Equivalents (8,014) 4,503
Cash and Cash Equivalents - Beginning of Period 46,012 38,508
--------- ---------
Cash and Cash Equivalents - Ending of Period $ 37,998 $ 43,011
========= =========
See notes to financial statements.
5
Notes to Combined Financial Statements (Unaudited)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - Alec Bradley Cigar Corp. (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 earnings per common share are based on the
weighted average number of shares outstanding of 4,899,777 and 4,484,777 for the
three months ended March 31, 2003 and 2002. There are no common stock
equivalents in the aforementioned periods.
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, 2003, and the results of its operations and cash
flows for the nine and three months ended March 31, 2003 and 2003, have been
included. The results of operations of such interim period are not necessarily
indicative of the results of the full year.
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
General
Alec Bradley Cigar Corp. (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 wine and liquor wholesalers; and
2. Retailers, that include 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, 2003 Compared to Three Months ending March 31,
2002
Revenues
Revenues for the three months ended March 31, 2003 were $467,106, an
increase of $230,830, or 97.7% from $236,276 for the three months ended March
31, 2002. This was attributable to the continuing growth of the Company and
success of cigar lines (Havana Sun Grown Cigars and Occidental Cigars)
introduced by the Company over the past several years. The Company's gross
profit increased for the three months ended March 31, 2003 as compared to the
three months ended March 31, 2002 from $93,549 to $213,459, an increase of
$119,910, or 128.2%. Gross profit, as a percentage of sales were 45.7% and
39.6%, respectively, for the three-month periods ending March 31, 2003 and 2002.
The increase in gross profit dollars was directly attributable to the increase
in sales. The increase in gross profit percentage was due to the specific mix of
product being sold.
7
Selling Expenses
Selling expenses for the three months ended March 31, 2003 were
$58,311, an increase of $45,382, or 325.8%, from $13,929 for the three months
ended March 31, 2002. Selling expenses include all compensation and related
benefits for the sales personnel and advertising and promotional costs. Selling
expenses represented 12.5% of revenues for the three months ended March 31,
2003, as compared to 5.9% for the three months ended March 31, 2002. The
increase was primarily attributable to an increase in freight costs of $4,600
and selling commission expense of $39,500.
General and administrative expenses
General and administrative expenses for the three months ended March
31, 2003 were $85,974, a increase of $20,303, or 30.9%, from $65,671 for the
three months ended March 31, 2002. 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 payroll and related expenses of approximately $10,500, office expenses of
approximately $7,200 and interest expense and bank charges of approximately
$1,700. General and administrative expenses represented 18.4% of revenues for
the three months ended March 31, 2003, compared to 27.8% for the three months
ended March 31, 2002.
Liquidity and Capital Resources
As of March 31, 2003, the Company had an accumulated deficit of
$286,531. For the three months ended March 31, 2003, cash utilized by operations
was $8,014 and primarily resulted from the income from operations plus the
effect of net of non-cash items (depreciation expense) offset by changes in
current assets and liabilities. The Company's cash balance as of March 31, 2003
decreased by $8,014 from $46,012 as of December 31, 2002 to $37,998.
As of March 31 2003, the Company's accounts receivable was $138,901. As
of March 31, 2003, the Company's working capital was $186,705.
Management believes that the cash generated from the Company's
operations, its line of credit and supplier credit terms will be adequate to
support its short-term cash requirements for capital expenditures and
maintenance of working capital. The Company has extended credit terms with
several of its major suppliers. In addition, the Company has a $50,000 line of
credit to provide for additional cash flow needs, of which $-0- was outstanding
as of the date of this filing.
ITEM 3. CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures
Within the 90 days prior to the filing date of 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, they 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.
8
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
99.1 Certification of Executive Officer
(b) Reports on Form 8-K
On March 27, 2003, the Company filed a current report on Form
8-K to disclose the following:
Effective March 17, 2003, the Company dismissed Jaffe, Kaufman
& Sarbey, LLC ("JKS") to audit Company's financial statements.
The reports of JKS on the financial statements of the Company
for the past fiscal year contained no adverse opinion or
disclaimer of opinion and were not qualified or modified as to
uncertainty, audit scope or accounting principle. The decision
to dismiss JKS was recommended by management and approved by
the Company's Board of Directors (the Company currently has no
formal audit committee).
In connection with its audit for the most recent fiscal year
and including the interim period up to and including the date
of dismissal, there have been no disagreements with JKS on any
matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which
disagreements if not resolved to the satisfaction of JKS would
have caused them to make reference thereto in their report on
the financial statements for such years.
Effective March 17, 2003, the Company engaged the accounting
firm of Jewett, Schwartz & Associates as the Company's new
independent accountants to audit the Company's financial
statements for the fiscal year ending December 31, 2002.
9
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 as a duly authorized officer as the chief financial officer of the
Registrant.
ALEC BRADLEY CIGAR CORPORATION
By: /s/ Alan Rubin
-------------------------------
Alan Rubin, Principal Executive
Officer and Principal Financial
Officer
DATED: May 22, 2003
10
Certifications
I, ALAN RUBIN, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of ALEC BRADLEY
CIGAR CORPORATION.
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report.
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report.
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
exchange act rules 13a-14 and 15d-14) for the registrant and have:
A) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
B) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "evaluation
date"); and
C) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the evaluation date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
A) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
B) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls.
11
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: MAY 22, 2003
/s/ALAN RUBIN
-------------
ALAN RUBIN
Chief Executive Officer (or equivalent)
12
I, ALAN RUBIN, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of ALEC BRADLEY
CIGAR CORPORATION.
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report.
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report.
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
exchange act rules 13a-14 and 15d-14) for the registrant and have:
A) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
B) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "evaluation
date"); and
C) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the evaluation date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
A) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
B) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls.
13
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: MAY 22, 2003
/s/ALAN RUBIN
-------------
ALAN RUBIN
Chief Financial Officer (or equivalent)
14