SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 24, 2000
CHESHIRE DISTRIBUTORS, INC.
---------------------------
(Exact name of registrant as specified in its charter)
Delaware 000-26186 84-1209978
-------- --------- ----------
(State or other jurisdiction of (Commission File No.) (IRS Employer
incorporation) Identification Number)
1599 Post Road East, Westport, CT 06880
---------------------------------------
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (203) 255-4116
<PAGE>
The undersigned registrant hereby amends Item 7 of its Current Report on Form
8-K dated April 24, 2000 and files such amended Item 7 with this report.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
Balance Sheet of Cardoso Cigarette Depot (Pty.) Limited at February
28, 1999, and the related statements of operations, stockholders' equity and
cash flows for the fiscal years ended February 28, 1999 and 1998 audited by H.D.
Woite & Co., Chartered Accountants (South Africa), and the Balance Sheet of
Cardoso Cigarette Depot (Pty.) Limited at February 29, 2000, and the related
statements of operations, stockholders' equity and cash flows for the fiscal
year ended February 29, 2000 audited by BDO International, Registered
Accountants and Auditors, Chartered Accountants (South Africa).
See Index to Financial Statements on page F-1.
(b) Pro forma financial information
Unaudited pro forma consolidated balance sheet of Cheshire
Distributors Inc. as of March 31, 2000 and unaudited pro forma consolidated
statement of operations for the period ended March 31, 2000.
See Index to Financial Statements on page F-1.
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CHESHIRE DISTRIBUTORS, INC.
Date: June 28, 2000 By: /s/ Willem Oost-Lievense
-----------------------------
Willem Oost-Lievense
Chief Executive Officer
<PAGE>
Index to Financial Statements
Page
----
PRO FORMA FINANCIAL INFORMATION
Unaudited Pro Forma Consolidated
Financial Statements..................................................... F-2
Unaudited Pro Forma Consolidated Balance Sheet............................. F-3
Notes to Unaudited Pro Forma Consolidated
Balance Sheet............................................................ F-4
Unaudited Pro Forma Consolidated Statement of
Operations............................................................... F-5
Notes to Unaudited Pro Forma Consolidated
Statement of Operations.................................................. F-6
FINANCIAL STATEMENTS OF CARDOSO CIGARETTE
DEPOT (PROPRIETARY) LIMITED
Report of BDO International Registered Accountants
and Auditors, Chartered Accountants...................................... F-7
Report of H.D. Woite & Co., Chartered Accountants (SA)..................... F-8
Balance Sheets as of February 29, 2000 and
February 28, 1999........................................................ F-9
Statements of Operations for the years ended
February 29, 2000, February 28, 1999 and
February 28, 1998........................................................ F-10
Statements of Stockholders' Equity (Deficit) for
the three years ended February 29, 2000.................................. F-11
Statements of Cash Flows for the three
years ended February 29, 2000, February 28,
1999 and February 28, 1998............................................... F-12
Notes to Financial Statements....................................... F-13 - F-18
F-1
<PAGE>
Cheshire Distributors Inc. (Cheshire) and
Cardoso Cigarette Depot (Pty.) Limited
Unaudited Pro Forma Consolidated Financial Statements
================================================================================
The unaudited pro forma consolidated balance sheet as of March 31, 2000 and the
unaudited pro forma consolidated statement of operations for the period ended
March 31, 2000 include the accounts of Cheshire Distributors Inc. and Cardoso
Cigarette Depot (Proprietary) Limited ("Cardoso"). The unaudited pro forma
financial statements have been prepared to illustrate the estimated effects of
the acquisition of Cardoso (the "Acquisition"). The Acquisition is accounted for
under the purchase method of accounting. The pro forma financial statements were
derived by adjusting the historical financial statements of Cheshire and Cardoso
for certain transactions pursuant to the Acquisition described in the notes to
the unaudited pro forma financial statements.
The Cardoso balance sheet as of February 29, 2000 was translated from South
African Rand to U.S. dollars using the exchange rate on February 29, 2000
($.15381 per South African Rand). Such balance sheet includes a dollar
denominated loan of $3,726,992 (included in short term loans payable of
$3,735,572). Cardoso's statement of operations for the year ended February 29,
2000 was translated from South African Rand to U.S. dollars using the average
rate of exchange prevailing during the year ($.16281 per South African Rand).
Currently, at the date of filing this document the exchange rate is
approximately $.1455 per South African Rand; such fluctuation would decrease
goodwill as of the current date by $10,195.
The unaudited pro forma consolidated balance sheet was prepared as if the
Acquisition had occurred on March 31, 2000. The unaudited pro forma consolidated
statement of operations for the year ended March 31, 2000 was prepared as if the
acquisition had occurred on April 1, 1999. The pro forma financial data does not
purport to be indicative of the results which actually could have been obtained
had such transactions been completed as of the assumed dates or which may be
obtained in the future. The pro forma financial data should be read in
conjunction with the financial statements of Cheshire and Cardoso.
F-2
<PAGE>
<TABLE>
Cheshire Distributors Inc.
Unaudited Pro Forma Consolidated Balance Sheet
<CAPTION>
Pro forma adjustments
---------------------------- Pro forma
Cheshire Cardoso Debit Credit consolidated
3/31/00 2/29/00
<S> <C> <C> <C> <C> <C>
Assets
Current:
Cash and cash equivalents ............ $ 5,097 $ 3,260,463 $ 1,400,000(1) $ 300,000(1) $ 3,365,560
1,000,000(2)
Trade accounts receivable, net ....... -- 4,011,847 4,011,847
Inventories .......................... -- 5,744,648 5,744,648
Prepaid expenses ..................... 2,932 -- 2,932
Receivable from affiliates ........... -- 107,368 107,368
------------ ------------ ------------
Total current assets ............ 8,029 13,124,326 13,132,355
Property, plant and equipment, net ........... 7,152 997,844 1,004,996
Goodwill ..................................... 7,469,142(2) 7,577,473
108,331(2)
Deferred acquisition costs ................... 108,331 -- 108,331(2) 0
Other ........................................ 14,154 -- 14,154
------------ ------------ ------------ ------------ ------------
$ 137,666 $ 14,122,170 $ 8,977,473 $ 1,408,331 $ 21,828,978
------------ ------------ ------------ ------------ ------------
Liabilities and Stockholders' equity
Current:
Accounts payable ..................... $ 60,238 $ 4,123,918 $ 30,000(2) $ 4,214,156
Accrued expenses ..................... 14,011 14,011
Short term notes payable ............. 690,000 3,735,572 300,000(1) 4,125,572
Income taxes payable ................. -- 1,693,400 1,693,400
Payable to affiliates ................ -- 28,235 28,235
Bank overdraft ....................... -- 1,548,906 1,548,906
------------ ------------ ------------
Total current liabilities ....... 764,249 11,130,031 11,624,280
Other:
Due to Seller........................ 9,000,000(2) 9,000,000
Long-term notes payable .............. 157,902 -- 1,400,000(1) 1,557,902
Due to shareholder ................... 431,281 431,281
------------ ------------ ------------
Total liabilities ............... 922,151 11,561,312 22,613,463
Stockholders' equity:
Common stock ......................... 10,365 32 32(2) 10,365
Additional paid-in capital ........... 504,371 -- 504,371
Retained earnings(deficit) ........... (1,299,221) 2,591,440 2,591,440(2) (1,299,221)
Accumulated other comprehensive income -- (30,614) 30,614(2) --
------------ ------------ ------------ ------------ ------------
Total stockholders' equity(deficit) . (784,485) 2,560,858 2,591,472 30,614 (784,485)
------------ ------------ ------------ ------------ ------------
$ 137,666 $ 14,122,170 $ 2,891,472 $ 10,460,614 $ 21,828,978
------------ ------------ ------------ ------------ ------------
</TABLE>
F-3
<PAGE>
Cheshire Distributors Inc. (Cheshire) and
Cardoso Cigarette Depot (Pty.) Limited
Notes to Unaudited Pro Forma Consolidated Balance Sheet
================================================================================
1. Represents cash received of $1,400,000 during April, 2000 under a
bridge financing agreement; $300,000 of such proceeds were utilized
for payment of short-term notes payable and $100,000 was retained for
working capital purposes. The Company is currently negotiating a
proposed long-term loan agreement to be entered into in connection
with the Acquisition.
2. Represents payment of an initial installment of $1,000,000 and accrual
of $9,000,000 due to seller relating to the purchase price of
$10,000,000 for the net assets of Cardoso, additional acquisition
costs of $108,331 and accrued legal and professional fees of $30,000
for a total acquisition price of $10,138,331. The excess cost over net
assets acquired in the acquisition has been allocated to goodwill
($7,577,473).
Pursuant to the Stock Purchase Agreement originally dated September
23, 1999, between Cheshire and Eduardo P.V. Cardoso and Alberteina
Cardoso and Cardoso ( a South African corporation), as amended by the
Amended Stock Purchase Agreement dated April 7, 2000, the purchase
price of $10,000,000 was payable in three cash installments of
$1,000,000, $2,000,000 and $7,000,000, respectively. The first
installment of $1,000,000 was paid through the issuance of debt
securities and warrants on April 7, 2000. The balance of the purchase
price ($9,000,000) will be paid with proceeds of long-term debt on or
before October 7, 2000.
F-4
<PAGE>
<TABLE>
Cheshire Distributors Inc.
Unaudited Pro Forma Consolidated Statement of Operations
<CAPTION>
For the period
from May 12 (inception) Yearended Pro forma adjustments
to March 31,2000 February 29, 2000 --------------------- Proforma
Cheshire Cardoso Debit Credit consolidated
<S> <C> <C> <C> <C> <C>
Net sales .................................. - $ 136,192,528 $ 136,192,528
Cost of goods sold ......................... - (130,898,580) (130,898,580)
------------ ------------- -------------
Gross profit ................. - 5,293,948 5,293,948
Operating expenses:
Selling, general and administrative $ 882,492 2,897,206 3,779,698
------------ ------------- -------------
Income (loss) from operations (882,492) 2,396,742 1,514,250
Other income (expense):
Interest income ................... 867 403,665 404,532
Non-cash financing charges ........ (128,500) (128,500)
Amortization of goodwill .......... $ 378,873(2) (378,873)
Interest expense .................. (14,096) (530,395) 1,680,000(1) (2,224,491)
Other income ...................... 2,291 2,291
------------ ------------- ---------- -------------
Income (loss) before taxes
on income .................. (1,024,221) 2,272,303 2,058,873 0 (810,791)
Taxes on income ............................ 762,734 762,734
------------ ------------- ---------- -------------
Net income (loss) .......................... $ (1,024,221) $ 1,509,569 $2,058,873 0 $ (1,573,525)
------------ ------------- ---------- -------------
Net income (loss) per share (basic) ........ $ (0.10) $ (0.15)
Net income (loss) per share (diluted) ...... $ (0.10) $ (0.15)
Weighted average common shares
outstanding:
Basic ............................. 10,202,839 10,202,839
Diluted ........................... 10,202,839 10,202,839
</TABLE>
F-5
<PAGE>
Cheshire Distributors Inc. (Cheshire) and
Cardoso Cigarette Depot (Pty.) Limited
Notes to Unaudited Pro Forma Consolidated Statement of Operations
================================================================================
1. Represents interest expense of $1,680,000 for the year ended March 31,
2000 based on proposed borrowings of $12,000,000 at the rate of 14%
per annum as a result of the acquisition.
2. Represents the amortization of goodwill over a twenty-year life on a
straight-line basis.
F-6
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Members of Cardoso Cigarette Depot (Proprietary) Ltd
We have audited the annual financial statements of Cardoso Cigarette Depot
(Proprietary) Limited for the year ended 29 February 2000. These financial
statements are the responsibility of the Company's directors. Our responsibility
is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with South African and United States
generally accepting auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance that the financial statements
are free of material misstatement.
An audit includes:
o examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements,
o assessing the accounting principles used and significant estimates made by
management, and
o evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements fairly present, in all material
respects, the financial position of the Company at 29 February 2000, and the
results of its operations, change in stockholders' equity and cash flows for the
year then ended in accordance with generally accepted accounting practices, and
in the manner required by the Companies, Act.
We have not performed applicable audit procedures in order to express an opinion
on the comparative financial information as disclosed in the financial
statements.
Johannesburg, South Africa BDO International
Registered Accountants
24 May 2000 and Auditors, Chartered
Accountants
F-7
<PAGE>
AUDITORS REPORT TO THE MEMBERS OF
CARDOSO CIGARETTE DEPOT (PROPRIETARY) LIMITED
We have audited the annual financial statements for the two years ended February
28, 1999. These financial statements are the responsibility of the Company's
Directors. Our responsibility is to report on these financial statements.
We conducted our audit in accordance with South African and United States
generally accepted auditing standards. These standards require that we plan and
perform the audit to obtain reasonable assurance that, in all material aspects,
fair representation is achieved in the financial statements.
An audit includes an evaluation of the appropriateness of the accounting
policies, an examination, on a test basis, of evidence supporting the amounts
and disclosures included in the financial statements, an assessment of the
reasonableness of significant estimates and a consideration of the
appropriateness of the overall financial statement presentation. We consider our
audit procedures appropriate in the circumstances to express our opinion below.
In our opinion these statements fairly present the financial position of your
company at 28 February 1999 and the results of its operations and cash flow
information to the two years then ended conformity with generally accepted
accounting practice and in the manner required by the Companies Act.
In terms of Section 275 of the Companies Act we report that we have written up
the books of the Company and that we have carried out the secretarial duties of
the Company with the written approval of all the shareholders.
/S/ H D WOITE & CO Nylstroom, South Africa
------------------------
H D WOITE & CO 23 March 2000
CHARTERED ACCOUNTANTS (SA)
AUDITORS
F-8
<PAGE>
<TABLE>
CARDOSO CIGARETTE DEPOT (PROPRIETARY) LIMITED
---------------------------------------------
Balance Sheets
(in South African Rand)
<CAPTION>
February 29, February 28,
2000 1999
----------- -----------
<S> <C> <C>
Assets (Note 8)
Current:
Cash and cash equivalents ....................... R20,595,432 R 6,433,570
Accounts receivable less allowance
for doubtful accounts of R0 and
R830,100 (Note 12) ............................ 25,341,718 19,701,341
Inventories ..................................... 36,287,337 30,910,637
Receivable from affiliated companies ............ 678,216 519,237
----------- -----------
Total current assets ....................... 82,902,703 57,564,785
Fixed assets, net (Note 3) ......................... 6,180,209 4,802,423
----------- -----------
R89,082,912 R62,367,208
----------- -----------
Liabilities and Shareholders' Equity
Current liabilities:
Short-term loans ................................ R 54,199 R 150,000
Short term debt (Note 5) ........................ 23,606,765 --
Bank overdraft (Note 8) ......................... 9,784,003 9,135,198
Accounts payable (Note 12)....................... 26,049,634 15,845,522
Income taxes payable (Note 6).................... 10,696,737 4,452,708
Payable to affiliated companies ................. 178,352 221,893
----------- -----------
Total current liabilities .................. 70,369,690 29,805,321
Loan from shareholder (Note 4) ..................... 2,724,279 2,774,819
Long-term debt (Note 5) ............................ -- 23,070,083
----------- -----------
Total liabilities .......................... 73,093,969 55,650,223
----------- -----------
Commitments and contingencies (Notes 7 and 9)
Shareholders' equity:
Share capital, R.01 par value - shares
authorized 100,000,000;
issued and outstanding 20,000 ................ 200 200
Retained earnings ............................... 15,988,743 6,716,785
----------- -----------
Total shareholders' equity ................. 15,988,943 6,716,985
----------- -----------
R89,082,912 R62,367,208
----------- -----------
</TABLE>
See accompanying notes to financial statements.
F-9
<PAGE>
<TABLE>
CARDOSO CIGARETTE DEPOT (PROPRIETARY) LIMITED
---------------------------------------------
Statements of Operations
(in South African Rand)
<CAPTION>
Year ended
----------------------------------------------------
February 29, February 28, February 28,
2000 1999 1998
------------- ------------- -------------
<S> <C> <C> <C>
Revenues (Notes 2 and 12) .................. R 836,512,057 R 752,988,903 R 425,149,930
Cost of sales (Note 12)..................... (803,995,947) (716,974,976) (408,940,264)
------------- ------------- -------------
Gross profit .................... 32,516,110 36,013,927 16,209,666
Operating expenses:
Selling, general and administrative...... (17,795,015) (21,832,102) (14,691,097)
------------- ------------- -------------
Operating income ................ 14,721,095 14,181,825 1,518,569
Other income (expense)
Interest income ............................ 2,479,365 1,698,188 1,034,026
Interest expense ........................... (3,257,760) (3,114,550) (2,787,073)
Other ...................................... 14,070 -- --
------------- ------------- -------------
Income (loss) before
taxes on income ............... 13,956,770 12,765,463 (234,478)
Taxes on income (Note 6) ................ 4,684,812 3,640,343 --
------------- ------------- -------------
Net income (loss)........................... R 9,271,958 R 9,125,120 R (234,478)
------------- ------------- -------------
</TABLE>
See accompanying notes to financial statements.
F-10
<PAGE>
<TABLE>
CARDOSO CIGARETTE DEPOT (PROPRIETARY) LIMITED
---------------------------------------------
Statements of Stockholders' Equity (Deficit)
(in South African Rand)
<CAPTION>
Three years ended February 29, 2000
-----------------------------------
Retained
Share capital R .01 par value earnings Total
------------------------------- (accumulated shareholders'
Shares Amount deficit) equity (deficit)
------------ ------------ ------------ ----------------
<S> <C> <C> <C> <C>
Balance, March 1, 1997 .............. 20,000 R 200 R (2,173,857) R (2,173,657)
Net loss ............................ -- -- (234,478) (234,478)
------ ------------ ------------ ------------
Balance, February 28, 1998 .......... 20,000 R 200 R (2,408,335) R (2,408,135)
Net income .......................... -- -- 9,125,120 9,125,120
------ ------------ ------------ ------------
Balance, February 28, 1999........... 20,000 200 6,716,785 6,716,985
Net income .......................... -- -- 9,271,958 9,271,958
------ ------------ ------------ ------------
Balance, February 29, 2000 .......... 20,000 R 200 R 15,988,743 R 15,988,943
------ ------------ ------------ ------------
</TABLE>
See accompanying notes to financial statements.
F-11
<PAGE>
<TABLE>
CARDOSO CIGARETTE DEPOT (PROPRIETARY) LIMITED
---------------------------------------------
Statements of Cash Flows
(in South African Rand)
<CAPTION>
Year ended
---------------------------------------------------
February 29, February 28, February 28,
2000 1999 1998
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).......................................... R 9,271,958 R 9,125,120 R (234,478)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation ......................................... 1,181,158 906,933 759,170
Loss (income) on sale of fixed assets ................ 3,884 2,690 (218,425)
Unrealized Foreign exchange loss ..................... 536,681 4,725,091 1,868,031
Increase in accounts receivable ...................... (5,640,377) (5,591,633) (693,852)
Increase in inventories .............................. (5,376,700) (5,983,904) (3,652,940)
Increase (decrease) in accounts payable .............. 10,204,112 (6,480,852) 801,188
Increase in income taxes payable ..................... 6,244,029 3,380,065 (272,378)
------------ ------------ -----------
Net cash provided by (used in)
operating activities ....................... 16,424,745 83,510 (1,643,684)
------------ ------------ -----------
Cash flows from investing activities:
Loans to affiliated companies ............................. (202,520) -- --
Capital expenditures ...................................... (4,856,332) (1,535,081) (3,273,887)
Proceeds from sale of fixed assets ........................ 2,293,505 499 2,655,367
------------ ------------ -----------
Net cash used in investing activities ........ (2,765,347) (1,534,582) (618,520)
------------ ------------ -----------
Cash flows from financing activities:
(Repayments) proceeds of debt ............................. (146,341) 1,517,898 (1,227,102)
Bank overdraft ............................................ 648,805 3,717,517 6,996
------------ ------------ -----------
Net cash provided by (used in)
financing activities ....................... 502,464 5,235,415 (1,220,106)
------------ ------------ -----------
Net increase in cash and cash equivalents ................... 14,161,862 3,784,343 (3,482,310)
Cash cash and cash equivalents, beginning of year ............ 6,433,570 2,649,227 6,131,537
------------ ------------ -----------
Cash cash and cash equivalents, end of year .................. R 20,595,432 R 6,433,570 R 2,649,227
------------ ------------ -----------
</TABLE>
See accompanying notes to financial statements.
F-12
<PAGE>
Cardoso Cigarette Depot (Proprietary) Limited
Notes to Financial Statements
================================================================================
1. Nature of Business Cardoso Cigarette Depot (Proprietary) Limited (the
and Basis of "Company") was incorporated in Johannesburg, South
Presentation Africa in 1959. The Company is primarily engaged
in the distribution of cigarettes, confectionery
and cosmetics in South Africa.
The financial statements are prepared on a
consistent basis in accordance with the
requirements of statements of generally accepted
accounting practice in South Africa. With respect
to the Company, there are no significant
differences between such practice and generally
accepted accounting principles in the United
States. The measurement basis used is the
historical cost-basis.
2. Summary of (a) Revenue Recognition
Accounting
Policies Revenue, which excludes value-added tax,
comprises the invoiced value of goods
supplied and is recorded at the date the
goods are delivered to customers.
(b) Use of Estimates
The preparation of financial statements in
accordance with generally accepted
accounting principles requires management to
make certain estimates and assumptions that
could affect the reported amounts of assets
and liabilities and disclosure of contingent
assets and liabilities at the date of the
financial statements and the reported
amounts of revenue and expenses during the
reporting period. Actual results could
differ from those estimates.
(c) Fixed Assets
Fixed assets are stated at cost.
Depreciation is computed using the
straight-line basis over the estimated
useful lives of the assets as follows:
F-13
<PAGE>
Cardoso Cigarette Depot (Proprietary) Limited
Notes to Financial Statements
================================================================================
--------------------------------------------
Computer equipment 5 years
Storeroom equipment 10 years
Motor vehicles 5 years
Office equipment 10 years
Workshop equipment 10 years
Security equipment 10 years
--------------------------------------------
Land and buildings are reflected at cost.
The Company regards its land and buildings
as investment properties and they are not
depreciated.
Expenditures for repairs and maintenance are
charged to expense as incurred.
(d) Inventories
Inventories, consisting primarily of
merchandise for resale are valued at the
lower of cost on a first-in, first-out
(FIFO) basis or net realizable value.
(e) Advertising Costs
Advertising costs are charged to expense as
incurred.
(f) Retirement Benefits
Current contributions to the group provident
fund are charged to expense as incurred.
(g) Foreign Currency Translation
Liabilities in foreign currencies are
translated at the rates of exchange ruling
at the end of the financial year. A surplus
or deficit arising on a transaction is
accounted for in the income statement in the
year in which it arises. During the years
ended February 29, 2000 and February 28,
1999, foreign currency exchange losses of
R536,682 and R4,275,091 were charged to
operations, respectively.
F-14
<PAGE>
Cardoso Cigarette Depot (Proprietary) Limited
Notes to Financial Statements
================================================================================
(h) Income Taxes
Income taxes are calculated using the
liability method specified by Statement of
Financial Accounting Standards ("SFAS") No.
109, "Accounting for Income Taxes." Under
SFAS No. 109, deferred tax assets and
liabilities are recognized for the estimated
future tax benefits or consequences
attributable to differences between the
financial statement carrying amounts and
their respective tax bases. Deferred tax
assets are recognized to the extent that it
is more likely than not the assets are
expected to be realized.
(i) Recent Accounting Pronouncement
In June 1998, the Financial Accounting
Standards Board ("FASB") issued SFAS No.
133, "Accounting for Derivative Instruments
and Hedging Activities," which requires
entities to recognize all derivative
financial instruments as either assets or
liabilities in the balance sheets and
measure these instruments at fair value.
SFAS No. 133, as amended by SFAS No. 137, is
effective for all fiscal years beginning
after June 15, 2000. The Company does not
presently enter into any transactions
involving derivative financial instruments
and, accordingly, does not anticipate that
the new standard will have any effect on its
financial statements.
(j) Certain prior year balance sheet amounts
have been reclassified to conform to current
year presentation.
F-15
<PAGE>
Cardoso Cigarette Depot (Proprietary) Limited
Notes to Financial Statements
================================================================================
3. Fixed Assets
Fixed assets consisted of the following at
February 29, 2000 and February 28, 1999:
<TABLE>
<CAPTION>
February 29, February 28,
2000 1999
---------------------------------------------------------------------
<S> <C> <C>
Land and buildings R 559,625 R 559,625
Computer equipment 518,842 518,006
Storeroom equipment 20,789 20,789
Motor vehicles 7,501,982 5,017,231
Office equipment 603,932 530,574
Workshop equipment 23,166 23,165
Security equipment 31,643 31,643
---------------------------------------------------------------------
Total 9,259,979 6,701,033
Less: Accumulated depreciation 3,079,770 1,898,610
---------------------------------------------------------------------
R 6,180,209 R 4,802,423
---------------------------------------------------------------------
</TABLE>
4. Loan from
Shareholder February 29, February 28,
2000 1999
--------------------------------------------------
EPV Cardoso R 2,724,279 R2,774,819
--------------------------------------------------
This loan is interest free, unsecured and has no
fixed terms of repayment.
5. Debt
<TABLE>
<CAPTION>
February 29, February 28,
2000 1999
-----------------------------------------------------------
<S> <C> <C>
Unsecured foreign loan R23,606,765 R23,070,083
-----------------------------------------------------------
</TABLE>
F-16
<PAGE>
Cardoso Cigarette Depot (Proprietary) Limited
Notes to Financial Statements
================================================================================
The uncovered United States dollar denominated
loan is owing to a non-resident and was originally
due for repayment in March 2000. In terms of the
original agreement, the loan is unsecured and
bears interest at 11% per annum. The amount
outstanding in United States dollars is $3,726,992
(1999: $3,726,992). The terms of this loan are
currently being renegotiated.
6. Taxation South African normal tax:
<TABLE>
<CAPTION>
February 29, February 28, February 28,
Year ended 2000 1999 1998
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current tax:
Current year R4,684,812 R3,640,343 --
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Reconciliation of taxation rate:
South African normal tax rate 30.00% 35.00% 35.00%
Adjusted for:
Disallowable expenses 3.57 -- --
Assessed losses carried forward -- (6.48) (35.00)
---------------------------------------------------------------------------------------
Effective rate 33.57% 28.52% --
---------------------------------------------------------------------------------------
</TABLE>
Income taxes payable at February 29, 2000 includes
R6,096,641 which was paid to the South African
Revenue Services ("SARS") on March 2, 2000. Of
this amount, R3,634,942 was with respect to taxes
and accrued interest thereon related to the fiscal
year ended February 28, 1999 and R2,461,699 was
with respect to taxes for certain years prior to
February 28, 1997 (and penalties and interest
thereon) based on a provisional agreement reached
with SARS to determine prior years normal taxation
due. In the opinion of the directors, no further
payments will be required for such years.
7. Operating Leases Rent and related expenses under operating leases
on a month-to-month basis with a related party
(see Note 9) amounted to R637,718, R628,942 and
R555,973 for the years ended February 29, 2000,
February 28, 1999 and February 28, 1998,
respectively.
8. Bank Overdraft Bank overdrafts are secured by:
o General Notorial bonds of R6,000,000 (1999:
R6,462,000) over movable assets.
o Cession of accounts receivable.
F-17
<PAGE>
o Various guarantees/pledges and cession of
assets and the assets of
shareholders/directors and companies
controlled by them.
o The directors of the Company have given
personal unlimited suretyship.
9. Related Party Certain properties are leased by the Company from
Transactions a shareholder/director and companies controlled by
them.
10. Subsequent Events (a) Acquisition
On April 7, 2000, the Cheshire Distributors,
Inc. closed the first installment of the
purchase of the outstanding ordinary shares
of the Company, pursuant to the stock
purchase agreement originally dated
September 23, 1999, between Cheshire
Distributors, Inc. and Eduardo P.V. Cardoso
and Albertina Cardoso ("Sellers"), as
amended by the amended stock purchase
agreement dated April 7, 2000.
(b) Foreign Currency Exchange Loss
The permanent diminution of the rand has
resulted in the Company incurring a further
foreign exchange loss of R2,705,796 at May
24, 2000.
11. Supplemental Interest paid during the years ended February 29,
Cash Flow 2000, February 28, 1999 and February 28, 1998 was
Information approximately R2,730,739, R3,105,543 and
R2,787,159, respectively.
Income tax payments made during the years ended
February 29, 2000, February 28, 1999 and February
28, 1998 totaled approximately R84,716, R260,278
and R272,378, respectively.
12. Major Customer One customer accounted for approximately 15% of
and Supplier accounts receivable and revenues as of and for the
years ended February 29, 2000, February 28, 1999
and February 28, 1998, respectively. One supplier
accounted for approximately 85% of accounts
payable and purchases as of and for the years
ended February 29, 2000, February 28, 1999 and
February 28, 1998, respectively.
F-18
