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 June 30, 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
--------------------------------------------------------------------------------
(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.)
1750 N. W. 65th Avenue, Plantation, 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 August 5, 2003, 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
Balance Sheet. 3
Statements of Operations. 4
Statement of Cash Flows. 5
Notes to Financial Statements. 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations. 7
Item 3. Controls and Procedures. 9
Part II. Other Information. 10
Item 1: Legal Proceedings. 10
Item 2: Changes in 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 and Reports on Form 8-K. 10
Signature 11
2
PART I: FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------
ALEC BRADLEY CIGAR CORP.
BALANCE SHEET
AS OF JUNE 30, 2003
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 116,368
Accounts receivable 137,350
Inventory 106,330
Prepaid expenses 36,711
---------
Total Current Assets 396,759
Furniture and Equipment - Net 1,032
Trademarks and Other Assets 3,327
---------
$ 401,118
=========
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable $ 164,188
Payroll taxes payable 23,433
Directors' loans and advances --
---------
Total Current Liabilities 187,621
---------
Equity
Common Stock 450
Paid in capital 479,096
Accumulated Deficit (266,049)
---------
Total Equity 213,497
---------
$ 401,118
=========
The accompanying notes are an integral part of these financial statements
3
ALEC BRADLEY CIGAR CORP.
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
-------------------------- --------------------------
Sales $ 511,022 $ 336,826 $ 978,128 $ 573,102
Cost of Sales 297,076 199,720 550,723 342,447
----------- ----------- ----------- -----------
Gross Profit 213,946 137,106 427,405 230,655
Operating Expenses
General and administrative 96,682 95,048 182,656 160,719
Selling 87,782 35,661 146,093 49,590
----------- ----------- ----------- -----------
184,464 130,709 328,749 210,309
----------- ----------- ----------- -----------
Income from Operations Before Income Taxes 29,482 6,397 98,656 20,346
Provision for Income Taxes 9,000 1,000 21,300 3,000
----------- ----------- ----------- -----------
Net Income 20,482 5,397 77,356 17,346
Accumulated Deficit - Beginning of Period (286,531) (369,567) (343,405) (381,516)
----------- ----------- ----------- -----------
Accumulated Deficit - End of Period $ (266,049) $ (364,170) $ (266,049) $ (364,170)
=========== =========== =========== ===========
Basic and diluted earnings per share $ 0.00 $ 0.00 $ 0.02 $ 0.00
=========== =========== =========== ===========
Weighted average number of common shares outstanding 4,631,645 4,484,777 4,764,970 4,484,777
=========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements
4
ALEC BRADLEY CIGAR CORP.
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30,
(Unaudited)
2003 2002
--------- ---------
Cash Flows From Operating Activities
Net Income/(Loss) $ 77,356 $ 17,346
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 3,900 3,900
Changes in current assets and liabilities:
Accounts receivable (33,726) (27,130)
Inventory 202,120 16,657
Prepaid expenses (16,499) (19,483)
Accounts payable (186,180) (8,990)
Payroll taxes payable 23,385 (5,950)
--------- ---------
Net Cash Used in Operating Activities 70,356 (23,650)
--------- ---------
Cash flows From Investing Activities
Cash payments for the purchase of property -- (970)
--------- ---------
Net cash flows From Investing Activities -- (970)
--------- ---------
Cash flows From Financing Activities
Cancellation of common stock
Cash payments for the purchase of property -- --
--------- ---------
Net cash flows From Financing Activities -- --
--------- ---------
Net Decrease in Cash and Cash Equivalents 70,356 (24,620)
Cash and Cash Equivalents - Beginning of Period $ 46,012 $ 38,508
--------- ---------
Cash and Cash Equivalents - Ending of Period $ 116,368 $ 13,888
========= =========
The accompanying notes are an integral part of these financial statements
5
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 4,631,645,
4,764,970 and 4,484,777 for the three and six months ended June 30, 2003 and
2002, 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 June 30, 2003, and the results of its operations and cash
flows for the six and three months ended June 30, 2003 and 2002, 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 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 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 June 30, 2003 Compared to Three Months ending June 30, 2002
Revenues
Revenues for the three months ended June 30, 2003 were $511,000, an
increase of $174,200, or 51.7% from $336,800 for the three months ended June 30,
2002. This was attributable to the continuing success of cigars lines introduced
during 2001 (Havana Sun Grown Cigars) and late 2000 (Occidental Cigars). The
Company's gross profit increased for the three months ended June 30, 2003 as
compared to the three months ended June 30, 2002 from approximately $137,100 to
approximately $213,900, an increase of $76,800, or 57.3%. Gross profit, as a
percentage of sales were 41.9% and 40.7% 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.
Selling Expenses
Selling expenses for the three months ended June 30, 2003 were $87,800,
an increase of $52,100, or 145.9%, from $35,700 for the three months ended June
30, 2002. Selling expenses include all compensation and related benefits for the
sales personnel and advertising and promotional costs. Selling expenses
represented 17.2% of revenues for the three months ended June 30, 2003, as
compared to 10.6% for the three months ended June 30, 2002. The increase was
primarily attributable to the increase in sales commissions paid to outside
salespersons and increased trade show expenses.
7
General and administrative expenses
General and administrative expenses for the three months ended June 30,
2003 were $96,700, an increase of $1,700, or 1.8%, from $95,000 for the three
months ended June 30, 2002. General and administrative expenses primarily
include salaries, supplies, and general operating expenses. General and
administrative expenses represented 18.9% of revenues for the three months ended
June 30, 2003, compared to 28.2% for the three months ended June 30, 2002.
Six Months ending June 30, 2003 Compared to Six Months ending June 30, 2002
Revenues
Revenues for the six months ended June 30, 2003 were $978,100, an
increase of $405,000, or 70.6%, from $573,100 for the six-month period ended
June 30, 2002. This was attributable to the continuing success of cigars lines
introduced during 2001 (Havana Sun Grown Cigars) and late 2000 (Occidental
Cigars) and aggressive marketing by the Company during the first six months of
2003. The Company's gross profit increased for 2003 as compared to 2002 to
$427,400 from $230,700, an increase of $196,700, or 85%. The increase in gross
profit dollars was directly attributable to the increase in sales.
Selling Expenses
Selling expenses for the six-month period ended June 30, 2003 were
$146,100, an increase of $96,500, or 194.6%, from $49,600 in the six months
ended June 30, 2002. Selling expenses include all compensation and related
benefits for the sales personnel and advertising and promotional costs. This
increase was attributable to the increase in sales commissions paid to outside
salespersons and increased trade show expenses. Selling expenses represented
14.9% of revenues in the six-month period ended June 30, 2003, compared to 8.7%
in six months ended June 30, 2002.
General and administrative expenses
General and administrative expenses for 2003 were $182,700, an increase
of $22,000, or 13.7%, from $160,700 in 2002. General and administrative expenses
primarily include salaries, supplies, and general operating expenses. The
increase in general and administrative expenses is attributable to an increase
in payroll ($13,000) and insurance and other office expenses ($9,000). General
and administrative expenses represented 18.7% of revenues in 2003, compared to
28.0% in 2002.
Liquidity and Capital Resources
As of June 30, 2003, the Company had an accumulated deficit of $266,049.
For the six months ended June 30, 2003, the Company provided cash from
operations to increase accounts receivables and reduce accounts payable of
$70,356. This was primarily funded from the income from operations, reductions
in inventory plus the effect of net of non-cash items (depreciation expense).
The Company's cash balance as of June 30, 2003 increased by $70,356 from $46,012
as of December 31, 2002 to $116,368.
As of June 30 2003, the Company's accounts receivable was $137,350. As
of June 30, 2003, the Company's working capital was $209,138.
8
The Company has negotiated with its major suppliers to obtain extended
credit terms for new products being developed through these suppliers. In
addition, the Company has established a line of credit with a local bank to
provide for additional cash flow needs.
Management believes that the cash generated from the Company's
operations and credit terms and credit facility(s) will be adequate to support
its short-term cash requirements for capital expenditures and maintenance of
working capital.
ITEM 3. CONTROLS AND PROCEDURES
The Company has carried out an evaluation, under the supervision and
with the participation of its management, including its Chief Executive Officer
(the "CEO") and Principal Financial Officer, of the effectiveness of the design
and operation of the Company's disclosure controls and procedures (as defined in
Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended (the "Act")) as of the end of the fiscal quarter covered by this report.
Based upon that evaluation, the Company's CEO and Principal Financial Officer
concluded that the Company's disclosure controls and procedures are effective in
providing reasonable assurance that (a) the information required to be disclosed
by the Company in the reports that it files or submits under the Act is
recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commission's rules and forms, and (b) such
information is accumulated and communicated to the Company's management,
including its CEO and Principal Financial Officer, as appropriate to allow
timely decisions regarding required disclosure.
There has been no changes in the Company's internal control over
financial reporting during the fiscal quarter covered by this report that has
materially affected, or is reasonably likely to materially affect, its internal
control over financial reporting.
9
Part II: Other Information
ITEM 1: Legal Proceedings
None.
ITEM 2: Changes in Securities and Use of Proceeds
During the three month period ended June 30, 2003, a
shareholder returned 400,000 shares of the Company's common stock to
the Company. The shares were initially issued for services to be
performed. The services were not performed and the Company demanded
return of the shares. The shares were returned to the Company's
treasury and are no longer deemed outstanding.
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.
10
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: August 13, 2003
11