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, 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
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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 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 August 12, 2004, there were 4,499,777 shares of Common Stock, par value
$.0001 per share, outstanding.
I N D E X
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Page
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Part I. Financial Information. 3
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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
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 8
Item 3. Controls and Procedures. 10
Part II. Other Information. 11
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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
Signatures 12
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PART I: FINANCIAL INFORMATION
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ITEM 1. Financial Statements (Unaudited)
ALEC BRADLEY CIGAR CORP.
CONDENDSED BALANCE SHEETS
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June 30, December 31,
2004 2003
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(Unaudited)
ASSETS
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Current Assets:
Cash and cash equivalents $ 37,180 $ 108,361
Accounts receivable 234,423 144,946
Inventory 327,889 328,068
Prepaid expenses 14,157 69,005
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Total Current Assets 613,649 650,380
Furniture and Equipment, net 4,363 1,215
Trademarks and Other Assets, net 1,827 2,577
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Total Assets $ 619,839 $ 654,172
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LIABILITIES AND SHAREHOLDERS' EQUITY
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Current Liabilities:
Accounts payable and accrued expenses $ 250,304 $ 391,880
Accrued income taxes payable 8,724 31,550
Revolving line of credit 100,000 --
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Total Current Liabilities 359,028 423,430
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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 186,851 156,782
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Total Shareholders' Equity 260,811 230,742
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Total Liabilities and Shareholders' Equity $ 619,839 $ 654,172
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The accompanying notes are an integral part of these financial statements.
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ALEC BRADLEY CIGAR CORP.
CONDENSED STATEMENTS OF OPERATIONS
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Three Months Ended June 30, Six Months Ended June 30,
2004 2003 2004 2003
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(Unaudited) (Unaudited) (Unaudited) (Unaudited)
NET SALES $ 626,619 $ 511,022 $ 1,001,697 $ 978,128
Cost of goods sold 396,475 297,076 606,394 550,723
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GROSS PROFIT 230,144 213,946 395,303 427,405
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Operating Expenses
Selling expenses 92,969 87,782 146,905 146,093
General and administrative expenses 110,145 96,682 212,206 182,656
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Total operating expenses 203,114 184,464 359,111 328,749
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INCOME BEFORE PROVISION FOR INCOME TAXES 27,030 29,482 36,192 98,656
Provision for income taxes 6,123 9,000 6,123 21,300
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Net Income $ 20,907 $ 20,482 $ 30,069 $ 77,356
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Earnings per share - basic and diluted $ 0.005 $ 0.004 $ 0.007 $ 0.016
============ ============ ============== ============
Weighted average number of common
shares outstanding - basic and diluted 4,499,777 4,631,645 4,499,777 4,764,970
============ ============ ============== ============
The accompanying notes are an integral part of these financial statements.
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ALEC BRADLEY CIGAR CORP.
STATEMENTS OF CASH FLOWS
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Six Months Ended June 30,
2004 2003
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(Unaudited) (Unaudited)
Cash Flows From Operating Activities:
Net Income $ 30,069 $ 77,356
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 3,056 3,900
Changes in current assets and liabilities:
Accounts receivable (89,477) (33,726)
Inventory 179 202,120
Prepaid expenses 54,848 (16,499)
Accounts payable and accrued expenses (141,576) (186,180)
Accrued income taxes payable (22,826) 23,385
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Net Cash Provided by (Used in) Operating Activities (165,727) 70,356
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Cash Flows from Investing Activities:
Purchase of equipment (5,454) --
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Net Cash Used in Investing Activities (5,454) --
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Cash Flows from Financing Activities:
Proceeds from long term debt financing 100,000 --
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Net cash provided by Financing Activities 100,000 --
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Net Decrease in Cash and Cash Equivalents (71,181) 70,356
Cash and Cash Equivalents - Beginning of Period $ 108,361 $ 46,012
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Cash and Cash Equivalents - End of Period $ 37,180 $ 116,368
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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 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
4,764,970 for the six months ended June 30, 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 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, 2003 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 June 30, 2004 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 - 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.
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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 June 30, 2004:
Year Amount
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2004 $ 18,000
2005 $ 36,000
2006 $ 36,000
2007 $ 9,000
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Total minimum lease payments $ 99,000
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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") 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.
Results of Operations
Six months ending June 30, 2004 Compared to June 30, 2003
Revenues
Revenues for the six months ended June 30, 2004 were $1,001,700; an
increase of $23,600, or 2.4%, from $978,100 for the six-month period ended June
30, 2003. 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
2004. The Company's gross profit decreased for 2004 as compared to 2003 to
$395,300 from $427,400, a decrease of $32,100, or 7.5%. The decrease in gross
profit dollars was directly attributable to the aggressive sales effort in the
second quarter. In addition, first quarter sales during 2004 were detrimentally
effected by harsh weather conditions.
Selling Expenses
Selling expenses for the six-month period ended June 30, 2004 were
$146,900, an increase of $800, or 0.5%, from $146,100 in the six months ended
June 30, 2003. Selling expenses include all compensation and related benefits
for the sales personnel and advertising and promotional costs. Selling expenses
represented 14.7% of revenues in the six-month period ended June 30, 2004,
compared to 14.9% in six months ended June 30, 2003.
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General and administrative expenses
General and administrative expenses for 2004 were $212,200, an increase
of $29,500, or 16.1%, from $182,700 in 2003. 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 ($4,000), rent ($8,700) and insurance and other office expenses
($16,800). General and administrative expenses represented 21.2% of revenues in
2004, compared to 18.7% in 2003. Rent, insurance and other office expense
reflect the Company's opening and operating of its new facilities. These
facilities provide the Company with approximately 2,000 square feet of
additional warehouse space and 2,000 square feet of additional administrative
space.
Three Months ending June 30, 2004 Compared to Three Months ending June 30, 2003
Revenues
Revenues for the three months ended June 30, 2004 were $626,600, an
increase of $115,600, or 22.6% from $511,000 for the three months ended June 30,
2003. This was attributable to the continuing success of cigars lines introduced
during 2001 (Havana Sun Grown Cigars) and late 2000 (Occidental Cigars) and
overall continued growth of the Company. The Company's gross profit increased
for the three months ended June 30, 2004 as compared to the three months ended
June 30, 2003 from approximately $213,900 to approximately $230,100, an increase
of $16,200, or 7.6%. Gross profit, as a percentage of sales were 36.7% and 41.9%
respectively for the three-month periods ending June 30, 2004 and 2003. The
decrease in gross profit dollars was directly attributable to the more
aggressive sales promotions utilized by the company to increase in sales.
Selling Expenses
Selling expenses for the three months ended June 30, 2004 were $93,000,
an increase of $5,200, or 5.9%, from $87,800 for the three months ended June 30,
2003. Selling expenses include all compensation and related benefits for the
sales personnel and advertising and promotional costs. Selling expenses
represented 14.8% of revenues for the three months ended June 30, 2004, as
compared to 17.2% for the three months ended June 30, 2003. The decrease was
primarily attributable to management's focus on cost management during the
quarter.
General and administrative expenses
General and administrative expenses for the three months ended June 30,
2004 were $110,100, an increase of $13,400, or 13.9%, from $96,700 for the three
months ended June 30, 2003. General and administrative expenses primarily
include salaries, supplies, and general operating expenses. General and
administrative expenses represented 17.6% of revenues for the three months ended
June 30, 2004, compared to 18.9% for the three months ended June 30, 2003.
Liquidity and Capital Resources
As of June 30, 2004, the Company had accumulated earnings of $186,851.
For the six months ended June 30, 2004, the Company utilized cash from
operations to increase accounts receivables and reduce accounts payable of
$165,727. This was primarily funded from the income from operations, the
Company's credit facility, plus the effect of net of non-cash items
(depreciation expense). The Company's cash balance as of June 30, 2004 decreased
by $71,181 from $108,361 as of December 31, 2003 to $37,180.
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As of June 30 2004, the Company's accounts receivable was $234,423. As
of June 30, 2004, the Company's working capital was $254,621.
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 new 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
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
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.
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SIGNATURES
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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: August 18, 2004
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