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, 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 August 1, 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. 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 6-7
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: Unregistered Sales of Equity 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 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
June 30, December 31,
2005 2004
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(Unaudited)
ASSETS
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Current Assets:
Cash and cash equivalents $ 52,998 $ 113,617
Accounts receivable, net 267,828 134,037
Inventory 227,565 170,590
Prepaid expenses and other current assets 16,268 101,328
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Total Current Assets 564,659 519,572
Furniture and equipment, net 14,344 14,888
Intangible assets 6,462 7,412
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Total Assets $ 585,465 $ 541,872
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LIABILITIES AND SHAREHOLDERS' EQUITY
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Current Liabilities:
Accounts payable and accrued expenses $ 240,998 $ 105,475
Note payable - related party 77,974 120,474
Income taxes payable 2,731 11,495
Total Current Liabilities 321,703 237,444
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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 189,802 230,468
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Total Shareholders' Equity 263,762 304,428
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Total Liabilities and Shareholders' Equity $ 585,465 $ 541,872
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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
Three Months Ended June 30, Six Months Ended June 30,
2005 2004 2005 2004
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(Unaudited) (Unaudited) (Unaudited) (Unaudited)
NET SALES $ 679,465 $ 626,619 $ 1,092,030 $ 1,001,697
Cost of goods sold 436,045 396,475 670,762 606,394
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GROSS PROFIT 243,420 230,144 421,268 395,303
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Operating Expenses
Selling expenses 126,782 92,969 208,767 146,905
General and administrative expenses 136,526 110,145 253,166 212,206
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Total operating expenses 263,308 203,114 461,933 359,111
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INCOME BEFORE PROVISION FOR INCOME TAXES (19,888) 27,030 (40,665) 36,192
Provision for income taxes - 6,123 - 6,123
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Net Income (Loss) $ (19,888) $ 20,907 $ (40,665) $ 30,069
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Earnings per share - basic and diluted $ (0.004) $ 0.005 $ (0.009) $ 0.007
============= ============= ============= =============
Weighted average number of common
shares outstanding - basic and diluted 4,499,777 4,499,777 4,499,777 4,499,777
============= ============= ============= =============
The accompanying notes are an integral part of these financial statements.
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ALEC BRADLEY CIGAR CORP.
STATEMENTS OF CASH FLOWS
Six Months Ended June 30,
2005 2004
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(Unaudited) (Unaudited)
Cash Flows From Operating Activities:
Net Income $ (40,665) $ 30,069
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,494 2,777
Allowance for doubtful accounts 4,297 279
Changes in current assets and liabilities:
Accounts receivable (138,088) (89,477)
Inventory (56,975) 179
Prepaid expenses 85,060 54,848
Accounts payable and accrued expenses 135,522 (141,576)
Accrued income taxes payable (8,764) (22,826)
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Net Cash Provided by (Used in) Operating Activities (18,119) (165,727)
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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
Repayment of shareholder loan (42,500) -
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Net cash Provided by (Used in) Financing Activities (42,500) 100,000
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Net Decrease in Cash and Cash Equivalents (60,619) (71,181)
Cash and Cash Equivalents - Beginning of Period $ 113,617 $ 108,361
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Cash and Cash Equivalents - End of Period $ 52,998 $ 37,180
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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
six months ended June 30, 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 June 30, 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
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, 2005:
Year Amount
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2005 $ 18,000
2006 $ 36,000
2007 $ 9,000
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Total minimum lease payments $ 63,000
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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
Six months ending June 30, 2005 Compared to June 30, 2004
Revenues
Revenues for the six months ended June 30, 2005 were approximately
$1,092,000, an increase of $90,300, or 9.0%, from approximately $1,001,700 for
the six-month period ended June 30, 2004. 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 2005. The Company's gross profit
increased for 2005 as compared to 2004 to approximately $421,300 from
approximately $395,300, an increase of $26,000, or 6.6%. The increase in gross
profit dollars was directly attributable to the aggressive sales effort in the
second quarter to compensate for seasonally slow first quarter sales.
Selling Expenses
Selling expenses for the six-month period ended June 30, 2005 were
approximately $208,800, an increase of $61,900, or 42.1%, from approximately
$146,900 in the six months ended June 30, 2004. Selling expenses include all
compensation and related benefits for the sales personnel and advertising and
promotional costs. Selling expenses represented 19.1% of revenues in the
six-month period ended June 30, 2005, compared to 14.7% in six months ended June
30, 2004. The increase in selling expenses was primarily due to more aggressive
consumer advertising in the first six months of 2005.
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General and administrative expenses
General and administrative expenses for the six months ended June 30,
2005 were approximately $253,200, an increase of $41,000, or 19.3%, from
approximately $212,200 for 2004. 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 travel
($7,000), rent ($6,000) and insurance and other office expenses ($28,000).
General and administrative expenses represented 23.2% of revenues in 2005,
compared to 21.2% in 2004.
Three Months ending June 30, 2005 Compared to Three Months ending June 30, 2004
Revenues
Revenues for the three months ended June 30, 2005 were approximately
$679,500, an increase of $52,900, or 8.4% from approximately $626,600 for the
three months ended June 30, 2004. This was attributable to the continuing
success of cigars lines introduced during 2001 (Havana Sun Grown Cigars) and
late 2000 (Occidental Cigars) and pent up demand from seasonally slow first
quarter sales and aggressive advertising programs. The Company's gross profit
increased for the three months ended June 30, 2005 as compared to the three
months ended June 30, 2004 from approximately $230,100 to approximately
$243,400, an increase of $13,300, or 5.8%. Gross profit, as a percentage of
sales, were 35.8% and 36.7% respectively for the three-month periods ending June
30, 2005 and 2004. 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, 2005 were
approximately $126,800, an increase of $33,800, or 36.3%, from approximately
$93,000 for the three months ended June 30, 2004. Selling expenses include all
compensation and related benefits for the sales personnel and advertising and
promotional costs. Selling expenses represented 18.7% of revenues for the three
months ended June 30, 2005, as compared to 14.8% for the three months ended June
30, 2004. The increase was primarily attributable to the Company's more
aggressive promotions and advertising during the three months ended June 30,
2005, which resulted in an increase of approximately $34,000 over advertising
and promotional costs for the three months ended June 30, 2004.
General and administrative expenses
General and administrative expenses for the three months ended June 30,
2005 were approximately $136,500, an increase of $26,400, or 24.0%, from
approximately $110,100 for the three months ended June 30, 2004. General and
administrative expenses primarily include salaries, supplies, and general
operating expenses. General and administrative expenses represented 20.1% of
revenues for the three months ended June 30, 2005, compared to 17.6% for the
three months ended June 30, 2004.
Liquidity and Capital Resources
The Company's cash balance as of June 30, 2005 decreased by $60,619
from $113,617 as of December 31, 2004 to $52,998. As of June 30, 2005, the
Company had accumulated earnings of $189,802. For the six months ended June 30,
2005, the Company utilized cash from operations to increase accounts receivables
and inventory while reducing accounts payable and prepaid expenses of $18,119.
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This was primarily funded from the income from operations, a loan from the
Company's president plus the effect of net of non-cash items (depreciation
expense).
As of June 30 2005, the Company's accounts receivable was $267,828. The
Company's working capital was $242,956 as of June 30, 2005.
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's president loaned the company $150,000 on August 13,
2004, which is being repaid as a term loan over a 20 month period. The loan is
being repaid in monthly installments of $5,000 plus interest at 5%.
Management believes that the cash generated from the Company's
operations and new credit terms and loans from its president 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
The Company's management, with the participation of the Company's
principal executive officer and principal financial officer, evaluated the
effectiveness of the Company's disclosure controls and procedures as of the end
of the period covered by this report. The term "disclosure controls and
procedures," as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act,
means controls and other procedures of a company that are designed to ensure
that information required to be disclosed by a company in the reports that it
files or submits under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the Securities and Exchange
Commission's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed by a company in the reports that it files or submits
under the Exchange Act is accumulated and communicated to the Company's
management, including its principal executive and principal financial officers,
as appropriate to allow timely decisions regarding required disclosure.
Management recognizes that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving their
objectives and management necessarily applies its judgment in evaluating the
cost-benefit relationship of possible controls and procedures. Based on the
evaluation of the Company's disclosure controls and procedures as of the end of
the period covered by this report, the Company's principal executive officer and
principal financial officer concluded that, as of such date, the Company's
disclosure controls and procedures were effective.
Changes in Internal Controls
No change in the Company's internal control over financial reporting
occurred during the last fiscal quarter of the period covered by this report
that has materially affected, or is reasonably likely to materially affect, the
Company's internal control over financial reporting.
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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: August 10, 2005
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