-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EIQ5dNUk0ZIlyhSYRxmTZhZuYIpp0TFgmUPJbxEDIx4BQ2XZo8fiW4EDbZzaZbqD RxTkjMQTUGoS5fobQXgM6w== 0001077357-00-000177.txt : 20000522 0001077357-00-000177.hdr.sgml : 20000522 ACCESSION NUMBER: 0001077357-00-000177 CONFORMED SUBMISSION TYPE: 10KSB/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000519 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CUIDAO HOLDING CORP CENTRAL INDEX KEY: 0001018765 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-BEER, WINE & DISTILLED ALCOHOLIC BEVERAGES [5180] IRS NUMBER: 650639616 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB/A SEC ACT: SEC FILE NUMBER: 333-43457 FILM NUMBER: 640345 BUSINESS ADDRESS: STREET 1: 3201 W GRIFFIN STREET 2: STE 204 CITY: FT LAUDERDALE STATE: FL ZIP: 33312 BUSINESS PHONE: 9549641060 MAIL ADDRESS: STREET 1: 3201 W GRIFFIN STREET 2: STE 204 CITY: FT LAUDERDALE STATE: FL ZIP: 33312 10KSB/A 1 ANNUAL REPORT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-KSB [ x ] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1999 [ _ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from ____________ to ____________ Commission File Number: 333-43497 CUIDAO HOLDING CORP. -------------------------------------------------------------- (Exact name of small business issuer as specified in its charter) FLORIDA 65-0639616 - ------------------------------------------ ----------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2951 SIMMS STREET HOLLYWOOD, FL 33020-1510 - ------------------------------------------- ----------------------- (Address of principal executive offices) (Zip Code) Issuer's telephone number: (954) 924-0047 Securities to be registered under Section 12(b) of the Act: Title of each class Name of each exchange on which registered None None - ----------------------------------- ----------------------------- Securities to be registered under Section 12(g) of the Act: Common Stock, $.0001 par value per share -------------------------------------------------------- (Title of class) Copies of Communications Sent to: Mintmire & Associates 265 Sunrise Avenue, Suite 204 Palm Beach, FL 33480 Tel: (561) 832-5696 - Fax: (561) 659-5371 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 --------- --------- Check if no disclosure of delinquent filers in response to Item 405 of Regulation S_B is contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10KSB or any amendment to this Form 10_KSB. [X] Issuer's revenues for its 1999 fiscal year were $125,057. Of the 2,402,175 shares of voting common of the registrant issued and outstanding as of December 31, 1999, 830,175 shares are held by non-affiliates. Because of the absence of an established trading market for the voting stock, the registrant is unable to calculate the aggregate market value of the voting stock held by non-affiliates as of a specified date within the past 60 days. 2 Item 1. Description of Business General Cuidao Holding Corp. (the "Company") was incorporated in Florida on February 12, 1996. The Company is a development stage corporation which was formed to participate in specific niche segments of the United States alcoholic beverage market by acting as an importer and supplier of a variety of beers, wines and spirits. Industry The alcoholic beverage industry in the United States consists of suppliers, wholesalers and retailers. Over the past five years there has been increasing consolidation at the supplier, wholesaler and, in certain markets, retailer tiers of the alcoholic beverage industry. During the 1990s, the overall per capita consumption of alcoholic beverage products in the United States declined slightly; however, consumption of table wine, in particular varietal table wine, and imported beer has increased during the period. The following table sets forth the industry unit volume for shipments of alcoholic beverage products in the three product lines in which the Company intends to participate in the United States. Data shown is for the five years ended December 31, 1997: Product 1997 1996 1995 1994 1993 ------- ----- ---- ---- ---- ---- Wine(1)(2) 213.7 208.9 197.5 193.0 188.6 Imported Beer(3) 194.9 171.8 156.0 144.5 127.4 Distilled Spirits(2) 138.7 138.8 137.3 140.0 144.2 - --------------- (1) Includes domestic and imported table, sparkling and dessert wine, wine coolers and vermouth. (2) Units are in millions of 9-liter case equivalents (2.378 gallons per case). (3) Units are in millions of 2.25 gallon cases. Wine. The United States wine industry consists of the domestic and foreign (most notably French and Italian) production of three basic wine groups.These groups are table wines (wines consumed with a meal), dessert wines (usually sweet wines consumed after a meal) and sparkling wines (champagnes). From 1993 to 1997, shipments of wine in the United States increased at an average compound annual growth rate of 3%. In 1997, wine shipments increased by 2% when compared to 1996, led by increased shipments of table wine. Table wine accounted for approximately 88% of the total United States wine market in 1997. The Company believes that Americans now consume more 3 table wine for a number of reasons including favorable news about the health benefits of red wine, favorable United States dietary guidelines, new packaging regulations and a strong economy. Beer. Beer has the largest share of the United States alcoholic beverage market with a total of 179,600,000 31-gallon barrels being sold in the United States in 1998. Imported beer sales were up 15.1% in 1998, to 16,316,000 31-gallon barrels. This rise in imported beer sales follows a 14.1% increase in 1997 and a 10.3% climb in 1996. Spirits. Although shipments of spirits in the United States declined at an average compound annual growth rate of 1% from 1993 to 1997, certain types of spirits, such as vodka, rum, tequila, brandy and prepared cocktails have increased. In 1997, shipments of spirits declined by 0.5% from 1996. The Company believes shipments of certain types of spirits may have been negatively affected by concerns in the United States about drinking and driving and a shift in consumer preference toward lower alcohol or lighter tasting products like imported beer and varietal table wines. Business Strategy The Company's strategy is to become a leading importer, developer, manager and distributor of a portfolio of brands of beer, wines and spirits which serve special niche alcoholic beverage markets. Key elements of the Company's strategy include making selective product acquisitions in the alcoholic beverage industry to expand its product portfolio; improving market position and capitalizing on growth trends within the industry; improving operating efficiencies through reduced product and organizational costs; capitalizing and improving on strong alliance and wholesaler relationships; developing brand identification for its portfolio of products; and expanding distribution into new markets and increasing penetration of existing markets. Product Portfolio The Company's current product portfolio encompasses three principal product lines: imported beer, wine and spirits. Imported Beer. The Company's imported beer products currently consist of four crafted beers brewed for the Company by the Tsingtao Brewery No. 3 in the People's Republic of China. The four beer products are a draft, light, extreme and amber beer which are bottled and sold under the Company's own "Red Dragon" label. The Tsingtao Brewery No. 3 is located at the foot of the Tin Zhu Mountains in Shangdong Province. In producing its beer products, the brewery utilizes a unique patented process which is designed to eliminate all impurities from the water used in the brewing process, thus creating a beer which taste pure and is clear. The brewing process utilized by the Tsingtao Brewery No. 3 has earned the brewery a number of national quality awards in China such as the Medal of Most Popular with 4 Consumers, the Medal of Beer Trusted by consumers (issued in the First Light Industry Fair), the title of Qingdao High Quality Product, and the title of National Ten Best Stars. The owner and operator of Tsingtao Brewery No. 3 is Tsingtao, China's most famous beer producer. Tsingtao's regular beer product, "Tsingtao Beer", is the number one Chinese Beer imported in the United States and ranks among the top 50 imported beers (out of over 600 brands) in the United States. Wine. The Company's wine portfolio consists of two current categories of wine. One is distributed for maximum earning potential throughout the State of Florida while the other has been obtained for the purpose of nationwide importation and subdistribution rights. Wine that was originally targeted during 1998 for mass distribution became a secondary target under management's direction in 1999. With the ability to import and also distribute in the state of Florida in 1999, management focused its efforts on the Bordeaux Region Chateaus and wine from the Beaune area of France, which is know for it's top of the line Burgandy wines. The company's portfolio of wines currently consists of wines from a few of the following producers: Maison Riviere Fils, Savas, Sa Cave Du Haut Poitou and Patriarche. In addition, the company represents many to numerous to list petite chateaus from throughout the bordeaux region. During 1999, the Company also imported South African wines from Laibach Vineyards. Met with uncertainty from the retailing community, as to the demand for South African wines , management is currently evaluating this part of it's portfolio. The Company sources its wine products through a network of producers and negotiants. Through its active role in the sourcing decision, the Company makes its own determination as to the quality and price characteristics of the wines that the Company adds to its product portfolio, and thereby is assured of its ability to offer wines of quality and value. Spirits. During 1999, with insufficient working capital available, the company was unable to properly develop its spirits portfolio. The Comapany with the appointment of it's nationwide distribution contract by F.X. De Beukelaer in 1998 still has the rights to import, distribute and develop those lucrative premium spirits n the market place. In addition to its multiple flavored fruit vodka products, DeBeukelaer produces vodka, gin and other prepackaged cocktails. Management, upon obtaining sufficient capitalization, will enter the spirits marketplace after obataining ATF approvals in the fourth (4) quarter of 2000. Marketing and Distribution Presently, the primary goal of the Company's marketing strategy is to develop a broad regional distribution network and to develop brand awareness for its products. The Company expects to sell its products to independent beverage distributors and wholesalers for resale to retailers who sell alcoholic beverages to the consumer. Currently, the Company has 5 contractual relations with seven independent wholesale distributors covering four states and 10 Caribbean Islands. Independent wholesale distributors (all of whom may carry other beverage products that compete with the Company's products) are formally appointed by the Company in a variety of ways throughout the states in which the Company does business. There are variations in appointment procedures which are directly attributable to state alcoholic beverage laws mandating territorial appointment (some exclusive and some non-exclusive), restricting in various ways the Company's ability to terminate or not renew the services of wholesale distributors and providing varying periods and methods of resolving contractual disputes. Generally, these state laws vary from a requirement that good cause be shown for the action taken to a requirement that compensation be paid to the terminated distributor for the fair market value of the lost business. In each of its targeted markets, the Company attempts to select its distributors based on a number of factors including: (i) market strength measured in terms of financial resources and number and size of accounts served, (ii) commitment to expend resources to educate consumers and retailers about the quality and tastes of the Company's beer, wine and spirits products, (iii) reputation for customer service, including the ability to frequently service retail accounts and to merchandise the Company's products aggressively and (iv) commitment to community involvement. The Company's marketing and sales program calls for the Company to pursue promotional strategies that are designed to create strong brand awareness built on quality products, service to distributors and product imaging. The Company believes that grass root promotion, word-of-mouth reputation and an identifiable and favorable price to quality value quotient are the principal ements of influencing consumer product selection. As a result, the Company anticipates devoting considerable effort, through tastings and distributor visits, to educating distributors and consumers as to the distinctive qualities of its products. The Company will participate in localized promotions designed to enhance the reputation of the Company and its products. The Company's sales and marketing staff will focus principally on distributor training and assistance, local promotions, and programs for on-premises consumer and retailer education. To build brand recognition in its target markets, the Company anticipates sponsoring or participating in cultural and community events, music and other entertainment performances, craft and imported beer festivals and cuisine events, and sporting events. The Company believes that an important function of its sales and marketing staff will be to elevate distributor and retailer awareness of the distinctive qualities of the Company's beer, wine and spirits products. This will be accomplished primarily through direct contact with restaurants, pubs, taverns and grocery chains, and by supplying distributors with distinctive point-of-sale materials, including neon signs, posters, table tents, coasters, calendars, glassware and promotional flyers. The Company's sales staff will meet frequently with distributor sales representatives to jointly visit retail accounts to educate retailers about the quality of the Company's products. This, in turn, allows retailers to assist in educating consumers. The Company will use distinctive graphics in its packaging and marketing materials designed to set the Company's products apart and promote strong brand recognition. To differentiate its beer products, the Company plans to sell and distribute a line of T- Shirts, sweatshirts, jackets, hats and similar products emblazoned with the Company's Red Dragon logo and graphics. The Company will also utilize direct mail, distributing a full color merchandise catalogue to the Company's distributors and retailers. 6 Competition The Company competes in niche segments of the United States alcoholic beverage industry. The Company believes that presently its beer products compete with imported Asian beers, its wine products compete with domestic and imported wines that generally sell in the range of $5.00 to $8.00 per 750 ml bottle, and its spirits products compete with a wide range of other spirits products such as vodka, gin and prepared cocktails. The principal competitive factors affecting the market for the Company's products include product quality and taste, packaging, price, brand recognition and distribution capabilities. The Company believes that its products will compete favorably overall with respect to these factors. However, absolutely no assurance can be given that the Company or its products will be able to compete successfully against current and future competitors based on these and other factors. The Company competes with a variety of importers and suppliers of alcoholic beverage products, many of whom have significantly greater financial, management, administrative, distribution and marketing resources and a higher level of brand recognition than the Company. With respect to its Red Dragon brand, the Company anticipates competition from Monarch Import Co., Inc. the importers and distributors of China's most famous brand, Tsingtao Beer. With respect to its wine and spirits products, the Company expects to compete with major importers, distributors and suppliers of domestic and foreign wines such as Allied Domecq Spirits and Wine and Canandaigua Brands, Inc. and Brown-Forman Corporation. The Company anticipates increased competition in all of the product markets that it serves. Increased competition could result in price reductions, reduced margins and loss of market share, all of which could have a material adverse effect on the Company. Government Regulation The alcoholic beverage industry is highly regulated by federal, state and local laws and regulations. Extensive and complex regulation at the federal and state levels has resulted in what is known as the "three-tier licensing system". At the first tier are manufacturers and importers who are licensed to sell to the second tier, wholesalers. Wholesalers in turn supply the third tier, retailers, who ultimately sell to the public. Each tier is subject to various restrictions on its activities. The Company currently is in the first tier, with plans to enter the second tier as soon as reasonably practical. In addition to the foregoing, federal and state laws and regulations govern trade and pricing practices, permitted and required labeling, advertising, promotion and marketing practices, relationships with distributors and related matters. For example, federal and state regulators require warning labels and signage on the Company's products. The Company has obtained all regulatory permits and licenses necessary to operate its business in the states where the Company's products are to be distributed. Failure on the part of the Company to comply with federal, state or local regulations could result in the loss or revocation or suspension of the Company's licenses, permits or approvals and accordingly could have a material adverse effect on the Company's business. The Company does not expect compliance with such laws and regulations to materially affect the Company's capital expenditures, earnings or competitive position. 7 Trademarks and Distribution Agreements The Company has applied to the United States Patent and Trademark Office (the "PTO") to register its Red Dragon mark. On February 9, 1998, the Company received notification from the PTO that a notice of opposition to the Company's application for registration of its Red Dragon mark had been filed by Desnoes & Geddes, Ltd., a Jamaican corporation ("Desnoes & Geddes") which distributes beer products under the brand names of Dragon Stout and Midnight Dragon. The Desnoes & Geddes notice of opposition claimed that the Company's Red Dragon mark is confusingly and deceptively similar to the Dragon Stout and Midnight Dragon names and therefore the purchasing public is likely to be confused into wrongly believing that the Company's goods originate with, or are sponsored by, Desnoes & Geddes. On June 1, 1998, the Company responded to the Desnoes & Geddes notice of opposition in a manner designed to cause the PTO to determine that the Desnoes & Geddes notice of opposition is without merit and that the Company's Red Dragon mark should be registered. As of the date of this report, no determinations have been made by the PTO with respect to this matter. Should the Company be unable to register its Red Dragon mark, then the Company may be required to obtain some form of license or other proprietary right of third parties from Desnoes & Geddes in connection with the use of the Company's Red Dragon mark. No assurance can be given that any licenses or arrangements required for the use of the Red Dragon mark would be made available on terms acceptable to the Company, if at all. The inability of the Company to use its Red Dragon mark may adversely affect the Company's beer distribution business. Further, the inability of the Company to use its Red Dragon mark in connection with its beer business may require the Company to develop and implement alternative trademarks for its beer business, which may require the Company to incur substantial costs related to such development and implementation. The Company believes that an important aspect of its business will relate to the ongoing development of its own house brands. As such, the Company expects to pursue registration of additional trademarks whenever possible and to oppose vigorously any infringement of its marks. As a result of the foregoing, the Company may in the future receive communications from other parties asserting that the Company is infringing certain trademark rights of others. No assurance can be given that any such claims will not result in protracted and costly litigation and that damages for infringement will not be assessed. Further, there can be no assurance that any of the Company's trademarks will not be infringed upon or designed around by others, or that the Company can adequately prosecute or defend any infringements. In addition to products that may be sold under trademarks owned by the Company, the Company also imports and distributes alcoholic beverage products under exclusive distribution agreements with suppliers of such products. Significant agreements currently include (1) a three year import and distribution agreement with Cave du Vignoble Gursonnais appointing the Company the exclusive distributor in North 8 America and the Caribbean Islands of all wine products produced by Cave du Vignoble Gursonnais (which agreement expires in 1999 and automatically renews for additional terms of 10 years each, unless either party gives the other sufficient written notice of non-renewal); (2) a three year import and distribution agreement with Les Chais du Prevot appointing the Company the exclusive distributor in North America and the Caribbean Islands of all wine products produced by Les Chais du Prevot (which agreement expires in 1999 and automatically renews for additional terms of three years each, unless either party gives the other sufficient written notice of non-renewal); (3) a 10 year import and distribution agreement with Vignerons De Buzet appointing the Company the exclusive distributor in the United States (excluding the State of New York) and the Caribbean Islands of all wine products produced by Vignerons De Buzet (which agreement expires in 2007 and automatically renews for additional terms of five years each, unless either party gives the other sufficient written notice of non-renewal); and (4) a five year import and distribution agreement with Godet Freres appointing the company the exclusive distributor in North America and the Caribbean Islands of all champagne products produced by Godet Freres (which agreement expires in 2002 and automatically renews for additional terms of five years each, unless either party gives the other sufficient written notice of non-renewal). In addition, the Company has numerous regional and State of Florida letters of appointment for exclusive distribution of wine produced or exclusively marketed from the following companies or caves, Maison Riviere Fils, Savas, SA Cace Du Haut Poitou, Patriarche (Sovidis) and Laibach Vineyards. These letters of appointment are for one (1) to three (3) year contracts and management will evaluate each brand and it's renewal priorities prior to the expiration of each letter of appointment. Prior to their expiration, the foregoing referenced agreements may be converted into non- exclusive agreements if the Company fails to meet certain performance criteria. The Company believes that there is a substantial likelihood that it will fail to meet the performance criteria established in its agreements with Cave du Vignoble, Les Chais du Prevot and Godet Freres, and that such agreements will convert to non-exclusive agreements. The Company believes that given the current development-stage nature of its business, the conversion of the foregoing referenced agreements into non-exclusive agreements will not have a materially adverse effect on the Company's business and its prospects. Employees As of December 31, 1999, the Company employed five persons other than its executive officers. One of these three persons is Robert K. Walker, whom the Company considers to be a key employee. Robert K. Walker has been General Manager of the Company since its inception and served as the Company's President from the Company's inception to March 1997. From December 1991 to January 1996, Mr. Walker was President of Leasing Associates, a Hollywood, Florida based company engaged in store site development for Food Lion, Inc. Also, from 1993 through 1995, Mr. Walker served as President of Never Burn, Inc., a Hollywood, Florida based suncare products distributor. Mr. Walker holds a BA degree from Virginia Wesleyan College. 9 Item 2. Description of Property In January 1999, the Company acquired an approximate 9,600 square foot office/warehouse facility in an area of Hollywood, Florida known as the South Florida Industrial Park. The acquired facility is approximately 25 years old and is considered to be in excellent condition. The facility is adequately covered by insurance. The Company acquired the facility from Sebastiano and Nunzia Salemi, a husband and wife ("Sellers") for a total purchase price of $575,000. For purposes of financing the purchase of the facility, the Company entered into two separate promissory notes. The first promissory note was entered into by and between the Company and Sandra Cooper, Lake Worth, Florida, in the principal amount of $350,000 (the "First Note"). The second promissory note was entered into by and between the Company and the Sellers in the principal amount of $130,000 (the "Second Note"). The First Note bears interest at a rate of 12.5% per annum for three years. The First Note provides for interest only monthly payments of $3,645.83, with the balance of $353,645.84 (assuming no prepayments) due and payable on February 1, 2002. The First Note is secured by a first mortgage and security agreement against the facility and in favor of Sandra Cooper. The Second Note bears interest at a rate of 12% per annum for two years. The Second Note provides for principal and interest monthly payments of $1,300 per month, with all principal and interest due and payable on January 22, 2001. The Second Note is secured by a second mortgage against the facility and in favor of the Sellers. As of December 31, 1999, 4,800 square feet of the facility previously leased to Laker Airways, Inc remains vacant. In November of 1999, Laker Airways, Inc. defaulted on it's lease obligations, vacated the premises and ceased operations in the United States, to the best of managements knowledge. The facility remains vacant at the time of this writing. Item 3. Legal Proceedings The Company has filed a financial lawsuit against Investors Conceptual Services Incorporated. This action is with reference to non-pyment on the part of Investors Conceptual Services Incorporated, as to funds owed to the Company. The amount of this debt was specified within an obligatory agreement, which was agreed to, by and between the Company and Investors Conceptual Services Incorporated. As of December 31, 1999, the Company had a disputed bill relating to printing charges with Bowne of Los Angeles. As of the date of this filing the Company is in the process of attempting to resolve an equitable settlement with reference to this disputed amount. Upon an unsatisfactory resolvement as to a settlement, the Company anticipates filing an appeal with the appropriate Court in California. Item 4. Submission of Matters to a Vote of Security Holders None 10 Part II Item 5. Market for Common Equity and Related Stockholder Matters. The Company's common stock is traded on the NASD OTC Bulletin Board under the symbol "CDAO". The Company's common stock commenced trading on the OTC Bulletin Board on March 5, 1999. The high and low per share sales price for the common stock for the period commencing March 5, 1999 and ending December 31, 1999, as reported by the OTC Bulletin Board, was $7.00 and $1.00 respectively. The foregoing referenced high and low price quotations represent prices between dealers, without retail mark-up, mark-down or commissions and may not necessarily represent actual transactions. As of December 31, 2000, there were approximately 100 holders of record of the Company's common stock. The holders of the issued and outstanding shares of common stock are entitled to receive dividends when, as and if declared by the Company's board of directors out of any funds lawfully available therefore. The Company has never declared a cash dividend on its common stock. The Board of Directors intends to retain future earnings to finance the development and expansion of the Company's business and does not expect to declare any dividends in the foreseeable future. As of December 31, 1999, the Company used $110,190 of the proceeds from the offering of the Units towards the purchase of an approximate 9,600 square foot office/warehouse facility in an area of Hollywood, Florida known as the South Florida Industrial Park. The Company considers the use of the proceeds towards the purchase of the office/warehouse facility to be a material, but necessary, change in the use of proceeds as described in the Company's prospectus relating to the offer and sale of the Units. The Company believes that acquisition of the office/warehouse facility will assist the Company in its stated objectives of developing a distribution network (the Company's ability to inventory and warehouse its products will allow it to more timely meet the delivery requirements of its distributors) and realizing certain operating efficiencies and product cost reductions. Item 6. Management's Discussion and Analysis or Plan of Operation General The Company's current portfolio of beers consists of the following line of beers produced in the People's Republic of China by Tsingtao Brewery No. 3, a brewery owned and operated by Tsingtao Brewery Co., Ltd., Red Dragon Draft, Red Dragon Xtreme, Red Dragon Light, and Red Dragon Amber. The Company's marketing strategy for its line of Chinese beer is to first introduce its Red Dragon product line to Asian-theme restaurants (primarily Chinese restaurants), stressing the fact that the Company's line of Chinese beer products will provide the restaurateur with a product that he or she currently does not have, which is a diversified light, amber and draft Chinese beer line. The Company's Red Dragon Xtreme is being well received by the consumer as the product is being rolled out to the off premise retail stores and retail chains. With its wine products, the Company's has begun to successfully introduce it's imported wines throughout the state of Florida. Regional state wide distribution on the East coast should 11 begin in the second and third quarters of the year 2000, through distributors and sub-distributors. The Company's marketing and sales strategy with respect to its wine products will be to provide the off premise merchandise market with quality products at a reasonable cost to the retailer and the consumer. Some of the Company's wine portfolio suppliers include Patriarche, Cave Du Haut Poitou, Savas and Maison Riviere. The company has had moderated successs inits introduction of its wines imported from South Africa produced Laibach Vineyards. The Company iscurrently awaiting several wine label approvals from the BATF, so that it might begin the roll-out of it's Chinese wine portfolio. The Company has contractural rights to for several spirit products. Upon Government label approval and compliance, which are expected by the third quarter of 2000, these products will begin to be distributed by the Company. During the balance of 2000, the Company plans to expand the number of alcoholic beverage products under its management, as well as increase the number of distribution channels for its products. This expansion may be accomplished by the acquisition of other importers and/or distributors of alcoholic beverage products. These distributors including beer and or wine distributors throughout the East coast. Upon review of suitable acquisitions, Management will diligently pursue and acquire a minimum of two acquisitions per year. Combined with our other product protfolio and the benefits of consolidating expenses, our profit structure can be greatly enhanced. The Company intends on continuing three basic principal objectives: (1) aggressively manage and market its current portfolio of beers, wines and spirits in specific niche markets of the overall alcoholic beverage industry; (2) expand its management and administrative personnel to support its alcoholic beverage product lines; and (3) expand its product line and distribution channels through strategic alliances and/or through acquisitions of other importers and distributors of alcoholic beverage products or through the acquisition of producers of alcoholic beverage products. Results of Operations During the twelve month period ending December 31, 1999, the Company increased its revenues $94,928 or approximately 138%, compared to revenues during the comparable period of 1998. The increased revenues resulted primarily from an increase in sales, which is a direct result of the Company's overall marketing efforts. A portion of the Company's revenues ($37,628) constituted rent from a portion of the Company's new facility, which was leased to an airline. The Company did not own this facility, and, accordingly, did not receive rent as a result of the lease, during the twelve months of 1998. Management believes that continued implementation and expansion of the Company's use of beer distributors and an increase in wine and liquor sales by using a similar method will have a positive result on sales and revenues in the future. The Company is pursuing additional marketing opportunities, which management anticipates will have a positive impact in the future. With reference to the various alcoholic products marketed both on a wholesale basis and as a distributor, profit percentages for various products vary depending on which product is being marketed and depending on which venue it is marketed through; i.e., whether to a wholesaler or marketed directly to retailers by the Company acting in some instances as its own distributor. Usually, beer products marketed to other distributors have approximately 25% to 30% profit, while 12 wine and spirit products should have between 35% to 40% profit. These gross profit margins represent an amount over and above the cost of goods sold including all shipping, freight and duty (U.S. Custom charges). When the Company acts as its own distributor, the gross margins are higher due to the Company capturing the profit margins the distributor adds on to goods which are sold to retailers, which is usually an additional 25% to 30%. Thus on goods sold by the Company, acting as its own distributor will result in a gross profit margins of approximately 45% to 55%. Overhead and cost of operations, office, warehouse, marketing expense and administrative staff, etc., is paid out of the revenues generated through the traditional and/or non-traditional means described above. It is a primary concern of the Company to keep all expenses to as much of a minimum as possible without sacrificing the quality of marketing of any products or any areas which need to be explored. This is why the Company has limited the amount of administrative staff and why many duties which are normally delegated are being performed by management. Essentially the philosophy of management is to be as professional as possible in the marketing of products and establishment of distributors and simultaneously to be frugal as possible with the limited funds it has available. Financial Condition The Company's balance sheet for the period ended December 31, 1999, reflects the acquisition of a new building. Management concluded that in both short and long term, it was more financially prudent to own its own facility than to pay a total rent which was higher than the resulting mortgage. During the fourth quarter of 1999 the Tenant occupying the adjacent space to the Company began experiencing fiancial difficulty and was forced to cease operations in the first part of the year 2000. This has left this side of the building unoccupied, the Company is working to secure a new tenant, but until then the Company has an additional financial hurdle of this shortfall created by this vacancy. Management has concluded, the prudent immediate resolvement is to refinance the building at a more desirable interest rate and terms. This action will result in a lower monthly debt service and not only solve the immediate issue but will greatly enhance the long range outlook. In addition the Company realized during the Fourth Quarter of 1999, that it's Notes receivable and other sums due from Investors Conceptual Services Incorporated. were seriously delinquent. Management upon advisement has written these sums due off it's balance sheet. Management is pursuing the collection of this debt via legal action. This delinquency of repayment to the Company has left the Company with a shortage of working capital in the fourth quarter of 1999 and the first quarter of 2000. Management is diligently seeking resolution to this problem and anticipates finalizing a private placement on the sale of stock thru warrants in the secound quarter of 2000. There is no assurance that management will be successful in raising additional working capital. Management believes that if the Company resolves its working capital shortage, sales and revenues will significantly increase. Liquidity and Capital Resources The Company's products, particularly its beer products, are receiving phenominal market acceptance. Sales growth has been and continues to be constrained by the Company's shortage of working capital. The Company's suppliers require payment at or before time of shipment and the Company's customers do not pay for the products until they receive them. The Company does not 13 have adequate working capital to import sufficient products to meet market demand. At the end of the third quarter 1999, management finalized a distribution alliance with a major wine producer located in Beaune, France. The result of these two credit facilitations will enable the Company to increase revenues and resulting profits. Management is currently seeking a lender and the sale of additional common stock or warrants to sufficiently capitalize the Company's growth plans. Forward-looking Statements This Annual Report on Form 10-KSB contains statements relating to future results, which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements which are other than statements of historical assumptions or facts. Specifically, this report contains forward- looking statements regarding anticipated future sales and revenues and the methods and strategies of increasing those sales and revenues. Actual results may differ materially from those anticipated as a result of certain risks and uncertainties, including but not limited to, management's ability to implement its marketing strategy, the availability of capital through sale of additional common stock or other means, including the availability of products for sale through credit insurance and distribution alliances, changes in general economic conditions, foreign exchange rate fluctuations, competitive product and pricing pressures, the impact of tax increases with respect to alcoholic beverage products, regulatory developments, as well as other risk and uncertainties detailed from time to time in the Company's Securities and Exchange Commission filings. The Company's expectations, beliefs and projections are expressed in good faith and are believed by the Company to have a reasonable basis, including without limitation, data contained in the Company's records and other available data from third parties, but there can be no assurance that management's expectations, beliefs or projections will result, or be achieved, or be accomplished. Item 7. Financial Statements The information called for by this item is indexed on Page F-1 ot this report and is contained on the pages following said page F-1. Item 8. Changes In and Disagrteements With Accountants on Accounting and Financial Disclosure. None Part III Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance With Section 16(a) of the Exchange Act. The directors and executive officers of the Company and their ages are set forth below: 14 Name Age Position(s) Held - --- --- ---------------- C. Michael Fisher 45 Chairman of the Board, President, Chief Financial Officer and Director David A. Kohl(1) 43 Subsidiary President Francis J. Hornik, Jr. 58 Director - ------------ (1) Mr. Kohl is not an executive officer of the Company, but is listed by reason of his status as President of R&R (Bordeaux) Imports, Inc., a wholly-owned subsidiary of the Company. C. Michael Fisher has been Chairman of the Board, President and a Director of the Company since March 31, 1997. Mr. Fisher became Chief Financial Officer of the Company on March 30, 1998. Mr. Fisher became Secretary of the Company on July 27, 1998. Mr. Fisher is also President of Fisher and Associates Realty and Princessboro Development Co., Inc., which are real estate development firms located in Virginia Beach, Virginia; positions which he has held since 1980 and 1984 respectively. In his capacity as President of Fisher and Associates Realty and Princessboro Development Co., Inc., Mr. Fisher has been responsible for locating sites, obtaining anchor tenants and performing leasing duties for approximately 15 food and drug retail shopping centers throughout the Mid-Atlantic region of the United States. Mr. Fisher holds a BA degree from Virginia Wesleyan College. David A. Kohl has been the President of R&R (Bordeaux) Import Co., Inc. since February 1, 1999. Prior to joining R&R (Bordeaux) Imports, Inc., Mr. Kohl was the General Sales Manager and Wine Buyer for Vinos Don Pablo Fine Wines Inc., a Bronx, New York-based wine importer and distributor. While at Vinos Don Pablo Fines Wines Inc., Mr. Kohl was responsible for establishing the importation and distribution of selected wines from France and Spain to retail customers throughout Manhattan and Queens, New York. Mr. Kohl was also responsible for all cost analysis and pricing of wines, as well as the handling of all federal and state regulatory matters relating to labeling. From February 1985 to November 1997, Mr. Kohl was President of Kohl International Inc., a Florida-based importer and distributor of beer, wine, spirits,and gourmet foods. Mr. Kohl holds a BA degree from Florida International University. Francis J. Hornik has been a Director of the Company since April 21, 1997. Since 1980, Mr. Hornik has been the sole proprietor of his own public accounting firm located in Chesapeake, Virginia. Item 10. Executive Compensation. The following table provides certain summary information concerning the compensation paid or accrued by the Company to or on behalf of its Chief Executive Officer and the other named executive officers of the Company for services rendered in all capacities to the Company and its subsidiaries for the years ended December 31, 1998 and 1997. 15 SUMMARY COMPENSATION TABLE Long-Term Annual Compensation Compensation ------------ ----------------- Securities All Other Bonus Underlying Other Comp. Name and Annual Principal Compen Position Year Salary($) Bonus sation Options(#) ($) - ------------------- ----- ---------- ------ ------- ---------- ------ C. Michael Fisher 1999 $ 2,692 $0 $0 $0 $0 Chairman of the Board and President Robert K. Walker General Manager 1999 $44,200 $0 $0 $0 $0 - ---------------- Item 11. Security Ownership of Certain Beneficial Owners and Management. The following table sets forth certain information as of December 31, 1999 regarding ownership of the Company's common stock (i) by each person known by the Company to be the beneficial owner of more than 5% of the Company's outstanding common stock, (ii) by each director of the Company, (iii) by certain related stockholders and (iv) by all executive officers and directors of the Company as a group. All persons named have sole voting and investment power with respect to such shares, subject to community property laws, and except as otherwise noted. Name and Address of Percent Beneficial Number of Beneficially Owner Shares Owned Owned ----- -------------- ----- C. Michael Fisher(1) 392,800 17% 1717 Jermyn Lane Virginia Beach, VA 23454 Robert K. Walker (2) 779,200 33% 3835 S.W. 56th Street Ft. Lauderdale, FL 33312 John W. Martin(3) 400,000 17% 5777 West Century Blvd. Suite 1540 Los Angeles, California 90045 All officers and directors as a group (3 persons) 792,800 34% - -------------------- 16 (1) Includes 148,000 shares held by Euro Imperial Group, Ltd., a corporation in which Mr. Fisher is the beneficial owner of all of the shares of common stock. Also includes 220,000 shares held by Paris International Holding, Ltd., a corporation in which Mr. Fisher is the beneficial owner of one-half (1/2) of the shares of common stock of such corporation and 800 shares owned by Katie Fisher and Lauren Fisher, the children of Mr. Fisher. (2) Includes 220,000 shares held by Paris International Holding, Ltd., a corporation in which Mr. Walker is the beneficial owner of one-half (1/2) of the shares of common stock of such corporation. Also includes 10,800 shares held by Kristopher Walker and Kendall Walker, Mr. Walker's minor children. Also includes 60,000 shares held by Mr. Robert H. Walker, Mr. Walker's father. Mr. Walker disclaims any beneficial ownership of all shares held by Mr. Robert H. Walker. (3) Mr. Martin received such 400,000 shares in consideration for legal services rendered to the Company, which legal services included the rendering of general corporate advice, and preparing various corporate documents and plans, in connection with the formation and organization of the Company, the negotiation and preparation of various Company agreements, including but not limited to the Company's agreements with its producers and distributors, and the rendering of advice, and the preparation of documents, in connection with the private and public offering of the Company's securities in accordance with applicable federal and state securities laws. Item 12. Certain Relationships and Related Transactions. From approximately June 14, 1996 to March 31, 1997, the Company issued 443,600 shares of its common stock to 47 persons for an aggregate cash purchase price of $110,900. Purchasers of the 443,600 shares included Kristopher Walker, the minor child of Robert K. Walker, who acquired 800 shares of common stock for an aggregate purchase price of $200, Katie and Lauren Fisher, the minor children of C. Michael Fisher, who acquired 800 shares of common stock for an aggregate purchase price of $200 and Robert H. Walker, the father of Robert K. Walker, who acquired 60,000 shares of common stock for an aggregate purchase price of $15,000. On March 31, 1997, the Company acquired R&R (Bordeaux) Imports, Inc., a Florida corporation and wholly owned subsidiary of the Company. In the acquisition of R&R (Bordeaux) Imports, Inc., the Company issued 60,000 shares of its common stock having an aggregate value of $15,000 to three persons. One of the recipients of the 60,000 shares was Robert K. Walker, who received 10,000 shares of common stock. From July 30, 1997 to October 1997, the Company issued 38,000 shares of its Series A Preferred Stock to five persons for an aggregate purchase price of $95,000. Purchasers of the 38,000 shares of Series A Preferred Stock included C. Michael Fisher, who purchased 16,000 shares for an aggregate purchase price of $40,000 and Euro Imperial Group, Ltd., which purchased 8,000 shares for an aggregate purchase price of $20,000. On November 5, 1998, each outstanding share of Series A Preferred Stock was converted into one share of common stock. On April 29, 1996, the Company issued 400,000 shares of its common stock to the Law Office of John W. Martin in consideration for legal services rendered to the Company by the Law Offices of John W. Martin. John W. Martin, the sole proprietor of the Law Office of John W. Martin is a director of the Company. The legal services rendered to the Company by the Law Office of John W. Martin included the rendering of general corporate advice, and preparing various corporate documents and plans, in connection with the formation and organization of the Company, the negotiation and preparation of various Company agreements, including but not limited to the Company's agreements with its producers and distributors, and the rendering of advice, and the preparation of documents, in connection with the private and public offering of the Company's securities in accordance with applicable federal and state securities laws. On December 28, 1999, the Company issued 46,000 shares of common stock. Of these 25,000 shares were issued to a private placement investor for an aggregate purchase price of $80,000. To date the Company has not relized sums due from this trnsaction, and is pursuing collection of these sums. In addition, 16,000 shares were issued to C. Michael Fisher in replacement of shares due, which were previously purchased as Series A preffered stock. Also, in consideration for consulting services, Ken Callihan received 5,000 shares for services rendered to the company. Item 13. Exhibits and Reports on Form 8-K Part F/S Part I. FINANCIAL INFORMATION CUIDAO HOLDING CORP. INDEX TO FINANCIAL STATEMENTS Page Independent Auditor's Report F-1 Consolidated Balance Sheets as of December 31, 1999 and 1998 F-2 Consolidated Statements of Operations for the two years ended December 31, 1999 and 1998 and cumulative totals for development stage operations from February 12, 1996 (date of inception) to December 31, 1999 F-4 Consolidated Statements of Stockholders' Equity for the two years ended December 31, 1999 and 1998 and cumulative totals for development stage operations from February 12, 1996 (date of inception) to December 31, 1999 F-5 Consolidated Statements of Cash Flows for the two years ended December 31, 1999 and 1998 and cumulative totals for development stage operations from February 12, 1996 (date of inception) to December 31, 1999 F-6 Notes to Financial Statements F-8 BAUM & COMPANY, P.A. Certified Public Accountants 1515 University Drive - Suite 209 Coral Springs, Florida 33071 (954) 752-1712 INDEPENDENT AUDITOR'S REPORT To the Board of Directors and Stockholders of Cuidao Holding Corp. Hollywood, Florida We have audited the accompanying consolidated balance sheets of Cuidao Holding Corp. and its wholly-owned subsidiaries as of December 31, 1999 and 1998, and the related consolidated statements of operations, stockholders' equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. 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 accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Cuidao Holding Corp. and its wholly-owned subsidiaries as of December 31, 1999 in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 8 of the financial statements, the company has suffered losses from operations for the past years which raise substantial doubt about it ability to continue as a going concern. The financial statements do not include any adjustment that might result from the outcome of this uncertainty. May 12, 2000 Coral Springs, Florida F-1
CUIDAO HOLDING CORP.AND ITS WHOLLY-OWNED SUBSIDIARIES (A Development Stage Company) CONSOLIDATED BALANCE SHEETS December 31, 1999 AND 1998 A S S E T S 1999 1998 -------- -------- Current Assets Cash and Cash Equivalents $ 1,533 $ 353,281 Accounts Receivable 27,422 24,226 Inventory 304,346 - 0 - Prepaid Expenses - 0 - 32,444 ------------ ---------- Total Current Assets 333,301 409,951 ------------ ---------- Plant and Equipment - (Net of $22,113 and $6,220 of accumulated depreciation at December 31, 1999 and 1998) 584,873 18,782 ------------ ---------- Other Assets Goodwill (net of $13,333 and $8,333 of accumulated amortization at December 31, 1999 and 1998) 1,667 6,667 Organizational Costs (Net of $1,048 and $740 of accumulated amortization at December 31, 1999 and 1998) 492 800 Deferred Loan Costs (Net of $3,500 of accumulated amortization at December 31, 1999 7,000 - 0 - Deposits and escrow balances 19,314 18,157 ------------ ---------- Total Other Assets 28,473 25,624 ------------ ---------- Total Assets $ 946,647 $ 454,357 ============ ==========
(Continued) F-2
CUIDAO HOLDING CORP. AND ITS WHOLLY-OWNED SUBSIDIARIES (A Development Stage Company) CONSOLIDATED BALANCE SHEETS December 31, 1999 and 1998 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Notes and Loans Payable $ 48,324 $ 50,070 Accounts Payable and Accrued Expenses 386,301 78,714 Taxes Payable 31,315 - 0 - Security Deposits Held 5,724 - 0 - ----------- ----------- 471,664 128,784 ----------- ----------- Long Term Liabilities Mortgage Payable 48,000 -0- ----------- ----------- Stockholders' Equity Common Stock, $.0001 par value: Authorized shares - 100,000,000 Issued and outstanding shares - 2,402,175 at December 31, 1999 and 2,356,175 at December 31, 1998 240 236 Preferred Stock, $.0001 par value: Authorized shares - 10,000,000 None issued and outstanding shares Additional Paid-In Capital 768,812 660,918 Accumulated Deficit during Development Stage (774,069) (335,581) ----------- ----------- Total Stockholders' Equity (5,017) 325,573 ----------- ----------- Total Liabilities and Stockholders' Equity $ 946,647 $ 454,357 =========== ===========
See Accompanying Auditor's Report and Notes to Financial Statements. F-3
CUIDAO HOLDING CORP. AND ITS WHOLLY-OWNED SUBSIDIARIES (A Development Stage Company) CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 Development Stage Year Ended Year Ended February 12, 1996 December 31 December 31 to December 31, 1999 1998 1999 ---------- ----------- ----------- Revenues $ 125,057 $ 68,387 $ 220,515 Cost of goods sold 46,154 40,359 113,963 ----------- --------- ------------ Gross Profit 78,903 28,028 106,552 Operating Expenses 426,450 197,365 778,799 ----------- --------- ------------ Net income (loss) before other income (expenses) (347,547) (169,337) (682,247) Other income (expenses) Interest expense (net) (56,880) (1,254) (57,761) Rental income 33,631 - 0 - 33,631 Miscellaneous (3,663) - 0 - (3,663) Write-off of uncollectible loan (64,029) - 0 - (64,029) ---------- --------- ------------ (90,941) (1,254) (91,822) ---------- --------- ------------ Net income (loss) before provision for income taxes (438,488) (170,591) (774,069) Provision for income taxes (Note 1) - 0 - - 0 - - 0 - ----------- --------- ---------- Net loss $ (438,488) $(170,591) $ (774,069) ========== ========= ============ Income (loss) per common share $ (.186 ) $ (.076) $ (.142) ========== ========= ============ Weighted average common shares outstanding 2,356,427 2,244,363 2,356,301 ========== ========== ============
See Accompanying Auditor's Report and Notes to Financial Statements. F-4
CUIDAO HOLDING CORP. AND ITS WHOLLY-OWNED SUBSIDIARIES (A Development Stage Company) CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 CUMULATIVE TOTALS FOR DEVELOPMENT STATE OPERATIONS From February 12, 1996 (Date of Inception) To December 31, 1999 Deficit Accumulated During the Common Stock Preferred Stock Paid-In Development # Shares Amount # Shares Amount Capital Stage ------- ------ -------- ------- ------- ------------ Balance December 31, 1996 4,154,400 $ 415 $ 78,810 $ (44,009) Cancellation of original (2,221,600) (221) 221 Additional shares issued in subscription offering 229,200 23 38,000 4 152,274 Shares issued for acquisition of subsidiary 60,000 6 14,994 Net loss for the year ended December 31, 1997 (120,982) -------- ----- --------- ------- --------- ------------ Balance December 31 1997 2,222,000 223 38,000 4 246,299 (164,991) Exchange of preferred stock for common stock 38,000 4 (38,000) (4) -0- Issuance of common stock 96,175 9 -0- -0- 414,619 (Net of offering expenses of$132,706) Net Loss for the year ended December 31, 1998 (170,590) -------- ----- --------- ------- --------- ------------ Balance December 31, 1998 2,356,175 236 -0- -0- 660,918 (335,581) Issuance of common stock 46,000 4 -0- -0- 107,894 Net loss for the year (438,488) -------- ----- --------- ------- --------- ------------ Balance December 31, 1999 2,402,175 $ 240 $ -0- $ -0- $ 768,812 $(774,069) ========== ===== ======== ====== ========= =============
See Accompanying Auditor's Report and Notes to Financial Statements. F-5
CUIDAO HOLDING CORP. AND ITS WHOLLY-OWNED SUBSIDIARIES (A Development Stage Company) CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 AND CUMULATIVE TOTALS FOR DEVELOPMENT STAGE OPERATIONS FROM February 12, 1996 (Date of Inception) to December 31, 1999 Year Ended Year Ended Development Stage December 31, December 31, February 12, 1996 1999 1998 to December 31, 1999 ----------- ----------- -------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net Loss $ (438,488) $ (170,591) $ (774,070) Adjustments to Reconcile Net Cash Used in Operating Activities Depreciation and amortization 26,465 8,951 41,759 Issuance of common stock for legal services -0- - 0 - 21,085 (Increase) Decrease in accounts receivable (3,196) (4,593) (27,422) (Increase) Decrease in inventory (304,346) 3,220 (304,346) (Increase) Decrease in organization costs -0- - 0 - (1,540) (Increase) Decrease in deferred offering costs -0- 35,162 -0- (Increase) Decrease in prepayments & deposits 31,287 (47,409) (19,314) Increase in accounts payables and accruals 307,587 73,337 386,301 Increase in taxes payable 31,315 -0- 31,315 Increase in security deposits held 5,724 -0- 5,724 ----------- ------------ ----------- Net Cash Flow from Operating Activities (343,652) (101,923) (640,508) CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of fixed assets (233,748) (12,834) (258,749) ----------- ------------ ----------- Net Cash Used in Investing Activities (233,748) (12,834) (258,749)
(Continued) F-6
CUIDAO HOLDING CORP. AND ITS WHOLLY-OWNED SUBSIDIARIES (A Development Stage Company) CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 AND CUMULATIVE TOTALS FOR DEVELOPMENT STAGE OPERATIONS FROM February 12, 1996 (Date of Inception) to December 31, 1999 Year Ended Year Ended Development Stage December 31, December 31, February 12, 1996 1999 1998 to December 31, 1999 ----------- ----------- -------------------- CASH FLOWS FROM FINANCING ACTIVITIES Increase in mortgage payable 130,000 -0- 130,000 Increase in deferred loan costs (10,500) -0- (10,500) Increase (Decrease)in loans payable (1,746) 47,570 48,324 Proceeds from issuing common stock - net 107,898 414,628 637,966 Proceeds from issuing preferred stock -0- -0- 95,000 ----------- ------------ ----------------- Net Cash Used in Financing Activities 225,652 462,198 900,790 ----------- ------------ ----------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (351,748) 347,441 1,533 CASH AND CASH EQUIVALENTS-BEGINNING OF PERIOD 353,281 5,840 -0- ----------- ------------ ----------------- CASH AND CASH EQUIVALENTS-END OF PERIOD $ 1,533 $ 353.281 $ (1,533) =========== ============ ================= CASH PAID FOR INTEREST EXPENSE $ 59,559 $ -0- $ 61,895 CASH PAID FOR INCOME TAXES -0- -0- -0-
See Accompanying Auditor's Report and Notes to Financial Statements. F-7 CUIDAO HOLDING CORP. AND ITS WHOLLY-OWNED SUBSIDIARIES (A Development Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 - Organization and Operations Cuidao Holding Corp. (the "Company") was organized under the laws of the State of Florida on February 12, 1996. On June 27, 1996, the Company formed Cuidao (USA) Import Co., Inc., a wholly owned subsidiary incorporated under the laws of the State of Florida. On March 31, 1997, the Company acquired all of the issued and outstanding common stock of R & R (Bordeaux) Imports, Inc., a Florida corporation, making R & R (Bordeaux) Imports, Inc., a wholly owned subsidiary of the Company. At the time of the acquisition, Robert K. Walker, a major beneficial owner of Cuidao Holding Corp., was also a beneficial owner of R & R (Bordeaux) Imports, Inc. In acquiring R & R (Bordeaux) Imports, Inc., the Company issued 60,000 shares of its common stock, which common stock was valued at $15,000. The results of operations of R & R (Bordeaux) Imports, Inc. as presented in these financial statements are for the period March 31, 1997 (date of inception) to December 31, 1998. The acquisition of R & R (Bordeaux) Imports, Inc. by the Company resulted in acquired goodwill valued at $15,000. The goodwill is being amortized by the Company over a three year life using the straight-line method. The Company is a development stage Company which imports, develops, manages and distributes a portfolio of international and regional brands of beer, wine and spirits. Note 2 - Significant Accounting Policies Basis of Accounting The Company's policy is to use the accrual method of accounting and to prepare and present financial statements which conform to generally accepted accounting principles. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All material intercompany transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. F-8 CUIDAO HOLDING CORP. AND ITS WHOLLY-OWNED SUBSIDIARIES (A Development Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 2 - Significant Accounting Policies (Continued) Cash and Cash Equivalents Cash and cash equivalents include cash on hand, cash in banks, and any highly liquid investments with a maturity of three months or less at the time of purchase. The Company maintains cash and cash equivalent balances at a financial institution which is insured by the Federal Deposit Insurance Corporation up to $100,000. At December 31, 1999 and 1998 there is no concentration of credit risk from uninsured bank balances. Equipment Equipment is stated at cost and depreciated over its estimated allowable useful life (5-7 years), using the double declining balance method. Expenditures for major renewals and betterments that extend the useful lives of fixed assets are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. Organizational Costs The Company has incurred certain federal and state filing and registration fees, legal and promotional fees in its formation and capitalization, which will benefit the Company in future periods. These costs are being amortized over a five year life using the straight-line method. Deferred Offering Costs Deferred offering costs include the costs associated with the initial public offering (effective in November 1998). The costs related to the initial public offering were capitalized and netted against the amount received from the public offering. Income Taxes In February 1992, the Financial Standards Board issued Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." Under SFAS No. 109, deferred assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective basis. F-9 CUIDAO HOLDING CORP. AND ITS WHOLLY-OWNED SUBSIDIARIES (A Development Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 2 - Significant Accounting Policies (Continued) Income Taxes (Continued) Deferred assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Under SFAS No. 109, the effect on deferred assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Net Loss per Common Share Net loss per common share is computed by dividing net loss by the weighted average number of common share outstanding during the period. Note 3 - Property, Plant and Equipment Property, Plant and Equipment at December 31, 1999 and 1998 are summarized as follows: 1999 1998 --------- --------- Building $ 587,677 $ - 0 - Machinery and Equipment 19,309 25,002 Less Accumulated Depreciation (22,113) (6,220) Net Property, Plant and Equipment $ 584,873 $ 18,782 ========== ========== Depreciation expense amounted to $18,377 and $4,059, respectively, for the years ended December 31, 1999 and 1998. Note 4 - Commitments Bank Line of Credit In July 1998, the company obtained a $50,000 revolving line of credit from a bank. This bank line of credit accrues interest at 10.50% per annum. Note 5 - Stock Options and Incentive Plans In October 1997, the Board of Directors and stockholders of the Company approved two stock option plans; an incentive stock option plan ("Incentive Plan") and a directors' stock option plan ("Directors' Plan"). The Incentive Plan covers employees of the Company (including officers and employee directors), and the Directors' Plan covers nonemployee directors of the Company. F-10 CUIDAO HOLDING CORP. AND ITS WHOLLY-OWNED SUBSIDIARIES (A Development Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A total of 750,000 shares of common stock of the company are reserved for issuance under the Incentive Plan. The Incentive Plan provides for the granting of "statutory incentive stock options" within the meaning of Section 422 of the Internal Revenue code of 1986, and for the granting to employees and consultants of nonstatutory stock options. A total of 250,000 shares of Common Stock are reserved for issuance under the Directors' Plan. The Directors' Plan provides only for the grant of nonstatutory stock options. At December 31, 1999, there were no stock options outstanding under either the Incentive Plan or the Directors' Plan. In February 1999, the Company amended the 1997 Incentive Stock Option Plan, with the Equity Incentive Plan. This revision, provides for, at the discretion of the Board of Directors, stock options, stock appreciation rights, restricted stock awards, performance shares and performance units to directors, officers, key employee and consultants of the Company. An aggregate of 3,750,000 shares of common stock has been reserved for issuance under these plans. Note 6 - Equity On December 30, 1997, the Company filed a Registration Statement on Form SB-2 with the Securities and Exchange Commission to offer up to 260,000 Units to the general public. Each Unit consisted of one share of the Company's common stock and one common stock purchase warrant ("Warrant"). Each Warrant entitles the holder thereof to purchase one share of common stock at an exercise price of $8.00, subject to adjustment, at any time over a three year period commencing on the effective date of the Registration Statement. The Warrants may be redeemed by the Company at $.05 per Warrant, at any time prior to their expiration on not less than 30 days' written notice, if the closing bid price of the common stock equals or exceeds $10.00 per share for 30 consecutive trading days ending within 10 days of the notice of redemption. On May 1, 1998, the Company's Registration Statements was declared effective by the Securities and Exchange commission, and in November 1998, the Company completed its public offering of Units. A total of 96,175 Units were sold at a price of $5.75 per Unit. After payment of commissions and other expenses of the offering, the Company received net proceeds from the offering of approximately $519,000. As part of the offering agreement, the 38,000 shares of outstanding Preferred stock was converted to 38,000 shares of common stock. F-11 CUIDAO HOLDING CORP. AND ITS WHOLLY-OWNED SUBSIDIARIES (A Development Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 7 - Concentration of Risk The Company's Red Dragon beer product is brewed and bottled by Tsingtao Brewery No. 3, located in the People's Republic of China. The foreign production of goods is subject to a number of risks, including transportation delays and interruptions, political and economic disruptions, the imposition of tariffs, quotas and other import or export controls, and changes in governmental policies. China currently enjoys most favored nation trading status with the United States. No assurance can be given that China will continue to enjoy most favored nation status in the future. The Company believes that if Tsingtao Brewery No. 3 was no longer able to brew and bottle the Company's beer products, it would be able to obtain its beer products from other producers located in the People's Republic of China. The Company believes this would not have a near-term severe impact on it's financial position or results of operations. Note 8 - Going Concern Considerations The Company has an accumulated deficit of $774,069, and has suffered losses of $438,488 in the current year. Additionally, the negative working capital at December 31, 1998 of $138,363 and for the year ended December 31, 1999, raise substantial doubt as to its ability to continue as a going concern. Management has advised us that a venture capital company has expressed an interest in infusing equity capital into the company. F-12 Part III. Items 1. Index to Exhibits Item 2. Description of Exhibits Exhibit No. Description - ---------- ------------------------------------------------------------ 3.0 Amended and Restated Articles of Incorporation of Cuidao Holding Corp.(1) 3.1 Bylaws of Cuidao Holding Corp.(1) 4.0 Specimen Stock Certificate(1) 10.0 Cuidao Holding Corp. 1999 Equity Incentive Plan(1) 10.1 Cuidao Holding Corp. 1997 Directors' Stock Option Plan(1) 10.2 Import and Distribution Agreement by and between Cuidao Holding Corp. and the People's Republic of China, Tsingtao Brewery No. 3 Co., Ltd.(1) 10.3 Import and Distribution Agreement by and between Cuidao Holding Corp. and Cave duVignoble Gursonnais(1) 10.4 Import and Distribution Agreement by and between Cuidao Holding Corp. and Les Chais du Prevot(1) 10.5 Import and Distribution Agreement by and between Cuidao Holding Corp. and Vignerons De Buzet(1) 10.6 Import and Distribution Agreement by and between Cuidao Holding Corp. and Godet Freres(1) 10.7 Form of Lock-Up Agreement by and between Cuidao Holding Corp., West America Securities Corp. and certain shareholders of Cuidao Holding Corp.(1) 10.8 Form of Promotional Share Lock-In Agreement by and between Cuidao Holding Corp. and certain shareholders of Cuidao Holding Corp.(1) 10.9 Promissory Note and Mortgage and Security Agreement dated January 22, 1999 by and between Cuidao Holding Corp. and Em-Star Mortgage Co. 10.10 Promissory Note dated January 22, 1999 by and between Cuidao Holding Corp. and Sebastiano Salemi and Nunzia Salemi, as husband and wife. 10.12 Assignment of Lease Agreement dated January 22, 1999 by and between Sebastiano Salemi and Nunzia Salemi, as husband and wife, and Cuidao Holding Corp.
28 21.0 Subsidiaries of Cuidao Holding Corp. 27.0 * Financial Data Schedule - --------------------------------------------- (1) Incorporated herein by reference to the Company's Registration Statement on Form SB-2 filed on December 30, 1997. * Filed herewith (b) Reports on Form 8-K. No current reports on Form 8-K were filed by the Company during the fourth quarter of 1999. 29 SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CUIDAO HOLDING CORP. (registrant) Dated: May 17, 2000 By: /s/ C. Michael Fisher ----------------------------------- C. Michael Fisher President & Chief Financial Officer In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated . CUIDAO HOLDING CORP. (registrant) Date Title May 17, 2000 By: /s/ C. Michael Fisher --------------------------- C. Michael Fisher President and Chief Financial Officer 30 EX-27 2 FDS --
5 0001018765 CUIDAO HOLDING CORP. 1 U.S. Currency 12-mos Dec-31-1998 Jan-01-1999 Dec-31-1999 1 1,533 0 27,422 0 304,346 333,301 584,873 0 946,647 471,664 0 0 0 240 (5,017) 946,647 0 125,057 46,154 46,154 426,450 0 33,631 (438,488) 0 0 0 0 0 (438,488) (.186) 0
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