<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 4, 1998
REGISTRATION NO. 333-43457
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CUIDAO HOLDING CORP.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
<TABLE>
<S> <C> <C>
FLORIDA 5182 65-0639616
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION NO.)
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
</TABLE>
3201 WEST GRIFFIN ROAD
SUITE 204
FT. LAUDERDALE, FLORIDA 33312-6900
(954) 964-1060
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
------------------------
MR. C. MICHAEL FISHER
3201 WEST GRIFFIN ROAD
SUITE 204
FT. LAUDERDALE, FLORIDA 33312-6900
(954) 964-1060
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
------------------------
COPIES TO:
JOHN W. MARTIN, ESQ.
5777 WEST CENTURY BLVD., SUITE 1540
LOS ANGELES, CALIFORNIA 90045
(310) 342-6800
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
------------------------
CALCULATION OF REGISTRATION FEE
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<S> <C> <C> <C> <C>
==========================================================================================================================
AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) UNIT(1) PRICE(1) REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------------
Units Consisting of One share of
Common Stock and One Common
Stock Purchase Warrant................. 260,000 $5.75 $1,495,000 $516
- --------------------------------------------------------------------------------------------------------------------------
Common Stock Underlying Warrants....... 260,000 $5.75 $1,495,000 $516
- --------------------------------------------------------------------------------------------------------------------------
TOTALS.................................................................... $2,990,000 $1,032
==========================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 of Regulation C promulgated under the Securities Act of
1933.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
CUIDAO HOLDING CORP.
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION PROSPECTUS HEADING
----------------------- ------------------
<C> <S> <C>
1. Front of Registration Statement and
Outside Front Cover of Prospectus........ Forepart of Registration Statement and
Prospectus Cover Page
2. Inside Front and Outside Back Cover Pages
of Prospectus............................ Inside Front and Outside Back Cover Pages
of Prospectus
3. Summary Information and Risk Factors..... Prospectus Summary and Risk Factors
4. Use of Proceeds.......................... Use of Proceeds
5. Determination of Offering Price.......... Risk Factors and Plan of Distribution
6. Dilution................................. Dilution
7. Selling Security Holders................. Not Applicable
8. Plan of Distribution..................... Plan of Distribution
9. Legal Proceedings........................ Not Applicable
10. Directors, Executive Officers, Promoters
and Control Persons...................... Management and Principal Stockholders
11. Security Ownership of Certain Beneficial
Owners and Management.................... Management and Principal Stockholders
12. Description of Securities
to be Registered......................... Description of Securities
13. Interest of Named Experts and Counsel.... Legal Matters
14. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.............................. Not Applicable
15. Organization Within Last Five Years...... Certain Relationships and Related
Transactions
16. Description of Business.................. Business
17. Management's Discussion and Analysis or
Plan of Operation........................ Plan of Operation
18. Description of Property.................. Business
19. Certain Relationships and Related
Transactions............................. Certain Relationships and Related
Transactions
20. Market for Common Equity and Related
Stockholder Matters...................... Not Applicable
21. Executive Compensation................... Management
22. Financial Statements..................... Financial Statements
23. Changes In and Disagreements With
Accountants on Accounting and Financial
Disclosure............................... Not Applicable
</TABLE>
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION
DATED MARCH 4, 1998
UP TO 260,000 UNITS CONSISTING OF 260,000
SHARES OF COMMON STOCK AND WARRANTS
TO PURCHASE 260,000 SHARES OF COMMON STOCK
CUIDAO HOLDING CORP. LOGO
CUIDAO HOLDING CORP.
------------------------
Each unit ("Unit") offered hereby consists of one share of Common Stock of
Cuidao Holding Corp. (the "Common Stock") and one Common Stock Purchase Warrant
(the "Warrant"). After completion of this offering, the shares of Common Stock
(the "Shares") and the Warrants comprising the Units shall be immediately
separately transferable. 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 until the third anniversary of the date of this Prospectus. 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. See "Description
of Securities."
The minimum offering by the Company will be 95,000 Units ($546,250) and the
maximum offering will be 260,000 Units ($1,495,000). The Units are offered on a
"best efforts, all or none" basis with respect to the minimum number of Units
offered hereby, and on a "best efforts" basis with respect to sales of Units
thereafter up to the maximum number of Units being offered. Pending the payment
for not less than 95,000 Units, all proceeds of this offering will be deposited
in an interest bearing escrow account at Imperial Trust Company, Los Angeles,
California (the "Escrow Agent").
Officers, directors and principal stockholders of the Company will not be
permitted to purchase Units in this offering for the purpose of assisting the
Company in meeting its obligation to sell the minimum number of Units offered
hereby. See "Plan of Distribution."
There has been no public market for any securities of the Company prior to
this offering, and there can be no assurance that a public market will develop
by reason of this offering. If such a market should develop, there is no
assurance that it will be sustained, or that it will develop into a market
greater than a limited market. See "Risk Factors."
The initial public offering price for the Units has been determined solely
by the Company, and does not necessarily bear any direct relationship to the
Company's assets, operations, book or other established criteria of value. See
"Risk Factors" and "Dilution."
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE
SUBSTANTIAL DILUTION FROM THE OFFERING PRICE. SEE "RISK FACTORS" AND "DILUTION."
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
===============================================================================================================
PRICE TO UNDERWRITING DISCOUNTS PROCEEDS TO
PUBLIC(1) AND COMMISSIONS(2) COMPANY(3)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share........................ $5.75 $.575 $5.175
- ---------------------------------------------------------------------------------------------------------------
Total Minimum.................... $546,250 $54,625 $491,625
- ---------------------------------------------------------------------------------------------------------------
Total Maximum.................... $1,495,000 $149,500 $1,345,500
===============================================================================================================
</TABLE>
Footnotes on Next Page
The offering of the Units hereunder will terminate not later than
, 1998 (the "Termination Date"), provided that, in the sole
discretion of the Company, the offering period may be extended for an additional
period not to exceed 90 days. The Company has entered into an escrow agreement
with Imperial Trust Company to hold any proceeds from this offering in an
interest bearing escrow account subject to certain terms and conditions. If
subscriptions for all of the Units offered hereby have not been received and
accepted by the Company by the Termination Date, no Units will be sold, and all
funds held in escrow will be returned promptly to investors along with any
interest accrued thereon. See "Plan of Distribution."
WEST AMERICA SECURITIES CORP.
THE DATE OF THIS PROSPECTUS IS , 1998
<PAGE> 4
Footnotes to Cover Page
(1) Units are being offered for sale at $5.75 per Unit. Payment in full for the
Units is due upon subscription. Unit purchase funds will initially be held
in an interest bearing escrow account at Imperial Trust Company. This
offering will terminate on or before a date 90 days from the date of this
Prospectus unless the maximum amount of Units offered hereby is sold prior
to such date, or unless this offering is otherwise extended in the
discretion of the Company for a period not to exceed 90 days. When
subscriptions for the minimum amount of Units offered hereby have been
received and accepted by the Company, such funds will be released from
escrow to the Company, and investors whose subscriptions for Units have been
accepted by the Company will be issued Common Stock and Warrant certificates
evidencing the number of Units acquired, and the initial escrow will close.
See "Unit Purchase Information" and "Plan of Distribution."
(2) Does not include additional compensation to the Placement Agent in the form
of (i) a nonaccountable expense allowance of $13,656 if the minimum number
of Units offered hereby are sold, and $37,375 if the maximum number of Units
offered hereby are sold, which amounts to 2.5% of the total proceeds to be
realized from the sale of the Units and (ii) an option (the "Placement Agent
Unit Purchase Option") to purchase up to 26,000 Units (the "Option Units")
at a price of $7.00 per Option Unit. In addition, the Company has agreed to
indemnify the Placement Agent against certain liabilities under the
Securities Act of 1933, as amended (the "Securities Act"). See "Plan of
Distribution."
(3) Proceeds to the Company are calculated before the deduction of expenses in
connection with this offering and payable by the Company, which are
estimated to be $78,118 if the minimum number of Units offered hereby are
sold, and $101,837 if the maximum number of Units offered hereby are sold,
and include filing, legal, accounting, printing and other miscellaneous
fees, and the nonaccountable expenses payable to the Placement Agent
referred to in footnote 2 above.
3
<PAGE> 5
The Company is not currently a reporting company under the Securities
Exchange Act of 1934, as amended. Upon completion of the offering of the Units,
the Company intends to deliver annual reports to the holders of its securities.
The annual reports will contain financial information that has been examined and
reported upon by an independent certified public accountant.
Red Dragon is an applied for trademark of the Company. This Prospectus also
includes product names other than the names of the Company's products, and also
includes the names of companies other than the Company.
UNIT PURCHASE INFORMATION
Subscribers purchasing Units should make checks payable to "Imperial Trust
Company as Escrow Agent for Cuidao Holding Corp." Subscribers must complete a
Subscription Agreement in the form attached as Appendix A to this Prospectus.
For convenience, an actual Subscription Agreement has been included with this
Prospectus. Additional copies of the Subscription Agreement may be obtained by
writing or calling or faxing the Placement Agent at its executive office; 4510
E. Thousand Oaks Boulevard, Suite 100, Westlake Village, California 91362,
telephone (800) 935-9378 and facsimile (805) 777-1744. All checks and
Subscription Agreements should be forwarded to the Placement Agent at its
Westlake Village, California office.
4
<PAGE> 6
PROSPECTUS SUMMARY
This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors
including those set forth under "Risk Factors" and elsewhere in this Prospectus.
The following information is selective and qualified in its entirety by the
detailed information (including financial information and notes thereto)
appearing elsewhere in this Prospectus. This summary of certain provisions of
the Prospectus is intended only for convenient reference and does not purport to
be complete. The entire Prospectus should be read and carefully considered by
prospective investors before making a decision to purchase Units. Except as set
forth in the Company's financial statements or as otherwise indicated herein,
all information in this Prospectus (i) reflects the voluntary surrender by
certain principal stockholders of the Company, and the cancellation thereof by
the Company, of 5,554,000 shares of the Company's Common Stock on March 31,
1997, (ii) reflects the 1-for-2.5 reverse stock split of the Company's Common
Stock effected on July 28, 1997, (iii) reflects the conversion of all of the
Company's outstanding shares of Preferred Stock into shares of Common Stock
which will occur automatically upon the closing of this offering and (iv)
assumes no exercise of the Warrants or the Placement Agent's Unit Purchase
Option.
THE COMPANY
Cuidao Holding Corp., a Florida corporation, was incorporated on February
12, 1996. The Company is authorized to issue two classes of capital stock, which
are Common Stock and Preferred Stock. The total authorized Common Stock of the
Company is 100,000,000 shares, $.0001 par value. The total authorized Preferred
Stock of the Company is 10,000,000 shares, $.0001 par value. The Company's
principal executive offices are located at 3201 West Griffin Road, Suite 204,
Ft. Lauderdale, Florida 33312-6900; and its telephone number is (954) 964-1060.
The Company is a development stage corporation which imports, develops,
manages and distributes a portfolio of international and regional brands of
beer, wine and spirits. The Company was formed to participate in specific niche
segments of the approximate $100 billion United States alcoholic beverage market
by acting as a supplier of a variety of beers, wines and spirits.
The Company's current portfolio of beers consist 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. ("Tsingtao"): Red
Dragon Draft, Red Dragon Light and Red Dragon Amber. The Company's present
portfolio of wines consist of the following French originated brands: Les
Vignerons De Buzet Wines, Armadis Wines, Les Chais Du Prevot Wines, La Grappe De
Gurson Wines, and Godet Freres Champagnes. The Company's portfolio of spirits
consist of the following French originated brands: La Belle Sandrine and
Armagnac Marquis De Puysegur. See "Business."
Through its Red Dragon beer brands, the Company intends to expand the
United States market for Chinese beer imports. The Company believes that the
United States market for Chinese beer imports is approximately $30,000,000
annually, although no assurance to this effect can be given. Currently, the only
significant brand of Chinese beer being marketed and sold in the United States
is a regular beer produced by Tsingtao, and sold under the brand name of
"Tsingtao Beer". The Company's initial strategy for expanding the United States
market for Chinese beer imports will relate to diversifying Tsingtao's beer
product from a singular brand to a wider variety of beer products which will
consist of light, draft and amber beer types, and which will be sold under the
brand name of "Red Dragon".
With its wine brands, the Company intends to exploit the United States
domestic wine market. According to Beverage World Magazine, in 1995 Americans
consumed approximately 470.8 million gallons of wine. The Company believes that
wine imports consists of approximately 72.5 million gallons and account for
approximately 16% of total United States wine consumption. The Company further
believes that its portfolio of wines will provide the United States consumer
with a "French quality" wine at a retail price of between $5.00 to $8.00 per 750
ml (milliliter) bottle. At such retail prices, the Company expects that its
wines will have particular appeal to the mass merchandise market.
5
<PAGE> 7
Through its La Belle Sandrine spirit, the Company intends to compete in the
growing market for prepared cocktail beverages. La Belle Sandrine is an all
natural, citrus based, prepared cocktail. The prepared cocktail market is a
niche market which currently has approximately 30 different brand participants
(such as Jose Cuervo Margaritas and Khalua Combos). Because of the composition
of its La Belle Sandrine product, the Company believes that La Belle Sandrine
will compete primarily with a prepared cocktail which sells under the brand name
of "Alize". Statistical information available to the Company indicates that
Alize has increased its United States sales from 20,000 cases in 1991 to 430,000
cases in 1996, resulting in total 1996 sales for the product of approximately
$37,000,000.
The Company's strategy is to become a leading importer, developer and
manager of a portfolio of beer, wine and spirit brands which serve specific
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.
- Expanding distribution into new markets and increasing penetration of
existing markets primarily through product line extensions, promotional
activities and through the acquisition of producers and other importers
and distributors of alcoholic beverage products.
RISK FACTORS
An investment in the Units offered hereby involves a high degree of risk.
The Company is a development stage company which has not had substantial
business operations to date. There can be no assurance that the Company will
have substantial product sales or revenues or that it will be able to sell its
products at a profit. Other risk factors include the seasonality of the
Company's products, the Company's reliance on third-party producers and the
Company's reliance on independent distributors and wholesalers for product
sales. See "Risk Factors."
THE OFFERING
Securities Offered by the
Company.................. 260,000 Units at a public offering price of $5.75
per Unit. Each Unit consists of one share of Common
Stock and One Warrant. Each Warrant entitles the
holder thereof to purchase one additional share of
Common Stock at an exercise price of $8.00, subject
to adjustment, at any time until the third
anniversary of the date of this Prospectus.
Common Stock Outstanding
before Offering.......... 2,222,000 Shares(1).
Common Stock Outstanding
after Minimum offering..... 2,355,000 Shares(2).
Common Stock Outstanding
after Maximum Offering..... 2,520,000 Shares(2).
Use of Proceeds............ To purchase alcoholic beverage products, to
advertise and market, to provide financing for
undetermined future acquisitions and for working
capital and general corporate purposes.
- ---------------
(1) Does not include 38,000 shares of Common Stock issuable upon the automatic
conversion of 38,000 shares of the Company's Series A Preferred Stock into
shares of the Company's Common Stock. Such Series A Preferred Stock will be
automatically converted into shares of the Company's Common
6
<PAGE> 8
Stock upon the closing of the sale of the Units offered hereby. See
"Description of Securities -- Preferred Stock."
(2) All references throughout this Prospectus to the number of Shares to be
outstanding following this offering include the issuance of 38,000 Shares as
a result of the automatic conversion of 38,000 shares of Series A Preferred
Stock into 38,000 shares of the Company's Common Stock, but exclude (i) the
possible issuance of up to 260,000 additional Shares that may be purchased
upon exercise of the Warrants offered hereby, (ii) up to 26,000 additional
Shares that may be purchased upon exercise of the Placement Agent Unit
Purchase Option and (iii) 1,000,000 shares of Common Stock reserved for
issuance under the Company's Stock Option Plans. See "Capitalization,"
"Stock Option Plans" and Notes to Financial Statements.
SUMMARY FINANCIAL AND OPERATING INFORMATION
<TABLE>
<CAPTION>
FEBRUARY 12, 1996
(DATE OF ELEVEN MONTHS DEVELOPMENT
INCEPTION) TO ENDED STAGE ENDED
DECEMBER 31, 1996 NOVEMBER 30, 1997 NOVEMBER 30, 1997(1)
----------------- ----------------- --------------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Revenues.................................... $ 192 $ 7,600 $ 7,600
Net income (loss)........................... (44,009) (99,778) (143,787)
Net income (loss) loss per share............ (.005) (.069) (.092)
Shares used in calculation of net loss per
Share(2).................................. 9,723,455 1,453,222 1,562,502
</TABLE>
<TABLE>
<CAPTION>
NOVEMBER 30, 1997
-----------------------------------------------
AS ADJUSTED AS ADJUSTED
ACTUAL MINIMUM MAXIMUM
(UNAUDITED) (UNAUDITED)(3) (UNAUDITED)(4)
----------- -------------- --------------
<S> <C> <C> <C>
BALANCE SHEET DATA
Working capital (deficit).......................... $54,081 $467,588 $1,297,744
Total assets....................................... 88,370 501,877 1,332,033
Total stockholders' equity (deficit)............... 87,739 501,246 1,331,402
</TABLE>
- ---------------
(1) Cumulative totals for development stage operations of the Company from
February 12, 1996 (date of inception) to October 31, 1997.
(2) See Note 2 of Notes to Financial Statements of the Company concerning net
loss per share information, which Financial Statements are included
elsewhere in this Prospectus.
(3) As adjusted amounts give effect to the sale of 95,000 Units by the Company
in this offering, the minimum number of Units offered hereby, and the use of
the net proceeds of $413,507 therefrom as if this offering had occurred at
the balance sheet date. See "Use of Proceeds" and "Capitalization."
(4) As adjusted amounts give effect to the sale of 260,000 Units by the Company
in this offering, the maximum number of Units offered hereby, and the use of
the net proceeds of $1,243,663 therefrom as if this offering had occurred at
the balance sheet date. See "Use of Proceeds" and "Capitalization."
7
<PAGE> 9
INDUSTRY INFORMATION
Unless otherwise indicated, the following industry information used in this
Prospectus is derived from the following publications: statistical information
regarding the prepared cocktail "Alize" was obtained from "Market Watch Magazine
(May 1997)"; information relating to the overall United States market for
alcoholic beverages was obtained from the "Miller Brewing Company Beer is Volume
with Profit Report (1997 Edition)"; statistical information regarding the United
States beer industry, the overall wine industry and the United States retail
wine market was obtained from the "Adams-Jobson 1996 Handbook Advance"; and
information regarding the United States spirits industry was obtained from the
"Adams Wines & Spirits Industry Marketing Guide (1997)".
8
<PAGE> 10
RISK FACTORS
An investment in the Units offered hereby involves a high degree of risk
and is not an appropriate investment for persons who cannot afford the loss of
their entire investment. Prospective investors should carefully consider the
following risk factors, in addition to the other information contained in this
Prospectus, before purchasing any of the Units. Except for the historical
information contained herein, the discussion in this Prospectus contains certain
forward-looking statements that involve risks and uncertainties, such as
statements of the Company's plans, objectives, expectations and intentions. The
cautionary statements made in this Prospectus should be read as being applicable
to all related forward-looking statements wherever they appear in this
Prospectus. The Company's actual results could differ materially from those
discussed here. Factors that could cause or contribute to such differences
include those discussed below, as well as those discussed elsewhere herein.
Development Stage Company; No Revenues. The Company is a development stage
company with no product sales and no operating revenues. The Company has
incurred cumulative losses from its inception and as of December 31, 1996 and
November 30, 1997, had an accumulated deficit of $(44,009) and $(143,787)
respectively. The Company anticipates that losses will continue for the
foreseeable future as the Company continues its development and initial product
marketing activities. The likelihood of the success of the Company must be
considered in light of the expenses, complications and delays frequently
encountered in connection with the establishment and expansion of new businesses
and the competitive environment in which the Company will operate. There can be
no assurance that future revenues from sales of the Company's products will
occur or be significant, or that the Company will be able to sell its products
at a profit. Future revenues and profits, if any, will depend on various
factors, including, but not limited to, initial and continued market acceptance
of the Company's products, and the successful implementation of its planned
marketing strategies. Failure to achieve a satisfactory level of sales could
impair the Company's ability to obtain required additional funds. See
"-- Capital Requirements" and "Plan of Operation."
Uncertainty of Demand. Although the Company believes that a demand exists
for its portfolio of alcoholic beverage products, the Company has not yet
marketed its alcoholic beverage products to any significant extent. As such, the
demand for the Company's products are not yet known. Although management of the
Company has conducted what it believes is market research into the alcoholic
beverage industry, absolutely no assurance can be given that sufficient demand
for the Company's products exist such that the Company will be successful in its
business endeavor. See "Plan of Operation."
Substantial Competition; Better Financed Competitors. The Company
encounters and is likely to continue encountering substantial competition from a
number of competitors some of which possess greater resources than the Company.
The principal competitive factors affecting the market for the Company's
alcoholic beverage products include product quality and taste, packaging, brand
recognition, price and distribution capabilities. There can be no assurance that
the Company will be able to compete successfully against current and future
competitors based on these and other factors. The Company competes with a
variety of domestic and international suppliers of alcoholic beverage products,
many of whom have substantially greater financial, distribution and marketing
resources and have achieved a higher level of brand recognition than the
Company. The Company anticipates increased competition in the specific niche
areas of the alcoholic beverage industry that it intends to serve from major
importers, distributors and suppliers of alcoholic beverages such as
Brown-Forman Company, Barton Beers Ltd., Kobrand Corporation and Allied Domecq
Spirits and Wines, each of whom has introduced and is marketing alcoholic
beverages designed to serve specific niche areas of the alcoholic beverage
industry. These large importers, distributors and suppliers dominate the overall
importation and/or distribution of alcoholic beverages in the United States and
the Company expects that certain of these companies, with their superior
financial resources and established distribution networks, will seek further
participation in niche areas of the alcoholic beverage industry through the
increased acquisition of alcoholic beverage products to distribute, or the
formation of distribution alliances with the producers of alcoholic beverage
products which serve specific niche areas of the alcoholic beverage industry.
Increased competition could result in price reductions, reduced profit margins
and loss of market share, all of which would have a material adverse effect on
the Company's business, financial condition and results of operations. See
"Business -- Competition."
9
<PAGE> 11
Potential Fluctuations in Quarterly Results; Seasonality. The Company's
quarterly operating results may vary significantly depending on factors such as
the timing of new product announcements by the Company or its competitors, the
timing of significant advertising and promotion campaigns by the Company,
changes in the sales mix between the Company's beer, wine and spirits products,
the impact of an increasing average federal excise tax rate as sales volume
increases, increased competition, seasonality of sales of the Company's
products, general economic factors, trends in consumer preferences, regulatory
developments, including changes in domestic import duties and excise and other
tax rates, changes in average selling prices or market acceptance of the
Company's alcoholic beverage products and variations in shipping and
transportation costs.
The Company expects to experience higher sales in the third and fourth
quarters of a calendar year due to increased consumption of alcoholic beverages
during seasonal holidays. Fluctuations in sales due to seasonality may become
more pronounced as the growth rate of the Company's sales slow.
Based upon all of the foregoing, the Company believes that quarterly sales
and operating results are likely to vary significantly in the future and that
period-to-period comparisons of its results of operations will not be meaningful
and should not be relied upon as indications of future performance. Further, it
is possible that in some future quarter the Company's revenue or operating
results will be below the expectations of public market analysts and investors.
In such event, if a public market for the Company's securities were to develop
in the future, the price of such securities could be materially adversely
affected. See "Business."
Product Concentration; Dependence on New Product Introductions. The Company
currently offers a relatively limited number of beer, wine and spirits products
and believes that the sale of such beer, wine and spirits products will account
for a significant portion of the Company's sales for the foreseeable future.
Therefore, the Company's future operating results, particularly in the near
term, are significantly dependent upon the continued market acceptance of these
beer, wine and spirits products. There can be no assurance that the Company's
beer, wine and spirits products will achieve market acceptance. Initial sales
for a new alcoholic beverage product may be caused by the interest of
distributors and retailers to have the latest product on hand for potential
future sale to consumers. As a result, initial stocking orders for, or sales of,
a newly introduced alcoholic beverage product may not be indicative of market
acceptance and long term consumer demand. A decline in the demand for any of the
Company's beers, wines and spirits as a result of competition, changes in
consumer tastes and preferences, government regulation or other factors would
have a material adverse effect on the Company's business, operating results and
financial condition. In addition, there can be no assurance that the Company
will be successful in importing, developing, managing, introducing and marketing
additional new alcoholic beverage products that will sustain sales growth in the
future. See "Business."
Reliance on Third-Party Producers. The Company does not produce any of the
alcoholic beverage products that it presently markets and distributes. The
Company's Red Dragon beer brands are produced in the People's Republic of China
by Tsingtao Brewery No. 3, a brewery owned and operated by Tsingtao. The
Company's wine and spirits products are produced in France by SICA-Les Chais du
Prevot, Armadis, Les Vignerons De Buzet, Cave du Vignoble Gursonnais and Godet
Freres. The Company has entered into an exclusive Import and Distribution
Agreement with each of these producers (hereinafter collectively referred to as
the "Producers") which gives the Company the exclusive right to market and
distribute in the United States all of the alcoholic beverage products produced
by SICA -- Les Chais du Prevot, Armadis, Les Vignerons De Buzet, Cave du
Vignoble Gursonnais and Godet Freres, and the Red Dragon beer brands only
(consisting of a light, amber and draft beer) produced by Tsingtao Brewery No.
3. The Company relies upon each of the Producers at all phases of production of
the alcoholic beverage products which are imported, managed, marketed and
distributed by the Company, including scheduling production to meet delivery
requirements, packaging, performing quality control and assurance and performing
regulatory compliance. The Company's relationship with each of its Producers is
therefore critical to the Company's business, operating results and financial
condition.
The Company's dependence on the Producers entails a number of significant
risks. The Company's business, results of operations and financial condition
would be materially adversely affected if any one of the Producers were unable,
for any reason, to meet the Company's delivery commitments or if a Producer were
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unable to continue to produce a product being marketed and distributed by the
Company. In the event that a Producer were no longer able to supply the Company
with a particular product, the Company would be required to identify, qualify
and obtain an appropriate substitute product from a different producer of
alcoholic beverage products. This identification, qualification and acquisition
of an alternative product could take up to one year or longer, and no assurance
can be given that alternative products would be available to the Company or that
the producers of such alternative products would be in a position to satisfy the
Company's production requirements on a timely and cost-effective basis. Any
inability by the Company to obtain a consistent and adequate supply of the
alcoholic beverages produced by the Producers on a timely basis or any other
circumstances that would require the Company to seek alternative sources of
supply would materially adversely effect the Company's revenues and goodwill and
would therefore have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business -- Products."
Foreign Production. Currently, all of the alcoholic beverage products to be
managed, marketed and distributed by the Company are produced outside of the
United States, and include production in 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 and
import and export controls and changes in governmental policies. China currently
enjoys most favored nation trading status with the United States. While the
Company has not to date experienced any material adverse effects due to such
risks, there can be no assurance that such events will not occur in the future
with the result of possible increases in costs and delays of, or interferences
with, product deliveries resulting in losses of revenues and goodwill. See
"Business -- Products."
Foreign Currency and Foreign Exchange Regulation. As part of the Company's
ordinary business operations, the Company will be required to purchase alcoholic
beverage products from the Producers. The Company may be required to accomplish
such purchases through the use of foreign currencies. As a result, fluctuations
in exchange rates of the United States dollar against foreign currencies could
adversely affect the Company's results of operations. The Company may attempt to
limit its exposure to the risk of currency fluctuations by purchasing forward
exchange contracts which could expose the Company to substantial risk of loss.
In such a transaction, the Company would purchase a predetermined amount of
foreign currency to ensure that the Company in the future will own a known
amount of such currency to pay for goods at a predetermined cost. The Company
believes that the use of such transactions will successfully allow the Company
to better determine costs involved in its operations, and thus better manage
currency fluctuations. There can be no assurance that the Company will in the
future successfully manage its exposure to currency fluctuations or that such
fluctuations will not have a material adverse effect on the Company. See
"Business -- Products."
Dependence on Independent Distributors and Wholesalers; Customer
Concentration. The Company expects to sell most of its alcoholic beverage
products to unrelated distributors and wholesalers for resale to restaurants,
bars and retail outlets. Accordingly, the Company is dependent upon these
distributors and wholesalers to sell the Company's products and to assist the
Company in promoting market acceptance of, and creating demand for, the
Company's products. There can be no assurance that the Company's distributors
will devote the resources necessary to provide effective sales and promotion
support to the Company. The Company believes that it is likely that the vast
majority of its sales in the future will be concentrated among ten or less
distributors and wholesalers that serve all of North America and the Caribbean
Islands. The Company believes that its future growth and success will depend in
large part upon a few significant distributors and wholesalers. If one or more
of these significant distributors were to discontinue selling, or decrease the
level of orders for the Company's products, the Company's business would be
adversely affected in the areas serviced by such distributors and wholesalers
until the Company retained replacements. There can be no assurance however that
the Company would be able to replace a significant distributor in a timely
manner or at all in the event it were to discontinue selling the Company's
products. In addition, there is always a risk that the Company's distributors
will give higher priority to the products of other beverage companies, including
products directly competitive with the Company's products, thus reducing their
efforts to sell the Company's products. The Company's distributors may not
contractually commit to make future purchases and therefore could discontinue
carrying the Company's products in favor of a competitor's product or other
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alcoholic beverages at any time or for any reason. If any of the Company's
significant distributors were to experience financial difficulties, or otherwise
become unable or unwilling to promote or sell the Company's products, the
Company's results of operations would be adversely affected. In addition, in
some states, the Company's relationship with its distributors may be affected by
laws that restrict enforceability of some contract terms, especially those
related to the Company's right to terminate the services of its distributors.
Accordingly, the Company's ability to change distributors in certain states may
be adversely impacted by such laws. See "Business -- Sales, Marketing and
Distribution."
Development of New Products; Need to Manage Product Introductions. The
alcoholic beverage industry is highly competitive and characterized by changing
consumer preferences and continuous introduction of new products. The Company's
goal is to expand its portfolio of alcoholic beverage products through the
acquisition of new products serving niche segments of the industry, develop and
manage such new products, and introduce such new products on a timely and
regular basis to maintain distributor and retail interest and appeal to varying
consumer preferences. The Company believes that its future growth will depend,
in part, on its ability to anticipate changes in consumer preferences and
acquire, manage, develop and introduce, in a timely manner, new alcoholic
beverage products that adequately address such changes. There can be no
assurance that the Company will be successful in acquiring, developing,
introducing and marketing new products on a timely and regular basis. If the
Company is unable to acquire and introduce new products or if the Company's new
products are not successful, the Company's sales may be adversely affected as
customers seek competitive products. In addition, the introduction or
announcement of new alcoholic beverage products by the Company could result in
reduction of sales of the Company's existing products, requiring the Company to
manage carefully product introductions in order to minimize disruption in sales
of existing products. There can be no assurance that the introduction of new
product offerings by the Company will not cause distributors, retailers and
consumers to reduce purchases or consumption of existing Company products. Such
reduction of purchases or consumption could have a material adverse effect on
the Company's business, operating results and financial condition. See
"Business -- Products."
Ability to Identify and Consummate Suitable Acquisitions; Integration of
Acquisitions. The Company expects to devote a substantial amount of time and
expense in attempting to acquire other importers and distributors of alcoholic
beverage products as a means of expanding the Company's alcoholic beverage
product lines and distribution channels and to create certain operating
efficiencies. Identifying appropriate acquisitions and proposing, negotiating
and consummating acquisitions can be a lengthy and costly process. Furthermore,
the Company may compete for acquisition opportunities with companies that may
have greater resources than the Company. There can be no assurance that suitable
acquisition candidates are available or can be identified or that acquisitions
can be consummated on terms favorable to the Company. Acquisitions require the
Company to attract and retain component and experienced management personnel and
require the implementation of management information systems and other operating
systems. There can be no assurance that the Company will be able to successfully
acquire and integrate other importers and distributors of alcoholic beverage
products. Any failure or inability to efficiently acquire and integrate other
importers and distributors may have a material adverse effect on the Company's
results of operations or financial condition. See "Plan of Operation."
Ability to Manage Growth. The Company is a development stage company which
has not completely realized its business plan. The Company believes that as its
business plan is more fully realized, the Company may experience a period of
rapid growth that will result in new and increased responsibilities for
management personnel and will place a significant strain upon the Company's
management, operating and financial systems and resources. To accommodate any
rapid growth and to compete effectively and manage future growth, if any, the
Company will be required to implement and improve its operational, financial and
management information systems, procedures and controls on a timely basis and to
expand, train, motivate and manage its work force. There can be no assurance
that the Company's personnel, systems, procedures and controls will be adequate
to support the Company's existing and future operations. Any failure to
implement and improve the Company's operational, financial and management
systems or to expand, train, motivate or manage employees could have a material
adverse effect on the Company's business, operating results and financial
condition. See "Business -- Employees."
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Dependence on Consumer Acceptance; Strength of Economy. Although the
Company believes it has the ability and experience to recognize potentially
valuable products and to gauge trends in its business, the Company's revenues,
nevertheless, will be substantially dependent on the success of its products,
which depends, among other things, on rapidly changing consumer acceptance,
which is difficult to predict and over which the Company will have little
control. The Company's profitability and sales will depend on the strength of
the economy, which can dictate consumers' spending habits on such items as
alcoholic beverage products. No prediction can be made about the stability of
the economy. Any prolonged downturn in the economy, whether real or perceived,
could adversely affect the Company. See "Business."
Capital Requirements. The Company anticipates that, if it fails to achieve
significant revenues or profitable operations from its initial marketing
efforts, or if the initiation of sales of its alcoholic beverage products is
delayed beyond planned time periods, it will require additional funding to
develop and market its initial products, to expand its management team and for
further marketing and product development. There can be no assurance that
additional capital from any source will be available when needed by the Company,
or that such capital will be available on terms acceptable to the Company. If
adequate funds are not available, the Company may be required to curtail
significantly its business activities or cease operations entirely. See "Use of
Proceeds."
Government Regulation. Federal, state and local authorities extensively
regulate the production and distribution of beer, wine and spirits. The Federal
Bureau of Alcohol, Tobacco and Firearms (the "ATF") and various state alcohol
authorities regulate matters such as licensing, trade and pricing practices,
labelling, advertising and relations with wholesalers and distributors. In the
last several years federal and state regulators have required warning labels to
be placed on alcoholic beverages. It is uncertain what future regulations may be
promulgated by these governmental agencies and the effect these regulations will
have on the Company's business. In addition, Congress in 1991 substantially
increased the amount of excise tax assessed upon alcoholic beverages and it is
possible that additional increases in excise taxes could be promulgated in the
future. Because the Company may be required to pay excise taxes as part of its
ordinary business operations, any increase may cause a corresponding increase in
the costs to the Company, thereby requiring the Company to raise prices or
suffer reduced profit margins. It is unknown what the impact of future
regulations will be, but it is possible that current or future governmental
regulations of the type referenced above could materially adversely affect the
Company's business. See "Business -- Government Regulation."
Health Risks; Social Concerns. There has been substantial attention paid in
recent years to the adverse social and health effects of alcohol consumption.
Although some studies have indicated that moderate wine consumption may result
in health benefits, other reports have sharply disputed these findings.
Anti-alcohol groups have advocated more stringent labelling requirements and
other governmental regulations generally unfavorable to the alcoholic beverage
industry. More restrictive regulations, negative publicity regarding alcohol
consumption or publication of studies which indicate a significant health risk
from moderate consumption of alcohol could adversely affect the sale and
consumption of alcoholic beverages and could have a material adverse effect on
the Company's financial results. See "Business."
Control by Existing Management and Stockholders. Following completion of
this offering, the control of the Company will remain in the hands of its
current directors, officers and stockholders. Accordingly, these persons will be
able to elect a majority of the Board of Directors and to control the management
of the Company. See "Management," "Principal Stockholders" and "Description of
Securities."
Lack of a Majority of Independent Directors. Upon completion of the
offering of the Units, the Company's board of directors will have only one
independent director. As such, upon completion of the offering of the Units, the
majority of the Company's directors will be either officers of the Company,
persons related to the officers of the Company, or persons who provide
consulting or advisory services to the Company in exchange for remuneration. See
"Management."
Lack of Experience of Management. Potential purchasers of the Units should
be aware that management of the Company does not have any experience operating a
company which has as its primary business, the importation and distribution of
alcoholic beverage products. Accordingly, management is required to retain
knowledgeable and experienced employees and consultants in the operations of the
Company's business.
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There can be no assurance that the Company will be able to retain its current
employees and/or consultants, or that it will be able to recruit knowledgeable
and experienced employees and consultants in the future should it be necessary
to do so. See "Management."
Conflicts of Interests. The validity of the securities being offered by the
Company hereby will be passed upon for the Company by the Law Offices of John W.
Martin. John W. Martin, the sole proprietor of the Law Offices of John W.
Martin, is the beneficial owner of 400,000 shares of Common Stock. Mr. Martin
received the 400,000 shares of Common Stock 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. Because of Mr. Martin's status as a principal
stockholder in the Company, he may have an inherent conflict of interest in
rendering any opinions regarding the validity of any transactions undertaken by
the Company, including an opinion regarding the validity of the securities being
offered by the Company hereby. See "Legal Matters."
Arbitrary Determination of Offering Price. The offering price of the Units
was arbitrarily determined by the Company. Among the factors considered by the
Company in establishing the offering price of the Units was the proceeds to be
raised by the Company, the percentage of ownership to be held by investors in
this offering, the experience of the Company's management and the current market
conditions in the over-the-counter securities market. Accordingly, there is no
relationship whatsoever between the offering price and the assets, earnings or
book value of the Company, or any other recognized criteria of value. See
"Dilution."
No Dividends on Common Stock Anticipated. The Company has not paid any
dividends upon its Common Stock since its inception and, by reason of its
present financial status and its contemplated financial requirements, does not
contemplate or anticipate paying any dividends upon its Common Stock in the
foreseeable future. Therefore, any potential purchaser of the Units whose
decision to invest in the Units is based upon an expectation of dividend
payments should refrain from purchasing the Units. See "Dividend Policy."
Dependence Upon Key Personnel. The Company's success is heavily dependent
upon the continued active participation of its current executive officers, key
employees and consultants. The Company does not have any employment agreements
with any of its current executive officers and key employees. Loss of the
services of one of these executives, employees or consultants could have a
material adverse effect upon the development of the Company's business. The
Company does not currently have "key-man" life insurance on any of its executive
personnel and does not intend to do so in the foreseeable future. There can be
no assurance that the Company will be able to recruit or retain other qualified
personnel should it be necessary to do so. See "Management."
Dependence Upon Consultants. The Company has established a team of
consultants which include persons with expertise in business areas important to
the Company's operations. Various members of the Company's team of consultants
consult with the Company regarding sales, marketing and operations efforts at
the Company, but are employed elsewhere on a full-time basis. As a result, they
can only spend a limited amount of time on the Company's affairs. There can be
no assurance that the Company will be able to continue to retain the consulting
services of any of its consultants, the loss of which may be detrimental to the
Company. There is no assurance that the Company will be able to continue to
attract and retain qualified consultants necessary for the development of its
business. The failure to recruit additional scientific and technical consultants
in a timely manner, would be detrimental to the Company's research and
development programs and to its business. See "Business -- Consultants."
Shares Available for Resale. Sales of substantial numbers of shares of
Common Stock in the public market following this offering could adversely affect
the market price of the Common Stock prevailing from time to time. Upon
completion of this offering, and assuming that the maximum number of shares
offered hereby have been sold, the Company will have 2,520,000 shares of Common
Stock outstanding. All shares of
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Common Stock outstanding (including the 260,000 Shares sold in this offering)
will be freely transferable without restriction of further registration under
the Securities Act, unless they are held by "affiliates" of the Company within
the meaning of Rule 144 promulgated under the Securities Act as currently in
effect. However, notwithstanding that all of the Company's outstanding Common
Stock may be sold by existing stockholders pursuant to Rule 144, certain of the
Company's stockholders have entered into an agreement with the Company and the
Placement Agent (the "Lock-Up Agreement") pursuant to which such stockholders
have agreed not to sell, pledge, hypothecate, assign, grant any option for the
sale of, or otherwise transfer or dispose of, whether or not for consideration,
directly or indirectly, 444,000 shares of Common Stock without the approval of
the Placement Agent or without the occurrence of certain events which are more
particularly described in the Lock-Up Agreement. Further, certain of the
Company's stockholders have entered into an agreement with the Company (the
"Promotional Share Lock-In Agreement") pursuant to which such stockholders have
agreed not to sell, pledge, hypothecate, assign or otherwise transfer or dispose
of 1,746,000 shares of Common Stock without the occurrence of certain events,
which are more particularly described in the Promotional Share Lock-In
Agreement.
The Company is unable to estimate when or the number of foregoing shares
that may be sold by existing stockholders because such sales will depend upon
the market price for the Common Stock, the personal circumstances of the seller
and other factors. The future sales of Common Stock or the availability of such
shares of Common Stock for sale may have an adverse effect on the market price
of the Common Stock prevailing from time to time. If such future sales did
adversely affect the market price of the Common Stock, the Company's ability to
raise additional funds through an equity offering at such time could be
adversely affected. See "-- Absence of Public Market; Possible Volatility of
Price of Common Stock," "Principal Stockholders" and "Shares Eligible for Future
Sale."
Dependence on Trademarks and Proprietary Rights; No Assurance of
Enforceability. The Company's success will depend in part on its ability to
obtain and preserve its trademarks and to operate without infringing the
proprietary rights of third parties. There can be no assurance that any
applications related to the Company's trademarks will provide the Company with a
competitive advantage or will afford protection against competitors with
products similar to those offered by the Company, or that competitors of the
Company will not circumvent, or challenge the validity of, the Company's
trademarks. In fact, the Company is currently experiencing opposition to its
application to register its Red Dragon mark with the United States Patent and
Trademark office, and no assurance can be given that the Company will be free
from similar opposition with respect to other trademarks that the Company may
wish to register in the future. In addition, in the event that another party
infringes the Company's trademarks, the enforcement of such rights is at the
option of the Company and can be a lengthy and costly process, with no guarantee
of success. Finally, although to date no claims have been brought against the
Company alleging that its trademarks infringe intellectual property rights of
others, there can be no assurance that such claims will not be brought against
the Company in the future, or that any such claims will not be successful. If
such a claim were successful, the Company's business could be materially
adversely affected. In addition to any potential monetary liability for damages,
the Company could be required to obtain a license in order to continue to
provide products under its trademarks or could be enjoined from utilizing its
trademarks if such a license were not made available on acceptable terms. If the
Company becomes involved in such litigation, it may require significant Company
resources, which may materially adversely affect the Company. See
"Business -- Trademarks."
Dilution. Present stockholders of the Company acquired their shares of
Common Stock at an average cost of approximately $0.09 per share, an amount
substantially less than the $5.75 per Unit to be paid by public investors. The
Company's net tangible book value as of November 30, 1997, without giving effect
to any outstanding warrants or options of the Company, was $87,739 or $0.04 per
share and will increase to approximately $501,246, or $0.21 per share if the
minimum number of Units offered hereby is sold, and $1,331,402, or $0.53 per
share, if the maximum number of Units offered hereby is sold. The result will be
an immediate and substantial dilution of the net tangible book value of the
shares of Common Stock acquired by the public investor of $5.54 (96%) per share
if the minimum number of Units offered hereby is sold, and $5.22 (91%) per Unit
if the maximum number of Units offered hereby is sold. Public investors
therefore will bear most of the risk of loss, while control of the Company will
remain in the hands of the present management and
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stockholders. See "Dilution" and "Certain Relationships and Related
Transactions -- Prior Issuances of the Company's Securities."
The Articles of Incorporation of the Company currently authorize the Board
of Directors to issue up to 100,000,000 shares of Common Stock and 10,000,000
shares of Preferred Stock. The power of the Board of Directors to issue shares
of Common Stock, Preferred Stock or options or warrants is subject to
shareholder approval in only limited circumstances. Shareholders have no
preemptive rights. Following completion of the offering, any additional
issuances of any of the Company's securities may have the effect of further
diluting the equity interest of shareholders. See "Stock Option Plans" and
"Description of Securities."
Escrow of Investors' Funds Pending Sale of Minimum Number of Shares
Offered. Under the terms of this offering, the Company is offering the Units on
a "95,000 Units or none, best efforts" basis. If the minimum number of Units is
sold, the remaining 165,000 Units will be offered on a "best efforts" basis
until all of the Units are sold or the offering period ends, whichever occurs
first, unless the offering is terminated earlier by the Company. Therefore, no
commitment exists by anyone to purchase all or any part of the Units offered
hereby. Consequently, there is no assurance that all of the Units offered hereby
will be sold, and subscribers' funds may be escrowed for so long as 90 days (or
a period of 180 days if the offering period is extended by the Company) and then
returned promptly with interest thereon, in the event all of the Units offered
hereby are not sold within the 90 day offering period. Investors, therefore will
not have the use of any funds paid for the purchase of the Units during the
offering period. In the event the Company is unable to sell all of the Units
offered hereby within the offering period, the offering will be withdrawn. See
"Plan of Distribution."
Directors' and Officers' Indemnification. Under applicable law, the
Company's directors will not, except for certain circumstances, be liable for
monetary damages to the Company or any other person for any statement, vote,
decision, or failure to act, regarding corporate management or policy, by a
director. Further, the Company's Articles of Incorporation and Bylaws require
the Company to indemnify and hold harmless its directors and officers from and
against and in respect of certain losses, damages, deficiencies, expenses or
costs which may be incurred or suffered by such directors and officers as a
result of their serving in such capacities with the Company. See "Certain
Provisions of Florida Law and of the Company's Articles of Incorporation and
Bylaws."
Placement Agent Unit Purchase Option To Be Outstanding. Upon completion of
the offering, the Company expects to have outstanding a Placement Agent Unit
Purchase Option to purchase an aggregate of 26,000 Units. For the life of the
Placement Agent Unit Purchase Option, the holder thereof is given, at no cost
and without assuming the risk of ownership of the Common Stock, the opportunity
to profit from an increase in the market price of the Common Stock of the
Company. The existence of such Placement Agent Unit Purchase Option might
adversely affect the ability of the Company to raise equity capital on favorable
terms, and such Placement Agent Unit Purchase Option is likely to be exercised
at a time when the Company could obtain additional equity capital on more
favorable terms. See "Plan of Distribution."
Potential Adverse Effect of Redemption of Warrants. Commencing on the date
of this Prospectus, the Warrants may be redeemed by the Company at a redemption
price of $.05 per Warrant upon not less than 30 days' prior written notice if,
with respect to the Warrants, the closing bid price of the Common Stock shall
have averaged $10.00 per share or above for 30 consecutive trading days ending
within 10 days of the notice. Redemption of the Warrants could force the holders
(i) to exercise the Warrants and pay the exercise price therefor at a time when
it may be disadvantageous for the holders to do so, (ii) to sell the Warrants at
the then current market price when they might otherwise wish to hold the
Warrants or (iii) to accept the nominal redemption price which, at the time the
Warrants are called for redemption, is likely to be substantially less than the
market value of the Warrants. See "Description of Securities -- Warrants."
Current Prospectus and State Registration to Exercise Warrants. The holders
of the Warrants will be able to exercise the Warrants only if (i) a current
prospectus under the Securities Act relating to the shares of Common Stock
underlying the Warrants is then in effect and (ii) such shares of Common Stock
are qualified for sale or exempt from qualification under the applicable
securities laws of the states in which the various holders of Warrants reside.
Although the Company has undertaken and intends to use its best efforts to
maintain a current prospectus covering the securities underlying the Warrants
following completion of the offering to the extent required by federal
securities laws, there can be no assurance that the Company will be
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able to do so. The value of the Warrants may be greatly reduced if a prospectus
covering the securities issuable upon the exercise of the Warrants is not kept
current or if the shares of Common Stock are not qualified, or exempt from
qualification, in the state in which the holders of Warrants reside. Persons
holding Warrants who reside in jurisdictions in which such shares of Common
Stock are not qualified and in which there is no exemption will be unable to
exercise their Warrants and would either have to sell their Warrants in the open
market or allow them to expire unexercised. If and when the Warrants become
redeemable by the terms thereof, the Company may exercise its redemption right
even if it is unable to qualify the underlying shares of Common Stock for sale
under all applicable state securities laws. See "Description of Securities --
Warrants."
Absence of Public Market; Possible Volatility of Price of Common
Stock. Prior to this offering, there has been no public market for any of the
shares of the Company's Common Stock, and there can be no assurance that a
trading market will develop, or if developed, that it will be developed into
something greater than a limited market. The trading price of the shares of
Common Stock could be subject to wide fluctuations in response to such factors
as, among others, variations in the Company's anticipated or actual results of
operations and market conditions in the industries in which the Company
operates. See "Plan of Distribution."
Risks of Low-Priced Stocks; Possible Effect of "Penny Stock" Rules on
Liquidity of the Common Stock and Warrants. The Common Stock and Warrants may
become subject to certain rules and regulations promulgated by the Securities
and Exchange Commission ("Commission") pursuant to the Securities Enforcement
Remedies and Penny Stock Reform Act of 1990 (the "Penny Stock Rules") which
impose strict sales practice requirements on broker-dealers which sell such
securities to persons other than established customers and certain "accredited
investors." For transactions covered by the Penny Stock Rules, a broker-dealer
must make a special suitability determination for the purchaser and have
received the purchaser's written consent for the transaction prior to sale.
Consequently, such rule may affect the ability of broker-dealers to sell the
Common Stock and may affect the ability of purchasers in this offering to sell
any of the Common Stock and Warrants acquired hereby in the secondary market.
The Penny Stock Rules generally define a "penny stock" to be any security
not listed on an exchange or not authorized for quotation on the Nasdaq Stock
Market and has a market price (as therein defined) less than $5.00 per share or
an exercise price of less than $5.00 per share, subject to certain exceptions.
For any transactions by broker-dealers involving a penny stock (unless exempt),
the rules require delivery, prior to a transaction in a penny stock, of a risk
disclosure document relating to the market for the penny stocks. Disclosure is
also required to be made about compensation payable to both the broker-dealer
and the registered representative and current quotations for the securities.
Finally, monthly statements are required to be sent disclosing recent price
information for the penny stocks.
The foregoing penny stock restrictions will not apply to the Company's
securities if such securities are listed on an exchange or quoted on the Nasdaq
Stock Market and have certain price and volume information provided on a current
and continuing basis or if the Company meets certain minimum net tangible asset
or average revenue criteria. There can be no assurance that the Company's
securities will qualify for exemption from the Penny Stock Rules. In any event,
even if the Company's securities were exempt from the Penny Stock Rules, they
would remain subject to Section 15(b)(6) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), which gives the Commission the authority to
prohibit any person that is engaged in unlawful conduct while participating in a
distribution of a penny stock from associating with a broker-dealer or
participating in a distribution of a penny stock, if the Commission finds that
such a restriction would be in the public interest. If the Company's securities
were subject to the rules on penny stocks, the market liquidity for the
Company's securities could be severely adversely affected. See "Plan of
Distribution."
Discretion of Management and the Board of Directors in Use of
Proceeds. Although the Company intends to apply the net proceeds of this
offering in the manner described under "Use of Proceeds," the Company's
management and the Board of Directors have broad discretion within such proposed
uses as to the precise allocation of the net proceeds, the timing of
expenditures and all other aspects of the use thereof. The Company reserves the
right to reallocate the net proceeds of this offering among the various
categories set forth under "Use of Proceeds" as it, in its sole discretion,
deems necessary or advisable based upon prevailing business conditions and
circumstances. See "Use of Proceeds."
17
<PAGE> 19
THE COMPANY
The Company is a development stage corporation which was formed to
participate in specific niche segments of the approximate $100 billion United
States alcoholic beverage market by acting as an importer and wholesale supplier
of a variety of beers, wines and spirits. Through its Red Dragon beer brands,
the Company intends to expand the United States market for Chinese beer imports.
The Company believes that the United States market for Chinese beer imports is
approximately $30,000,000 annually, although absolutely no assurance to this
effect can be given. Currently, the only significant brand of Chinese beer being
marketed and sold in the United States is a regular beer produced by Tsingtao,
and sold under the brand name of "Tsingtao Beer".
The Company intends to utilize its portfolio of wines to exploit the large
United States domestic wine market. According to Beverage World Magazine, in
1995, Americans consumed approximately 470.8 million gallons of wine. The
Company believes that wine imports consists of approximately 72.5 million
gallons and account for approximately 16% of total United States wine
consumption.
With its La Belle Sandrine brand, the Company intends to compete in the
growing market for prepared cocktail beverages. La Belle Sandrine is an all
natural, citrus based, prepared cocktail containing the spirit armagnac.
Currently, this niche market has approximately 30 different brands (such as Jose
Cuervo Margaritas and Khalua Combos). Because of the composition of La Belle
Sandrine, the Company believes that La Belle Sandrine will compete primarily
with a prepared cocktail which sells under the brand name of "Alize".
Statistical information available to the Company indicates that Alize has
increased its sales from 20,000 cases in 1991 to 430,000 cases in 1996,
resulting in total 1996 sales of approximately $37,000,000.
The Company's strategy is to become a leading importer, developer, manager
and distributor of a portfolio of brands of beer, wine and spirits which serve
specific niche alcoholic beverage markets. Key elements of the Company's
strategy include:
Continuous Development of Value-Added and Branded Business. The
Company intends to develop and build its business as a value-added and
branded business through careful selection of distribution channels,
continued development of niche products with volume potential and
aggressive marketing programs. The Company expects to devote significant
financial resources to innovative selling, advertising and promotional
activities designed to build brand awareness and a high level of consumer
loyalty for its products. The Company plans to focus its selling,
advertising and promotional activities on peak selling periods for its
beer, wine and spirit products. Through participation in trade shows and
other alcoholic beverage industry events, the Company will seek to educate
distributors, retailers and consumers about the Company's products.
Development and Expansion of Distribution Network. The Company's
strategy is to expand market share in key markets of the United States by
developing initially a regional distribution network, and thereafter a
national distribution network, to increase retail account distribution. The
Company believes that as it is able to extend its product line, it will be
able to leverage its distribution network by increasing the number of
products that the Company is able to move through its distribution network,
thereby allowing the Company to realize certain operating efficiencies and
product cost reductions. The Company expects to invest significant
resources to educate distributors and retailers about promoting and selling
the Company's products. The Company further expects to choose distributors
in each market that will devote significant attention and resources to the
promotion and sale of the Company's products.
Focus on Product Development and Diversity. The Company intends to
continue to expand its product line with additional beer, wine and spirit
products designed to appeal to varying consumer preferences. The Company
has a "volume-niche" strategy where development efforts are focused on
niche products which have sufficient volume to provide distribution
efficiency. The Company intends to pursue this strategy through strategic
alliances and/or acquisitions of producers and other importers and
distributors of alcoholic beverage products.
The Company was incorporated in Florida on February 12, 1996. On June 29,
1996 the Company formed Cuidao (USA) Import Co., Inc., a Florida corporation. On
March 31, 1997, the Company acquired R&R
18
<PAGE> 20
(Bordeaux) Imports, Inc., a Florida corporation. Both Cuidao (USA) Import Co.,
Inc. and R&R (Bordeaux) Imports, Inc., are wholly-owned subsidiaries of the
Company. Unless the context requires otherwise, all references to the Company
include Cuidao (USA) Import Co., Inc. and R&R (Bordeaux) Imports, Inc.
The Company's principal executive offices are located at 3201 West Griffin
Road, Suite 204, Ft. Lauderdale, Florida 33312-6900 and its telephone number is
(954) 964-1060.
USE OF PROCEEDS
The net proceeds to the Company from the sale of Units (after deducting
Placement Agent commissions and offering expenses) are estimated to be
approximately $413,507 if the minimum number of 95,000 Units is sold and
$1,243,663 if the maximum number of 260,000 Units is sold. The following table
sets forth the estimated application by the Company of the net proceeds to be
derived from the sale of Units offered hereby.
<TABLE>
<CAPTION>
MINIMUM OFFERING MAXIMUM OFFERING
AMOUNT, 95,000 PERCENTAGE OF AMOUNT, 260,000 PERCENTAGE OF
USE OF PROCEEDS UNITS NET PROCEEDS UNITS NET PROCEEDS
--------------- ---------------- ------------- ---------------- -------------
<S> <C> <C> <C> <C>
To purchase products(1)............. $290,000 70% $ 874,000 70%
To advertise and market(2).......... 83,000 20% 250,000 20%
To provide general working
capital(3)........................ 40,507 10% 119,663 10%
-------- --- ---------- ---
Total Net Proceeds............. $413,507 100% $1,243,663 100%
======== === ========== ===
</TABLE>
- ---------------
(1) Represents funds to be used to make payments to the producers of alcoholic
beverage products which the Company expects to import and distribute, and
includes letter of credit funding and the payment of expenses related
thereto. See "Business" and "Certain Relationships and Related
Transactions -- Certain Material Contracts."
(2) Represents funds required to implement the Company's sales and marketing
programs. This will include the retention of independent advertising and
marketing firms, attendance at trade shows, and the preparation of
promotional materials. See "Business -- Sales, Marketing and Distribution."
(3) Represents funds which will support the basic operations of the Company,
including but not limited to funds for office rent, utilities and
miscellaneous expenses.
Pending the expenditure of the proceeds of this offering, the Company may
make temporary investments in insured certificates of deposit, insured
short-term interest-bearing deposits, United States Government obligations or
insured money market certificates.
DIVIDEND POLICY
The Company has never paid or declared any cash dividends on its Common
Stock and does not intend to pay dividends on its Common Stock in the
foreseeable future. The Company presently expects to retain its earnings to
finance the development and expansion of its business. The payment by the
Company of dividends, if any, on its Common Stock in the future is subject to
the discretion of the Board of Directors and will depend on the Company's
earnings, financial condition, capital requirements and other relevant factors.
See "Description of Securities."
DILUTION
As of November 30, 1997, there were 2,222,000 shares of Common Stock
outstanding having a net tangible book value of $87,739 or approximately $0.04
per share. Net tangible book value per share is the net tangible assets of the
Company (total assets less total liabilities and intangible assets) divided by
the number of shares of Common Stock outstanding. Upon completion of this
offering, there will be 2,355,000 shares of the Company's Common Stock
outstanding having a net tangible book value of approximately $501,246 or
approximately $0.21 per share if the minimum number of Units is sold; and
2,520,000 shares of the Company's Common Stock outstanding having a net tangible
book value of approximately $1,331,402 or approximately $0.53 per share if the
maximum number of Units is sold. The net tangible book value of each
19
<PAGE> 21
share will have increased by approximately $0.17 per share to present
stockholders, and decreased by approximately $5.54 per share (a dilution of 96%)
to public investors if the minimum number of Units is sold, and the net tangible
book value of each share will have increased by approximately $0.49 per share to
the present stockholders and decreased by approximately $5.22 per share (a
dilution of 91%) to public investors if the maximum number of Units is sold.
Dilution represents the difference between the aggregate offering price of
the Units herein and the pro forma net tangible book value per share of Common
Stock of the Company immediately after the completion of the offering of the
Units. Dilution of the value of the Units purchased by investors in this
offering will also be due, in part, to the lower book value of the shares of
Common Stock presently outstanding, and in part, to expenses incurred in
connection with the offering of the Units. The following table illustrates this
dilution:
ASSUMING MINIMUM NUMBER OF UNITS SOLD
<TABLE>
<S> <C>
Public offering price per share(1).......................... $5.75
Net tangible book value per share before offering......... $0.04
Increase per share attributable to payment by investors in
this offering.......................................... $0.17
-----
Pro forma net tangible book value per share, after
offering.................................................. $0.21
-----
Dilution per share to new investors......................... $5.54
=====
</TABLE>
- ---------------
(1) Before deduction of underwriting commissions and expenses payable by the
Company. This figure does not assign any value to the Warrants included in
the Units.
ASSUMING MAXIMUM NUMBER OF UNITS SOLD
<TABLE>
<S> <C>
Public offering price per share(1).......................... $5.75
Net tangible book value per share before offering......... $0.04
Increase per share attributable to payment by investors in
this offering.......................................... $0.49
-----
Net tangible book value per share after offering.......... $0.53
-----
Dilution per share to new investors......................... $5.22
=====
</TABLE>
- ---------------
(1) Before deduction of underwriting commissions and expenses payable by the
Company. This figure does not assign any value to the Warrants included in
the Units.
The following tables set forth the percentage of equity to be purchased by
public investors in this offering compared to the percentage of equity to be
owned by the present stockholders, and the comparative amounts paid for the
shares of Common Stock by public investors as compared to the total cash
consideration paid by the present stockholders of the Company.
ASSUMING THE MINIMUM NUMBER OF UNITS SOLD
<TABLE>
<CAPTION>
SHARES OF PURCHASED TOTAL CONSIDERATION
-------------------- -------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PAID PER SHARE(1)
---------- ------- --------- -------- -----------------
<S> <C> <C> <C> <C> <C>
Existing Stockholders................ 2,260,000 96% $210,754 29% $0.09
New Investors........................ 95,000 4% $546,250 71% $5.75
---------- --- -------- ---
TOTAL...................... 2,355,000 100% $757,004 100%
========== === ======== ===
</TABLE>
- ---------------
(1) Based on the average value per share paid by existing stockholders to the
Company and a public offering price of $5.75 per share of Common Stock paid
by new investors.
20
<PAGE> 22
ASSUMING THE MAXIMUM NUMBER OF UNITS SOLD
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PAID PER SHARE(1)
--------- ------- ---------- ------- -----------------
<S> <C> <C> <C> <C> <C>
Existing Stockholders.......... 2,260,000 90% $ 210,754 12% $0.09
New Investors.................. 260,000 10% $1,495,000 88% $5.75
--------- --- ---------- ---
TOTAL................ 2,520,000 100% $1,705,754 100%
========= === ========== ===
</TABLE>
- ---------------
(1) Based on the average value per share paid by existing stockholders to the
Company and a public offering price of $5.75 per share of Common Stock paid
by new investors.
The Company has reserved an aggregate of 1,000,000 shares of its Common
Stock for its officers, directors, employees and consultants to purchase
pursuant to its Stock Option Plans. As of the date of this Prospectus, the
Company has not issued any options pursuant to the terms of its Stock Option
Plans. The above paragraph does not give effect to the possible issuance of up
to 1,000,000 additional shares of the Company's Common Stock upon exercise of
any options which have been, or may yet be, granted under the Stock Option
Plans. The issuance of shares of the Company's Common Stock upon the exercise of
options which may be granted under the Stock Option Plans would result in
further dilution in the interests of stockholders if at the time of exercise,
the Company's net tangible book value per share is greater than the exercise
price of any such options. See "Stock Option Plans."
21
<PAGE> 23
CAPITALIZATION
The following tables set forth at November 30, 1997 (i) the actual
capitalization of the Company and (ii) the capitalization as adjusted to reflect
the sale of the minimum and the maximum number of Units offered hereby (based
upon an initial public offering price of $5.75 per Unit and the application of
the net proceeds therefrom). The table should be read in conjunction with the
Financial Statements and Notes thereto included elsewhere in this Prospectus.
ASSUMES MINIMUM NUMBER OF UNITS SOLD
<TABLE>
<CAPTION>
NOVEMBER 30, 1997
-----------------------------
ACTUAL (1) AS ADJUSTED (2)
---------- ---------------
(UNAUDITED)
<S> <C> <C>
Stockholders' equity (deficit):
Common Stock, $.0001 par value, 100,000,000 shares
authorized; 2,222,000 shares outstanding; 2,355,000
outstanding as adjusted pro forma (2).................. $ 223 $ 236
Additional paid-in-capital................................ 136,303 644,797
Preferred Stock, $.0001 par value, 10,000,000 shares
authorized; Series A Preferred Stock outstanding....... 4 0
Additional paid-in-capital on Series A Preferred Stock.... 94,996 0
Accumulated deficit in development stage.................... (143,787) (143,787)
--------- ---------
Total stockholders' equity............................. 87,739 501,246
--------- ---------
Total capitalization.............................. $ 87,739 $ 501,246
========= =========
</TABLE>
- ---------------
(1) Derived from the Financial Statements of the Company included elsewhere in
this Prospectus.
(2) As adjusted to reflect the sale of the minimum number of Units offered
hereby and the application of the net proceeds set forth in "Use of
Proceeds."
ASSUMES MAXIMUM NUMBER OF UNITS SOLD
<TABLE>
<CAPTION>
NOVEMBER 30, 1997
---------------------------
ACTUAL(1) AS ADJUSTED(2)
--------- --------------
(UNAUDITED)
<S> <C> <C>
Stockholders' equity (deficit):
Common Stock, $.0001 par value, 100,000,000 shares
authorized; 2,222,000 shares outstanding; 2,520,000
outstanding as adjusted pro forma(2)................... $ 223 $ 252
Additional paid-in-capital................................ 136,303 1,474,937
Preferred Stock, $.0001 par value, 10,000,000 shares
authorized; Series A Preferred Stock outstanding....... 4 0
Additional paid-in-capital or Series A Preferred Stock.... 94,996 0
Accumulated deficit in development stage.................... (143,787) (143,787)
--------- ----------
Total stockholders' equity............................. 87,739 1,331,402
--------- ----------
Total capitalization.............................. $ 87,739 $1,331,402
========= ==========
</TABLE>
- ---------------
(1) Derived from the Financial Statements of the Company included elsewhere in
this Prospectus.
(2) As adjusted to reflect the sale of the maximum number of Units offered
hereby and the application of the net proceeds set forth in "Use of
Proceeds."
22
<PAGE> 24
SELECTED FINANCIAL DATA
The statement of operations and balance sheet information set forth below
as of December 31, 1996 and for the year ended December 31, 1996, are derived
from, and are qualified by reference to, the financial statements of the Company
which have been audited by Baum & Company, P.A., independent certified public
accountants. The financial statements as of December 31, 1996, and the report
thereon, are included elsewhere in this Prospectus. The selected data for the
eleven months ended November 30, 1997 are derived from the unaudited financial
statements of the Company, and in the opinion of management, all adjustments,
consisting of normal recurring adjustments, necessary for a fair presentation of
such data have been included. The information below should be read in
conjunction with the consolidated Financial Statements and Notes thereto
included in this Prospectus. The Company's historical operating results are not
necessarily indicative of the results of any future period.
<TABLE>
<CAPTION>
FEBRUARY 12, 1996
(DATE OF INCEPTION) TO ELEVEN MONTHS ENDED
DECEMBER 31, 1996 NOVEMBER 30, 1997
---------------------- -------------------
<S> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues............................................... $ 192 $ 7,600
Operating expenses..................................... 44,201 102,790
Operating income (loss)................................ (44,009) (99,778)
Weighted average number of shares of common stock and
common stock equivalents outstanding................ 9,723,455 1,453,222
BALANCE SHEET DATA:
Working capital (deficit).............................. $ 10,506 $ 54,081
Total assets........................................... 36,403 88,370
Stockholders' equity (deficit)......................... 35,216 87,739
</TABLE>
23
<PAGE> 25
PLAN OF OPERATION
During the 12 month period beginning immediately after completion of the
sale of the minimum number of Units offered hereby, the Company intends to carry
out three principal objectives:
(1) aggressively manage and market its current portfolio of beer,
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 the acquisition of other importers and
distributors of alcoholic beverage products or through the acquisition of
producers of alcoholic beverage products.
MARKETING OF PRODUCTS
With its Red Dragon beer brands, the Company intends to expand the Chinese
beer segment of the overall Asian beer import market. Presently, the Asian beer
import market has approximately five major brands which include Tsingtao,
Sapporo and Kirin. The Company's plans are to become a leading supplier of
Chinese brand beer in the North American market by expanding the product line of
Tsingtao, which is the predominant Chinese beer product sold in North America.
The Company's marketing strategy for its line of Chinese beer will be 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 restauranteur with a product that he or
she currently does not have, which is a diversified (light, amber, draft)
Chinese beer line. Thereafter, the Company will seek to introduce its Red Dragon
beer products to Asian-related specialty markets. Eventually, the Company plans
to introduce its Red Dragon beer brands to retailers who specialize in marketing
and selling imported beers. These vendors will primarily consist of ale houses
and specialty liquor stores that sell a variety of imported beers.
To market its Red Dragon beer products, the Company has developed, and will
institute, a variety of advertising and marketing programs designed to create
consumer awareness for its beer products and to establish brand identification.
The Company plans to conduct on-premise promotions, which will include the use
of posters and wall and daily scheduling calendars which prominently display the
Company's Red Dragon beer products at the site of retail sale of the Company's
beer products. Where legal, the Company will conduct product tasting seminars
with restaurant staff and consumers. In addition, the Company intends to utilize
a variety of restaurant table top "tent" displays featuring its beer products
and its monthly promotions. As the Company's Red Dragon products are gradually
introduced into the mainstream retail market, the Company will integrate a
giveaway merchandise program with T-Shirts and baseball caps featuring the
Company's Red Dragon logo. The Company's merchandise program will be
specifically designed to develop brand identification.
The Company anticipates that approximately $20,000 of the net proceeds
raised from the minimum offering of Units hereunder, and $50,000 of the net
proceeds raised from the maximum offering of Units hereby will be allocated for
the initial marketing of its Red Dragon beer products.
With its wine products, the Company's objective will be to successfully
introduce a profitable line of imported wines into the United States retail wine
market. According to the Adams-Jobson 1996 Handbook Advance, an alcoholic
beverage industry resource book, the retail wine market in the United States is
approximately $12.1 billion. 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. In the marketing of its wine products, the Company will focus on the
consumer fascination with imported wines and their image. The Company's wine
marketing approach will combine the positive image of French wines with an
appealing retail price (the Company's wine product line is anticipated to retail
in the $5.00-$10.00 range per 750 ml bottle) so as to communicate to the
consumer that the Company's wine products have an attractive price to quality
value. Management believes that retailers and consumers of wine
24
<PAGE> 26
products make their purchasing decisions based on an identifiable and favorable
price to quality value quotient.
The Company will distribute its wine products through agents that deal
directly with high volume off-premise accounts. Although the Company believes
that the high volume off-premise account market does not engage in heavy
advertising as a form of marketing (this market relies on providing distributors
and retailers value and an opportunity to realize reasonable profit margins as
its primary form of marketing strategy), it is the Company's plan to participate
in at least three major restaurant/hotel trade shows during the first 12 months
after completion of the sale of the minimum number of Units offered hereby, and
it is the Company's plan to design incentive programs for distributor personnel
which will have as its main focus the placement of products with off-premise
accounts.
Since the Company believes that its primary marketing strategy for its wine
products will be providing distributors and retailers with value and an
opportunity to realize reasonable profit margins, the Company does not expect to
use any of the net proceeds raised from the offering of the Units toward the
marketing of its wine products.
The Company's premier spirits product, La Belle Sandrine, will initially be
introduced in warm climate areas, and thereafter in seasonal climate areas as
appropriate. The Company's marketing strategy for its La Belle Sandrine product
will be to drive growth for this product using advertising that focuses on the
unique tropical related properties of the product (the combination of passion
fruit juice and armagnac).
The Company's marketing strategy for its La Belle Sandrine product will
initially concentrate on on-premise promotions, followed by a variety of
off-premise programs. The Company intends to utilize on-premise visuals which
show the various ways in which La Belle Sandrine can be mixed and used. The
Company's off-premise promotions will include the producing and packaging with
products sold, a cook book featuring a variety of seafood and poultry items
prepared with La Belle Sandrine as a sauce.
The Company anticipates that approximately $63,000 of the net proceeds
raised from the minimum offering of Units hereunder, and $200,000 of the net
proceeds raised from the maximum offering of Units hereby will be allocated for
the marketing of La Belle Sandrine.
EXPANSION OF MANAGEMENT AND ADMINISTRATIVE PERSONNEL
The Company currently has five employees and three consultants. Assuming
that product acceptance, sales and revenue growth justify such, the Company
anticipates employing an additional four persons by the end of the first quarter
of 1999. It is further anticipated that one of these persons will be an
executive officer of the Company responsible for certain aspects of sales and
marketing and three persons will be in corporate administration.
As a result of the foregoing, it is expected that annual employee
compensation will increase during the 12 month period commencing immediately
after the completion of the sale of the minimum number of Units offered hereby
from approximately $52,000 to approximately $265,000.
EXPANSION OF PRODUCT LINES AND DISTRIBUTION CHANNELS
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. At the foundation of the Company's plans for expansion of its product
lines and distribution channels is the acquisition of other importers and/or
distributors of alcoholic beverage products.
In its acquisition planning, the Company will look to acquire other
importers and/or distributors of alcoholic beverage products who own, or have
exclusive rights to, niche alcoholic beverage products which can be sold to
volume purchasers and which have the potential to be branded. In addition to
adding entirely new product lines, acquisitions are expected to be beneficial in
adding new customers and distribution channels, and improving operating
efficiencies of the Company through shared resources and regional facilities and
the creation of critical mass in product offerings.
25
<PAGE> 27
The Company believes that the importation and/or distribution of alcoholic
beverage products in the United States is a highly fragmented industry populated
by numerous single product, or niche product, importers and distributors. As a
result, the Company believes that opportunities exist for the Company to expand
its product offerings and distribution channels, and to increase its operating
efficiencies through the acquisition of other importers and/or distributors of
alcoholic beverage products.
The Company has no present commitments or agreements and is not currently
involved in any negotiations with respect to any acquisitions. The Company has
not specifically determined the amount it will be required to expend on any
future acquisition or the timing of the expenditure. The amount actually
expended, if any, is at the discretion of the Company and may depend upon a
number of factors including future revenue growth and the amount of cash
generated by the Company's operations.
The Company believes that the net proceeds from the minimum offering of
95,000 Units will provide it with sufficient working capital for approximately
12 months after completion of the minimum offering of 95,000 Units, and that the
net proceeds from the maximum offering of 260,000 Units will provide it with
sufficient working capital for approximately 18 months after completion of the
maximum offering of 260,000 Units.
The foregoing represents the Company's estimate of its plan of operations.
Future events, including the problems, delays, expenses and complications
frequently encountered by development-stage companies, as well as changes in the
economy, may require a change or alteration in the Company's plan of operation.
26
<PAGE> 28
BUSINESS
OVERVIEW
The Company is a development stage corporation which was formed to
participate in specific niche segments of the approximate $100 billion United
States alcoholic beverage market by acting as a supplier of a variety of beers,
wines and spirits. Through its Red Dragon beer brands, the Company intends to
expand the United States market for Chinese beer imports. The Company believes
that the United States market for Chinese beer imports is approximately
$30,000,000 annually. Currently, the only significant brand of Chinese beer
being marketed and sold in the United States is a regular beer produced by
Tsingtao, and sold under the brand name of "Tsingtao Beer".
The Company intends to utilize its portfolio of wines to exploit the large
United States domestic wine market. According to Beverage World Magazine, in
1995, Americans consumed approximately 470.8 million gallons of wine. The
Company believes that wine imports consists of approximately 72.5 million
gallons and account for approximately 16% of total United States wine
consumption.
With its La Belle Sandrine brand, the Company intends to compete in the
growing market for prepared cocktail beverages. La Belle Sandrine is an all
natural, citrus based, prepared cocktail containing the spirit armagnac.
Currently, this niche market has approximately 30 different brands (such as Jose
Cuervo Margaritas and Khalua Combos). Because of the composition of La Belle
Sandrine, the Company believes that La Belle Sandrine will compete primarily
with a prepared cocktail which sells under the brand name of "Alize".
Statistical information available to the Company indicates that Alize has
increased its sales from 20,000 cases in 1991 to 430,000 cases in 1996,
resulting in total 1996 sales of approximately $37,000,000.
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
specific 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; expanding distribution into new
markets and increasing penetration of existing markets primarily through product
line extensions, promotional activities and through the acquisition of producers
and other importers and distributors of alcoholic beverage products.
The Company was incorporated in Florida on February 12, 1996. On June 29,
1996 the Company formed Cuidao (USA) Import Co., Inc., a Florida corporation. On
March 31, 1997, the Company acquired R&R (Bordeaux) Imports, Inc., a Florida
corporation. Both Cuidao (USA) Import Co., Inc. and R&R (Bordeaux) Imports,
Inc., are wholly-owned subsidiaries of the Company. Unless the context requires
otherwise, all references to the Company include Cuidao (USA) Import Co., Inc.
and R&R (Bordeaux) Imports, Inc.
INDUSTRY BACKGROUND
Beer Industry
Beer has the largest share of the United States alcoholic beverage market
with a total of 5.8 billion gallons of beer being sold in the United States in
1995. Beer owns 87.9% of the consumed alcohol industry in the United States.
Demographic information shows that 61% of beer drinkers are men, with the 25 to
34 and 45 to 55 age brackets being the most likely to drink beer. Beer continues
to attract consumer attention through the introduction of new styles and types,
such as ice beer and specialty brew.
According to the Adams-Jobson 1996 Handbook Advance, imported beer in 1996
continued a three year growth pattern with a 7.4% increase in sales over the
previous year, and resulting in a 6% share of the United States beer market. As
Americans continue to beer surf and experiment, import sales have increased.
Importers are continuing to look for new ways to expand their core business, and
are implementing new strategies such as product line extensions.
27
<PAGE> 29
The leading import sales in cases, comparing 1995 to 1996 are as follows
(in millions):
<TABLE>
<CAPTION>
1995 1996
----- -----
<S> <C> <C>
Heineken............................................. 34 38
Corona Extra......................................... 21 28.4
Molson Ice........................................... 11 10
Total Imported Beer.................................. 155.2 172.2
</TABLE>
Asian produced beers fared relatively well in 1996 as traffic at Asian
theme restaurants (the prime sites for Asian beer sales) improved. Asahi, Kirin
and Sapporo, all Japanese brands, and Tsingtao, the predominant Chinese brand,
continue to lead in the Asian beer market.
The Company estimates that the United States market for Chinese beer is in
excess of 1,000,000 cases annually. The primary venue for Chinese beer sales in
the United States is the Chinese restaurant. According to the 1992 Census of
Retail Trade, there are over 22,000 Chinese restaurants in the United States,
with major cities having the largest share of them.
The only Chinese beer sold in all 50 states of the United States is
Tsingtao Beer. Tsingtao Beer sells in excess of 1,000,000 cases per annum.
Tsingtao Beer is almost exclusively marketed and sold in Chinese restaurants.
Unlike the Japanese brewers who have found tremendous success selling a varied
product line, Tsingtao has traditionally chosen to sell only one brand. In
response to this lack of product diversification, many of Tsingtao's Chinese
restaurant buyers have been forced to carry other brands of Asian and European
beers to satisfy their customer's demands for product diversity. The Company
believes that Tsingtao's historical decision not to extend its beer product line
has severely limited the sales potential of Tsingtao in the United States.
Wine Industry
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). Table wines account for
more than 80% of the total United States wine market.
Table wines which retail for more than $3.00 per 750 ml (milliliter) bottle
are generally referred to as "premium wines". There are three segments within
the premium wine market. These segments are the "popular premium" wines which
retail between $3.00 and $7.00 per 750 ml bottle, "super premium" wines which
retail between $7.00 and $14.00 per 750 ml bottle and "ultra premium" wines
which retail over $14.00 per 750 ml bottle.
Champagnes are the most famous wines in the world. Born in the province of
Champagne, in northeastern France, it is the only one of the world's hundreds of
sparkling wines that rightly bears the name Champagne.
In 1996, shipments of champagne from France set a record of 95 million
bottles. The United States alone imported over 13 million bottles of champagne
from France in 1996. The United States was the third largest importer of
champagne in the world in 1996, trailing only the United Kingdom and Germany.
Since 1993, the overall United States wine market has enjoyed four
consecutive growth years posting a 2.3% growth between 1995 and 1996. In 1995,
wine imports climbed to 72.5 million gallons and accounted for 15.7% of total
wine sales. Import wines share of the United States wine market varies widely
among different states, with shares generally higher in the East and lower in
the West. In 1996, imports accounted for 23.8% of wine sales in New York and
19.4% of wine sales in Florida, but only 9.2% of wine sales in California. The
1996 figures surged by 5.7 million cases, up 19% from 1995, mainly because of
huge gains by European wines and products from Chile, Brazil, Argentina and
Australia. European table wines sported relatively high growth in 1996 with
Italy at 15% of the import market, France at 18% of the import market and Spain
at 15% of the import market leading the way.
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<PAGE> 30
The Company believes that Americans now consume more table wine for a
number of reasons including favorable news about the health benefits of red
wine, favorable new United States dietary guidelines, new packaging and a strong
economy.
Spirits Industry
Spirits are essentially all alcoholic beverages other than beer or wine.
Spirits are created through the process of distilling, which reduces water
content and greatly increases the alcohol strength of an alcoholic beverage.
Where beers on average have an alcohol content ranging from 2% to 8% and wines
have an alcohol content ranging from 8% to 14%, distilled spirits are usually in
the range of 35% alcohol content, although individual products may be higher or
lower.
Buoyed by a strong economy, sales of distilled spirits reversed a 15-year
record of decline, with volume rising 0.3 percent in 1996 to 135 million
nine-liter cases, according to Impact Databank.
One category of spirits is the prepared cocktail. Prepared cocktails as a
whole were up in 1996 by more than 11% as compared to 1995, and were led by
Heublein's TGI Friday's line. The TGI Friday's brand had a strong year in 1996,
with a 68% sales gain over 1995 to reach more than 1.1 million 9-liter cases
sold. The brand has had an annual compound growth rate of more than 100% since
1992. Alize, the cognac and passion fruit prepared cocktail distributed by
Kobrand Corporation, had 1996 sales of 430,000 9-liter cases, more than tripling
its sales since 1994.
PRODUCTS
Beer Products
The Company's beer products currently consist of three crafted brews from
the Tsingtao Brewery No. 3 in the People's Republic of China. These three
products are Red Dragon Draft, Red Dragon Light and Red Dragon Amber.
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 tastes 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 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 quality awards earned by the brewery
are presented in Beijing to less than two percent of the more than 800 breweries
operating in the People's Republic of China.
Tsingtao , the owner and operator of Tsingtao Brewery No. 3 is China's most
famous beer producer. Its regular beer product, "Tsingtao Beer", is the number
one Chinese Beer imported in the United States and ranks among the top 25
imported beers (out of over 600 brands) in the United States. Tsingtao Beer is
also the number one branded consumer product exported from China. Since 1986,
Tsingtao Beer has sold approximately 1,000,000 cases annually in the United
States. Tsingtao Beer is served in more than 90% of all Chinese restaurants in
the United States. It is the only Chinese beer available in all fifty states of
the United States. Tsingtao Beer was awarded a gold medal for its superior taste
and quality by a panel of highly acclaimed chefs belonging to Chefs in America,
a prestigious culinary association.
The Company's exclusive Import and Distribution Agreement with Tsingtao
Brewery No. 3 provides the Company with the exclusive right to market and
distribute in the United States the Red Dragon beer brands only, and not the
regular beer product, "Tsingtao Beer," which is also produced at Tsingtao
Brewery No. 3. The Red Dragon beer brands represent the draft, light and amber
beer types produced at Tsingtao Brewery No. 3, while Tsingtao Beer represents
the regular beer product produced at Tsingtao Brewery No. 3. With its newly
crafted Red Dragon brands, the Company intends to further expand the growing
market for Asian beer imports, and specifically, the market for Chinese beer
imports.
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<PAGE> 31
Wine Products
The Company is a supplier of a diverse line of popular premium and super
premium varietal wines produced in the Bordeaux region of France. The Company's
wines are procured from five different French wine producers. These producers
are Les Vignerons De Buzet, Armadis, SICA-Les Chais Du Prevot, Cave Vignoble
Gursonnais and Godet Freres.
Les Vignerons De Buzet ("Buzet") is the second largest exporter of "co-op"
wines in France, shipping over 3,000,000 bottles worldwide and selling an
additional 3,500,000 bottles to restaurants within France. Buzet offers a
diverse line of premium table wines under three different labels. These labels
are Renaissance, Excellance and Instant Nature, with each label providing
premium red, white and rose flavors.
The Buzet Red Renaissance is made from Merlot, with the addition of
Cabernet Sauvignon, and has a distinctive character. The Buzet White Renaissance
is made principally from Semillion, Sauvignon and Muscatel, and has a floral,
fruity aroma. The Buzet Rose Renaissance is made from a harmonious blend of
Merlot and Cabernet and is supple and fruity.
The Company expects that its Buzet Renaissance and Excellance lines will be
sold to consumers at prices between $5.50 and $8.00 per 750 ml bottle.
Buzet Instant Nature lines will consist of Red Instant Nature and White
Instant Nature. The Instant Nature lines are unique in that their labels have
various wildlife scenes depicting what foods these wines are best to be consumed
with.
Armadis provides the Company with a variety of labels which will be
marketed and sold to the United States consumer. The relatively low priced
popular premium labels of Bordeaux Rouge, Bordeaux Blanc Dry and Bordeaux Blanc
Sweet are expected to retail in the $6.00 per 750 ml bottle range. The super
premium premier line of Premieres Cotes de Bergerac in Blanc Molleux,
Monbazellas, Sauternes and Medoc will retail from $9.00 to $15.00 per 750 ml
bottle. Also falling into this range will be the Armadis Montagne St. Emilion
and Graves Rouge.
SICA-Les Ches Du Prevot provides the Company with the popular premium wines
of Entre Duex Mers, Bordeaux Blanc, Bordeaux Rouge and Bordeaux Superieur. Entre
Duex Mers is a dry wine containing 70% Semillion, 20% Sauvignon and 10%
Muscatel. The Sauvignon and the Muscatel bring floral aromas to the wine and the
Semillion gives it a fruity taste. The Bordeaux Blanc is 100% Sauvignon with a
prevailing floral aroma and a fruity (orange family) taste. The Bordeaux Rouge
is 50% Merlot, 40% Cabernet Franc and 10% Cabernet Sauvignon, and has a harmony
and fineness which enable it to be tasted in its youth. The Bordeaux Superieur
is 30% Merlot, 30% Sauvignon and 40% Cabernet Franc, and has a dark purple
color, intense aromas and a fruity taste. All of the SICA-Les Ches Du Prevot
wines are expected to retail to the consumer at $5.00 to $7.00 per 750 ml
bottle.
Cave du Vignoble Gursonnais provides the Company with a line of popular
premium wines under the Bergerac, Cotes de Bergerac and Moelleux labels. Some of
the wines within these lines are the Bergerac Blush, which is a wine which comes
from Cabernet grapes soaked during a short period, the Cotes de Bergerac Dry
White, which comes from a blend of Muscatel and Semillion, the Cotes de Bergerac
Mellow White, which has a very intense flavor and which is reminiscent of the
passion fruit, and Cotes de Bergerac Mellow Prestige, which is a combination of
Semillion, Sauvignon and Muscatel. The Company expects that all of the Cave de
Vignoble Gursonnais wines will retail to the consumer at a price range of
between $5.00 to $8.00 per 750 ml bottle.
Godet Freres provides the Company with an elite champagne. The Company will
offer three types of Godet Freres champagne. A Brut, which is usually the best
choice for an aperitif because it contains almost no sugar, a Rose, which is
produced in only small amounts, and a Cuvee, which is a four year old champagne.
Both the Brut and Rose are aged for two years before being made available for
commercial sale.
The Company will offer its Cuvee in both a standard 750 ml bottle and a
magnum 1.5 liter bottle. The Company expects its Godet Freres champagnes to
retail in the $20.00 to $30.00 per 750 ml bottle range. As a general rule,
champagne can never be expected to be inexpensive because by the time a bottle
of champagne
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<PAGE> 32
leaves a wine cellar, it has been handled at least 150 times. For example,
champagne bottles are typically stored on a rack on a 45 degree angle, and are
turned daily to force any sediment into the neck of the bottle up near the
bottle's cork.
Spirits Products
In addition to wines, Armadis also provides the Company with a product
called La Belle Sandrine. La Belle Sandrine is a unique aperitif which is a
blend of the exotic flavor of passion fruit and armagnac. Although it is ideal
as a before dinner drink, it can also be appreciated at any time of day or
night, and can be served chilled, over ice, or added to other cocktails.
SALES, MARKETING AND DISTRIBUTION
The Company expects to sell its products to independent beverage
distributors and wholesalers for resale to retailers who sell alcoholic
beverages to the consumer. Independent wholesale distributors (all of whom may
carry other beverage products that compete with the Company's products) will be
formally appointed by the Company in a variety of ways throughout the states in
which the Company does business. The Company anticipates that in most cases,
there will be 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.
The Company believes that its specific distribution and sales strategy will
necessarily vary among its beer, wine and spirits products. Preliminarily, the
diverse strategies for each such product will be as follows:
Beer Distribution. The Company's beer products are expected to be initially
distributed primarily to Asian-themed (initially Chinese) restaurants, bars and
taverns, and later to brew pubs, warehouse clubs and specialty liquor stores
that sell a variety of imported beers. The Company's beer products will be
delivered to these retail outlets through a network of approximately 20 local
and regional distributors.
The Company plans to initially introduce its Red Dragon beer products to
distributors who serve eight primary states which have the majority of Chinese
theme restaurants and retailers, and who currently sell Tsingtao Beer. These
eight primary states are California, Illinois, New York, Virginia, Florida,
Maryland, Georgia and Colorado. The Company expects that these markets will
account for the greatest percentage of its Red Dragon beer distribution in the
near future.
Wine Distribution. The Company's wine products are expected to be
distributed in restaurants, bars and taverns, warehouse clubs, liquor stores and
supermarkets. The Company plans for its wine products to be delivered initially
to these retail outlets through a network of approximately 10 local and regional
distributors, or will be provided to retailers (such as wholesale clubs) through
direct shipment to warehouse facilities. In the event of direct shipments to
warehouse facilities, local distributors will be paid a stocking fee and be
responsible for insuring that all excise taxes are paid where required by
revenue authorities.
Initially, the Company will contract with regional distributors in the
least competitive markets on the East Coast. Distribution will begin in the
region of Delaware and gradually move south to Florida. As the Company is able
to demonstrate the viability of its wine products, it expects to be able to
expand its distribution network west into those regions of the United States
where California produced wines are also distributed.
With respect to its champagnes, the Company will focus on contracting with
wine distributors who concentrate on the restaurant trade. The Company realizes
that champagne is mostly a seasonal beverage, and will look for most of its
champagne sales to be in the third and fourth quarters of the year. The Company
expects its champagne products to perform well in specialty wine shops and large
liquor stores that offer a large variety of wines and champagnes to consumers at
prices ranging from inexpensive to higher price quality products.
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Spirits. The Company's spirits products will be purchased by consumers at
restaurants, bars and taverns, as well as in bottles at liquor stores, warehouse
clubs and supermarkets (where permitted by law). The Company believes that its
spirits products will initially be delivered to these retail outlets through a
network of approximately 12 regional distributors who serve the Southeastern and
Southwestern states of the United States, and the Caribbean Islands.
The Company plans to initially introduce its flagship spirits product, La
Belle Sandrine, to distributors who serve states and regions which have
relatively warm climates and which are less likely to be affected by seasonal
climate changes. Once the viability of the product is proven, the Company will
seek to effectuate an alliance with a large national distributor of spirits
products in order to secure nationwide distribution of La Belle Sandrine.
In each of its targeted markets, the Company will 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 expects 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 elements 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.
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 other 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
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these factors. There can be no assurance however that the Company 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,
administrative, distribution and marketing resources and a higher level of brand
recognition than the Company. With respect to its Red Dragon beer products, the
Company anticipates competition from Sapporo USA, Inc. and Kirin Brewery of
America, major importers and distributors of alcoholic beverage products, and
the importers and distributors of such Asian beer brands as Sapporo Draft and
Kirin Lager and Kirin Light. With respect to its wine 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 Worldwide Wine and
Spirits, Inc. With respect to its primary spirits product, La Belle Sandrine,
the Company anticipates competition from Kobrand Corporation, the importer and
distributor of Alize.
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.
EMPLOYEES
As of the date of this Prospectus, the Company employs two persons other
than its executive officers. One of these two 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.
The Company expects to hire additional employees in the first quarter of
1998. It is anticipated that additional employees will be hired in the areas of
sales and marketing and administration. See "Plan of Operation -- Expansion of
Management and Administrative Personnel."
CONSULTANTS
The Company has formed a team of consultants with which it may consult on
various matters relating to the business of the Company. Consultants may not be
officers or directors of the Company although they may be shareholders. The
establishment of a consulting team is not intended to be a delegation by the
Company's officers and directors of their power of management and control of the
Company, as management and control of the Company shall at all times be retained
by the Company's officers and directors. As of the date of this Prospectus, the
following persons have agreed to provide consulting services to the Company:
KEN CALLIHAN is a marketing consultant responsible for researching market
conditions in the alcoholic beverage industry, and designing and implementing
marketing strategies for the Company. Mr. Callihan has worked with beer
producers such as Anheuser-Busch, and has been a consultant to Sweden's Kalbach
Beer. Mr. Callihan holds a BA degree from Drew University and an MBA from
Fairleigh Dickinson University.
EMMANUEL LEBLANC is collaborating with the Company on coordinating and
facilitating container shipments of the Company's products from France to the
United States. From April 1995 to December 1996, Mr. LeBlanc was Station Manager
for Regional Airlines in Bordeaux, France. As Station Manager for Regional
Airlines, Mr. LeBlanc was responsible for overseeing and coordinating all
freight shipments on all domestic flights for the airlines. From 1990 to 1995,
Mr. LeBlanc was the Airport Agent, Ramp and Freight Coordinator for American
Airlines in Paris, France. Mr. LeBlanc received a BA degree in English at the
University of Tours (France).
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JEAN FRANCOIS LOUCHET is consulting with the Company in the area of quality
assurance for the Company's wine and spirits products. Mr. Louchet is the former
owner of a restaurant in Southwest France where he was constantly involved in
the selection and procurement of wines. For a number of years, Mr. Louchet was
the Sales Manager and Managing Director for Hepworth Holding Company, a United
Kingdom corporation, where he supervised the France branch of Hepworth Holding
Company. Mr. Louchet also served in the French Army achieving the rank of
Sergeant.
FACILITIES
The Company's corporate offices are located in a 925 square foot facility
leased by the Company in Ft. Lauderdale, Florida. The Company entered into the
lease for its corporate offices on September 30, 1996. The rental payment is
currently $740 per month. The Company's lease expires on September 30, 1998. The
Company has an option to renew the lease for its corporate offices for an
additional two year period at a rental rate of $775 per month. The Company
believes that its current corporate offices are adequate for its present needs.
GOVERNMENT REGULATION
The Company's business is highly regulated by federal, state and local laws
and regulations. Federal and state laws and regulations govern licensing
requirements, 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 believes that it 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 is operating within existing laws and
regulations or is taking action aimed at assuring compliance therewith. The
Company does not expect compliance with such laws and regulations to materially
affect the Company's capital expenditures, earnings or competitive position.
TRADEMARKS
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 has 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 claims 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.
The Company intends to respond to the Desnoes & Geddes notice of opposition
in a manner which will be 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. However, absolutely no assurance can be
given that the Company will be able to overcome the Desnoes & Geddes notice of
opposition and have its Red Dragon mark registered.
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 Chinese beer distribution business. Further, the inability
of the Company to use its Red Dragon mark in connection with its Chinese beer
business may require the Company to develop and implement alternative trademarks
for
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its Chinese beer business, which may require the Company to incur substantial
costs related to such development and implementation.
The Company may in the future receive communications from third parties
asserting that the Company is infringing certain trademark rights of others. No
assurance can be given that any of these claims will not result in protracted
and costly litigation and that damages for infringement will not be assessed.
In general, the Company's policy will be to pursue registration of its
marks whenever possible and to oppose vigorously any infringement of its marks.
There can be no assurance that any of the Company's trademarks will afford
protection against competitors with similar products. There can also be no
assurance that 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.
LEGAL PROCEEDINGS
The Company is not a party to any litigation.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company and their ages as of
the date of this Memorandum are set forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION(S) HELD
---- ---- ----------------
<S> <C> <C>
C. Michael Fisher 43 Chairman of the Board, President
and Director
Francis X. Scanlan 48 Chief Financial Officer
Edward L. Magdycz 49 Secretary and Director
Regis I. Louchet(1) 28 Subsidiary President
Francis J. Hornik, Jr. 56 Director
</TABLE>
- ---------------
(1) Mr. Louchet 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 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.
FRANCIS X. SCANLAN has been the Company's Chief Financial Officer since
March 4, 1997. Prior to joining the Company, Mr. Scanlan was the MIS Manager,
Operations Manager and Controller of Innovation Computers, a retailer and
telemarketer of computer related products. From September 1994 through October
1995, Mr. Scanlan was a computer consultant to Sales Control Systems, a
manufacturer of computer-related products. From March 1994 through September
1994, Mr. Scanlan was Chief Financial Officer of The Marbledge Group, Inc., an
importer, manufacturer and installer of natural stone products. From 1989
through 1994, Mr. Scanlan was Chief Financial Officer of Bernstein/Leibatone
Associates, Inc., a Nasdaq Stock Market company engaged in the business of
importing and distributing vinyl packaging textiles. Mr. Scanlan holds an MBA
degree and a BBA degree in Accounting from Florida Atlantic University.
EDWARD L. MAGDYCZ has been Secretary and a Director of the Company since
March 31, 1997. From the Company's inception until March 31, 1997, Mr. Magdycz
was Director of Sales and Marketing for the Company. From November 1993 to
December 1995, Mr. Magdycz was a District Sales Manager for Calico Industries,
Inc., an Annapolis Junction, Maryland based company engaged in the sales and
distribution of food and beverage service equipment. From December 1992 through
November 1993, Mr. Magdycz was a Vice President of Sales and Marketing for Never
Burn, Inc., a Hollywood, Florida based suncare products distributor. From 1976
to November 1992, Mr. Magdycz was a District Manager for the Vollrath Company,
Inc., a Sheboygan, Wisconsin based food service equipment manufacturer. Mr.
Magdycz holds a BS degree from the University of Delaware.
REGIS I. LOUCHET has been the President and a Director of R&R (Bordeaux)
Import Co., Inc. since April 1, 1997. Prior to becoming President of R&R
(Bordeaux) Import Co., Inc., Mr. Louchet served as the Company's Secretary. From
February 1995 to November 1996, Mr. Louchet was the President of French Cooking,
Inc., a food catering company located in Hollywood, Florida. From July 1993 to
February 1995, Mr. Louchet was the head Chef and Director of Purchasing of food
and wines at Duo Traituer and La Convention restaurants in France. From January
1992 to July 1993, Mr. Louchet was the head Chef at Le Foch and Le Pelican
restaurants in France. From December 1990 to November 1991, Mr. Louchet served
at Hotel Matignon where he directed the food and wine staff for French Prime
Ministers Michel Rocard and Edith Cresson and where he was responsible for
purchasing and quality assurance of all food and beverages.
36
<PAGE> 38
FRANCIS J. HORNIK, JR. 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.
COMPENSATION OF DIRECTORS
The Company's directors will not receive compensation for services on the
Board of Directors or any committee thereof, but directors may be reimbursed for
certain expenses in connection with attendance at Board and committee meetings.
EXECUTIVE COMPENSATION
The following summary compensation table sets forth the aggregate cash
compensation paid or accrued by the Company to each of the Company's executive
officers and key employees for services rendered to the Company during the
Company's fiscal year ended 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ------------------------
---------------------------------- SECURITIES ALL OTHER
BONUS OTHER ANNUAL UNDERLYING COMP.
NAME AND PRINCIPAL POSITION SALARY($) ($) COMPENSATION OPTIONS(#) ($)
--------------------------- --------- ----- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C>
C. Michael Fisher..................... $0 $0 $0 $0 $0
Chairman of the Board
and President
Edward L. Magdycz..................... 0 0 0 0 0
Secretary
Robert K. Walker...................... 0 0 0 0 0
General Manager
</TABLE>
EMPLOYMENT AGREEMENTS
During the first quarter of 1998, the Company expects to enter into formal
employment agreements with C. Michael Fisher, the Company's Chairman of the
Board, Edward L. Magdycz, the Company's Secretary, Francis X. Scanlan, the
Company's Chief Financial Officer and Robert K. Walker, the Company's General
Manager. It is anticipated that said employment agreements will provide that
Messrs. Fisher, Magdycz, Scanlan and Walker shall be entitled to an annual base
salary of $35,000, $35,000, $40,000 and $35,000 respectively. In addition to
securing the annual cash compensation arrangement for Messrs. Fisher, Magdycz,
Scanlan and Walker, the employment agreements are also expected to address cash
and stock bonuses payable to such officers, medical, life and disability
insurance coverage, incentive compensation, automobile allowances and
reimbursement of expenses incurred on behalf of the Company.
37
<PAGE> 39
STOCK OPTION PLANS
1997 INCENTIVE STOCK OPTION PLAN
The Company's 1997 Incentive Stock Option Plan (the "1997 Option Plan") was
adopted by the Board of Directors and a majority of the shareholders of the
Company on October 10, 1997. A total of 750,000 shares of Common Stock are
reserved for issuance under the 1997 Option Plan. The 1997 Option Plan provides
for the granting to employees (including officers and employee directors) of
"incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code of 1986 (the "Code"), and for the granting to employees and
consultants of nonstatutory stock options. The 1997 Option Plan may be
administered by the Board of Directors or a committee of the Board of Directors
(the "Administrator"), which committee shall satisfy the applicable requirements
of Section 16 of the Exchange Act and the Code. The Administrator determines the
terms of options granted under the 1997 Option Plan, including the number of
shares subject to the option, exercise price, term and the rate at which the
options become exercisable. The exercise price of all incentive stock options
granted under the 1997 Option Plan must be at least equal to the fair market
value of the Common Stock of the Company on the date of grant. The exercise
price of all nonstatutory stock options must equal at least 85% of the fair
market value of the Common Stock on the date of grant other than those granted
to certain executive officers of the Company which must have an exercise price
equal to 100% of the fair market value of the Common Stock on the date of grant.
The exercise price of any stock option granted to an optionee who owns stock
representing more than 10% of the voting power of all classes of stock of the
Company must equal at least 110% of the fair market value of the Common Stock on
the date of grant. The exercise price may be paid in such consideration as
determined by the Administrator, including cash and promissory notes. With
respect to any participant who owns stock representing more than 10% of the
voting power of all classes of stock of the Company, the term of the option is
limited to five years or less. The term of all other options may not exceed ten
years. If not terminated earlier, the 1997 Option Plan will terminate in 2007.
The Administrator has the authority to amend or terminate the 1997 Option Plan
as long as such action does not adversely affect any outstanding options. In the
event of a proposed sale of all or substantially all of the Company's assets, or
a merger of the Company with or into another corporation, each option will be
assumed or an equivalent option substituted by the successor corporation, unless
the Administrator determines, in the exercise of its sole discretion, that the
optionee will have the right to exercise the option as to some or all of the
shares of stock covered by the option, including shares as to which the option
would not otherwise be exercisable, in which case each option will be
exercisable for 30 days from the date of notice of such determination.
1997 DIRECTORS' STOCK OPTION PLAN
The 1997 Directors' Stock Option Plan (the "Directors' Plan") was adopted
by the Board of Directors and approved by a majority of the stockholders of the
Company on October 10, 1997. A total of 250,000 shares of Common Stock has been
reserved for issuance under the Directors' Plan. The Directors' Plan provides
for the grant of nonstatutory stock options to nonemployee directors of the
Company. The Directors' Plan is designed to work automatically without
administration; however, to the extent administration is necessary, it will be
performed by the Board of Directors. The Directors' Plan provides that each
person who is a nonemployee director of the Company upon joining the Board of
Directors, shall be granted a nonstatutory stock option to purchase 1,000 shares
of Common Stock (the "First Option"). Thereafter, on January 1 of each year
commencing January 1, 1998, each nonemployee director shall be automatically
granted an additional option to purchase 500 shares of Common Stock (a
"Subsequent Option") if, on such date, he or she shall have served on the
Company's Board of Directors for at least six months. The Directors' Plan
provides that the First Option shall become exercisable in installments as to
25% of the total number of shares subject to the First Option on each
anniversary of the date of grant of the First Option; each Subsequent Option
shall become exercisable in full on the first anniversary of the date of grant
of that Subsequent Option. The exercise price of all stock options granted under
the Directors' Plan shall be equal to the fair market value of a share of the
Company's Common Stock on the date of grant of the option. Options granted under
the Directors' Plan have a term of ten years. In the event of the dissolution or
liquidation of the Company, a sale of all or substantially all of the assets of
the Company, the merger of the Company with or into another
38
<PAGE> 40
corporation in which the Company is not the surviving corporation or any other
capital reorganization in which more than 50% of the shares of the Company
entitled to vote are exchanged, each nonemployee director shall have either (i)
a reasonable time within which to exercise the option, including any part of the
option that would not otherwise be exercisable, prior to the effectiveness of
such dissolution, liquidation, sale, merger or reorganization, at the end of
which time the option shall terminate or (ii) the right to exercise the option,
including any part of the option that would not otherwise be exercisable, or
receive a substitute option with comparable terms, as to an equivalent number of
shares of stock of the corporation succeeding the Company or acquiring its
business by reason of such dissolution, liquidation, sale, merger or
reorganization. The Board of Directors may amend or terminate the Directors'
Plan; provided, however, that no such action may adversely affect any
outstanding option, and the provisions regarding the grant of options under the
plan may be amended only once in any six-month period, other than to comport
with changes in the Employee Retirement Income Security Act of 1974, as amended
or the Code. If not terminated earlier, the Directors' Plan will have a term of
ten years.
During the period in which the Registration Statement of which this
Prospectus is a part is effective, the total amount of shares of Common Stock
issuable pursuant to outstanding options of the Company granted under the 1997
Option Plan and the Directors' Plan shall not exceed 10% of the shares of Common
Stock to be outstanding upon completion of the offering of the Units hereby.
39
<PAGE> 41
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PRIOR ISSUANCES OF THE COMPANY'S SECURITIES
The Company was formed on February 12, 1996. From approximately March 31,
1996 to May 31, 1996, the Company issued 1,718,400 shares of its Common Stock to
six persons for an aggregate cash purchase price of $4,080. Purchasers of the
1,718,400 shares included Robert K. Walker, General Manager of the Company, who
acquired 488,400 shares of Common Stock for an aggregate price of $430, Euro
Imperial Group, Ltd., a corporation controlled by C. Michael Fisher, Chairman of
the Board and President of the Company, which acquired 148,000 shares of Common
Stock for an aggregate price of $750 and Paris International Holding Corp., a
corporation controlled by Mr. Fisher and Mr. Walker, which acquired 440,000
shares of Common Stock for an aggregate price of $2,250.
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, Ed Magdycz, the Secretary and a director of
the Company, who acquired 2,000 shares of Common Stock for an aggregate purchase
price of $500, 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,
Regis Louchet, President of R&R (Bordeaux) Imports, Inc., a wholly-owned
subsidiary of the Company, who purchased 17,600 shares for an aggregate purchase
price of $4,400 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 to three persons. Recipients of the 60,000 shares included
Robert K. Walker, who received 10,000 shares, Regis Louchet, who received 10,000
shares, and Jean Francis Louchet, the father of Regis Louchet, who received
40,000 shares.
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 cash 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.
CERTAIN MATERIAL CONTRACTS
On December 13, 1996, the Company entered into an Import and Distribution
Agreement with Cave du Vignoble Gursonnais pursuant to which the Company was
appointed the exclusive distributor in North America and the Caribbean Islands
of all wine products produced by Cave du Vignoble Gursonnais. The term of the
agreement is for three years and is automatically renewed for additional terms
of 10 years each, unless either party gives the other sufficient written notice
of non-renewal. During the calendar year beginning January 1, 1997, the Company
is required to make a minimum annual total purchase of wine products of $100,000
U.S. Commencing with the calendar year beginning January 1, 1998, the Company is
required to make a minimum annual total purchase of wine products of $150,000
U.S. Commencing with the calendar year beginning January 1, 1999, the Company is
required to make a minimum annual total purchase of wine products of $400,000.
The Company did not meet its minimum annual purchase requirement during the 1997
calendar year. If, commencing with the 1999 calendar year, the Company fails to
meet the minimum annual purchase requirements set forth above, then the
agreement between the Company and Cave du Vignoble Gursonnais will become a
non-exclusive agreement.
On March 7, 1997, the Company entered into an Import and Distribution
Agreement with Armadis pursuant to which the Company was appointed the exclusive
distributor in North America and the Caribbean Islands of all wine and spirits
products produced by Armadis. The term of the agreement is for 30 years and is
automatically renewed for additional terms of 10 years each, unless either party
gives the other sufficient
40
<PAGE> 42
written notice of non-renewal. During the calendar year beginning January 1,
1997, the Company is required to make a minimum annual total purchase of wine
products of $300,000 U.S. Commencing with the calendar year beginning January 1,
1998, the Company is required to make a minimum annual total purchase of wine
products of $500,000. Commencing with the calendar year beginning January 1,
1999, the Company is required to make a minimum annual total purchase of wine
products of $1,000,000. The Company did not meet its minimum annual purchase
requirement during the 1997 calendar year. If, commencing with the 1999 calendar
year, the Company fails to meet the minimum annual purchase requirements set
forth above, then the agreement between the Company and Armadis will become a
non-exclusive agreement.
On March 11, 1997, the Company entered into an Import and Distribution
Agreement with Les Chais du Prevot pursuant to which the Company was appointed
the exclusive distributor in North America and the Caribbean Islands of all wine
products produced by Les Chais du Prevot. The term of the agreement is for three
years and is automatically renewed for additional terms of three years each,
unless either party gives the other sufficient written notice of non-renewal.
During the calendar year beginning January 1, 1997, the Company is required to
make a minimum annual total purchase of wine products of $100,000 U.S.
Commencing with the calendar year beginning January 1, 1998, the Company is
required to make a minimum annual total purchase of wine products of $150,000
U.S. Commencing with the calendar year beginning January 1, 1999, the Company is
required to make a minimum annual total purchase of wine products of $400,000
U.S. The Company did not meet its minimum annual purchase requirement during the
1997 calendar year. If, commencing with the 1999 calendar year, the Company
fails to meet the minimum annual purchase requirements set forth above, then the
agreement between the Company and Les Chais du Prevot will become a
non-exclusive agreement.
On April 16, 1997, the Company entered into an Import and Distribution
Agreement with Vignerons De Buzet pursuant to which the Company was appointed
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.
The term of the agreement is for 10 years and is automatically renewed for
additional terms of five years each, unless either party gives the other
sufficient notice of non-renewal. During the calendar year beginning January 1,
1997, the Company is required to make a minimum annual purchase of wine products
of 275,000 French Francs (FF). Commencing with the calendar year beginning
January 1, 1998, the Company is required to make a minimum annual total purchase
of wine products of 825,000 FF. Commencing with the calendar year beginning
January 1, 1999, the Company is required to make a minimum annual total purchase
of wine products of 2,200,000 FF. The Company did not meet its minimum annual
purchase requirement during the 1997 calendar year. If, commencing with the 2000
calendar year, the Company fails to meet the minimum annual purchase
requirements set forth in the agreement, then the agreement between the Company
and Vignerons De Buzet shall become a non-exclusive agreement.
On September 29, 1997, the Company entered into an Import and Distribution
Agreement with Godet Freres pursuant to which the Company was appointed the
exclusive distributor in North America and the Carribean Islands of champagne
products produced by Godet Freres. The term of the agreement is for five years
and is automatically renewed for additional terms of five years each, unless
either party gives the other sufficient notice of non-renewal. During the
calendar year beginning 1997, the Company is required to make a minimum annual
total purchase of champagne products of 400 cases (each case consisting of 12
bottles). Commencing with the calendar year beginning just after the Company
receives required regulatory approval related to labeling of the champagne
products, the Company is required to make a minimum annual total purchase of 600
cases, followed by a minimum of 800 cases the next calendar year and a minimum
of 1,000 cases the calendar year thereafter. The Company did not meet its
minimum annual purchase requirement during the 1997 calendar year. If,
commencing with the 1998 calendar year, the Company fails to meet the minimum
annual purchase requirements set forth in the agreement, then the agreement
between the Company and Godet Freres shall become a non-exclusive agreement.
On November 24, 1997, the Company entered into a Distribution Agreement
with the People's Republic of China, Tsingtao Brewery No. 3 Co., Ltd. pursuant
to which the Company was appointed the exclusive distributor in North America of
all Red Dragon beer products produced by the Tsingtao Brewery No. 3. The term of
the agreement is for five years and is automatically renewed for additional
terms of 10 years each,
41
<PAGE> 43
unless either party gives the other sufficient written notice of non-renewal.
During the calendar year beginning January 1, 1998, the Company is required to
make a minimum annual total purchase of beer products of $200,000 U.S.
Commencing with the calendar year beginning January 1, 1999, the Company is
required to make a minimum annual total purchase of beer products of $250,000
U.S. Commencing with the calendar year beginning January 1, 2000, the Company is
required to make a minimum annual total purchase of beer products of $1,000,000
U.S. If, commencing with the 2000 calendar year, the Company fails to meet the
minimum annual purchase requirements set forth above, then the agreement between
the Company and the Tsingtao Brewery No. 3 Co., Ltd. will become a non-exclusive
agreement.
OTHER EVENTS
The Law Offices of John W. Martin is presently retained and has been
retained by the Company as its outside general counsel since its inception. On
April 29, 1996, the Company issued 400,000 shares of its Common Stock to the Law
Offices of John W. Martin in consideration for legal services rendered to the
Company by the Law Offices of John W. Martin, 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. See "Legal Matters."
The Company believes that all of the transactions set forth above involving
officers, directors, employees, promoters and agents of the Company were made on
terms no less favorable to the Company than could have been obtained from
unaffiliated third parties. All future transactions, including loans between the
Company and its officers, directors and principal shareholders and their
affiliates will be approved by a majority of the Board of Directors, including a
majority of the disinterested directors of the Board of Directors, and will be
on terms no less favorable to the Company than could be obtained from
unaffiliated third parties.
42
<PAGE> 44
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of the date of this
Prospectus, 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.
<TABLE>
<CAPTION>
PERCENT BENEFICIALLY
OWNED
-----------------------
NUMBER OF BEFORE AFTER
NAME OF SHAREHOLDER(1) SHARES OWNED OFFERING OFFERING(2)
---------------------- ------------ -------- -----------
<S> <C> <C> <C>
C. Michael Fisher(3)...................................... 392,800 18% 16%
1717 Jermyn Lane
Virginia Beach, Virginia 23454
Robert K. Walker(4)....................................... 779,200 35% 31%
3835 S.W. 56th Street
Ft. Lauderdale, Florida 33312
Edward L. Magdycz......................................... 2,000 * *
1800 Bayberry Drive
Pembroke Pines, Florida 33024
Regis Louchet(5).......................................... 67,600 3% 3%
1809 Taylor Street
Hollywood, Florida 33020
John W. Martin(6)......................................... 400,000 18% 16%
5777 West Century Boulevard
Suite 1540
Los Angeles, California 90045
All officers and directors as a group
(4 persons)............................................. 396,800 18% 16%
</TABLE>
- ---------------
* Less than 1%.
(1) See table under "Management of the Company" for offices and directorships
held by the persons listed hereunder.
(2) Assumes all Units offered hereby are sold.
(3) 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. Also
reflects the conversion into Common Stock of 8,000 shares of Series A
Preferred Stock owned by Euro Imperial Group, Ltd. and 16,000 shares of
Series A Preferred Stock owned by Mr. Fisher.
(4) 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.
(5) Includes 40,000 shares held by Mr. Jean Francois Louchet, Mr. Louchet's
father. Mr. Louchet disclaims beneficial ownership of all shares held by Mr.
Jean Francis Louchet.
(6) 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.
43
<PAGE> 45
DESCRIPTION OF SECURITIES
The Company's authorized capital stock consist of 100,000,000 shares of
Common Stock, $.0001 par value and 10,000,000 shares of Preferred Stock, $.0001
par value. Giving effect to the sale of the maximum number of Units offered
hereby, there will be outstanding 2,520,000 shares of Common Stock.
The following description is a summary and is qualified in its entirety by
the provisions of the Company's Articles of Incorporation and Bylaws, copies of
which have been filed as exhibits to the Registration Statement of which this
Prospectus is a part.
UNITS
Each Unit offered hereby consists of one share of Common Stock and one
Warrant. The Common Stock and the Warrants are immediately detachable and
separately transferable.
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 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. The holders of the Common Stock have the right in the event
of liquidation to receive pro rata all assets remaining after payment of debts
and expenses. The Common Stock does not have any preemptive rights. The issued
and outstanding shares of Common Stock are fully paid and nonassessable.
Holders of shares of Common Stock are entitled to vote at all meetings of
such shareholders for the election of directors and for other purposes. Such
holders have one vote for each share of Common Stock held by them.
PREFERRED STOCK
The Company's Preferred Stock may be issued from time to time in one or
more series. The Board of Directors is authorized to determine or alter any or
all of the rights, preferences, privileges and restrictions granted to or
imposed upon any wholly unissued series of Preferred Stock, and to fix, alter or
reduce (but not below the number then outstanding) the number of shares
comprising any such series and the designation thereof, or any of them, and to
provide for the rights and terms of redemption or conversion of the shares of
any such series.
As of the date of this Prospectus, the Board of Directors has authorized
the issuance of 100,000 shares of a series of Preferred Stock designated as
"Series A Preferred Stock". Of the 100,000 shares of Series A Preferred Stock
authorized, 38,000 shares of Series A Preferred Stock are issued and
outstanding.
The Series A Preferred Stock ranks senior to the Common Stock with respect
to dividends. Holders of shares of Series A Preferred Stock are entitled to
receive dividends at the rate of $0.25 per share per annum, payable out of funds
legally available therefor. Such dividends are payable only when, as, and if
declared by the Board of Directors and are non-cumulative. Upon any liquidation,
dissolution or winding up of the Company, whether voluntary or involuntary,
before any distribution or payment is made to any person holding Common Stock or
of any shares ranking junior to the Series A Preferred Stock in respect of
distribution of assets, the persons holding Series A Preferred Stock will be
entitled to be paid an amount in cash equal to the sum of $2.50 plus any
declared but unpaid dividends on each share of Series A Preferred Stock.
Each share of Series A Preferred Stock will be automatically converted in
whole into one share of Common Stock upon the closing of the sale of the
Company's Common Stock in a firm commitment underwritten or best efforts public
offering registered under the Securities Act, at a public offering price equal
to or exceeding $3.50 per share of Common Stock. At such time, the rights of the
holders of Series A Preferred Stock, as preferred stockholders, shall cease, and
such person or persons shall thereupon and thereafter be deemed to be for all
purposes the holder of shares of Common Stock of the Company.
44
<PAGE> 46
WARRANTS
General. Each Warrant entitles the registered holder to purchase one share
of Common Stock at an exercise price of $8.00 per share at any time until 5:00
p.m., New York Time, on , 2001. Commencing immediately after the
date of this Prospectus, the Warrants are redeemable by the Company on 30 days'
written notice at a redemption price of $.05 per Warrant if the closing bid
price of the Common Stock equals or exceeds $10.00 per share for any 30
consecutive trading days ending within 10 days of the notice of redemption. The
Company presently expects to call all of the Warrants for redemption as soon as
the trading price of its Common Stock meets the minimum amount of the specified
number of days. In the event the Company gives notice of its intention to
redeem, a holder would be forced either to exercise his or her Warrants within
the period set forth in the notice of redemption or accept the redemption price.
See "Risk Factors -- Current Prospectus and State Registration to Exercise
Warrants."
The Warrants will be issued pursuant to a warrant agreement (the "Warrant
Agreement") by and between the Company and Florida Atlantic Stock Transfer,
Inc., as warrant agent for the Company (the "Warrant Agent"), and will be
evidenced by warrant certificates in registered form. The Warrants provide for
adjustment of the exercise price and for a change in the number of shares
issuable upon exercise to protect holders against dilution in the event of a
stock dividend, stock split, combination or reclassification of the Common Stock
or upon issuance of shares of Common Stock at prices lower than the market price
of the Common Stock, with certain exceptions. The Company is not required to
issue fractional shares upon the exercise of a Warrant. The holder of a Warrant
will not possess any rights as a shareholder of the Company until such holder
exercises the Warrant.
The exercise price of the Warrants was determined by the Company and should
not be construed to be predictive of or to imply that any price increases in the
Shares will occur.
The Company has reserved from its authorized but unissued shares of Common
Stock a sufficient number of shares of Common Stock for issuance upon the
exercise of the Warrants. A Warrant may be exercised upon surrender of the
Warrant certificate on or prior to its expiration date (or earlier redemption
date) at the offices of the Warrant Agent, with the form of "Election to
Purchase" on the reverse side of the Warrant certificate completed and executed
as indicated, accompanied by payment of the full exercise price (by certified or
bank check payable to the order of the Company) for the number of shares with
respect to which the Warrant is being exercised. Shares of Common Stock issued
upon exercise of Warrants and payment in accordance with the terms of the
Warrants will be fully paid and nonassessable. For the life of the Warrants, the
holders thereof have the opportunity to profit from a rise in the market value
of the Common Stock, with a resulting dilution in the interest of all other
stockholders. So long as the Warrants are outstanding, the terms on which the
Company could obtain additional capital may be adversely affected. The holders
of Warrants might be expected to exercise them at a time when the Company would,
in all likelihood, be able to obtain any needed capital by a new offering of
securities on terms more favorable than those provided for by the Warrants.
Federal Income Tax Aspects of Investment in the Warrants. The following is
a description of certain of the tax effects occasioned by an investment in the
Warrants.
No gain or loss will be recognized by the holder of a Warrant upon the
exercise of a Warrant. The cost basis of the shares of Common Stock acquired
upon such exercise will be the cost basis of the Warrant plus any additional
amount paid upon the exercise of the Warrant. Gain or loss will be recognized
upon the subsequent sale or exchange of the shares of Common Stock acquired by
the exercise of the Warrant, measured by the difference between the amount
realized upon sale or exchange and the cost basis of the shares of Common Stock.
If a Warrant is not exercised, but is sold or exchanged (whether pursuant
to redemption or otherwise), gain or loss will be recognized upon such event,
measured by the difference between the amount realized by the holder of the
Warrant as a result of the sale, exchange or redemption and the cost basis of
the Warrant.
45
<PAGE> 47
If a Warrant is not exercised and is allowed to expire, the Warrant will be
deemed to be sold or exchanged on the date of expiration. In such event, the
holder of the Warrant will recognize a loss to the extent of the cost basis of
the Warrant.
Generally, any gain or loss recognized as a result of the foregoing will be
a capital gain or loss and will either be long term or short term depending upon
the period of time the shares of Common Stock sold or exchanged or the Warrant
sold, exchanged, redeemed, or allowed to expire, as the case may be, was held. A
holding period of more than one year results in long term capital gain or loss
treatment. If a Warrant is exercised, the holding period of the shares of Common
Stock so acquired will not include the period during which the Warrant was held.
ALTHOUGH IN THE OPINION OF COUNSEL TO THE COMPANY THE FOREGOING IS AN ACCURATE
DESCRIPTION OF THE TAX EFFECTS DESCRIBED, EACH PURCHASER OF THE WARRANTS SHOULD
SEEK THE ADVICE OF HIS/HER OWN TAX ADVISOR REGARDING THE EFFECTS THAT AN
INVESTMENT IN THE WARRANTS WILL HAVE FOR HIS/HER INDIVIDUAL TAX SITUATION.
TRANSFER AGENT
Florida Atlantic Stock Transfer, Inc., Tamarac, Florida has been appointed
the transfer agent of the Company's Common Stock and Preferred Stock and the
warrant agent for the Company's Warrants.
CERTAIN PROVISIONS OF FLORIDA LAW AND OF THE
COMPANY'S ARTICLES OF INCORPORATION AND BYLAWS
Under Florida law, a director of the Company is not personally liable for
monetary damages to the Company or any other person for any statement, vote,
decision, or failure to act, regarding corporate management or policy, by a
director, unless the director breached or failed to perform his duties as a
director and the director's breach of, or failure to perform, those duties
constitutes or result in: (1) a violation of the criminal law, unless the
director had reasonable cause to believe his conduct was lawful or had no
reasonable cause to believe his conduct was unlawful; (2) a transaction from
which the director derived an improper personal benefit, either directly or
indirectly; (3) a circumstance under which the director is liable for an
unlawful corporate distribution; (4) a proceeding by or in the right of the
Company to procure a judgment in its favor or by or in the right of a
shareholder, for conscious disregard for the best interest of the Company, or
willful misconduct; or (5) a proceeding by or in the right of someone other than
the Company or a shareholder, for recklessness or an act or omission which was
committed in bad faith or with malicious purpose or in a manner exhibiting
wanton and willful disregard of human rights, safety, or property.
Further, under Florida law, a director is not deemed to have derived an
improper personal benefit from any transaction if the transaction and the nature
of any personal benefit derived by the director are not prohibited by state or
federal law or regulation and without further limitation:
(a) In an action other than a derivative suit regarding a decision by
the director to approve, reject, or otherwise affect the outcome of an
offer to purchase the stock of, or to effect a merger of, the Company, the
transaction and the nature of any personal benefits derived by a director
are disclosed or known to all directors voting on the matter, and the
transaction was authorized, approved, or ratified by at least two directors
who comprise a majority of the disinterested directors (whether or not such
disinterested directors constitute a quorum);
(b) The transaction and the nature of any personal benefits derived by
a director are disclosed or known to the shareholders entitled to vote, and
the transaction was authorized, approved, or ratified by the affirmative
vote or written consent of such shareholders who hold a majority of the
shares, the voting of which is not controlled by directors who derived a
personal benefit from or otherwise had a personal interest in the
transaction; or
46
<PAGE> 48
(c) The transaction was fair and reasonable to the Company at the time
it was authorized by the board, a committee, or the shareholders,
notwithstanding that a director received a personal benefit.
The Company's Articles of Incorporation and Bylaws require the Company to
indemnify its directors and officers to the fullest extent permitted by Florida
law. Florida law presently provides that in the case of a nonderivative action
(that is, an action other than by or in the right of a corporation to procure a
judgment in its own favor), a corporation has the power to indemnify any person
who was or is a party or is threatened to be made a party to any proceeding by
reason of the fact that the person is or was an agent of the corporation,
against expenses, judgments, fines, settlements and other amounts actually and
reasonably incurred in connection with the proceeding if that person acted in
good faith and in a manner the person reasonably believed to be in the best
interests of the corporation and, in the case of a criminal proceeding, had no
reasonable cause to believe that the conduct of the person was unlawful. The
termination of any proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent does not, of itself, create a
presumption that the person did not act in good faith and in a manner that the
person reasonably believed to be in the best interests of the corporation or
that the person had reasonable cause to believe that the person's conduct was
unlawful.
With respect to derivative actions, Florida law provides that a corporation
has the power to indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action by or in the
right of the corporation to procure a judgment in its favor by reason of the
fact that the person is or was an agent of the corporation, against expenses
actually and reasonably incurred by that person in connection with the defense
or settlement of the action if the person acted in good faith, in a manner the
person believed to be in the best interests of the corporation and its
shareholders. Indemnification is not permitted to be made in respect of any
claim, issue, or matter as to which the person shall have been adjudged to be
liable to the corporation in the performance of that person's duty to the
corporation and its shareholders, unless and only to the extent that the court
in which the proceeding is or was pending determines that, in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
indemnity for expenses, and then only to the extent that the court shall
determine.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the offer and sale of the maximum number of Units
offered hereby, the Company will have outstanding 2,520,000 shares of Common
Stock (assuming that the Warrants are not exercised). The 260,000 shares of
Common Stock sold in this offering will be freely tradeable without restrictions
under the Securities Act, except for any shares held by an "affiliate" of the
Company, which will be subject to the resale limitations of Rule 144 under the
Securities Act.
443,600 of the 2,222,000 shares of Common Stock currently issued and
outstanding are freely tradeable without restrictions under the Securities Act,
except for any shares held by an "affiliate" of the Company, which are subject
to the resale limitations of Rule 144 under the Securities Act. 1,778,400 of the
2,222,000 shares of Common Stock currently outstanding are "restricted
securities" within the meaning of Rule 144 promulgated under the Securities Act,
and may not be sold except in compliance with the registration requirements of
the Securities Act or an applicable exemption under the Securities Act,
including an exemption pursuant to Rule 144 thereunder.
In general, under Rule 144 as currently in effect, any affiliate of the
Company and any person (or persons whose sales are aggregated) who has
beneficially owned his or her restricted shares for at least one year, is
entitled to sell in the open market within any three-month period a number of
shares of Common Stock that does not exceed the greater of (i) 1% of the then
outstanding shares of the Company's common stock, or (ii) the average weekly
trading volume in the Common Stock during the four calendar weeks preceding such
sale. Sales under Rule 144 are also subject to certain limitations on manner of
sale, notice requirements, and availability of current public information about
the Company. Non-affiliates of the Company who have held their restricted shares
for two years are entitled to sell their shares under Rule 144 without regard to
any of the above limitations, provided they have not been affiliates for the
three months preceding such sale.
47
<PAGE> 49
Further, Rule 144A as currently in effect, in general, permits unlimited
resales of certain restricted securities of any issuer provided that the
purchaser is an institution that owns and invests on a discretionary basis at
least $100 million in securities or is a registered broker-dealer that owns and
invests $10 million in securities. Rule 144A allows the existing stockholders of
the Company to sell their shares of Common Stock to such institutions and
registered broker-dealers without regard to any volume or other restrictions.
Unlike under Rule 144, restricted securities sold under Rule 144A to
nonaffiliates do not lose their status as restricted securities.
As a result of the provisions of Rule 144, all of the restricted securities
could be available for sale in the public market beginning 90 days after the
date of this Prospectus.
However, notwithstanding the foregoing, certain of the Company's officers,
directors and stockholders, who in the aggregate own 1,746,000 shares of Common
Stock (hereinafter collectively referred to as the "Promotional Shares"), have
agreed, pursuant to the terms of a Promotional Share Lock-In Agreement entered
into by and between such persons and the Company (the "Lock-In Agreement"), not
to offer, pledge, sell, contract to sell, or otherwise transfer or dispose of,
directly or indirectly, any of the Promotional Shares without the occurrence of
certain conditions. In this regard, the restrictions on transferability of the
Promotional Shares may only be terminated under the following circumstances:
(1) With respect to twenty-five percent (25%) of the Promotional
Shares on the sixth, seventh, eighth and ninth anniversary dates of this
Prospectus; or
(2) With respect to one hundred percent (100%) of the Promotional
Shares after the Company has had annual net earnings per share equal to, or
greater than, $0.29, according to generally accepted accounting principles
(GAAP), after taxes and excluding extraordinary items, for any two
consecutive fiscal years after the date of this Prospectus; or
(3) With respect to one hundred percent (100%) of the Promotional
Shares after the Company has had average annual net earnings per share
equal to, or greater than, $0.29, according to GAAP, after taxes and
excluding extraordinary items, for any five consecutive fiscal year period
after the date of this Prospectus; or
(4) With respect to one hundred percent (100%) of the Promotional
Shares on the date that the Common Stock becomes listed, or authorized for
listing, on the New York Stock Exchange or the American Stock Exchange, or
listed on the National Market System of the Nasdaq Stock Market (or any
successor to such entities).
In addition to the foregoing, certain other shareholders of the Company,
who in the aggregate own 444,000 shares of Common Stock (the "Lock-Up Shares"),
have agreed pursuant to the terms of a lock-up agreement entered into by and
between such stockholders, the Company and the Placement Agent (the "Lock-Up
Agreement") not to offer, pledge, sell, contract to sell, or otherwise transfer
or dispose of, directly or indirectly, any of the Lock-Up Shares without the
occurrence of certain conditions. In this regard, the restrictions on
transferability of the Lock-Up Shares may only be terminated under the following
circumstances:
(1) Upon the prior written consent of the Placement Agent; or
(2) Upon the expiration of 30 months after the date of this
Prospectus; or
(3) Upon the Company achieving annual gross revenues of $10,000,000;
or
(4) Upon the Company achieving annual net earnings per share equal to,
or greater than, $0.57 after taxes and excluding extraordinary items; or
(5) Upon the Company's shares of Common Stock trading on either the
New York Stock Exchange, American Stock Exchange or the Nasdaq Stock Market
(including the Nasdaq SmallCap Market), at a price of at least $8.62 for at
least 90 consecutive trading days after at least six months after the date
of this Prospectus. See "Plan of Distribution."
48
<PAGE> 50
Prior to this offering, no public market for the Company's securities has
existed. Following this offering, no predictions can be made of the effect, if
any, of future public sales of restricted securities or the availability of
restricted securities for sale in the public market. Moreover, the Company
cannot predict the number of shares of Common Stock that may be sold in the
future pursuant to Rule 144 because such sales will depend on, among other
factors, the market price of the Common Stock and the individual circumstances
of the holders thereof. The availability for sale of substantial amounts of
Common Stock under Rule 144 could adversely affect prevailing market prices for
the Company's securities.
PLAN OF DISTRIBUTION
On the date of this Prospectus, the Company will have entered into a
Placement Agent Agreement with West America Securities Corp. (the "Placement
Agent"). Pursuant to the terms of the Placement Agent Agreement, the Placement
Agent has agreed to use its best efforts to sell, as exclusive agent for the
Company, up to 260,000 Units at a purchase price of $5.75 per Unit. The Units
will be sold on a "best efforts, all or none" basis with respect to the first
95,000 Units, and on a "best efforts" basis as to the remaining 165,000 Units.
The minimum number of Units offered hereby must be sold, if any are to be
sold, within a period of 90 days (or a period of 180 days if extended upon
mutual agreement between the Company and the Placement Agent) from the date of
this Prospectus (the "Offering Period"). If the Placement Agent is unable to
sell 95,000 Units within the Offering Period, the offering of the Units will be
terminated and all funds will be returned to subscribers in full with interest,
but without deduction for commissions or other expenses related to the offering.
All funds received by the Placement Agent during the offering will be
transmitted promptly, pursuant to the terms of an escrow agreement, to Imperial
Trust Company, Los Angeles, California, until the minimum number of Units
offered hereby are sold. Purchasers of the Units will not receive Common Stock
or Warrant certificates unless and until subscription funds have been released
from escrow. Such subscription funds will be held in escrow for the benefit of
subscribers until the minimum number of Units offered hereby are sold and
subscription funds are released from escrow.
Subject to the sale of 95,000 Units, the Company has agreed to pay the
Placement Agent a sales commission equal to ten percent (10%) of the gross
offering price of the Units. In addition, the Placement Agent Agreement provides
for the payment to the Placement Agent of a nonaccountable expense allowance
equal to two and one-half percent (2.5%) of the gross proceeds from the public
offering of the Units, or $13,656 if the minimum number of Units offered hereby
are sold, and $37,375 if the maximum number of Units offered hereby are sold.
The amount will be used to reimburse the Placement Agent for its expenses,
including fees and disbursements of counsel and such other due diligence and
customary expenses as are normally incurred by a placement agent. At this time,
$4,500 of such expense allowance has been paid on an accountable basis, to be
applied toward the nonaccountable expense allowance at the closing of the
offering.
Subject to the sale of 95,000 Units, the Company has agreed to sell to the
Placement Agent a Placement Agent Unit Purchase Option to purchase not more than
10% of the Units sold by the Company for a price of $260.00. The Placement Agent
Unit Purchase Option will be exercisable 12 months after the date of issuance at
an exercise price of $7.00 per Unit and will be subject to certain antidilution
rights. The Placement Agent Unit Purchase Option may not be sold, transferred,
assigned, pledged or hypothecated for a period of one year following the date of
this Prospectus, except that the Placement Agent Unit Purchase Option may be
transferred to bona fide officers of the Placement Agent.
During the period that the Placement Agent Unit Purchase Option is
exercisable, the Placement Agent and any transferee will have the opportunity to
profit from a rise in the market price of the Common Stock with a resulting
dilution in the interest of other stockholders. In addition, the terms on which
the Company will be able to obtain additional capital during the exercise period
of the Placement Agent Unit Purchase Option may be adversely affected because
the Placement Agent is likely to exercise the Placement Agent Unit Purchase
Option at a time when the Company would, in all likelihood, be able to obtain
capital by a new
49
<PAGE> 51
offering of securities on terms more favorable than those provided by the terms
of the Placement Agent Unit Purchase Option.
The Company has agreed to indemnify the Placement Agent against certain
liabilities, including liabilities under the Securities Act. The Company has
been advised that in the opinion of the Commission, such indemnification for
liabilities arising under the Securities Act is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
The Company and the Placement Agent have required that certain stockholders
of the Company, who in the aggregate own 444,000 shares of the Company's Common
Stock (the Lock-Up Shares), agree not to sell any of the Company's Common Stock
owned by them for a period of 30 months from the date of this Prospectus unless
the Placement Agent consents to a sale of such shares or unless certain other
conditions occur. See "Shares Eligible For Future Sale."
It is anticipated that after this offering, the Common Stock will be traded
in the over-the-counter market, and the Company has been advised that the
Placement Agent intends to make a market in the Common Stock following this
offering.
The foregoing is a brief summary of the provisions of the Placement Agent
Agreement and does not purport to be a complete statement of its terms and
conditions. A copy of the Placement Agent Agreement has been filed as an exhibit
to the Registration Statement of which this Prospectus is a part.
LEGAL MATTERS
The validity of the securities being offered hereby will be passed upon for
the Company by the Law Offices of John W. Martin, Los Angeles, California.
Certain legal matters will be passed upon for the Placement Agent by David L.
Kagel, Esq. John W. Martin, Esq., the sole proprietor of the Law Offices of John
W. Martin is the beneficial owner of 400,000 shares of Common Stock. See
"Principal Stockholders."
EXPERTS
The Financial Statements of the Company for the period February 12, 1996
(date of inception) to December 31, 1996 and for the period ended therein, have
been included in this Prospectus in reliance upon the report appearing elsewhere
herein, of Baum & Company, P.A., independent certified public accountants, and
upon the authority of said independent certified public accountants as experts
in accounting and auditing.
AVAILABLE INFORMATION
Cuidao Holding Corp., a Florida corporation (the "Company") has filed with
the Commission a Registration Statement on Form SB-2 (Registration No. 333-43457
under the Securities Act for the registration of the Units offered hereby. This
Prospectus omits certain of the information contained in the Registration
Statement, and reference is hereby made to the Registration Statement and
exhibits and schedules thereto for further information with respect to the
Company and the securities to which this Prospectus relates. Statements made
herein concerning the provisions of any document are not necessarily complete
and, in each instance, reference is made to the copy of such document filed as
an exhibit to the Registration Statement. Each such statement is qualified in
its entirety by such reference. Items of information omitted from this
Prospectus but contained in the Registration Statement may be inspected without
charge at the Public Reference Room of the Commission, 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549, at prescribed rates.
Upon consummation of the offering of the Units, the Company will become
subject to the informational requirements of the Securities Exchange Act of
1934, as amended, and in accordance therewith will file reports and other
information with the Commission. Such reports and other information can be
inspected at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the Commission's
New York Regional Office, 26 Federal Plaza, New York,
50
<PAGE> 52
New York 10007, and its Chicago Regional Office, Everett McKinley Dirksen
Building, 219 South Dearborn Street, Room 1204, Chicago, Illinois 60604. Copies
of such material can be obtained from the Public Reference Section of the
Commission, Washington, D.C. 20549, at prescribed rates. The Commission also
makes electronic filings publicly available on the Internet within 24 hours of
acceptance. The Commission's Internet address is http://www.sec.gov. The
Commission web site also contains reports, proxy and information statements, and
other information regarding registrants that file electronically with the
Commission.
The Company intends to deliver annual reports to the holders of its
securities, which will contain, among other information, audited financial
statements examined and reported upon by its independent certified public
accountants.
51
<PAGE> 53
CUIDAO HOLDING CORP., INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................... F-2
Consolidated Balance Sheet as of December 31, 1996.......... F-3
Consolidated Statement of Operations for the period from
February 12, 1996 (date of inception) to December 31,
1996...................................................... F-4
Consolidated Statement of Stockholders' Equity for the
period from February 12, 1996 (date of inception) to
December 31, 1996......................................... F-5
Consolidated Statement of Cash Flows for the period from
February 12, 1996 (date of inception) to December 31,
1996...................................................... F-6
Notes to Financial Statements............................... F-7
Interim Financial Statements:
Interim Consolidated Balance Sheet as of November 30, 1997
(unaudited)............................................... F-10
Interim Consolidated Statement of Operations for the eleven
months ended November 30, 1997 and 1996 and cumulative
totals for development stage operations (unaudited)....... F-11
Interim Consolidated Statement of Stockholders' Equity for
the eleven months ended November 30, 1997 and 1996 and
cumulative totals for development stage operations
(unaudited)............................................... F-12
Interim Consolidated Statement of Cash Flows for the eleven
months ended November 30, 1997 and 1996 and cumulative
totals for development stage operations (unaudited)....... F-13
Notes to Interim Financial Statements....................... F-14
</TABLE>
F-1
<PAGE> 54
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
of Cuidao Holding Corp.
We have audited the accompanying consolidated balance sheet of Cuidao
Holding Corp. and its subsidiaries (a development stage company) as of December
31, 1996 and the related consolidated statements of operations, stockholders'
equity and cash flows from February 12, 1996 (date of inception) through
December 31, 1996. These 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 financial position of Cuidao Holding Corp. and
subsidiaries (a development stage company) as of December 31, 1996, and the
results of its operations and its cash flows from February 12, 1996 (date of
inception) through December 31, 1996, in conformity with generally accepted
accounting principles.
BAUM & COMPANY, P.A.
July 15, 1997
Coral Springs, Florida
F-2
<PAGE> 55
CUIDAO HOLDING CORP.
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
ASSETS
<TABLE>
<S> <C>
Current Assets
Cash and Cash Equivalents................................. $ 11,693
--------
Office Equipment (Net of $247 of accumulated
depreciation)............................................. 1,476
--------
Other Assets
Organizational Costs (Net of $139 of accumulated
amortization).......................................... 926
Deferred Offering Costs................................... 20,500
Prepayments and Deposits.................................. 1,808
--------
Total Other Assets..................................... 23,234
--------
Total Assets...................................... $ 36,403
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accrued Expenses.......................................... $ 1,187
--------
Stockholders' Equity
Common Stock, par value $0.0001, 100,000,000 shares
authorized 10,386,000 issued and outstanding........... 1,039
Additional Paid-In Capital.................................. 78,186
Deficit Accumulated during Development Stage................ (44,009)
--------
Total Stockholders' Equity............................. 35,216
--------
Total Liabilities and Stockholders' Equity........ $ 36,403
========
</TABLE>
See Accompanying Auditor's Report and Notes to Financial Statements.
F-3
<PAGE> 56
CUIDAO HOLDING CORP.
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS
FEBRUARY 12, 1996 (DATE OF INCEPTION) TO DECEMBER 31, 1996
<TABLE>
<S> <C>
Revenues
Interest Earned........................................... $ 192
Operating Expenses
General and Administrative................................ 44,201
----------
Net Loss during Development Stage........................... $ (44,009)
==========
Loss per Common Share....................................... $ (.005)
==========
Weighted Average Common Shares Outstanding.................. 9,723,455
==========
</TABLE>
See Accompanying Auditor's Report and Notes to Financial Statements.
F-4
<PAGE> 57
CUIDAO HOLDING CORP.
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FEBRUARY 12, 1996 (DATE OF INCEPTION) TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
COMMON STOCK DURING THE
------------------- PAID-IN DEVELOPMENT
# SHARES AMOUNT CAPITAL STAGE
---------- ------ ------- -----------
<S> <C> <C> <C> <C>
Common Stock issued -- initial incorporation.......... 8,850,000 $ 885 $ 3,155
Issuance of common stock for legal services, May
1996................................................ 1,000,000 100 20,985
Issuance of common stock in private placement
offering............................................ 536,000 54 54,046
Net Loss.............................................. $(44,009)
========== ====== ======= ========
10,386,000 $1,039 $78,186 $(44,009)
========== ====== ======= ========
</TABLE>
See Accompanying Auditor's Report and Notes to Financial Statements.
F-5
<PAGE> 58
CUIDAO HOLDING CORP.
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS
FEBRUARY 12, 1996 (DATE OF INCEPTION) TO DECEMBER 31, 1996
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss.................................................. $(44,009)
Adjustments to Reconcile Net Loss to Net Cash Used in
Operating Activities:
Depreciation........................................... 247
Amortization of Organizational Costs................... 139
Increase in Accrued Expenses........................... 1,187
--------
Net Cash Used in Operating Activities..................... (42,436)
--------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Office Equipment........................... (1,723)
Increase in Deferred Offering Costs....................... (20,500)
Increase in Organizational Costs.......................... (1,065)
Increase in Prepayments and Deposits...................... (1,808)
--------
Net Cash Used in Investing Activities..................... (25,096)
--------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuing Common Stock........................ 79,225
--------
Net Cash Provided by Financing Activities................. 79,225
--------
NET INCREASE IN CASH AND CASH EQUIVALENTS................... 11,693
CASH AND CASH EQUIVALENTS -- BEGINNING OF PERIOD............ 0
--------
CASH AND CASH EQUIVALENTS -- END OF PERIOD.................. $ 11,693
========
</TABLE>
See Accompanying Auditor's Report and Notes to Financial Statements.
F-6
<PAGE> 59
CUIDAO HOLDING CORP. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
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.
The Company and its subsidiaries are development stage companies which
import, develop, manage and distribute 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 prepare its financial statements using the
accrual basis of accounting in accordance with 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.
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, 1996 there is no concentration of credit risk from
uninsured bank balances.
Office Equipment
Office Equipment is stated at cost and depreciated over its estimated
allowable useful life (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.
F-7
<PAGE> 60
CUIDAO HOLDING CORP. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 proposed
initial public offering. The costs related to the initial public offering will
be capitalized and netted against the amount received from the public offering.
All deferred offering costs will be expended in the event the offering is not
consummated.
Income Taxes
In February 1992, the Financial Accounting Standards Board issued Statement
on 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.
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 shares outstanding during the period.
NOTE 3 -- EQUIPMENT
<TABLE>
<S> <C>
Equipment................................................... $1,723
Less: Accumulated Depreciation............................ 247
------
Net Equipment............................................. $1,476
======
</TABLE>
Depreciation expense amounted to $247 for the period ended December 31,
1996.
NOTE 4 -- COMMITMENTS
Operating Lease
Effective July 1, 1996, the Company has assumed all obligation under a 14
month lease ending September, 1997. The lease calls for monthly rent payments
starting in September and October 1996 of $500 per month, increased to $740 for
the duration of the lease term. Upon its expiration, management intends to
extend the lease for a two year period.
Rent expense amounted to $3,816 for the period ended December 31, 1996.
Remaining future minimum lease payments under this operating lease at
December 31, 1996, net of deposit and prepayment, is $4,348.
F-8
<PAGE> 61
CUIDAO HOLDING CORP. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
NOTE 4 -- COMMITMENTS (CONTINUED)
Stock Options
At December 31, 1996 the Company has an agreement with a certain individual
to provide the Company with consulting services in exchange for the right to
exercise options to acquire 45,000 shares of stock at a total cost of $900.
These options are exercisable in 1997 and 1998 (See Note 6).
NOTE 5 -- DEFERRED INCOME TAXES
As discussed in Note 2, the Company applied the provision of SFAS No. 109.
The significant components of deferred income tax benefit arising from a
net operating loss carry forward of approximately $22,400 is as follows at
December 31, 1996.
<TABLE>
<S> <C>
Deferred Tax Benefit........................................ $3,400
Valuation Allowance......................................... 3,400
------
$ 0
======
</TABLE>
The valuation allowance has been estimated at 100% due to the Company being
in the development stage.
NOTE 6 -- SUBSEQUENT EVENT
On March 31, 1997, certain principal stockholders of the Company
voluntarily surrendered, and the Company cancelled therein, 5,554,000 shares of
the Company's common stock.
On July 28, 1997, the Company effectuated a 1-for-2.5 reverse common stock
split..
All outstanding options were terminated during 1997, and there remain no
outstanding options.
F-9
<PAGE> 62
CUIDAO HOLDING CORP.
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
INTERIM CONSOLIDATED BALANCE SHEET
NOVEMBER 30, 1997
(UNAUDITED)
ASSETS
<TABLE>
<S> <C>
Current Assets
Cash and Cash Equivalents................................. $ 29,843
Accounts Receivable....................................... 7,600
Inventory................................................. 15,735
Prepaid Expenses.......................................... 1,534
---------
Total Current Assets................................... 54,712
Office Equipment
(Net of $2,001 of accumulated depreciation)............... 10,166
---------
Other Assets
Organizational Costs
(Net of $406 of accumulated amortization).............. 1,134
Deferred Offering Costs................................... 20,700
Prepayments and Deposits.................................. 1,658
---------
Total Other Assets..................................... 23,492
---------
Total Assets...................................... $ 88,370
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accrued Expenses and Taxes................................ $ 631
---------
Stockholders' Equity
Common Stock, par value $0.0001, 100,000,000 shares
authorized; 2,222,000 issued and outstanding........... 223
Preferred Stock, par value $0.0001, 10,000,000 shares
authorized; 38,000 issued and outstanding.............. 4
Additional Paid-In Capital.................................. 231,299
Deficit Accumulated during Development Stage................ (143,787)
---------
Total Stockholders' Equity............................. 87,739
---------
Total Liabilities and Stockholders' Equity........ $ 88,370
=========
</TABLE>
See Accompanying Notes to Interim Financial Statements.
F-10
<PAGE> 63
CUIDAO HOLDING CORP.
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
INTERIM CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE ELEVEN MONTHS ENDED NOVEMBER 30, 1997 AND 1996 AND
CUMULATIVE TOTALS FOR DEVELOPMENT STAGE OPERATIONS
FROM FEBRUARY 12, 1996 (DATE OF INCEPTION) TO NOVEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
DEVELOPMENT
ELEVEN MONTHS ELEVEN MONTHS STAGE
ENDED ENDED FEBRUARY 12, 1996
NOVEMBER 30, 1997 NOVEMBER 30, 1996 TO NOVEMBER 30, 1997
----------------- ----------------- --------------------
<S> <C> <C> <C>
Revenues.................................... $ 7,600 $ 0 $ 7,600
Cost of Revenues............................ 4,737 0 4,737
---------- ---------- ----------
Gross Profit................................ 2,863 0 2,863
Operating Expenses:
General and Administrative................ 102,790 42,307 146,991
---------- ---------- ----------
Income (Loss) Before Interest Income........ (99,927) (42,307) (144,128)
Interest Income............................. 149 173 341
---------- ---------- ----------
Net Income (Loss) During Development
Stage..................................... $ (99,778) $ (42,134) $ (143,787)
========== ========== ==========
Income (Loss) Per Common Share.............. (.069) (.004) (.092)
========== ========== ==========
Weighted Average Common Shares Outstanding.. 1,453,222 9,657,200 1,562,502
========== ========== ==========
</TABLE>
See Accompanying Notes to Interim Financial Statements.
F-11
<PAGE> 64
CUIDAO HOLDING CORP. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
INTERIM CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE ELEVEN MONTHS ENDED OCTOBER 31, 1997 AND
CUMULATIVE TOTALS FOR DEVELOPMENT STAGE OPERATIONS
FROM FEBRUARY 12, 1996 (DATE OF INCEPTION) TO NOVEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
COMMON STOCK PREFERRED STOCK DURING THE
------------------- ----------------- PAID-IN DEVELOPMENT
# SHARES AMOUNT # SHARES AMOUNT CAPITAL STAGE
---------- ------ -------- ------ -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Common Shares issued -- initial
incorporation.............................. 8,850,000 $ 885 $ 3,155
Issuance of common stock for legal services,
May 1996................................... 1,000,000 100 20,985
Issuance of common stock in private placement
offering................................... 536,000 54 54,046
Net Loss December 31, 1996................... $ (44,009)
---------- ------ ------ -- -------- ---------
Balance December 31, 1996 10,386,000 1,039 78,186 (44,009)
Cancellation of original shares.............. (5,554,000) (555) 555
Execution of 1-for-2.5 reverse common stock
split...................................... (2,899,200) (290) 290
Additional shares issued in subscription
offering................................... 229,200 23 38,000 4 152,274
Shares issued for Acquisition of
Subsidiary................................. 60,000 6 (6)
Net Loss for the eleven months ended November
30, 1997................................... (99,778)
---------- ------ ------ -- -------- ---------
Balance November 30, 1997.................... 2,222,000 $ 223 38,000 $4 $231,299 $(143,787)
========== ====== ====== == ======== =========
</TABLE>
See Accompanying Notes to Interim Financial Statements.
F-12
<PAGE> 65
CUIDAO HOLDING CORP. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE ELEVEN MONTHS ENDED NOVEMBER 30, 1997 AND 1996 AND
CUMULATIVE TOTALS FOR DEVELOPMENT STAGE OPERATIONS FROM
FEBRUARY 12, 1996 (DATE OF INCEPTION) TO NOVEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
DEVELOPMENT
STAGE
ELEVEN MONTHS ELEVEN MONTHS FEBRUARY 12, 1996
ENDED ENDED TO
NOVEMBER 30, 1997 NOVEMBER 30, 1996 NOVEMBER 30, 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss.................................... $ (99,778) $(42,134) $(143,787)
Adjustments to Reconcile Net Loss to Net
Cash Used in Operating Activities:
Depreciation............................. 1,754 225 2,001
Amortization of Organizational Costs..... 267 126 406
Increase in Accounts Receivable.......... (7,600) 0 (7,600)
Increase in Inventory.................... (15,735) 0 (15,735)
Increase in Organizational Costs......... (475) (1,065) (1,540)
Increase in Deferred Offering Costs...... (200) (20,500) (20,700)
Increase in Prepayments and Deposits..... (1,385) (1,808) (3,193)
Decrease (increase) in Accrued
Expenses............................... (555) 1,187 632
--------- -------- ---------
Net Cash Used in Operating Activities....... (123,707) (63,969) (189,516)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Office Equipment............. (10,444) (1,723) (12,167)
--------- -------- ---------
Net Cash Used in Investing Activities....... (10,444) (1,723) (12,167)
--------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuing Common Stock.......... 37,301 76,725 116,526
Proceeds from issuing Preferred Stock....... 115,000 0 115,000
--------- -------- ---------
Net Cash Provided by Financing Activities... 152,301 76,725 231,526
--------- -------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS..... 18,150 11,033 29,843
CASH AND CASH EQUIVALENTS -- BEGINNING OF
PERIOD...................................... 11,693 0 0
--------- -------- ---------
CASH AND CASH EQUIVALENTS -- END OF PERIOD.... $ 29,843 $ 11,033 $ 29,843
========= ======== =========
</TABLE>
See Accompanying Notes to Interim Financial Statements.
F-13
<PAGE> 66
CUIDAO HOLDING CORP. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM FINANCIAL STATEMENTS
OCTOBER 31, 1997
(UNAUDITED)
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.
The Company and its subsidiaries are development stage companies which
import, develop, manage and distribute a portfolio of international and regional
brands of beer, wine and spirits.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and in accordance with Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments considered necessary for a fair
presentation have been included.
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.
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 October 31, 1997 there is no concentration of credit risk from
uninsured bank balances.
Office Equipment
Office Equipment is stated at cost and depreciated over its estimated
allowable useful life (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.
F-14
<PAGE> 67
CUIDAO HOLDING CORP. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1997
(UNAUDITED)
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 proposed
initial public offering. The costs related to the initial public offering will
be capitalized and netted against the amount received from the public offering.
All deferred offering costs will be expended in the event the offering is not
consummated.
Income Taxes
In February 1992, the Financial Accounting Standards Board issued Statement
on 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.
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 shares outstanding during the period.
NOTE 3 -- EQUIPMENT
<TABLE>
<S> <C>
Machinery and Office Equipment............................. $12,168
Less: Accumulated Depreciation........................... 1,842
-------
Net Equipment............................................ $10,326
=======
</TABLE>
Depreciation expense amounted to $1,595 for the ten months ended October
31, 1997.
NOTE 4 -- COMMITMENTS
Operating Lease
Effective July 1, 1996, the Company has assumed all obligation under a 14
month lease ending September, 1997. The lease calls for monthly rent payments
starting in September and October 1996 of $500 per month, increased to $740 for
the duration of the lease term. The lease was extended one year on September 30,
1997.
Rent expense amounted to $6,657 for the ten months ended October 31, 1997.
F-15
<PAGE> 68
CUIDAO HOLDING CORP. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1997
(UNAUDITED)
NOTE 5 -- DEFERRED INCOME TAXES
As discussed in Note 2, the Company applied the provision of SFAS No. 109.
The significant components of deferred income tax benefit arising from a
net operating loss carry forward of approximately $74,000 is as follows at
October 31, 1997.
<TABLE>
<S> <C>
Deferred Tax Benefit....................................... $13,500
Valuated Allowance......................................... 13,500
-------
$ 0
=======
</TABLE>
The valuation allowance has been estimated at 100% due to the Company being
in the development stage.
NOTE 6 -- CAPITALIZATION
On March 31, 1997, certain principal stockholders of the Company
voluntarily surrendered, and the Company cancelled therein, 5,554,000 shares of
the Company's common stock.
On July 28, 1997, the Company effectuated a 1-for-2.5 reverse common stock
split. In order to properly reflect this event, all financial statements are
being presented as if this had occurred at inception.
F-16
<PAGE> 69
APPENDIX A
CUIDAO HOLDING CORP.
3201 WEST GRIFFIN ROAD, SUITE 204
FT. LAUDERDALE, FLORIDA 33312-6900
SUBSCRIPTION AGREEMENT AND SIGNATURE PAGE
(ALL INVESTORS MUST SIGN THIS SUBSCRIPTION AGREEMENT)
================================================================================
SUBSCRIBER DATA: (Must be completed in full)
================================================================================
FULL NAME OF SUBSCRIBER: (Do not use initials)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
------------------------------------------------------------------------------
------------------------------------------------------------------------------
------------------------------------------------------------------------------
First Full Name (Do not use initials) Middle Initial Last Name
RESIDENCE ADDRESS, INCLUDING ZIP CODE: (Do not use P.O. box)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
------------------------------------------------------------------------------
CORRESPONDENCE ADDRESS, INCLUDING ZIP CODE:
------------------------------------------------------------------------------
------------------------------------------------------------------------------
------------------------------------------------------------------------------
RESIDENCE TELEPHONE NUMBER: BUSINESS TELEPHONE NUMBER:
--------- --------- ------------ --------- --------- ------------
--------- --------- ------------ --------- --------- ------------
SOCIAL SECURITY: OR TAX I.D. NUMBER:
--------- ------ ------------ ------ ---------------------
--------- ------ ------------ ------ ---------------------
================================================================================
SUBSCRIPTION: (Must be completed in full)
================================================================================
NUMBER OF UNITS BEING PURCHASED: _______________ X $5.75 PER UNIT = TOTAL
PURCHASE PRICE FOR UNITS: $
AMOUNT OF PAYMENT RECEIVED: $__________________ ____________________ DATE
PAYMENT RECEIVED:
[INITIALS OF RECIPIENT]
The undersigned subscriber hereby authorizes and directs the immediate deposit
of his/her subscription amount into the Imperial Trust Company, 201 North
Figueroa Street, Suite 610, Los Angeles, California 90012.
================================================================================
BROKER/DEALER INFORMATION
TO BE COMPLETED BY THE REGISTERED REPRESENTATIVE
================================================================================
Registered Representative Name: _____________________________ No. ______________
Branch Office Address: _________________________________________________________
City: _____________________ State: _________ Zip: _________ Phone: _____________
Broker/Dealer NASD Firm Name: __________________________________________________
Home/Main Office Address: ______________________________________________________
City: _____________________ State: _________ Zip: _________ Phone: _____________
- -------------------------------------- --------------------------------------
SIGNATURE OF REGISTERED REPRESENTATIVE SIGNATURE OF REGISTERED REPRESENTATIVE
(IF MORE THAN ONE)
================================================================================
SIGNIFICANT DISCLOSURE
================================================================================
THIS SUBSCRIPTION IS MADE PURSUANT TO, AND IS SUBJECT TO, THE TERMS
AND CONDITIONS OF THE QUALIFICATION APPROVED BY THE SECURITIES COMMISSIONS
OF THE STATES IN WHICH THE UNITS ARE BEING OFFERED.
SIGNATURE MUST BE IDENTICAL TO NAME OF REGISTERED OWNER
- ---------------------------------------------------------
Printed Name of Subscriber
- --------------------------------------------------------- ----------------
Signature of Subscriber Date
- ---------------------------------------------------------
Printed Name of Subscriber (if more than one)
- --------------------------------------------------------- ----------------
Signature of Subscriber Date
================================================================================
ADDITIONAL INFORMATION
================================================================================
In order to facilitate processing of your subscription, please be sure you have
completed each of the following:
- A check made payable to "Imperial Trust Company as Escrow Agent for
Cuidao Holding Corp."
- Enter the number of units being purchased and total cash contribution
on this Subscription Agreement.
- Enter the state in which you are a legal resident in the "Residence
Address" column above.
- Please mail check and this Subscription Agreement to:
West America Securities Corp.
4510 E. Thousand Oaks Boulevard, Ste. 100
Westlake Village, California 91362
Attn: Mr. Tracy Spencer
A-1
<PAGE> 70
======================================================
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, BY ANY
PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION IN THIS PROSPECTUS IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
OF THIS PROSPECTUS.
------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Unit Purchase Information............. 4
Prospectus Summary.................... 5
Risk Factors.......................... 9
The Company........................... 18
Use of Proceeds....................... 19
Dividend Policy....................... 19
Dilution.............................. 19
Capitalization........................ 22
Selected Financial Data............... 23
Plan of Operation..................... 24
Business.............................. 27
Management............................ 36
Stock Option Plans.................... 38
Certain Relationships and Related
Transactions........................ 40
Principal Stockholders................ 43
Description of Securities............. 44
Certain Provisions of Florida Law and
of the Company's Articles of
Incorporation and Bylaws............ 46
Shares Eligible for Future Sale....... 47
Plan of Distribution.................. 49
Legal Matters......................... 50
Experts............................... 50
Available Information................. 50
Index to Financial Statements......... F-1
Subscription Agreement (Appendix A)... A-1
</TABLE>
------------------------
UNTIL , 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS.
======================================================
======================================================
CUIDAO HOLDING CORP. LOGO
------------------------
260,000 UNITS
CONSISTING OF 260,000 SHARES OF
COMMON STOCK AND WARRANTS
TO PURCHASE 260,000 SHARES
OF COMMON STOCK
------------------------
PROSPECTUS
------------------------
, 1998
======================================================
<PAGE> 71
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Florida law, a director of the Company is not personally liable for
monetary damages to the Company or any other person for any statement, vote,
decision, or failure to act, regarding corporate management or policy, by a
director, unless the director breached or failed to perform his duties as a
director and the director's breach of, or failure to perform, those duties
constitutes or result in: (1) a violation of the criminal law, unless the
director had reasonable cause to believe his conduct was lawful or had no
reasonable cause to believe his conduct was unlawful; (2) a transaction from
which the director derived an improper personal benefit, either directly or
indirectly; (3) a circumstance under which the director is liable for an
unlawful corporate distribution; (4) a proceeding by or in the right of the
Company to procure a judgment in its favor or by or in the right of a
shareholder, for conscious disregard for the best interest of the Company, or
wilful misconduct; or (5) a proceeding by or in the right of someone other than
the Company or a shareholder, for recklessness or an act or omission which was
committed in bad faith or with malicious purpose or in a manner exhibiting
wanton and willful disregard of human rights, safety, or property.
Further, under Florida law, a director is not deemed to have derived an
improper personal benefit from any transaction if the transaction and the nature
of any personal benefit derived by the director are not prohibited by state or
federal law or regulation and without further limitation:
(a) In an action other than a derivative suit regarding a decision by
the director to approve, reject, or otherwise affect the outcome of an
offer to purchase the stock of, or to effect a merger of, the Company, the
transaction and the nature of any personal benefits derived by a director
are disclosed or known to all directors voting on the matter, and the
transaction was authorized, approved, or ratified by at least two directors
who comprise a majority of the disinterested directors (whether or not such
disinterested directors constitute a quorum);
(b) The transaction and the nature of any personal benefits derived by
a director are disclosed or known to the shareholders entitled to vote, and
the transaction was authorized, approved, or ratified by the affirmative
vote or written consent of such shareholders who hold a majority of the
shares, the voting of which is not controlled by directors who derived a
personal benefit from or otherwise had a personal interest in the
transaction; or
(c) The transaction was fair and reasonable to the Company at the time
it was authorized by the board, a committee, or the shareholders,
notwithstanding that a director received a personal benefit.
The Articles of Incorporation and the Bylaws of the Registrant contain
provisions providing for the indemnification by the Registrant of all past and
present directors, officers, employees or agents of the Registrant. Such
indemnification applies only to the extent that any such person by reason of
acting in such capacity is, or is threatened to be made, a witness in, or party
to, any action, suit, arbitration, alternative dispute resolution mechanism,
investigation, administrative hearing or other proceeding. In that event, such
person (1) shall be indemnified, with respect to any proceeding other than a
proceeding brought by or in the right of the Registrant, against all judgments,
penalties, fines and amounts paid in settlement, and all reasonable expenses
incurred, in connection therewith, if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Registrant, and if, with respect to criminal proceeding, he had no reasonable
cause to believe his conduct was unlawful, (2) shall be indemnified, to the
extent permitted by applicable law, with respect to any proceeding brought by or
in the right of the Registrant to procure a judgment in its favor, for his
reasonable expenses in connection therewith if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests of
the Registrant, (3) shall be indemnified for reasonable expenses incurred in
connection with any proceeding in which he is wholly or partly successful on the
merits, and (4) shall be indemnified for reasonable expenses incurred in
connection with being, or being threatened to be made, a witness in any
proceeding.
II-1
<PAGE> 72
The specific provisions of the Articles of Incorporation of the Registrant
with respect to the indemnification of directors and officers are as follows:
ARTICLE 13 -- Indemnification: The Corporation shall indemnify its
officers, directors and authorized agents for all liabilities incurred directly,
indirectly or incidentally for services performed for the Corporation, to the
fullest extent permitted under Florida law existing now or hereafter enacted.
The specific provisions of the Bylaws of Registrant with respect to the
indemnification of directors and officers are as follows:
The corporation shall indemnify any person:
(1) Who was or is a party, or is threatened to be made a party, to any
threatened, pending, or completed action, suit, or proceeding, whether
civil, criminal, administrative, or investigative (other than an action by,
or in the right of, the corporation) by reason of the fact that he is or
was a director, officer, employee, or agent of the corporation or is or was
serving at the request of the corporation as a director, officer, employee,
or agent of another corporation, partnership, joint venture, trust, or
other enterprise against such costs and expenses, and to the extent and in
the manner provided under Florida law.
(2) Who was or is a party, or is threatened to be made a party, to any
threatened, pending, or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that
he is or was a director, officer, employee, or agent of the corporation or
is or was serving at the request of the corporation as a director, officer,
employee, or agent of another corporation, partnership, joint venture,
trust, or other enterprise against such costs and expenses, and to the
extent and in the manner provided under Florida law.
The extent, amount, and eligibility for the indemnification provided herein
will be made by the Board of Directors. Said determinations will be made by a
majority vote to a quorum consisting of directors who were not parties to such
action, suit, or proceeding or by the shareholders by a majority vote of a
quorum consisting of shareholders who were not parties to such action suit or
proceeding.
The corporation will have the power to make further indemnification as
provided under Florida law except to indemnify any person against gross
negligence or willful misconduct.
The corporation is further authorized to purchase and maintain insurance
for indemnification of any person as provided herein and to the extent provided
under Florida law.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses of this offering are estimated as follows:*
<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 1,032
Blue Sky fees and expenses.................................. 5,930
Transfer Agent and Registrar fees........................... 1,000
Printing and engraving expenses............................. 25,000
Legal fees and expenses..................................... 20,000
Accounting fees and expenses................................ 1,500
Miscellaneous............................................... 10,000
-------
Total............................................. $64,462
=======
</TABLE>
- ---------------
* All amounts other than the SEC registration fee are estimated.
II-2
<PAGE> 73
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Within the past three years, the Registrant sold securities without
registration under the Securities Act of 1933, as amended (the "Act") as
follows:
<TABLE>
<CAPTION>
NAMES OF
SECURITIES SOLD INVESTORS CONSIDERATION RECEIVED EXEMPTION FROM REGISTRATION
--------------- --------- ---------------------- ---------------------------
<S> <C> <C> <C>
1,718,400 Shares 6 Persons(1)(2) $4,080 in cash and Section 4(2) of the
of Common Stock past services valued Securities Act
at $21,045
443,600 Shares of 47 Persons(3) $110,900 Section 3(b) of the
Common Stock Securities Act and Rule 504
of Regulation D promulgated
thereunder.
60,000 Shares of 3 Persons(4) 50,000 Shares of Section 4(2) of the
Common Stock Common Stock of R&R Securities Act
(Bordeaux)
Imports,Inc.
38,000 Shares of 5 Persons(5) $95,000 Section 3(b) of the
Series A Preferred Stock Securities Act and Rule 504
of Regulation D promulgated
thereunder.
</TABLE>
- ---------------
(1) The six persons who purchased the 1,722,400 shares of Common Stock are
Robert K. Walker (488,400 shares), Euro Imperial Group, Ltd. (148,000
shares), Lucia & Tai Shing Chaw (222,000 shares), Paris International
Holding Corp. (440,000 shares), Lui Hoa Xue (20,000 shares) and John W.
Martin (400,000 shares). The offering of the shares purchased by the
foregoing referenced six persons began on March 31, 1996 and ended on May
31, 1996. Each of the six persons was a sophisticated purchaser who by
virtue of his/her personal relationship to the Company, or to a promoter of
the Company, was able to obtain all information necessary to make an
informed decision concerning an investment in the Company's shares.
(2) One of the six persons acquiring shares in this offering was John W. Martin
who acquired 400,000 shares of Common Stock on or about May 31, 1996, in
exchange for legal services rendered to the Company by the Law offices of
John W. Martin, of which Mr. Martin is the sole proprietor. Such 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.
(3) The 47 persons who purchased 443,600 shares of Common Stock are Barbara
Occhuzzi (12,000 shares), Filomena Gerasimchik (4,000 shares), Kristopher
Walker (800 shares), Clorinda Gerasimchik (6,000 shares), Hilda Tornatta
(4,000 shares), Nora Marin (4,000 shares), Violet Walker (800 shares),
Shirley Ferguson (400 shares), Lee and Robin Still (400 shares), Elizabeth
Schmale (800 shares), Ed and Gail Magdycz (2,000 shares), Carole Still (400
shares), Katie and Lauren Fisher (800 shares), Robert E. Friend III, Lee
Friend, Michelle F. Edwards and Owen Kelly Feild (1,600 shares), Dorthy and
Robert Friend (4,800 shares), Carolyn L. Blenner (6,000 shares), Robert H.
Callis (4,000 shares), Bertrand Ross (20,000 shares), Thomas Dobson (10,000
shares), Bretharte Jones (22,000 shares), Amy Lampert (4,000 shares), John
Fowler (20,000 shares), Gaynelle Ayers (20,000 shares), Ernest Sutton
(20,000 shares), Diane Anders (10,000 shares), Robert Kerr (4,000 shares),
Steven Powell (12,000 shares), Janet Courtney (2,000 shares), Charmeine
Wiktor (2,000 shares), Regis and Sylvia Louchet (17,600 shares), Luis Ramos
(2,000 shares), Edward Mojena (4,000 shares), Harry Newman (44,000 shares),
Robert H. Walker (60,000 shares), Theresa Schopler (24,000 shares), Michael
McDonnell (16,000
II-3
<PAGE> 74
shares), Roy Bee (32,000 shares), Jonathan Smith (800 shares), Betty Lachman
(20,000 shares), Jason Mistler (1,600 shares), Marcos Fiegler (6,400
shares), Jeannette Caissie (4,800 shares), John Gillespie (1,200 shares),
James Schindel (4,000 shares), Mary Knaak (2,000 shares), Kristene Klein
(400 shares) and Mark Warren (4,000 shares). The offering of the shares
purchased by the foregoing referenced 47 persons began on June 14, 1996 and
ended on March 31, 1997.
(4) The three persons who acquired the 60,000 shares of Common Stock are Robert
K. Walker (10,000 shares), Regis Louchet (10,000 shares) and Jean Francis
Louchet (40,000 shares). The offering of the shares purchased by the
foregoing referenced three persons began and ended on March 31, 1997. Each
of the three persons was a sophisticated purchaser who by virtue of his
personal relationship to the Company, or to a promoter of the Company, was
able to obtain all information necessary to make an informed decision
concerning an investment in the Company's shares.
(5) The five persons who purchased 38,000 shares of Series A Preferred Stock are
Phillipe F. Drefus (4,000 shares), C. Michael Fisher (16,000 shares), P.
Tristan & Helene F. Bourgolgnie (2,000 shares), Euro Imperial Group, Ltd.
(8,000 shares)and Edward Mojena (8,000 shares). The offering of the shares
purchased by the foregoing referenced five persons began on August 1, 1997
and ended on October 30, 1997.
ITEM 27. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1 Placement Agent Agreement
1.2 Escrow Agreement by and between Cuidao Holding Corp. and
Imperial Trust Company
1.3 Warrant Agreement by and between Cuidao Holding Corp. and
Florida Atlantic Stock Transfer*
3.0 Amended and Restated Articles of Incorporation of Cuidao
Holding Corp.*
3.1 Bylaws of Cuidao Holding Corp.*
4.0 Specimen Stock Certificate*
5.0 Opinion of Law Offices of John W. Martin as to legality*
10.0 Cuidao Holding Corp. 1997 Incentive Stock Option Plan*
10.1 Cuidao Holding Corp. 1997 Directors' Stock Option Plan*
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.*
10.3 Import and Distribution Agreement by and between Cuidao
Holding Corp. and Cave du Vignoble Gursonnais*
10.4 Import and Distribution Agreement by and between Cuidao
Holding Corp. and Armadis*
10.5 Import and Distribution Agreement by and between Cuidao
Holding Corp. and Les Chais du Prevot*
10.6 Import and Distribution Agreement by and between Cuidao
Holding Corp. and Vignerons De Buzet*
10.7 Import and Distribution Agreement by and between Cuidao
Holding Corp. and Godet Freres*
10.8 Form of Lock-Up Agreement by and between the Cuidao Holding
Corp., West America Securities Corp. and certain
shareholders of Cuidao Holding Corp.*
10.9 Form of Promotional Share Lock-In Agreement by and between
Cuidao Holding Corp. and certain shareholders of Cuidao
Holding Corp.*
24.0 Consent of Baum & Company, independent certified public
accountants
24.1 Consent of Law Offices of John W. Martin (included in
Exhibit 5.0)*
27.0 Financial Data Schedule
</TABLE>
- ---------------
* Previously filed.
II-4
<PAGE> 75
ITEM 28. UNDERTAKINGS
A. Undertaking pursuant to Rule 415.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) Reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof), which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement; and
(iii) Include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment will be deemed to be a
new Registration Statement relating to the securities offered therein, and
the offering of such securities at that time will be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration, by means of a post-effective
amendment, any of the securities being registered that remain unsold at the
termination of the offering.
B. Undertaking in respect of indemnification.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and other agents of the Company, the
Company has been informed that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
II-5
<PAGE> 76
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Ft.
Lauderdale, State of Florida, on the 2nd day of March, 1998.
CUIDAO HOLDING CORP.
/s/ C. MICHAEL FISHER
--------------------------------------
C. Michael Fisher
Chairman of the Board and President
/s/ FRANCIS X. SCANLAN
--------------------------------------
Francis X. Scanlan
Chief Financial Officer
(Principal Accounting Officer)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities and
on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ C. MICHAEL FISHER Chairman of the Board, March 2, 1998
- ----------------------------------------------- President and Director
C. Michael Fisher
/s/ EDWARD L. MAGDYCZ Secretary and Director March 2, 1998
- -----------------------------------------------
Edward L. Magdycz
/s/ FRANCIS J. HORNIK Director March 2, 1998
- -----------------------------------------------
Francis J. Hornik
</TABLE>
II-6
<PAGE> 1
EXHIBIT 1.1
CUIDAO HOLDING CORP.
A Florida Corporation
260,000 Units Consisting of 260,000 Shares of Common
Stock and Warrants to Purchase 260,000
Shares of Common Stock
PLACEMENT AGENT AGREEMENT
Westlake Village,California
March , 1998
West America Securities Corp.
4510 E. Thousand Oaks Boulevard
Suite 100
Westlake Village, California 91362
Gentlemen:
The undersigned, Cuidao Holding Corp., a Florida corporation (the
"Company"), hereby confirms its agreement with West America Securities Corp.
(the "Placement Agent") as follows:
SECTION 1. Description of Units. The Company is offering for sale an
aggregate of 260,000 units, each unit consisting of one share of the Company's
common stock, $.0001 par value ("Share") and one redeemable common stock
purchase warrant ("Warrant")(the aggregate of such 260,000 units being
hereinafter referred to as the "Units"). The offering of the Units is further
described in the Company's Registration Statement (File No. 333-43457)filed on
Form SB-2 with the United States Securities and Exchange Commission
("Commission"). The Placement Agent, as a licensed broker-dealer capable of
participating in the offering of the Units is invited to assist the Company in
the offer and sale of the Units by using its best efforts to solicit offers for
the purchase of the Units, and in this regard, the Placement Agent has agreed to
act in such capacity on the terms and conditions set forth in this Placement
Agent Agreement (the "Agreement").
SECTION 2. Representations and Warranties of the Company. In order to
induce the Placement Agent to enter into this Agreement, and to further the
offering of the Units, the Company hereby represents and warrants as follows:
(a) The Company has filed a Registration Statement (No.
333-43457) on Form SB-2 relating to the Units with the Commission pursuant to
the Securities Act of 1933, as amended (the "Securities Act"), and the
Registration Statement was declared effective on ________________, 1998. As used
in this Agreement, the term "Registration Statement" means the Registration
Statement,
<PAGE> 2
including the Prospectus, the exhibits and the financial statements, and all
amendments thereto, including any amendments after the effective date of the
Registration Statement. The term "Prospectus" means the prospectus filed as a
part of Part I of the Registration Statement, including all pre-effective and
post-effective amendments and supplements thereto.
(b) The Registration Statement and all other documents previously
filed or filed after the date hereof with the Commission conform and will
conform with all of the requirements of the Securities Act in all material
respects. Neither the Registration Statement, the Prospectus nor the material
filed or to be filed with the Commission contains nor will contain any untrue
statements of material fact nor are there or will there be any omissions of
material facts required to be stated therein or that are necessary to make the
statements therein not misleading, except that this warranty does not apply to
any statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by and with respect to the
Placement Agent, or any dealer through the Placement Agent, expressly for use in
the Registration Statement or Prospectus or any amendment or supplement thereto.
(c) The Company has obtained a CUSIP number for its common stock.
The materials previously filed or filed after the date hereof with any state do
not and will not contain any untrue statements of material fact nor are there or
will there be any omissions of material facts required to be stated therein or
that are necessary to make the statements therein not misleading.
(d) The Company has been legally incorporated and is now and
always during the period of the offering will be, a validly existing corporation
under the laws of the state of Florida, lawfully qualified to conduct the
business for which it was organized and which it proposes to conduct. The
Company will always during the period of the offering be qualified to conduct
business as a foreign corporation in each jurisdiction where the nature of its
business requires such qualification.
(e) The outstanding capital stock of the Company has been duly
and validly authorized, issued and is fully paid and non-assessable and conforms
to all statements made in the Registration Statement and Prospectus with respect
thereto. The Units, Shares, Warrants, shares underlying the Warrants (the
"Warrant Shares"), Placement Agent Unit Purchase Option (as defined in Section
4(e)(ii) hereof) and the shares of common stock underlying the Placement Agent
Unit Purchase Option (the "Placement Agent Option Shares") have been duly and
validly authorized and, when issued and delivered against payment as provided in
this Agreement, will be validly issued, fully paid and nonassessable. The Shares
and Warrant Shares, upon issuance, will not be subject to the preemptive rights
of any shareholders of the Company. The Warrants
2
<PAGE> 3
and Placement Agent Unit Purchase Option, when sold and delivered, will
constitute valid and binding obligations of the Company enforceable in
accordance with their terms. A sufficient number of shares of common stock have
been reserved for issuance upon exercise of the Warrants and Placement Agent
Unit Purchase Option. The Units, Shares, Warrant Shares, Placement Agent Unit
Purchase Option and the Placement Agent Option Shares will conform to all
statements in the Registration Statement and Prospectus. Upon delivery of the
payment for the Placement Agent Unit Purchase Option to be sold by the Company
as set forth in this Agreement, the Placement Agent and its designees will
receive good and marketable title thereto, free and clear of all liens,
encumbrances, charges and claims except those created by, through or under the
Placement Agent and except restrictions on transfer arising under federal and
state securities laws and the rules and regulations promulgated thereunder. The
Company will have on the Effective date (as hereinafter defined in subsection
(h) of this Section 2) of the Registration Statement and at the time of delivery
of such Placement Agent Unit Purchase Option full legal right and power and all
authorization and approval required by law to sell, transfer and deliver such
Placement Agent Unit Purchase Option in the manner provided thereunder.
(f) The Company has an authorized capitalization of 100,000,000
shares of Common Stock, $.0001 par value, and 10,000,000 shares of Preferred
Stock, $.0001 par value. If all of the Units are sold, the Shares will represent
at least 10% of the Company's shares of common stock outstanding after the
public offering. Common stock underlying outstanding options and warrants except
options issued pursuant to the Company's 1997 Incentive Stock Option Plan and
1997 Directors' Stock Option Plan described in subsection (g) of this Section 2
and except the Warrants and Placement Agent Unit Purchase Option will be deemed
to be outstanding for purposes of determining the number of shares of the
Company's common stock outstanding after the public offering. There are no
outstanding options, warrants or other rights to purchase securities of the
Company, however characterized, except as described in the Registration
Statement. There are no securities of the Company, however characterized, held
in its treasury. With respect to the sell, sale, offer to purchase or purchase
of any of its securities, the Company has not made any intentional or reckless
violations of the antifraud provisions of the federal securities laws, rules or
regulations promulgated thereunder or the laws, rules or regulations of any
jurisdiction wherein such securities transactions or solicitation occurred.
(g) The Board of Directors of the Company and the shareholders of
the Company have adopted a 1997 Incentive Stock Option Plan designed to qualify
under Section 422A of the Internal Revenue Code. The Board of Directors of the
Company and the shareholders of the Company have also adopted a 1997 Directors'
Stock Option Plan which is designed to attract and reward non-
3
<PAGE> 4
employee directors. The Incentive Stock Option Plan relates to 750,000 shares of
the Company's common stock. The 1997 Directors' Stock Option Plan relates to
250,000 shares of the Company's common stock.
(h) During the period of the offering of the Units and for one
year from the date the Commission declares the Registration Statement to be
effective (the "Effective Date"), the Company will not sell any equity or
long-term debt securities (except options issued pursuant to the Company's 1997
Incentive Stock Option Plan and 1997 Directors' Stock Option Plan, except any
shares issued upon the exercise of such options, except any shares issued upon
the exercise of any other options or warrants outstanding on the Effective Date
and except the Warrants and Placement Agent Unit Purchase Option) without the
Placement Agent's prior written consent, which will not be unreasonably
withheld.
(i) The Company has caused each of its officers, directors,
promoters and principal stockholders to enter into a Promotional Share Lock-In
Agreement in the form attached hereto as Exhibit "A". The Company has obtained
such an agreement from shareholders owning at least 1,750,000 shares of the
Company's outstanding common stock.
(j) The Company has caused each of its shareholders, other than
its officers, directors, promoters and principal stockholders, to enter into a
Lock-Up Agreement with the Placement Agent in the form attached hereto as
Exhibit "B". The Company has obtained such an agreement from shareholders owning
at least 444,000 shares of the Company's outstanding common stock.
(k) The audited financial statements, together with related
schedules and notes, included in the Registration Statement and Prospectus
present fairly the financial condition of the Company and are reported upon by
independent public accountants according to generally accepted accounting
principles and as required by the rules and regulations of the Commission.
(l) Except as disclosed in the Registration Statement and the
Prospectus, the Company does not have any contingent liabilities, obligations,
or claims nor has it received threats of claims or regulatory action. Further,
except as disclosed in the Registration Statement and the Prospectus, subsequent
to the date information is given in the Registration Statement and definitive
Prospectus, and prior to the close of the offering: (a) there shall not be any
material adverse change in the management or condition, financial or otherwise,
of the Company or in its business taken as a whole; (b) there shall not have
been any material transaction entered into by the Company other than
transactions in the ordinary course of business; (c) the Company shall not have
incurred any material obligations, contingent or otherwise, which are not
disclosed in the Registration Statement
4
<PAGE> 5
and the Prospectus; (d) there shall not have been nor will there be any change
in the capital or long-term debt (except current payments) of the Company; and
(e) the Company has not and will not have paid or declared any dividends or
other distributions on its common stock.
(m) The Company will have the legal right and authority to enter
into this Agreement upon its execution, to effect the proposed sale of the
Units, and to effect all other transactions contemplated by this Agreement.
(n) The Company knows of no person who rendered any services in
connection with the introduction of the Company to the Placement Agent. No
broker's or other finder's fees are due and payable by the Company and none will
be paid by it.
(o) The Company is eligible to use Form SB-2 for the offering of
the Units.
(p) The Company and its affiliates are not currently offering any
securities nor has the Company or its affiliates offered or sold any securities
except as required to be described in the Registration Statement.
(q) The Company will not file any amendment or supplement to the
Registration Statement, Prospectus, or exhibits if the Placement Agent and its
counsel have not been previously furnished a copy, or if the Placement Agent or
its counsel have objected in writing to the filing of the amendment or
supplement.
(r) The Company possesses adequate certificates or permits issued
by the appropriate federal, state or local regulatory authorities necessary to
conduct its business and to retain possession of its properties. The Company has
not received any notice of any proceeding relating to the revocation or
modification of any of these certificates or permits.
(s) The Company has filed all tax returns required to be filed
and is not in default in the payment of any taxes which have become due pursuant
to any law or any assessment.
(t) The Company has marketable title to all properties including
intellectual properties described in the Registration Statement as owned by it.
The properties are free and clear of all liens, charges, encumbrances or
restrictions, however characterized, except as described in the Registration
Statement. All of the contracts, leases, subleases, patents, copyrights,
licenses, and agreements, however characterized, under which the Company holds
its properties as described in the Registration Statement are in full force and
effect. The Company is not in default under any of the material terms or
provisions of any contracts, leases, subleases, patents, copyrights, licenses or
5
<PAGE> 6
agreements under which the Company holds its properties. There are no known
claims against the Company concerning the Company's rights under the leases,
subleases, patents, copyrights, licenses and agreements and concerning its right
to continued possession of its properties.
(u) All original documents and other information relating to the
Company's affairs has and will continue to be made available upon request to the
Placement Agent and to the Placements Agent's counsel at the Placement Agent's
office or at the office of the Placement Agent's counsel and copies of any such
documents will be furnished upon request to the Placement Agent and to the
Placement Agent's counsel. Included within the documents made available have
been at least the Articles of Incorporation and any amendments thereto, minutes
of all of the meetings of the Incorporators, Directors and Shareholders of the
Company, all financial statements and copies of all contracts, leases, patents,
copyrights, licenses or agreements to which the Company is a party or in which
the Company has an interest.
(v) The Company has appointed Florida Atlantic Stock Transfer,
Tamarac, Florida, as the Company's transfer agent and warrant agent. The Company
will continue to retain a transfer agent for so long as the Company is subject
to the reporting requirements under Section 12(g) or Section 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Company
will make arrangements to have available at the office of the transfer agent
sufficient quantities of the Company's common stock certificates and Warrant
certificates as may be needed for the quick and efficient transfer of the Units.
(w) The Company will use the proceeds from the sale of the Units
as set forth in the Registration Statement and Prospectus.
(x) There are no contracts or other documents required to be
described in the Registration Statement or to be filed as exhibits to the
Registration Statement which have not been described or filed as required.
(y) The Company is not in material default under any of the
contracts, leases, licenses or agreements to which it is a party. The proposed
offering of the Units will not cause the Company to become in material default
under any of its contracts, leases, subleases, patents, copyrights, licenses or
agreements nor will it create a conflict between the Company and any of the
contracting parties to the contracts, leases and other agreements. Further, the
Company is not in material default in the performance of any obligation,
agreement or condition contained in any debenture, note or other evidence of
indebtedness or any indenture or loan agreement of the Company. The execution
and delivery of this Agreement and the consummation of the transactions herein
6
<PAGE> 7
contemplated and compliance with the terms of this Agreement will not conflict
with or result in a breach of any of the material terms, conditions or
provisions of, or constitute a material default under, the Articles of
Incorporation or Bylaws of the Company, as amended, or any note, indenture,
mortgage, deed of trust, or other agreement or instrument to which the Company
is a party or by which it or any of its property is bound, or any existing law,
order, rule, regulation, writ, injunction, or decree of any government,
governmental instrumentality, agency or body, arbitration, tribunal or court,
domestic or foreign, having jurisdiction over the Company or its property. The
consent, approval, authorization, or order of any court or governmental
instrumentality, agency or body is not required for the consummation of the
transactions herein contemplated except such as may be required under the Act,
under the Blue Sky or securities laws of any state or jurisdiction, or the rules
of the NASD (as defined in Section 3(c) hereof).
Each contract to which the Company is a party has been duly and
validly executed, is in full force and effect in all material respects in
accordance with its respective terms, and no contracts have been assigned by the
Company, except as disclosed in the Registration Statement and Prospectus by the
Company. The Company knows of no present situation, condition or fact which
would prevent compliance with the terms of such contracts. Except for amendments
or modifications of contracts in the ordinary course of business and except as
disclosed in the Registration Statement and Prospectus, the Company has no
intention of exercising any right which would cancel any of its obligations
under any contract, and has no knowledge that any other party to any contract,
in which the Company has an interest, has any intention not to render full
performance under such contract.
(z) Except as disclosed in the Registration Statement and
Prospectus, there is, and prior to the close of the offering of the Units to the
public there will be, no action, suit or proceeding before any court or
governmental agency, authority or body pending or to the knowledge of the
Company threatened which might result in judgments against the Company not
adequately covered by insurance or which collectively might result in any
material adverse change in the condition (financial or otherwise), the business
or the prospects of the Company, or would materially affect the properties or
assets of the Company.
7
<PAGE> 8
SECTION 3. Representations and Warranties of the Placement Agent.
The Placement Agent hereby represents and warrants to the Company and agrees as
follows:
(a) This Agreement has been duly and validly authorized, executed
and delivered by the Placement Agent and is a valid, binding and enforceable
agreement of the Placement Agent.
(b) Neither the execution and delivery of this Agreement, and the
performance and consummation of the transactions contemplated in this Agreement
will result in any breach of any of the terms and conditions of, or constitute a
default under, the Placement Agent's Articles of Incorporation or Bylaws, or any
indenture, agreement, or instrument by which the Placement Agent is a party or
violate any order directed to the Placement Agent of any court or any federal or
state regulatory body or administrative agency having jurisdiction over the
Placement Agent or its affiliates.
(c) The Placement Agent represents that it is a member in good
standing of the National Association of Securities Dealers, Inc. ("NASD") and
registered as a broker-dealer with the Commission, or that it is a foreign
broker-dealer not eligible for membership under Section 1 of the Bylaws of the
NASD who agrees to make no sales within the United States, its territories or
possessions or to persons who are nationals thereof or residents therein. The
Placement Agent's attention is called to the following: (a) Section 2700 of the
NASD Conduct Rules; (b) Section 10(b) of the Exchange Act and Rule 10b-9 of the
general rules and regulations promulgated under the Exchange Act; (c) Section 15
of the Exchange Act and Rule 15c2-4 of the general rules and regulations
promulgated under the Exchange Act; and (d) Rule 15c2-8 of the general rules and
regulations promulgated under the Exchange Act and Securities Act Release No.
4968 requiring the distribution of a Preliminary Prospects to all persons
reasonably expected to be purchasers of Units from the Placement Agent at least
48 hours prior to the time it expects to mail confirmations of purchase. The
Placement Agent, if a member of the NASD, by signing this Agreement,
acknowledges that its is familiar with the cited law, rules and releases and
agrees that it will not directly and/or indirectly violate any provisions of
applicable law in connection with its participation in the distribution of the
Units.
(d) The Placement Agent will not, until advised by the Company in
writing or by wire that the offering of Units has been distributed and closed,
bid for or purchase Shares or Warrants in the open market or otherwise make a
market in the Shares or Warrants or otherwise attempt to induce others to
purchase Shares or Warrants in the open market.
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<PAGE> 9
(e) Neither the Placement Agent nor its directors or officers (or
any other person serving in a similar capacity):
(1) Has been convicted within ten years prior hereto of
any crime or offense involving the purchase or sale, or any conduct or practice
in connection with the purchase or sale, of any security; involving the making
of a false statement with the Commission; or has been convicted or charged with
a crime or offense arising out of the Placement Agent engaging in the business
of an underwriter, broker, dealer, municipal securities dealer, or investment
adviser.
(2) Is subject to any order, judgment, or decree of any
court of competent jurisdiction temporarily or permanently enjoining or
restraining such person from engaging in or continuing any conduct or practice
in connection with the purchase or sale of any security; involving the making of
a false statement with the Commission; or has been convicted or charged with a
crime or offense arising out of such person engaging in the business of an
underwriter, broker, dealer, municipal securities dealer, or investment adviser.
(3) Is subject to an order of the Commission entered
pursuant to Section 15(b), 15B(a) or 15B(c) of the Exchange Act; has been found
by the Commission to be a cause of any such order which is still in effect; or
is subject to an order of the Commission entered pursuant to Section 203(e) or
(f) of the Investment Advisers Act of 1940.
(4) Has been and is suspended or expelled from membership
in a national or regional securities dealers association or a national
securities exchange or a Canadian securities exchange for conduct inconsistent
with just and equitable principles of trade.
(5) Is subject to a United States Postal Service fraud
order or is subject to any restraining order or preliminary injunction entered
under Section 3007 of Title 30, United States Code, with respect to any conduct
alleged to constitute postal fraud.
(6) Has been an underwriter or named as an underwriter of
any securities covered by any registration statement which is the subject of any
proceeding or examination under Section 8 of the Securities Act, or is the
subject of any refusal order or stop order entered thereunder within five (5)
years prior to the date hereof.
(f) To the Placement Agent's knowledge, no action or proceeding
is pending against it or any of its officers or directors concerning its
activities as a broker or dealer that would affect the Company's offering of the
Units.
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<PAGE> 10
(g) The Placement Agent will offer the Units only in those states
and in the quantities that are identified in the Blue Sky Memorandum from the
Company's counsel to the Placement Agent that the offering of the Units has been
qualified for sale under applicable state statutes and regulations.
(h) The Placement Agent, in connection with the offer and sale of
the Units, and in the performance of its duties and obligations under this
Agreement, agrees to use its best efforts to comply with all applicable federal
laws, the laws of the states or other jurisdictions in which the Units are
offered and sold, and the Rules and Regulations of the NASD.
(i) The Placement Agent will not make any offer or sale of Units
unless the offer or sale is made in compliance with the Securities Act, the
Conduct Rules of the NASD, and the applicable securities or Blue Sky laws of
jurisdictions in which offers or sales are made, and the rules and regulations
thereunder. The Placement Agent agrees that it will not offer or sell Units to
any subscriber unless it has reasonable grounds to believe that the investment
in Units is suitable for the subscriber.
(j) The Placement Agent will, reasonably promptly after the
closing of the offering of the Units, supply the Company with all information as
the Company may reasonably request to be supplied to the securities commission
of such states in which the Units have been qualified for sale.
All of the above representations and warranties shall survive the
performance or termination of this Agreement.
SECTION 4. Retention of Placement Agent. In reliance upon the
representations and warranties set forth herein, and subject to the terms and
conditions of this Agreement:
(a) The Placement Agent hereby agrees to solicit, as an
independent contractor and not as the Company's agent, persons who will acquire
the Units. The Placement Agent will be promptly advised when the Registration
Statement becomes effective. The Placement Agent, in selling Units pursuant
hereto, agrees that it will comply with the applicable requirements of the
Securities Act and the Exchange Act and any applicable rules and regulations
issued under the Securities Act and/or the Exchange Act. Neither the Placement
Agent nor any other person is or has been authorized to give any information or
to make any representations other than those contained in the Prospectus in
connection with the sale of the Units, and the Placement Agent hereby agrees not
to give any such information or make any such representations.
(b) The Company shall have full authority to take such action as
it may deem advisable in respect of all matters pertaining to the offering or
arising thereunder. The Company
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<PAGE> 11
shall be under no liability to the Placement Agent, except such as may be
incurred under the Securities Act and the rules and regulations thereunder,
except for lack of good faith and except for obligations expressly assumed by
the Company in this Agreement, and no obligation on the Company's part shall be
implied or inferred herefrom.
(c) The Placement Agent will be informed by the Company as to the
states in which the Company has been advised by counsel that the Units have been
qualified for sale or are exempt under the respective securities or blue sky
laws of such states, but the Company has not assumed and will not assume any
obligation or responsibility as to the right of the Placement Agent or any other
participating broker-dealer to sell Units in any states.
(d) An escrow account shall be established for the Company's
offering at Imperial Trust Company, 201 North Figueroa Street, Suite 610, Los
Angeles, California 90012 (the "Escrow Agent"). The Placement Agent shall
deliver all checks received from purchasers of the Units solicited by it to the
Escrow Agent by twelve o'clock noon of the next business day after the date of
receipt, and all checks should be made payable to "Imperial Trust Company, as
Escrow Agent for Cuidao Holding Corp."
(e) Subject to the sale of 95,000 of the Units to be offered by
the Company, the Company agrees to:
(i) pay a cash commission equal to ten percent (10%) of
the purchase price of all Units sold by the Placement Agent. In the event that a
sale of a Unit for which the Placement Agent has solicited a purchaser shall not
occur, no payment with respect to such Unit shall be paid to the Placement
Agent. Payment of commissions due the Placement Agent will be made promptly
after the release of the funds which have been deposited in the escrow account;
and
(ii) sell immediately upon the close of the offering of
the Units, at a price of $260, and issue and deliver to the Placement Agent or
its designees, a Placement Agent Unit Purchase Option to purchase a number of
Units equal to one Unit for every ten (10) Units sold by the Placement Agent, or
a maximum of 26,000 Units. Such Placement Agent Unit Purchase Option shall be in
the form and substance of the Placement Agent Unit Purchase Option attached
hereto as Exhibit "C" and shall represent the right to purchase up to an
aggregate of 26,000 Units for the four-year period commencing on the first and
ending on the fifth anniversary of the effective date of the Registration
Statement, at a price of $7.00 per Unit. The Placement Agent Unit Purchase
Option shall not be sold, transferred, assigned or hypothecated for a period of
twelve (12) months from the effective date of the Registration Statement except
to officers of the Placement Agent.
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<PAGE> 12
SECTION 5. Expenses.
(a) Subject to the sale of 95,000 of the Units offered by the
Company, the Company shall reimburse the Placement Agent for its expenses on a
nonaccountable basis in an amount equal to two and one-half percent (2.5%) of
the aggregate gross dollar amount of Units sold by the Placement Agent, of
which $10,000 shall be paid on the execution of this Agreement and the balance
on closing. In the event the offering for any reason is not closed, the
Placement Agent will retain only so much of the $10,000 received from the
Company as is equal to its actual accountable expenses and reimburse the
Company for the remainder, if any.
(b) Except as stated elsewhere in this Agreement, the Placement
Agent agrees that out of its nonaccountable expense allowance, it will pay all
costs incurred or to be incurred by it or its personnel in connection with the
offering of the Units, except those to be paid by the Company as described in
Section 6 hereof.
SECTION 6. Payment of Expenses and Fees. The Company agrees that
it will pay the following fees and expenses:
(a) All fees and expenses of its legal counsel who will be
engaged to prepare certain information, documents and papers for filing with the
Commission, and with state or local securities authorities;
(b) All fees and expenses of its accountants incurred in
connection with the offering of the Units and preparation of all documents and
filings made as part of the offering;
(c) All costs in issuing and delivering the Units;
(d) All costs of printing and delivering to the Placement Agent
as many copies of the Registration Statement and amendments thereto, Preliminary
Prospectuses and definitive Prospectuses as reasonably requested by the
Placement Agent;
(e) All of the Company's mailing, telephone, travel, clerical and
other office costs incurred or to be incurred in connection with the offering of
the Units;
(f) All fees and costs which may be imposed by the various state
or local securities authorities and the NASD for review of the offering of the
Units; and
(g) All other expenses incurred by the Company in performance of
its obligations under this Agreement.
SECTION 7. Company Indemnification. The Company agrees to
indemnify, defend and hold the Placement Agent harmless against any losses,
claims, damages or liabilities, joint or several:
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<PAGE> 13
(a) To which the Placement Agent may become subject under
applicable law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement, Prospectus, or any amendment or supplement thereto or in any sales
literature, or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading; or
(b) To which the Placement Agent may become subject due to the
misrepresentation by the Company or its agents (other than the Placement Agent
or any other participating broker-dealer) of material facts in connection with
the sale of the Units, unless the misrepresentation of such material facts was
the direct result of misleading information provided to the Company or its
agents by the Placement Agent; or
(c) To which the Placement Agent may become subject as a result
of any breach by the Company of the representations and warranties contained in
this Agreement.
The Company will reimburse the Placement Agent for any legal or
other expenses reasonably incurred in connection with investigating or defending
any such loss, claim, damage or liability (or actions in respect thereof);
provided, however, that the Company shall not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in the Registration Statement, Prospectus or such amendment or
supplement or in any sales literature, in reliance upon and in conformity with
written information furnished to the Company by the Placement Agent specifically
for use in the preparation thereof. This indemnity agreement shall be in
addition to any liabilities which the Company may otherwise have in connection
with this offering.
The foregoing indemnity agreement shall extend upon the same
terms and conditions to, and shall inure to the benefit of, each person, if any,
who controls the Placement Agent.
SECTION 8. Placement Agent Indemnification. The Placement Agent agrees
to indemnify, defend and hold the Company harmless against any losses, claims,
damages or liabilities, joint or several to which the Company may become subject
under applicable law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement, Prospectus, or any amendment or supplement thereto or in any sales
literature, or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or
13
<PAGE> 14
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in the Registration
Statement, Prospectus, or any amendment or supplement thereto or in any sales
literature, in reliance upon and in conformity with written information
furnished to the Company by the Placement Agent specifically for use in the
preparation thereof; and will reimburse the Company for any legal or other
expenses reasonably incurred in connection with investigating or defending any
such loss, claim, damage or liability (or actions in respect thereof). This
indemnity agreement shall be in addition to any liabilities which the Company
may otherwise have in connection with this offering.
The foregoing indemnity agreement shall extend upon the same
terms and conditions to, and shall inure to the benefit of, each person, if any,
who controls the Company.
SECTION 9. Indemnification Procedures: Promptly after receipt by
an indemnified party of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under Section 7 or Section 8 of this Agreement, notify the
indemnifying party in writing of the commencement thereof; but the omission to
so notify the indemnifying party shall not relieve it from any liability which
it may have to any indemnified party otherwise than under such Sections. In case
any such action shall be brought against such indemnified party, it shall notify
the indemnifying party of the commencement thereof, the indemnifying party shall
be entitled to participate in, and, to the extent that it shall wish, jointly
with any other indemnifying party, similarly notified, assume the defense
thereof, with counsel satisfactory to such indemnifying and indemnified parties.
Any indemnified party shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of such indemnified party unless (a) the
employment thereof has been specifically authorized by the indemnifying party in
writing, or (b) the indemnifying party has failed to assume the defense and
employ counsel or (c) the named parties to any such action (including any
impleaded parties) include both such indemnified party and the indemnifying
party, and such indemnified party shall have been advised by such counsel that
representation of such indemnified party and the indemnifying party by the same
counsel would be inappropriate under applicable standards of professional
conduct due to actual or potential differing interests between them, in which
case the indemnifying party shall not have the right to assume the defense of
such action on behalf of such indemnified party; provided, however, that the
indemnifying party shall, in connection with any one such action or separate or
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable for the reasonable fees
and expenses of
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<PAGE> 15
only one separate firm of attorneys at any time for all such indemnified
parties, which firm shall be designated in any settlement of any such action
effected without the written consent of the indemnifying party, but if settled
with such written consent, or if there be a final judgment or decree for the
plaintiff in any such action by a court of competent jurisdiction and the time
to appeal shall have expired or the last appeal shall have been denied, the
indemnifying party agrees to indemnify and hold harmless any indemnified party
from and against any loss or liability by reason of such settlement or judgment.
SECTION 10. Termination. This Agreement may be terminated by
either party hereunder at any time upon five days' written notice to the other
party. The Placement Agent's participation in the offer and sale of the Units
will be governed by the conditions herein set forth until this Agreement is
terminated. If this Agreement is not terminated sooner as provided in this
Section, then this Agreement will terminate when the offering is completed.
SECTION 11. Notices. Except as otherwise expressly provided in
this Agreement:
(a) Whenever notice is required by the provisions of this
Agreement to be given to the Company, such notice shall be in writing addressed
to the Company as follows:
Cuidao Holding Corp.
3201 West Griffin Road, Suite 204
Ft. Lauderdale, Florida 33312-6900
Attention: Mr. C. Michael Fisher, President
With a copy to:
John W. Martin, Esq.
5777 West Century Boulevard, Suite 1540
Los Angeles, California 90045
(b) Whenever notice is required by the provisions of this
Agreement to be given to the Placement Agent, such notice shall be given in
writing addressed to the Placement Agent as follows:
West America Securities Corp.
4510 E. Thousand Oaks Boulevard, Suite 100
Westlake Village, California 91362
Attention: Mr. Robert B. Kay, President
With a copy to:
David R. Kagel, Esq.
1801 Century Park East, Suite 2400
Los Angeles, California 90067
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<PAGE> 16
SECTION 12. Binding Effect. This Agreement shall inure to the
benefit of and be binding upon the Placement Agent and the Company and the
Company's respective successors. Nothing expressed in this Agreement is intended
to give any person other than the persons mentioned in the preceding sentence
any legal or equitable right, remedy or warranties included in this Agreement.
SECTION 13. Miscellaneous Provisions.
(a) Nothing contained herein shall constitute the relationship
between the Placement Agent and the Company as an association, partnership,
unincorporated business or other separate entity.
(b) This Agreement shall be construed according to the laws of
the State of California.
(c) The representations and warranties made in this Agreement
shall survive the termination of this Agreement and shall continue in full force
and effect regardless of any investigation made by the party relying upon any
such representation or warranty.
(d) This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
Please confirm your agreement to solicit persons to acquire Units on the
foregoing terms and conditions by signing and returning the form enclosed
herewith.
Very truly yours,
CUIDAO HOLDING CORP.
a Florida corporation
By
---------------------------------
C. Michael Fisher, President
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<PAGE> 17
Cuidao Holding Corp.
3201 West Griffin Road
Suite 204
Ft. Lauderdale, Florida 33312-6900
Gentlemen:
The undersigned confirms its agreement to act as Placement Agent
as referred to in the foregoing Placement Agent Agreement, subject to the terms
and conditions of such agreement. The undersigned confirms that it is a member
in good standing of the National Association of Securities Dealers, Inc.
WEST AMERICA SECURITIES CORP.
By
----------------------------------
(Signature)
-----------------------------------
(Print Name and Title of
Authorized Representative)
-----------------------------------
(NASD Firm Number)
Dated: March , 1998 4510 E. Thousand Oaks Boulevard
----------- Suite 100
Westlake Village, CA 91362
Telephone (805) 777-9124
17
<PAGE> 1
EXHIBIT 1.2
ESCROW AGREEMENT
THIS ESCROW AGREEMENT ("Agreement") is made and entered into as of
March __, 1997, by and among Imperial Trust Company, a wholly-owned subsidiary
of Imperial Bank, a California state banking corporation (the "Escrow Agent"),
having its principal place of business at 201 North Figueroa Street, Suite 610,
Los Angeles, California 90012 and Cuidao Holding Corp., a Florida corporation
(the"Company"), having its principal place of business at 3201 West Griffin
Road, Suite 204, Ft. Lauderdale, Florida 33312-6900.
RECITALS
A. The Company proposes to offer for sale to investors up to 260,000
Units, each Unit consisting of one share of the Company's common stock, $.0001
par value ("Common Stock") and one Common Stock Purchase Warrant, for a maximum
aggregate offering price of $1,495,000 (the "Proceeds").
B. The Company has engaged West America Securities Corp., a member of
the National Association of Securities Dealers, Inc. (the "Placement Agent") to
use its best efforts to sell, as exclusive agent for the Company, the Units. The
Placement Agent shall be bound by this Agreement. However, for purposes of
communications and directives, the Escrow Agent need only accept those signed by
the Company.
C. The Company desires to establish an escrow account in which funds
received from subscribers for the Units will be deposited pending completion of
the escrow period. Imperial Trust Company agrees to serve as Escrow Agent in
accordance with the terms and conditions set forth herein and subject to the
approval of the state securities administrators set forth on the list attached
hereto as Exhibit "A" (hereinafter referred to as the "State Administrators").
The purpose of this Agreement is to comply with the provisions of Rules 10(b)-9
and 15c2-4 promulgated under the Securities Exchange Act of 1934, as amended,
and under the applicable securities laws of all states in which the offering of
Units (the "Offering") is made.
D. The Escrow Agent must be satisfactory to the State Administrators
and it is not affiliated with the Company.
AGREEMENT
1. ESTABLISHMENT OF ESCROW ACCOUNT. Effective as of the date of the
commencement of the Offering, the parties hereby establish an escrow account
with the Escrow Agent, which escrow account shall be entitled "Cuidao Holding
Corp./Imperial Trust Company Escrow Account (the "Escrow Account"). The Company
and the Placement Agent will instruct subscribers to make checks for
subscriptions payable to "IMPERIAL TRUST COMPANY, AS ESCROW AGENT FOR CUIDAO
HOLDING CORP." until a minimum of 95,000 Units have been sold in the Offering.
Any checks received that are made payable to a party other than the Escrow Agent
shall be returned to the Company or the Placement Agent.
<PAGE> 2
2. ESCROW PERIOD. The period for the existence of the escrow (the
"Escrow Period") shall begin with the commencement of the Offering and shall
terminate upon the earlier to occur of the following dates:
A. The date upon which the Escrow Agent confirms to the State
Administrators as hereinafter provided that it has received in the Escrow
Account gross proceeds of $546,250 in deposited funds (the "Minimum Offering
Amount"); or
B. The expiration of ninety (90) days from the date of
commencement of the Offering (unless extended as permitted in the Registration
Statement filed with the Securities and Exchange Commission in connection with
the Offering for an additional ninety (90) days at the sole discretion of the
Company with a copy of such extension to the Escrow Agent and the State
Administrators); or
C. The date upon which a determination is made by the Company to
terminate the Offering prior to the sale of the Minimum Offering Amount.
During the Escrow Period, the Company is aware and understands that it is
not entitled to any funds received into escrow and no amounts deposited in the
Escrow Account shall become the property of the Company or any other entity, or
be subject to the debts of the Company or any other entity.
3. DEPOSITS INTO THE ESCROW ACCOUNT. All monies received from
subscribers of the Units will be deposited with the Escrow Agent by twelve
o'clock noon of the next business day after receipt of said monies from
subscribers, together with a written account of each sale, which account shall
set forth, among other things, the subscriber's name and address, the number of
Units purchased, the amount paid therefor, whether the consideration received
was in the form of a check, draft, or money order, the date of said check,
draft, or money order, and the date received and delivered to the Escrow Agent.
All monies so deposited in the Escrow Account are hereinafter referred to as the
"Escrow Amount." The State Administrators shall have the authority to inspect
the Escrow Account without obtaining any further permission from the Company
and/or the Escrow Agent.
4. DISBURSEMENTS FROM THE ESCROW ACCOUNT.
4.1. In the event the Escrow Agent does not receive deposits
totalling the Minimum Offering Amount prior to the termination of the Escrow
Period, the Escrow Agent shall promptly notify the State Administrators by
telephone, confirmed in writing, of such fact and shall, upon approval by the
State Administrators, promptly thereafter refund to each subscriber the amount
received from the subscriber, without deduction, penalty, or expense to
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<PAGE> 3
the subscriber, and the Escrow Agent shall notify the Company and the Placement
Agent of its distribution of the funds. The purchase money returned to each
subscriber shall be free and clear of any and all claims of the Company or any
of its creditors.
4.2. In the event the Escrow Agent receives the Minimum Offering
Amount prior to termination of the Escrow Period, the Escrow Amount will not be
released to the Company until such amount is received by the Escrow Agent in
collected funds and the release provisions set forth in paragraph C below are
complied with. For purposes of this Agreement, the term "collected funds" shall
mean all funds received by the Escrow Agent which have cleared normal banking
channels and are in the form of cash. The Minimum Offering Amount may be met by
funds that are deposited from the effective date of the Offering up to and
including the date on which the contingency must be met, i.e., during the Escrow
Period. However, escrow cannot be broken and the Offering may not proceed to
closing until customer checks have been collected through the normal banking
channels in an aggregate amount sufficient to meet the Minimum Offering Amount.
Purchases made after the Escrow Period has terminated, but prior to the date
escrow is broken pending clearance of subscribers' funds, may not subsequently
be counted to meet the Minimum Offering Amount should checks tendered prior to
the termination of the Escrow Period fail to clear the banking system. In no
event may the Placement Agent substitute its own good check for the check of a
purchaser that has insufficient funds nor otherwise purchase Units to satisfy
the offering contingency unless purchasing for investment prior to the
termination of the Escrow Period and the offering document discloses the maximum
amount of such potential purchase and such arrangement has been approved by the
State Administrators.
4.3. Upon the release of any funds from the Escrow Account to
the Company, Escrow Agent shall notify the State Administrators in writing of
said release.
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<PAGE> 4
5. COLLECTION PROCEDURE.
5.1. The Escrow Agent is hereby authorized to forward each check
for collection and, upon collection of the proceeds of each check, deposit the
collected proceeds in the Escrow Account. As an alternative, the Escrow Agent
may telephone the bank on which the check is drawn to confirm that the check has
been paid.
5.2. Any check returned unpaid to the Escrow Agent shall be
returned to the Company or the Placement Agent. In such cases, the Escrow Agent
will promptly notify the Company of such return.
5.3. If the Company rejects any subscription for which the Escrow
Agent has already collected funds, the Escrow Agent shall promptly issue a
refund check to the rejected subscriber. If the Company rejects any subscription
for which the Escrow Agent has not yet collected funds but has submitted the
subscriber's check for collection, the Escrow Agent shall promptly issue a check
in the amount of the subscriber's check to the rejected subscriber after the
Escrow Agent has cleared such funds. If the rejected subscriber's check which
has been submitted for collection by the Escrow Agent is uncollectible, and if
the Escrow Agent has issued a check to the rejected subscriber hereunder, then
the Escrow Agent shall notify the Company and the Company shall immediately
reimburse the Escrow Agent for the amount of such funds. If the Escrow Agent has
not yet submitted a rejected subscriber's check for collection, the Escrow Agent
shall promptly remit the subscriber's check directly to the subscriber.
6. INVESTMENT OF ESCROW AMOUNT. The Escrow Agent may invest the Escrow
Amount only in such accounts or investments as the Company may specify by
written notice. The Company may only specify investment in (1) bank accounts,
(2) bank money-market accounts, (3) short-term certificates of deposit issued by
a bank, or (4) short-term securities issued or guaranteed by the U.S.
Government.
7. COMPLIANCE WITH TAXATION MATTERS.
7.1. The Company shall provide the Escrow Agent with a completed
Internal Revenue Service ("IRS") Form W-9 upon the execution of this
Agreement. The Escrow Agent may delay accepting escrow funds until the IRS forms
have been provided. For purposes of reporting to tax authorities, the Escrow
Agent will treat all income earned by the Escrow Agent as paid to the Company at
the time income is received by the Escrow Account.
4
<PAGE> 5
7.2. The Company shall be responsible for determining any
requirements for paying taxes or reporting any payments for tax purposes. The
Company shall give written directions to the Escrow Agent to prepare and file
tax information or to withhold any payments hereunder for tax purposes. The
Company covenants and agrees to indemnify and hold the Escrow Agent harmless
against all liability for tax withholding and/or reporting for any payments made
by the Escrow Agent pursuant to this Agreement.
8. ESCROW AGENT.
8.1. Nothing contained in this Agreement shall constitute Escrow
Agent as trustee for any party hereto or impose on the Escrow Agent any duties
or obligations other than those for which there is an express provision herein.
Except as provided herein, Escrow Agent shall have no responsibility or
liability for delivery of the Escrow Account funds.
8.2. For all purposes connected herewith Escrow Agent shall be
entitled to assume that the Company is exclusively entitled to the Escrow Agent
funds in accordance with this Agreement (and any amendments hereto) and is
fully authorized and empowered, without affecting the rights of any third
parties, to appoint Escrow Agent as the escrow agent in accordance with the
terms and provisions hereof.
8.3. Escrow Agent shall be obliged to render statements of account
only with respect to the Escrow Agent funds deposited to the parties referred to
herein and Escrow Agent shall not be under any obligation to render statements
of account to any third parties unless Escrow Agent so consents.
9. COMPENSATION OF ESCROW AGENT.
9.1. The Company shall pay the Escrow Agent a fee for its escrow
services hereunder in accordance with the fee schedule attached hereto as
Exhibit "B". However, no such fee or any monies whatsoever shall be paid out of
or chargeable to the funds on deposit in the Escrow Account.
9.2. In the event Escrow Agent performs any service not
specifically provided hereinabove, or that there is any assignment or attachment
of any interest in the subject matter of this escrow or modification thereof, or
that any controversy arises hereunder, or that Escrow Agent is named a party to,
or intervenes in, any litigation pertaining to this escrow or the subject matter
thereof, Escrow Agent shall be reasonably compensated therefor and reimbursed
for all costs and expenses including attorneys' fees occasioned thereby. Escrow
Agent shall have a first lien on the property and papers held by it hereunder
for such compensation and expenses, and the Company agrees to pay the same.
10. RESIGNATION OF ESCROW AGENT. The Escrow Agent reserves the right to
resign as escrow agent at any time, and may further do so upon giving five (5)
days written notice of such resignation to the Company at the address set forth
hereinbelow. On the effectiveness of such resignation, the Escrow Agent shall
deliver to any escrow agent appointed by the Company (or if there is no escrow
agent appointed by the Company, then to the purchasers of the Units), all
documents and money in the Escrow Account, and thereupon the Escrow Agent will
be released of any further responsibility or obligation in connection with the
Escrow Account or this Agreement.
11. LIABILITY OF THE ESCROW AGENT.
11.1. It is understood and agreed that Escrow Agent shall incur no
liability (except for acts of gross negligence or willful misconduct) and be
under no obligation, except as expressly set forth herein. Escrow Agent shall
be under no obligation to take any steps or action (whether by commencement of
legal proceedings or otherwise) to ensure that any funds are actually received
by the Escrow Agent.
11.2. None of the provisions hereof shall be construed so as to
require Escrow Agent to expend or risk any of its own funds or otherwise incur
any liability in the performance of its duties under this Agreement and it
shall be under no obligation to make any payment except out of the funds
received by it from the offering of the Units.
11.3. If it becomes illegal or impossible for Escrow Agent to carry
out any of the provisions hereof, Escrow Agent shall incur no liability as a
consequence of the enforceability or lack thereof of any agreements referred to
herein.
11.4. Escrow Agent shall not be liable to any party hereto in
acting upon any written notice, request, waiver, consent, receipt or other paper
or document believed by Escrow Agent to be signed by the proper party or
parties. Escrow Agent will be entitled to treat as genuine any letter, paper,
telex or other documents furnished or caused to be furnished to Escrow Agent by
any party to this Agreement, and believed by Escrow Agent to be genuine and to
have been transmitted by the proper party or parties. Escrow Agent shall have no
liability with respect to any good faith action taken or allowed by it
hereunder.
11.5. Escrow Agent shall not be liable for any error or judgment or
for act done or step taken or omitted by it in good faith or for any mistake of
fact or law (except for acts of gross negligence or willful misconduct), or for
anything which it may do or refrain from doing in connection herewith, and
Escrow Agent shall have no duties to any one except those signing this
Agreement.
11.6. Escrow Agent may consult with legal counsel in the event of
any dispute or questions with respect to the interpretation or construction of
this Agreement or Escrow Agent's duties hereunder, and Escrow Agent shall incur
no liability and shall be fully protected in acting in accordance with the
opinion and instructions of counsel. Any fees or costs so incurred shall be
borne by Escrow Agent.
11.7. In the event of any disagreement or dispute involving the
Escrow Account and resulting in adverse claims and demands being made in
connection with or for any monies involved therein or affected thereby, Escrow
Agent shall be entitled at its option to refuse to comply with any such claims
or demands, so long as such disagreement or dispute shall continue, and in so
doing, Escrow Agent shall not be or become liable for damages or interest to
the Company, or to any person named in this Agreement, for its refusal to
comply with such conflicting or adverse demands, and Escrow Agent shall be
entitled to continue to refrain and refuse to so act until:
11.7.1. the rights of the adverse claimants have been finally
adjudicated in a court or by arbitration as set forth below assuming and having
jurisdiction of the parties and the monies involved therein and affected
thereby; or
11.7.2. all differences have been adjudicated by agreement and
Escrow Agent has been notified thereof in writing by all of the persons
interested.
11.8. In the event of any disagreement or dispute involving the
Escrow Agent, Escrow Agent, in its discretion, may file a suit in interpleader
or for declaratory relief for the purpose of having the respective rights of all
claimants adjudicated, and deposit with the court all documents and property
held hereunder, and the Company agrees to pay the Escrow Agent's fee and all
reasonable costs and reasonable counsel fees incurred in such action and said
costs and fees shall be included in the judgment of any such action.
5
<PAGE> 6
12. MAINTENANCE OF RECORDS. The Escrow Agent shall at all times keep and
maintain a complete set of books, records and accounts relating to the
subscriptions received by the Escrow Agent hereunder, and the disposition by the
Escrow Agent of the proceeds thereof. All such records maintained by the Escrow
Agent shall be available for inspection by the State Administrators, and the
Escrow Agent shall furnish to the State Administrators, upon demand, at such
place designated in such demand, true, correct, complete and current copies of
any or all of such records.
13. MISCELLANEOUS.
13.1. All notices, reports, instructions, requests and other
communications given under this Agreement shall be either (a) sent in writing
and served personally by delivery to a responsible officer at the party's
offices listed on the signature pages hereto; or delivered by first class
registered or certified U.S. mail, return receipt requested, postage prepaid; or
(b) sent by telex or telecopier and then acknowledged as received by return
telex or telecopier by the intended recipient. Notices shall be deemed received
only upon receipt. Notices shall be directed to the addresses or telex or
telecopier numbers indicated on the signature pages hereto; provided that a
party may change its address or numbers for notices by giving notice to all
other
6
<PAGE> 7
parties in accordance with this paragraph. Escrow Agent shall be protected in
acting upon any notice, request, waiver, consent, receipt or other paper or
document believed by Escrow Agent to be signed by the proper party or parties.
13.2. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of California. This
Agreement, together with any exhibits and/or schedules referred to herein,
constitutes the entire agreement among the parties pertaining to the subject
matter hereof and supersedes all prior and contemporaneous agreements and
undertakings of the parties in connection herewith.
13.3. All of the terms, covenants, conditions and provisions of
this Agreement shall bind and inure to the benefit of the parties hereto and to
their respective representatives, successors and assigns.
13.4. No failure or delay on the part of the Escrow Agent in
exercising any right, power or remedy may be, or may be deemed to be, a waiver
thereof; nor may any single or partial exercise of any right, power or remedy
preclude any other or further exercise of any other right, power or remedy.
13.5. The invalidity of any provision hereof shall in no way affect
the validity of any other provision hereof. Each of the parties hereto shall at
the request of the other party, deliver to the requesting party all further
documents or other assurances as may reasonably be necessary or desirable in
connection with this Agreement.
13.6. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original and all of which together shall
be deemed to be one and the same instrument.
13.7. All disputes which may arise between or among the parties
hereto under or with respect to this Agreement will be resolved solely by
arbitration in Los Angeles, California in accordance with the rules of the
American Arbitration Association (AAA) pursuant to the procedure set forth in
this paragraph. The aggrieved party shall serve upon the other party a notice
in writing requiring arbitration and jointly designating one (1) arbitrator.
Within five (5) business days thereafter, the other party shall designate a
second arbitrator. The two (2) arbitrators thus chosen shall appoint a third
arbitrator within five (5) business days thereafter. If the third arbitrator is
not appointed within such five (5) business day period, then either party may
secure the appointment of a third arbitrator by application to the AAA. When
appointed, the three (3) arbitrators shall determine the subject controversy by
majority vote, except that if there is only one arbitrator mentioned above,
then the first arbitrator appointed shall be the sole arbitrator. If any
vacancy occurs on the board of arbitrators appointed hereunder by reason of
death, resignation, refusal to act, physical incapacity or otherwise, a new
arbitrator shall be appointed by the remaining arbitrators. The costs of the
arbitration shall be borne by the party which does not prevail in the matter.
All determinations by the duly appointed arbitrators shall be final, binding
and conclusive upon all parties thereto and shall be rendered in such form that
it may be judicially confirmed under the laws of the State of California.
7
<PAGE> 8
J. In the event the escrow created by this Agreement is canceled
for any reason, the Company will nevertheless pay the escrow fee, plus all other
costs and expenses of Escrow Agent, as established under Section 9 of this
Agreement. Should the Escrow Agent resign as escrow hereunder pursuant to
Section 10 of this Agreement, Escrow Agent shall be entitled to reimbursement
only for those costs and expenses incurred by Escrow Agent to date of such
resignation.
The Company and the Escrow Agent have entered into this Agreement on this
___ day of March, 1998 in multiple counterparts, each of which shall be
considered an original. Escrow Agent, by its signature hereon, accepts the
escrow agency created by this Agreement, and agrees to carry out its duties as
escrow agent pursuant to the terms and conditions contained herein.
COMPANY
Cuidao Holding Corp.
By:________________________________________
C. Michael Fisher, President
Address for Notices:
3201 West Griffin Road, Suite 204
Ft. Lauderdale, Florida 33312-6900
Facsimile: (954) 964-7087
ESCROW AGENT
Imperial Trust Company
By:________________________________________
Authorized Officer
Address for Notices:
201 North Figueroa Street
Suite 610
Los Angeles, California 90012
8
<PAGE> 9
EXHIBIT A
STATE SECURITIES COMMISSIONS
1. Colorado Department of Regulatory Agencies, Division of Securities
2. Delaware Division of Securities
3. Florida Division of Securities and Investor Protection
4. Georgia Secretary of State, Securities Division
5. Illinois Securities Department
6. Maryland Office of the Attorney General, Division of Securities
7. New Jersey Department of Law and Public Safety, Division of Consumer
Affairs, Bureau of Securities
8. New York Department of Law
9. North Carolina Secretary of State, Securities Division
10. Virginia Corporation Commission, Division of Securities and Retail
Franchising
9
<PAGE> 10
EXHIBIT B
ESCROW FEE SCHEDULE
10
<PAGE> 1
EXHIBIT 24
BAUM & COMPANY, P. A.
Certified Public Accountants
1515 University Drive, Suite 209
Coral Springs, Florida 33071
(954) 752-1712
Cuidao Holding Corp.
3201 West Griffin Road, Suite 204
Fort Lauderdale, Florida 33312-6900
RE: CUIDAO HOLDING CORP.
Dear Sir or Madam:
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement on Form SB-2 of our report dated July 15, 1997, relating
to the financial statements of Cuidao Holding Corp. which are contained in this
Prospectus.
We also consent to the reference to us under the captions "Selected Financial
Data" and "Experts" in the Prospectus.
BAUM & COMPANY, P.A.
Coral Springs, Florida
March 2, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE INTERIM
UNAUDITED FINANCIAL STATEMENTS OF CUIDAO HOLDING CORP. FOR THE TEN MONTH PERIOD
ENDED OCTOBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 11-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> NOV-30-1997
<CASH> 29,843
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 54,712
<PP&E> 10,166
<DEPRECIATION> 2,001
<TOTAL-ASSETS> 88,370
<CURRENT-LIABILITIES> 793
<BONDS> 0
0
4
<COMMON> 223
<OTHER-SE> 231,299
<TOTAL-LIABILITY-AND-EQUITY> 88,370
<SALES> 0
<TOTAL-REVENUES> 7,600
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 102,790
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (99,927)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (99,778)
<EPS-PRIMARY> (.069)
<EPS-DILUTED> (.069)
</TABLE>
