U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2000
Commission file number: 0-26186
CHESHIRE DISTRIBUTORS, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 84-1209978
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization )
1599 Post Road East Westport, CT 06880
(Address of principal executive offices)
(203) 255-4116
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes -X- No ---
As of May 15, 2000, 10,365,000 shares of common stock, par value $0.001
per share, were outstanding.
Transitional Small Business Disclosure Format (check one): Yes --- No -X-
<PAGE>
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet (Unaudited) March 31, 2000 1
Statements of Operations (Unaudited)
for the three month period ended March 31, 2000 and
for the period from inception to March 31, 2000 2
Statements of Cash Flows (Unaudited) for the three
month period ended March 31, 2000 and for the
period from inception to March 31, 2000 3
Notes to financial statements 4-6
Item 2. Management's Discussion and Analysis or
Plan of Operations 7
PART II. OTHER INFORMATION 8
Signatures 9
<PAGE>
Cheshire Distributors, Inc.
(A Development Stage Company)
Balance Sheet
March 31, 2000
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 5,097
Prepaid expenses 2,932
--------------
Total current assets 8,029
--------------
PROPERTY AND EQUIPMENT, NET 7,152
OTHER ASSETS
Deferred acquisition costs 108,331
Security deposits 14,154
--------------
Total other assets 122,485
TOTAL ASSETS $ 137,666
============
LIABILITIES AND STOCKHOLDER'S DEFICIT
CURRENT LIABILITIES
Accounts payable $ 60,238
Accrued expenses 14,011
Short term notes payable 690,000
--------------
Total current liabilities 764,249
Long term notes payable 157,902
STOCKHOLDER'S DEFICIT
Common stock, $0.001par value; 100,000,000
shares authorized; 10,365,000 shares issued and
outstanding 10,365
Additional paid-in capital 504,371
Deficit accumulated during the development
stage (1,299,221)
--------------
(784,485)
--------------
TOTAL LIABILITIES AND STOCKHOLDER'S DEFICIT $ 137,666
=============
The accompanying notes are an integral part of the financial statements.
1
<PAGE>
Cheshire Distributors, Inc.
(A Development Stage Company)
Statements of Operations
(Unaudited)
For the period
from inception For the three
(May 12, 1999) month period
to March 31, ended March 31,
2000 2000
REVENUES $ - $ -
EXPENSES
Professional fees 128,676 53,581
Consulting fees 500,000 65,000
Merger fees 200,575 575
Other selling, general and
administrative expenses 53,241 29,918
--------- ---------
Total expenses 882,492 149,074
OTHER INCOME (EXPENSE)
Interest income 867 371
Non-cash financing charges (128,500) (54,000)
Interest expense (14,096) (10,716)
--------- ---------
Total other expense (141,729) (64,345)
--------- ---------
NET LOSS (1,024,221) (213,419)
Accumulated deficit
Balance, beginning of period - (810,802)
Distribution - Pacific Development (275,000) (275,000)
--------- ---------
Balance, end of period $ (1,299,221) $ (1,299,221)
========= =========
NET LOSS PER SHARE $ (0.02)
=========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 10,202,839
==========
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
Cheshire Distributors, Inc.
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
For the period
from inception For the three
(May 12, 1999) month period
to March 31, ended March 31,
2000 2000
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (1,024,221) $ (213,419)
Adjustments to reconcile net
loss to net cash flows from
operations:
Stock issued for services 35,296 35,296
Non-cash financing charges 128,500 54,000
Accounts payable 60,238 16,616
Accrued expenses 14,011 10,675
Prepaid expenses (1,464) (1,464)
Security deposit (14,154) (14,154)
--------- ---------
Net cash used by operating
activities (801,794) (112,450)
CASH FLOWS FROM INVESTING ACTIVITIES
Deferred acquisition costs (108,331) (21,484)
------- ---------
Net cash used by investing
activities (108,331) (21,484)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loans 840,000 340,000
Issuance of common stock 350,940 940
Distribution - Pacific Development (275,000) (275,000)
Repayment of term debt (718) (718)
------- ---------
Net cash provided by
financing activities 915,222 65,222
------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 5,097 (68,712)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD - 73,809
------- ---------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 5,097 $ 5,097
========= =========
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
Cheshire Distributors, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(March 31, 2000)
(Unaudited)
1. Management's Representation of Interim Financial Information
The accompanying financial statements have been prepared by Cheshire
Distributors, Inc. without audit 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 generally accepted accounting principles have
been condensed or omitted as allowed by such rules and regulations,
and management believes that the disclosures are adequate to make the
information presented not misleading. These financial statements include
all of the adjustments which, in the opinion of management, are necessary
to a fair presentation of financial position and results of operations.
Results of operations for partial periods are not necessarily indicative of
the results for the whole year.
2. Merger
On February 18, 2000, the Company's predecessor issuer, Pacific Development
Corporation, a Colorado corporation, issued 10,000,000 shares in
consideration of the merger of Cheshire Distributors, Inc., a Delaware
Corporation into Cheshire Holdings, Inc., a wholly owned subsidiary of
Pacific Development. Cheshire Holdings, Inc. was the surviving corporation,
and the former shareholders of Cheshire Distributors, Inc. became the
controlling shareholders of Pacific Development. Immediately after the
closing, there were 10,365,000 Pacific Development shares outstanding.
On March 24, 2000, Pacific Development Corporation and Cheshire Holdings,
Inc. were merged into a single corporation existing under the laws of the
state of Delaware, with Cheshire Holdings, Inc. being the surviving
corporation. The name of the surviving corporation was changed to Cheshire
Distributors, Inc. Each share of Pacific Development Corporation's issued and
outstanding common stock was automatically converted into shares of Cheshire
Distributors, Inc.'s common stock.
Pacific Development Corporation was formed for the purpose of acquiring an
operating business and at the time of the merger, had no significant assets or
liabilities. The transaction has been accounted for as a recapitalization of
Cheshire Distributors, Inc., which is the accounting acquirer of Pacific
Development Corporation.
4
<PAGE>
2. Merger, continued
The following is a summary of the changes in equity of the surviving
corporation, as adjusted for the recapitalization:
Additional
Number of Common Paid-In
Shares Stock Capital
Incorporation of Cheshire
Distributors, Inc. 10,000,000 $ 10,000 $ 469,440
Stock issued to consultant for
services under S-8 227,717 228 35,068
Stock deemed to be issued to
non-Cheshire shareholders of
Pacific Development Corporation 137,283 137 (137)
---------- --------- --------
10,365,000 $ 10,365 $ 504,371
========== ========= ========
3. Note and Stock Warrant Capitalization
(All share and per share amounts have been restated to reflect share
adjustment terms contained in the governing agreements. The
February 18, 2000 merger of the Company into Pacific Development Corp.
described above resulted in an exchange ratio of 4,957.858 to 1 shares of
Pacific Development common stock for each Cheshire Distributors share
previously outstanding.)
The company has the following notes outstanding at March 31, 2000:
$350,000 face amount 7% unsecured promissory note, convertible into
shares of stock at a rate of $4 per share until maturity, which is November
18, 2000.
$150,000 face amount 6% unsecured promissory note, convertible into
shares of stock at 75% of the fair value of each share of the Company's
common stock until maturity, which is December 21, 2001.
$300,000 face amount unsecured, non-interest bearing promissory note, due
May 1, 2000. The note was repaid on April 7, 2000.
5
<PAGE>
3. Note and Stock Warrant Capitalization (continued)
$40,000 term loan payable to a bank, with interest at 9%, secured by a
pledge of bank accounts belonging to shareholders of the company, due
June 26, 2000.
In addition to conversion privileges contained in the above outstanding
debt instruments, the Company has the following outstanding warrants to
purchase common shares:
Three year warrant to purchase approximately 116,708 shares of the
Company's common stock for total proceeds of $400,000 if exercised
before October 1, 2000, for total proceeds of $500,000 if exercised
between October 1, 2000 and October 1, 2001, and for total proceeds of
$600,000 if exercised between October 1, 2001 and October 1, 2002.
Two year warrant to purchase common shares at an amount equal to the
number of common shares into which the above $150,000 face amount
note is converted. Warrant exercise price will be equal to 75% of the fair
market value of the company's common stock at the date of exercise.
The Company recorded a total of $128,500 in financing costs related to the
conversion privileges and warrants contained in the outstanding debt and
equity instruments, based on the approximate fair value of these conversion
privileges and warrants.
4. Subsequent Event
On April 7, 2000, the Company closed the first installment of the purchase
of the outstanding shares of common stock of Cardoso Cigarette Depot (Pty.)
Limited, pursuant to the Stock Purchase Agreement originally dated
September 23, 1999, between the Company and Eduardo P.V. Cardoso and
Alberteina Cardoso ("Sellers") and Cardoso, as amended by the Amended
Stock Purchase Agreement dated April 7, 2000 (collectively, the "Purchase
Agreement").
The total purchase price of $10,000,000 is payable in cash in installments of
$1,000,000 at closing, a second installment of $2,000,000 on or before
June 27, 2000, and a final installment of $7,000,000 on or before October 7,
2000.
The $1,000,000 April 7 installment was paid with funds raised through the
issuance of additional debt securities and warrants after the end of the
quarter.
At March 31, 2000, a total of $108,331 in direct costs of this acquisition
had been incurred. Such costs will be charged to operations ratably
beginning on the acquisition date.
6
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain statements contained in this report, including statements concerning
the Company's future cash and financing requirements, and other statements
contained herein regarding matters that are not historical facts, are forward
looking statements; actual results may differ materially from those
anticipated.
Plan of Operations
Cheshire Distributors Inc. is in the process of purchasing all of the
outstanding shares of Cardoso Cigarette Depot (pty) Limited, a major tobacco,
confectionary and cosmetic distributor in South Africa. On February 18, 2000,
CDI reverse-merged into Pacific Development Corporation, a fully reporting
OTCBB company, with Cheshire Distributors Inc., the surviving entity.
Liquidity and Capital Resources
The following is a summary of the Company's cash flows from operating,
investing, and financing activities:
Inception Three months
To March 31, March 31,
2000 2000
Operating activities $ (801,794) $ (112,450)
Investing activities (108,331) (21,484)
Financing activities 915,222 65,222
Net effect on cash $ 5,097 $ (68,712)
=========== =========
Cash flows used by operations relates primarily to expenses incurred in the
acquisition of Cardoso Cigarette Depot. Consulting fees related to the
acquisition totaling approximately $500,000 were paid to persons who are
current shareholders of the Company. The amounts were funded through the
issuance of common shares for cash of $350,000, $500,000 in convertible
debt, $300,000 in term debt, and $40,000 in bank debt.
Future conversions of debt to equity may result in the issuance of
additional common shares. Assuming a $5 trading price and full conversion,
an additional 140,000 common shares would be issuable upon the conversion
of $500,000 in debt.
The exercise of currently outstanding three year warrants to purchase
99,157 common shares would result in proceeds to the Company ranging
between $400,000 and $600,000.
The exercise of contingently issuable warrants will result in proceeds of
up to $150,000 within the next two years.
The Company has recorded a total of $128,500 in debt issue costs related
to various equity instruments issued in connection with loans to the
Company.
7
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 3. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedule, filed herewith
electronically
(b) Reports on Form 8-K
a. January 24, 2000, 8K by Pacific Development Corp.,
predecessor issuer to Cheshire Distributors, Inc.
reporting under Item 5 a 1 for 50 reverse split of
its outstanding common shares.
b. March 7, 2000, 8K by Pacific Development Corp.
reporting a change in control of the registrant.
8
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
CHESHIRE DISTRIBUTORS, INC.
By: /s/ Jerry M. Kleinberg
Chief Financial Officer
Date: May 22, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The accompanying financial data has been extracted from the financial
statements of the registrant included in form 10QSB, and is qualified
in its entirety by reference to the financials appearing in that document.
</LEGEND>
<S> <C>
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<PERIOD-END> MAR-31-2000
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0
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</TABLE>
