Exhibit 99.3
FINANCIAL STATEMENTS FOR DAMIANEX S.A.
INDEX
Page
----
Item 1. Report of Independent Auditors ............................................ EXB-2
Item 2. Financial Statements
Balance Sheets at December 31, 2000 and December 31, 2001
and March 31, 2001 (unaudited) and March 31, 2002 (unaudited) ............. EXB-3
Statements of Income for the years ended December 31, 2000
and December 31, 2001 and for the three month periods ended
March 31, 2001 (unaudited) and March 31, 2002 (unaudited) ................. EXB-4
Statements of Changes in Stockholders' Equity for the years ended
December 31, 2000 and December 31, 2001 ................................... EXB-5
Statements of Cash Flows for the years ended December 31, 2000 and
December 31, 2001 and for the three month periods ended
March 31, 2001 (unaudited) and March 31, 2002 (unaudited) ................. EXB-6
Notes to Financial statements ............................................. EXB-7
EXB-1
REPORT OF INDEPENDENT AUDITORS
The Board of Directors of Damianex S.A.
We have audited the accompanying balance sheets of Damianex S.A. as of December
31, 2000 and 2001 and the related statements of income, changes in stockholders'
equity, and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Damianex S.A. at December 31,
2000 and 2001, and the results of its operations and its cash flows for the
years then ended in conformity with accounting principles generally accepted in
the United States.
ERNST & YOUNG AUDIT Sp. z o.o.
Warsaw, Poland
April 22, 2002
EXB-2
DAMIANEX S.A.
BALANCE SHEETS
(Amounts in columns expressed in thousands)
December December (Unaudited) (Unaudited)
31, 2000 31, 2001 March 31, March 31,
2001 2002
--------------------------------------------------------------------
ASSETS
Current Assets
Cash and cash equivalents $ 2,688 $ 2,327 $ 2,349 $ 451
Accounts receivable, (net of allowance for
doubtful accounts of $55,000 and $273,000 at
December 31, 2000 and December 31, 2001,
respectively and $109,000 and $287,000 at March
31, 2000 and March 31, 2001 5,795 6,964 5,406 6,497
Inventories 4,282 4,356 4,686 4,550
Deferred income taxes 2 19 59 19
Prepaid expenses and other current assets 178 54 213 211
--------------------------------------------------------------------
Total Current Assets 12,945 13,720 12,713 11,728
Non-current deferred income taxes 164 172 182 180
Property, plant, and equipment, net 1,370 1,550 1,499 1,497
--------------------------------------------------------------------
Total Assets $14,479 $15,442 $ 14,394 $13,405
====================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Trade accounts payable $ 6,431 $ 3,346 $ 3,788 $ 4,385
Bank loans and overdraft facilities 5,303 8,012 7,508 4,704
Income and other taxes payable 264 308 385 413
Other current liabilities 143 205 213 204
--------------------------------------------------------------------
Total Current Liabilities 12,141 11,871 11,894 9,706
Commitments and contingencies
Stockholders' Equity
Common Stock ($57 par value, 30,500 shares
authorized, issued and outstanding at respective
dates)
1,739 1,739 1,739 1,739
Retained earnings 617 1,727 737 1,992
Accumulated other comprehensive income (loss) (18) 105 24 (32)
--------------------------------------------------------------------
Total Stockholders' Equity 2,338 3,571 2,500 3,699
--------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $14,479 $15,442 $ 14,394 $13,405
====================================================================
See accompanying notes.
EXB-3
DAMIANEX S.A.
STATEMENTS OF INCOME
(amounts in columns expressed in thousands)
Year ended Year ended (Unaudited) (Unaudited)
December 31, December 31, 3 month 3 month
2000 2001 period period
ended ended
March 31, March 31,
2001 2002
--------------------------------------------------------------------------
Net sales $ 59,135 $ 78,977 $14,921 $ 17,554
Cost of goods sold, excluding 52,756 70,262 13,208 15,565
depreciation
--------------------------------------------------------------------------
6,379 8,715 1,713 1,989
Selling, general and administrative 4,976 6,008 1,284 1,451
expenses, excluding depreciation
Bad debt expense 45 218 54 14
Depreciation of tangible fixed assets 49 258 51 68
--------------------------------------------------------------------------
Operating income 1,309 2,231 324 456
Non-operating income (expense)
Interest expense (401) (555) (113) (151)
Interest income 62 108 10 4
Realized and unrealized foreign
currency transaction gains, (losses),
net 16 140 (9) 54
Other expenses, net (88) (193) (59) (10)
--------------------------------------------------------------------------
Income before income taxes 898 1,731 153 353
Income tax expense (296) (520) (33) (88)
--------------------------------------------------------------------------
Net income $ 602 $ 1,211 $ 120 $ 265
==========================================================================
See accompanying notes.
EXB-4
DAMIANEX S.A.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Monetary amounts in columns expressed in thousands)
Common Retained Accumulated other Total
Stock Earnings comprehensive
income/(loss)
---------------------------------------- -----------------------------------------
No. of Amount
shares
- --------------------------------- -----------
Balance at 31 30,500 $ 1,739 $ 15 $ 184 $ 1,938
December 1999
Net income 602 - 602
Foreign currency
translation - - - (202) (202)
adjustment (net of
tax effect)
---------------
Comprehensive income - - 400
--------- ----------- ----------- --------------------- ---------------
Balance at 31 30,500 1,739 617 (18) 2,338
December 2000
Net income - - 1,211 - 1,211
Foreign currency
translation
adjustment (net of - - - 123 123
tax effect)
---------------
Comprehensive income - - 1,334
Dividend declared
and paid (101) (101)
------------------------ ----------- --------------------- ---------------
Balance at 31 30,500 $ 1,739 $1,727 $ 105 $ 3,571
December 2001
======================== =========== ===================== ===============
See accompanying notes.
EXB-5
DAMIANEX S.A.
STATEMENTS OF CASH FLOWS
(amounts in columns expressed in thousands)
Year ended Year ended (Unaudited) (Unaudited)
December 31, December 31, 3 month 3 month
2000 2001 period period
ended ended
March 31, 2001 March 31, 2002
--------------------------------------------------------------------------
Operating Activities
Net income $ 602 $ 1,211 $ 120 $ 265
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation 49 258 51 68
Bad debt provision 45 218 54 14
Deferred income tax benefit (2) (25) (75) (8)
Gain on disposal of fixed assets (6) (14) - (2)
Changes in operating assets and
liabilities:
Accounts receivable (2,203) (1,387) 353 453
Inventories (3,617) (74) (404) (194)
Prepayments and other (156) 124 (35) (158)
current assets
Trade accounts payable 4,545 (3,085) (2,643) 1,039
Income and other taxes 216 44 121 105
payable
Other 141 199 94 (133)
--------------------------------------------------------------------------
Net Cash provided by (used in)
Operating Activities (386) (2,531) (2,364) 1,449
Investing Activities
Purchase of property and equipment (645) (481) (187) (17)
Proceeds from sale of equipment 35 43 7 -
--------------------------------------------------------------------------
Net Cash used in Investing Activities (610) (438) (180) (17)
Financing Activities
Proceeds from short-term borrowings 5,303 8,012 3,425 2,561
Repayments of short-term borrowings (1,717) (5,303) (1,220) (5,869)
Dividends paid - (101) - -
--------------------------------------------------------------------------
Net Cash provided by (used in)
Financing Activities 3,586 2,608 2,205 (3,308)
--------------------------------------------------------------------------
Net Increase (decrease) in cash and 2,590 (361) (339) (1,876)
cash equivalents
Cash and cash equivalents at beginning 98 2,688 2,688 2,327
of period
--------------------------------------------------------------------------
Cash and cash equivalents at end of $ 2,688 $ 2,327 $ 2,349 $ 451
period
==========================================================================
Supplement cash flow information:
Interest paid $ 397 $ 447 $ 126 $ 134
Income taxes paid $ 163 $ 391 $ 114 $ 5
See accompanying notes.
EXB-6
DAMIANEX S.A.
NOTES TO FINANCIAL STATEMENT
(amounts in columns expressed in thousands)
1. Organization and Description of Business
The business "Damianex" was originally organized as a partnership ("the
Partnership") during 1991. Damianex S.A. (the "Company", "S.A.") was established
on December 10, 1998 as a Polish Joint Stock Company. The Company started
trading activities on May 21, 1999, when inventories were transferred to the
Company from the Partnership in exchange for cash. The Partnership ceased to
exist during 2000. The Company's main activities are the wholesale of alcoholic
(mainly beer) and non-alcoholic beverages. The Company has approximately 600
employees and 11 branch offices, which are located throughout south-eastern
Poland. The Company's headquarters are located in Lancut, Poland and all
of the Company's operations are conducted within the boundaries of Poland.
Pursuant to Polish statutory requirements, Damianex S.A. may pay annual
dividends, based on their audited Polish statutory financial statements, to the
extent of their retained earnings as defined. At December 31, 2001,
substantially all retained earnings were available for payment of dividends.
2. Accounting Policies
The significant accounting policies and practices followed by the Company are as
follows:
Basis of Presentation
The Company maintains its books of account and prepares its statutory financial
statements in Polish zloties (PLN) in accordance with Polish statutory
requirements and the Accounting Act of September 29, 1994. The accompanying
financial statements have been adjusted to reflect accounting principles
generally accepted in the United States ("US GAAP").
In the opinion of Company management, the unaudited financial statements as of
and for each three month period ended March 31, 2001 and 2002 include all
adjustments necessary to present financial position, results of operations and
cash flows in accordance with US GAAP. Such adjustments are of a normal
recurring nature. The results of operations for the three month period ended
March 31, 2002 are not necessarily indicative of the results for the entire year
ended December 31, 2002.
Foreign Currency Translation and Transactions
The accompanying financial statements have been prepared in US Dollars.
The Company's functional currency is the local currency-Polish Zloty. Assets
and liabilities are translated to US Dollars at the exchange rate in effect at
each year end. Income statement accounts are translated to US Dollars at the
average rate of exchange prevailing during the year. Translation adjustments
(net of taxes) arising from the use of differing exchange rates from period to
period are included as a separate component of stockholders' equity. Gains and
losses from foreign currency transactions are included in net income for the
period.
The exchange rate used on zloty denominated transactions and balances for
translation purposes as of December 31, 2000 and 2001 for one US dollar was 4.14
PLN and 3.98 PLN respectively. As of April 22, 2002, the rate had changed to
4.04 PLN.
The exchange rate used on zloty denominated transactions and balances for
translation purposes as of March 31, 2000 and 2001 for one US dollar was 4.10
PLN and 4.13 PLN respectively. As of August 15, 2002, the rate had changed to
4.16 PLN.
EXB-7
DAMIANEX S.A.
NOTES TO FINANCIAL STATEMENTS
(amounts in columns expressed in thousands of USD)
Property, Plant and Equipment
Property, plant and equipment are recorded at cost, less accumulated
depreciation. Depreciation is provided using the straight-line method over the
estimated useful lives of the assets. Depreciation periods are as follows:
Type Depreciation life in years
- ---------------------------------------------- -------------------------------
Land -
Buildings 25-40
Machinery and Equipment 2-5
Transportation Equipment 2-5
Other 2-7
The Company periodically reviews property, plant and equipment, when indicators
of impairment exist and if the value of the asset is impaired, an impairment
loss is recognized. The Company recognizes impairment losses on long-lived
assets in the event the net book values of such assets exceeds the future
undiscounted cash flows attributable to such assets. No such impairment
adjustments have been recorded by the Company.
Revenue Recognition
Revenue is recognized when goods have been delivered to customers in accordance
with United States Securities and Exchange Commission Staff Accounting Bulletin
101. Sales are presented net of sales returns, customer discounts and sales
taxes.
Inventories
Inventories are stated at the lower of cost (first-in, first-out method) or
market value. Inventories are comprised primarily of beer and non-alcoholic
beverages. The Company has not experienced significant losses from spoilage or
obsolescence.
Cash and Cash Equivalents
Short-term investments that have a maturity of three months or less at the date
of purchase are classified as cash equivalents. All of the amounts were located
in bank accounts in Poland at December 31, 2001 and 2000 and March 31, 2001 and
2002.
Estimates
The preparation of financial statements in conformity with US GAAP requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results may differ from
those estimates and such differences may be material to the financial
statements.
Income Taxes
The Company computes and records income taxes in accordance with the liability
method.
Comprehensive income
Comprehensive income, is defined as all changes in equity during a period except
those resulting from investments by owners and distributions to owners.
Comprehensive income includes net income adjusted by, among other items, foreign
currency translation adjustments. The foreign translation gains and losses on
the translation from Polish zloties to U.S. dollars are classified as a separate
component of the stockholders' equity as "accumulated other comprehensive income
(loss)". Such adjustments were the only items effecting accumulated other
comprehensive income or loss in 2001 and 2002 interim periods.
During the period ended December 31, 2001, the Company incurred foreign currency
translation gains of $123,000 (net of tax effect) and reported this amount as
part of the accumulated comprehensive income in stockholders' equity of
$105,000. The total of the accumulated other comprehensive income consists of
currency translation adjustments
EXB-8
DAMIANEX S.A.
NOTES TO FINANCIAL STATEMENTS
(amounts in columns expressed in thousands of USD)
($12,000 net loss, net of taxes) and adjustments from discontinuing
hyper-inflationary accounting for assets purchased prior to January 1, 1998
($117,000 gain, net of taxes)
Employee benefits
The Company is required pursuant to Polish labor laws, to pay a bonus of one
month's salary to employees upon retirement. The estimated liability for these
benefits is accrued on a current basis. The Company also accrues for vacation
pay.
Recently issued accounting pronouncements
In June 2001, the Financial Accounting Standards Board (FASB) released SFAS 141
"Business Combinations". This Statement requires that combinations be accounted
for by a single method - the purchase method. This Statement also requires among
other things, separate recognition of intangible assets apart from goodwill if
they meet the prescribed criteria. The provisions of this Statement apply to all
business combinations initiated after June 30, 2001.
In June 2001, the FASB released SFAS 142 "Goodwill and other intangible assets".
This Statement addresses financial accounting and reporting for acquired
goodwill and other intangible assets and supersedes APB Opinion No. 17,
Intangible Assets. It addresses among other things, how intangible assets that
are acquired individually or with a group of other assets (but not those
acquired in a business combination) should be accounted for in financial
statements upon their acquisition. The provisions of this Statement are required
to be applied starting with fiscal years beginning after December 15, 2001.
The Company does not anticipate that these two statements will have a material
effect on its financial statements.
In August 2001, the FASB released SFAS 144 "Accounting for the Impairment or
Disposal of Long-Lived Assets". This standard supersedes SFAS 121 "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be disposed
of". This statement removes goodwill from its scope, (addressed in SFAS 142) and
addresses long-lived assets to be held and used, to be disposed of other than by
sale and to be disposed of by sale. The provisions of this statement are
required to be applied starting with fiscal years beginning after December 15,
2001. The Company does not anticipate that this statement will have a material
effect on its financial statements.
3. Property, Plant and equipment
Property, plant and equipment, presented net of accumulated depreciation in the
balance sheets, consists of:
December 31, December 31, (Unaudited) (Unaudited)
2000 2001 March March
31, 2001 31, 2002
--------------------------------------------------------------------------
Land $ 78 $ 87 $ 84 $ 84
Buildings 738 799 785 804
Machinery and equipment 57 86 66 95
Transportation equipment 575 878 688 870
Other 148 179 160 192
--------------------------------------------------------------------------
1,596 2,029 1,783 2,045
Less accumulated
depreciation 226 479 284 548
--------------------------------------------------------------------------
Property, plant and
equipment, net $1,370 $1,550 $1,499 $1,497
==========================================================================
EXB-9
DAMIANEX S.A.
NOTES TO FINANCIAL STATEMENTS
(amounts in columns expressed in thousands of USD)
4. Allowance for Doubtful Accounts
Changes in the allowance for doubtful accounts were as follows:
Year ended Year ended (Unaudited) (Unaudited)
December 31, December 31, 3 month 3 month
2000 2001 period ended period ended
March 31, 2001 March 31, 2002
----------------------------------------------------------------------
Balance, beginning of year $10 $ 55 $ 55 $273
Provision for doubtful accounts 45 218 54 14
----------------------------------------------------------------------
Balance, end of year/period $55 $273 $109 $287
======================================================================
5. Short-term bank loan and overdraft facilities
During 2000, the Company entered into two overdraft facilities that were
denominated in foreign currencies. These were: 4,707,900 Swiss Francs (CHF)
(increased to CHF 8,744,000 Swiss Francs at March 31, 2001 (unaudited)) (secured
by an authorization to the Company's current bank account and the cession of
rights to an insurance agreement, with an interest rate of 3 months CHF LIBOR)
and a $1,220,000 USD facility which was secured with a bill of exchange, cession
of rights to an insurance agreement and take-over rights in regards to inventory
and fixed assets. The interest rate applied amounted to 6 months USD LIBOR plus
1%. The Company also opened a 5,000,000 Polish Zloty (PLN) overdraft facility,
secured by cession of rights to an insurance agreement, bill of exchange and
take-over rights to vehicles. The interest rate applied was WIBOR. Outstanding
amounts follow:
(Unaudited)
December 31, 2000 March 31, 2001
Swiss Franc (CHF), maximum available CHF 4,708 and CHF
8,744(unaudited) respectively $2,876 $5,056
USD overdraft, maximum available $1,220 1,220 -
Polish Zloty (PLN), maximum available PLN 5,000 and
10,055(unaudited) respectively 1,207 2,452
------------------------------------------------
Total $5,303 $7,508
================================================
During 2001, all outstanding overdraft facilities as at 31 December 2000 were
repaid. A new overdraft facility was acquired for 4,000,000 Swiss Francs (CHF)
which was secured by the Company's inventories. The interest rate was set at 3
month CHF LIBOR plus 1.8%. The other overdraft facilities opened in 2001 were as
follows: 18,000,000 Polish Zloty (PLN), which was secured by the Lancut
premises, and authorization to the Company's bank accounts and inventories. The
interest rate applied was 1 month WIBOR plus 0.7%; 10,000,000 PLN which was
secured with authorization to the Company's bank accounts and take over rights
of Company inventories, interest rate at 1 month WIBOR + 2%. Outstanding amounts
follow:
December 31, 2001 (Unaudited) March 31, 2002
Swiss Franc (CHF), maximum available CHF $1,191 $ -
4,000 ($ 2,384)
Polish Zloty (PLN), maximum available PLN 4,312 4,232
18,000 ($ 4,515)
Polish Zloty (PLN), maximum available PLN 2,509 472
10,000 ( $ 2,509)
--------------------------------------------------------------
Total $8,012 $4,704
==============================================================
The weighted average interest rate on short-term borrowings at December 31, 2001
and 2000 was approximately 14.33%, and 14.55% respectively.
EXB-10
DAMIANEX S.A.
NOTES TO FINANCIAL STATEMENTS
(amounts in columns expressed in thousands of USD)
Income tax expense is summarized below:
Year ended Year ended (Unaudited) (Unaudited)
December 31, December 31, 3 month 3 month
2000 2001 period ended period ended
March 31, 2001 March 31, 2002
-------------------------------------------------------------------------------
Current Polish $298 $545 $ 157 $41
income tax expense
Deferred Polish (2) (25) (124) 47
income tax benefit
-------------------------------------------------------------------------------
Income tax expense $296 $520 $ 33 $88
===============================================================================
Total income tax expense varies from expected income tax expense computed at
Polish statutory rates (30% in 2000 and 28% in 2001 and 2002) as follows:
Year ended Year ended (Unaudited) (Unaudited)
December 31, December 31, 3 month 3 month
2000 2001 period ended period ended
March 31, 2001 March 31, 2002
---------------------------------------------------------------------------
Tax at Polish statutory rate $269 $485 $ 43 $ 99
Increase in deferred tax 10 5
asset valuation allowance 10 41
relating primarily to bad
debt expense
Permanent differences between
financial and taxable income 17 (6) (20) (16)
---------------------------------------------------------------------------
Income tax expense $296 $520 $ 33 $ 88
===========================================================================
EXB-11
DAMIANEX S.A.
NOTES TO FINANCIAL STATEMENTS
(amounts in columns expressed in thousands of USD)
Significant components of the Company's deferred tax asset is as follows:
Year ended Year ended (Unaudited) (Unaudited)
December 31, December 31, 3 month 3 month
2000 2001 period period
ended ended
March 31, March 31,
2001 2002
-------------------------------------------------------------------------
Deferred tax liabilities:
Unrealized foreign exchange gains $ - $ (12) $ - $ -
Prepaid expenses (14) - (24) (44)
-------------------------------------------------------------------------
$ (14) $ (12) $ (24) $ (44)
Deferred tax assets:
Differences on fixed assets
resulting from hyperinflationary $ 164 $ 172 $ 182 $ 180
adjustments and in the tax base
Allowance for doubtful accounts 17 76 31 80
receivable
Unrealized foreign exchange losses 11 - 39 -
Accrued expenses and deferred income - 8 35 41
-------------------------------------------------------------------------
178 244 263 257
Less valuation allowance (12) (53) (22) (58)
-------------------------------------------------------------------------
Net deferred tax asset $ 166 $ 191 $ 241 $ 199
=========================================================================
Consisting of:
Current deferred tax asset $ 2 $ 19 $ 59 $ 19
Non-current deferred tax asset 164 172 182 180
-------------------------------------------------------------------------
$ 166 $ 191 $ 241 $ 199
=========================================================================
Valuation allowances are provided when it is more likely than not that some or
all of the deferred tax assets will not be realized in the future. These
evaluations are based on expected future taxable income and expected reversals
of the various net deductible temporary differences. The valuation allowance
relates primarily to the future tax deductibility of the allowance for bad debts
which may not be deductible under local statutes.
In November 1999, legislation was enacted which reduced the corporate income tax
rates in Poland effective January 1, 2000. The tax rate of 32% was reduced to
30% in 2000, 28% in 2001 and 2002, 24% in 2003 and 22% thereafter.
The Company's tax liabilities (including corporate income tax, Value Added Tax
(VAT), social security and other taxes) may be subject to examinations by Polish
tax authorities for up to five years from the end of the year the tax is
payable. As the application of tax laws and regulations and transactions are
susceptible to varying interpretations, amounts reported in the financial
statements could be changed at a later date upon final determination by the tax
authorities.
7. Financial Instruments, Commitments and Contingent Liabilities
Financial Instruments With On-Balance Sheet Risk and Their Fair Values
Financial instruments with on-balance sheet risk include cash and cash
equivalents, accounts receivable, certain other current assets, trade accounts
payable, bank loans and overdraft facilities, and other payables. These
financial instruments are shown separately in the balance sheets and their
carrying values approximate their fair values. This is because substantially all
of these financial instruments have short maturity periods or carry interest at
rates that approximate current market rates. The Company does not utilize
financial derivatives such as foreign currency contracts or interest rate swaps.
EXB-12
DAMIANEX S.A.
NOTES TO FINANCIAL STATEMENTS
(amounts in columns expressed in thousands of USD)
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentration of
credit risk consist primarily of accounts receivable from Polish companies. The
Company restricts temporary cash investments to financial institutions with high
credit standing. Credit is given to customers only after a thorough review of
their credit worthiness. The Company does not normally require collateral with
respect to credit sales. As of December 31, 2000 and 2001 and March 31, 2001 and
2002, the Company had no customers, which accounted for more than ten percent of
outstanding receivables. The Company has not experienced significant credit
losses in the past.
Currency Risk
A portion of Company's bank loans and financial costs are expected to continue
to be denominated in or indexed to other non-Polish denominated currencies. By
contrast, all of the Company's revenue is denominated in Polish zloty. Any
devaluation of the Polish zloty against the non-Polish denominated currency that
the Company is unable to offset through price adjustments will require the
Company to use a larger portion of its revenue to service its non-zloty
denominated obligations.
Supply contracts
The Company has various agreements covering its sources of supply. Either party
on relatively short notice may terminate some of them. Thus, there is a risk
that some portion of the Company's supply of products could be curtailed at any
time. Management believes that if these arrangements were terminated that
alternative suppliers would be found without significant disruption to the
business.
Lease Obligations
The Company has cancelable rental agreements for a number of the branch office
locations. Monthly rentals range from approximately $4,000 to $8,000. All the
branch office leases can be terminated by either party within two to three
months.
The rental expense incurred under operating leases during 2000, 2001 and 2002
was as follows:
Year ended Year ended December (Unaudited) (Unaudited)
December 31, 31, 2001 3 month 3 month
2000 period ended period ended
March 31, 2001 March 31, 2002
-----------------------------------------------------------------------------------------
Rent expense $ 246 $ 431 $76 $98
=========================================================================================
8. Related party transactions
In January 2000, the Company acquired the following business operating assets
from the Partnership for cash consideration, which was equivalent to the
underlying carrying value in the accounts of the Partnership.
2000
----------------
Vehicles $ 156
Computers $ 10
Other $ 12
Inventory $ 60
EXB-13
DAMIANEX S.A.
NOTES TO FINANCIAL STATEMENTS
(amounts in columns expressed in thousands of USD)
9. Subsequent Events
On April 22, 2002, the shareholders of the Company sold one hundred percent of
their shares to Central European Distribution Corporation ("CEDC"), a United
States company and to its wholly-owned subsidiary Carey Agri International
Poland. The sales price consisted of approximately $7,138,000 of cash and
152,996 unregistered newly issued common shares of CEDC, with a 1-year
restriction on sale.
On April 13, 2002, a dividend of $740,000 was declared with respect to prior
earnings. The dividend is to be paid over five consecutive months, starting May
2002.
EXB-14