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 September 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
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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.)
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 November 11, 2003, 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
Balance Sheets 3
Statements of Operations 4
Statement of Cash Flows 5
Statement of Stockholders' Equity 6
Notes to Financial Statements (Unaudited) 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: 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
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PART I: FINANCIAL INFORMATION
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ITEM 1. Financial Statements (Unaudited)
ALEC BRADLEY CIGAR CORP.
BALANCE SHEETS
AS OF SEPTEMBER 30,
(Unaudited)
2003
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ASSETS
------
Current Assets:
Cash and cash equivalents $ 55,618
Accounts receivable 195,857
Inventory 147,308
Prepaid expenses 66,471
---------
Total Current Assets 465,254
---------
Furniture and Equipment - Net --
Trademarks and Other Assets 2,952
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$ 468,206
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LIABILITIES AND EQUITY
----------------------
Current Liabilities
Accounts payable $ 190,897
Payroll taxes and deductions payable 3,860
Accrued income taxes payable 41,200
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Total Current Liabilities 235,957
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Equity
Common Stock 450
Paid in capital 479,095
Accumulated Deficit (247,296)
---------
Total Equity 232,249
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$ 468,206
=========
The accompanying notes are an integral part of these financial statements
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ALEC BRADLEY CIGAR CORP. AND CIGAR CONCEPTS, INC
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- --------------------------
2003 2002 2003 2002
---- ---- ---- ----
Sales $ 755,852 $ 559,755 $ 1,733,980 $ 1,132,857
Cost of Sales 485,043 338,531 1,035,766 680,978
----------- ----------- ----------- -----------
Gross Profit 270,809 221,224 698,214 451,879
Operating Expenses
General and administrative 115,720 123,379 298,376 284,098
Selling 116,882 62,244 262,975 111,834
----------- ----------- ----------- -----------
232,602 185,623 561,351 395,932
----------- ----------- ----------- -----------
Income from Operations Before Income Taxes 38,207 35,601 136,863 55,947
Provision for Income Taxes 19,454 8,660 40,754 11,660
----------- ----------- ----------- -----------
Net Income/(Loss) 18,753 26,941 96,109 44,287
Accumulated Deficit - Beginning of Period (266,049) (364,170) (343,405) (381,516)
----------- ----------- ----------- -----------
Accumulated Deficit - End of Period $ (247,296) $ (337,229) $ (247,296) $ (337,229)
=========== =========== =========== ===========
Basic and diluted earnings per share $ 0.00 $ 0.01 $ 0.02 $ 0.01
=========== =========== =========== ===========
Weighted average number of common shares outstanding 4,499,777 4,899,777 4,675,601 4,624,630
=========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements
4
ALEC BRADLEY CIGAR CORP.
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
(Unaudited)
2003 2002
---- ----
Cash Flows From Operating Activities
Net Income/(Loss) $ 96,109 $ 44,287
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 5,307 6,400
Stock issued in exchange for consulting services -- 19,460
Changes in current assets and liabilities:
Accounts receivable (92,233) (79,603)
Inventory 161,142 (17,825)
Prepaid expenses (46,259) (26,428)
Accounts payable (159,472) 111,207
Payroll taxes deductions payable 3,812 (4,352)
Accrued income taxes payable 41,200 6,380
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Net Cash Used in Operating Activities 9,606 59,526
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Cash flows From Investing Activities
Cash payments for the purchase of property -- (4,103)
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Net cash flows From Investing Activities -- (4,103)
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Net Decrease in Cash and Cash Equivalents 9,606 55,423
Cash and Cash Equivalents - Beginning of Period 46,012 38,508
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Cash and Cash Equivalents - Ending of Period $ 55,618 $ 93,931
========= =========
The accompanying notes are an integral part of these financial statements
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ALEC BRADLEY CIGAR CORP.
Statement of Stockholders' Equity
For the Period Ended September 30, 2003
(Unaudited)
Additional Total
Number Common Paid-in Accumulated Stockholders'
of shares Stock Capital Deficit Equity
-------------------------------------- ----------- -------------
Balance at December 31, 2000 4,484,777 $ 448 $ 459,597 $ (405,585) $ 54,460
Net (Loss) 24,069 24,069
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Balance at December 31, 2001 4,484,777 448 459,597 (381,516) 78,529
Issuance of stock in exchange for services 415,000 42 19,458 19,500
Net Income 38,111 38,111
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Balance at December 31, 2002 4,899,777 490 479,055 (343,405) 136,140
------------------------------------- ---------- ----------
Redemption of stock (400,000) -40 40 --
Net Income 96,109 96,109
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Balance at September 30, 2003 4,499,777 $ 450 $ 479,095 $ (247,296) $ 232,249
===================================== ========== ==========
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,
4,899,777 and 4,675,601 and 4,624,630 for the three and nine months ended
September 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 September 30, 2003, and the results of its operations and
cash flows for the nine and three months ended September 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.
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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 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
Nine months ending September 30, 2003 Compared to Nine Months ending September
30, 2002
Revenues
Revenues for the nine months ended September 30, 2003 were
approximately $1,734,000, an increase of $601,100, or 53.1%, from approximately
$1,132,900 for the nine-month period ended September 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 nine months of 2003. The Company's
gross profit increased for 2003 as compared to 2002 to approximately $698,200
from approximately $451,900, an increase of $246,300, or 55%. The increase in
gross profit dollars was directly attributable to the increase in sales.
Selling Expenses
Selling expenses for the nine-month period ended September 30, 2003
were approximately $263,000, an increase of $151,100, or 194.6%, from
approximately $111,900 in the nine months ended September 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 15.2% of revenues in the nine-month
period ended September 30, 2003, compared to 9.9% in nine months ended September
30, 2002.
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General and administrative expenses
General and administrative expenses for 2003 were approximately
$298,400, an increase of $14,300, or 5.0%, from approximately $284,100 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 (approximately $13,000). General and
administrative expenses represented 17.2% of revenues in 2003, compared to 25.1%
in 2002.
Three Months ending September 30, 2003 Compared to Three Months ending
September 30, 2002
Revenues
Revenues for the three months ended September 30, 2003 were
approximately $755,900, an increase of $196,100, or 35% from approximately
$559,800 for the three months ended September 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 September 30, 2003 as compared to the three months
ended September 30, 2002 from approximately $221,200 to approximately $270,800,
an increase of $49,600, or 22.4%. Gross profit, as a percentage of sales were
35.8% and 39.5% respectively for the three-month periods ending September 30,
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 September 30, 2003 were
approximately $116,900, an increase of $54,700, or 87.9%, from approximately
$62,200 for the three months ended September 30, 2002. Selling expenses include
all compensation and related benefits for the sales personnel and advertising
and promotional costs. Selling expenses represented 15.5% of revenues for the
three months ended September 30, 2003, as compared to 11.1% for the three months
ended September 30, 2002. The increase was primarily attributable to the
increase in sales commissions paid to outside salespersons and increased trade
show expenses.
General and administrative expenses
General and administrative expenses for the three months ended
September 30, 2003 were approximately $115,700, a decrease of $7,700, or 6.2%,
from approximately $123,400 for the three months ended September 30, 2002.
General and administrative expenses primarily include salaries, supplies, and
general operating expenses. General and administrative expenses represented
15.3% of revenues for the three months ended September 30, 2003, compared to
22.0% for the three months ended September 30, 2002.
Liquidity and Capital Resources
As of September 30, 2003, the Company had an accumulated deficit of
$247,296. For the nine months ended September 30, 2003, the Company provided
cash from operations to increase accounts receivables and reduce accounts
payable of $9,606. 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 September 30, 2003 increased by
$9,606 from $46,012 as of December 31, 2002 to $55,618.
9
As of September 30 2003, the Company's accounts receivable was
$195,857. The Company expects sales for the remainder of the year to remain
strong. As of September 30, 2003, the Company's working capital was $229,297.
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
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.
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PART II: OTHER INFORMATION
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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
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
---------------------------------------
Alan Rubin, Principal Executive
Officer and Principal Financial Officer
DATED: November 11, 2003
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