SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT
For the transition period from ____________ to ____________
Commission File Number 333-43497
CUIDAO HOLDING CORP.
(Exact name of small business issuer as specified in its charter)
FLORIDA 65-0639616
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2951 SIMMS STREET
HOLLYWOOD, FL 33020-1510
(Address of principal executive offices)
(954) 924-0047
(Issuer's telephone number)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days: Yes x No
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by court. Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: At September 30, 1999, the
registrant had outstanding 2,356,175 shares of common stock, par value $0.0001,
which is the registrant's only class of common stock.
<PAGE>
PART I. FINANCIAL INFORMATION
CUIDAO HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
DECEMBER 31, 1998 AND SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
December 31, September 30,
1998 1999
------------ -------------
(Unaudited)
<S> <C>
ASSETS
Current Assets
Cash and Cash Equivalents ................................. $ 353,281 $ 34,927
Accounts Receivable ....................................... $ 24,226 $ 39,913
Inventory ................................................. 0 $ 61,520
Prepaid Expenses .......................................... $ 32,444 $ 19,530
--------- ---------
Total Current Assets ................................... $ 409,951 $ 155,890
Property & Equipment
(Net of $6,220 and $15,332 of accumulated
depreciation at December 31, 1998
and September 30, 1999) ................................ $ 18,782 $ 589,918
--------- ---------
Other Assets
Goodwill (Net of $8,333 and $9,280 of
accumulated amortization at December 31, 1998
and September 30, 1999) ................................ $ 6,667 $ 5,720
Organizational Costs
(Net of $740 of accumulated amortization
at December 31, 1998 and September 30, 1999) ........... 800 730
Deferred Offering Costs ................................... 0 0
Prepayments and Deposits .................................. 18,157 8,235
Total Other Assets ..................................... 25,624 3,913
--------- ---------
Total Assets ....................................... $ 454,357 $ 764,406
--------- ---------
LIABILITIES
Current Liabilities
Accounts Payable and Accrued Expenses ................... $ 78,714 $ 76,867
Loan Payable ............................................ 50,500 50,500
Mortgage Payable ........................................ 0 480,000
--------- ---------
Total Current Liabilities .......................... $ 128,784 $ 607,367
--------- ---------
STOCKHOLDERS' EQUITY
Preferred Stock, $.0001 par, 10,000,000 shares authorized,
none issued ............................................ 0 0
Common Stock, $.0001 par, 100,000,000 shares authorized,
2,356,175 issued and outstanding at December 31, 1998
and September 30, 1999 ................................. $ 236 $ 236
Additional Paid-In Capital ............................... 660,918 660,918
Deficit Accumulated ...................................... (335,581) (503,879)
--------- ---------
Total Stockholders' Equity ......................... 202,439 157,039
--------- ---------
Total Liabilities and Stockholders' Equity ......... $ 454,357 $ 764,406
--------- ---------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
CUIDAO HOLDING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR 9 MONTHS ENDING SEPTEMBER 30, 1998 AND SEPTEMBER 30,1999
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ending September 30,
------------------------------
1998 1999
---- ----
<S> <C>
Revenues .............................. $ 63,317 $ 79,112
Cost of Revenues ...................... 36,065 62,498
----------- -----------
Gross Profit .......................... 27,252 16,614
Operating Expenses:
General and Administrative ......... 149,154 184,912
----------- -----------
Income (Loss) Before Interest
Income ............................. (121,902) (168,298)
Interest Income ....................... 0 0
Net Comprehensive Income (Loss)........ $ (121,902) $ (168,298)
----------- -----------
Income (Loss) Per Common
Share .............................. $ (.055) $ (.071)
Weighted Average Common
Shares Outstanding ................. 2,222,000 2,356,175
Comprehensive Income Items ............ 0 0
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
CUIDAO HOLDING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 9 MONTHS ENDING SEPTEMBER 30, 1998 AND
9 MONTHS ENDING SEPTEMBER 30,1999
<TABLE>
<CAPTION>
Nine Months Ended September 30,
---------------------------------
1998 1999
----------- ----------
<S> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net Loss .................................................... $(121,902) $(168,298)
Adjustments to Reconcile Net Loss to
Net Cash Used in Operating
Activities:
Depreciation ......................................... 2,830 15,332
Amortization ......................................... 4,606 9,280
Issuance of Common Stock for Legal Services .......... 0 0
(Increase) Decrease in accounts receivable ............ (4,593) 35,222
(Increase) Decrease in Inventory ...................... 1,655 0
(Increase) Decrease in Organizational Costs ........... 0 0
(Increase)Decrease in Deferred Offering Costs ......... (3,504) 0
(Increase)Decrease in Prepayments and Deposits........ (1,359) 0
(Increase) Decrease in loan closing fee ............... (5,000) 0
Increase in Accounts Payable ......................... 34,839 76,867
(Increase) Decrease in Accrued Expenses ............... 8,733 0
Increase in loans payable ............................ 87,689 530,500
--------- ---------
Net Cash Used in Operating Activities .............. 3,994 31,497
CASH FLOWS FROM INVESTING
ACTIVITIES:
Acquisition of Equipment and Building .................. (12,000) (123,024)
--------- ---------
Net cash Used in Investing Activities .............. (12,000) (123,024)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from Issuing Common Stock ..................... 0 0
Proceeds from Issuing Preferred Stock .................. 0 0
--------- ---------
Net Cash Provided by Financing Activities .......... 0 0
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS .............................. (8,006) (91,577)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD .................................... 5,840 353,281
CASH AND CASH EQUIVALENTS AT
END OF PERIOD .......................................... 2,166 34,927
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
CUIDAO HOLDING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
(UNAUDITED)
FROM DECEMBER 31, 1998 TO SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
Deficit
Accumulated
During the
Paid-In Development
Common Stock Preferred Stock Capital Stage
------------ --------------- ------- -----
Shares Amount Shares Amount Capital
------ ------ ------ ------ -------
<S> <C>
Balance at
December 31, 1998 2,356,175 $ 236 $ 660,918 $ 335,581
Net loss, (168,298)
September 30, 1999
Balance,
September 30, 1999 2,356,175 236 660,918 (503,879)
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
CUIDAO HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30,1999
(UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY
CUIDAO HOLDING CORP. (the "Company") is a development stage company
which imports, develops, manages and distributes a portfolio of international
and regional brands of beer, wine and spirits.
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 wholly owned
subsidiary of the Company.
The accompanying condensed consolidated financial statements presented
include the accounts of the Company and its wholly owned subsidiaries. All
significant intercompany balances and transactions have been eliminated.
BASIS OF PRESENTATION
The condensed consolidated balance sheet as of September 30, 1999, the
statements of operations for the nine-month periods ended September 30, 1999 and
1998, the related condensed consolidated statement of stockholders' equity for
the nine-month period ended September 30, 1999, and the related condensed
consolidated statements of cash flows for the nine-month periods ended September
30, 1999 and 1998 are unaudited. In the opinion of management, all adjustments
necessary consisted of normal recurring items. Interim results may not be
indicative of results for a full year.
The condensed consolidated financial statements and notes are presented
as permitted on Form 10-QSB and do not contain information included in the
Company's annual consolidated statements and notes. The year-end condensed
consolidated balance sheet, was derived from the Company's financial statements,
but may not include all disclosures required by generally accepted accounting
principles. These condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and related notes thereto
included in the Company's December 31, 1998 financial statements.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand, cash in banks, and any
highly liquid investment with a maturity of three months or less at the time of
purchase.
OFFICE EQUIPMENT
Office equipment is stated at cost aid depreciation over its estimated
allowable useful life (7 years), using the double declining balance method.
Expenditure for major renewals and betterments that extend the useful lives of
fixed assets are capitalized. Expenditures for the maintenance and repairs are
charged to expense as incurred.
<PAGE>
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.
NOTE 2 RELATED PARTY LOANS
On March 1, 1999, the Company had loans outstanding from officers,
directors and shareholders of the Company totaling $7,500. As of September 30,
1999, this loan had been paid off.
NOTE 3 STOCKHOLDERS' EQUITY
The Company's authorized and outstanding $.0001 par value capital stock
as of June 30, 1999 was as follows:
Shares Shares
Authorized Outstanding
Series A Preferred Stock 10,000,000 -0-
Common Stock 100,000,000 2,356,175
On December 30, 1997, the Company filed a Registration Statement with
the Securities and Exchange Commission to offer up 260,000 units to the general
public. Each unit consists of one share of the Company's Common Stock and one
common stock purchase warrant ("Warrant"). Each Warrant entitles the holder
thereof to purchase one share of common stock at an exercise price of $8.00
subject to adjustment, at any time over a three year period commencing on the
effective date of the Registration Statement. The Warrants may be redeemed by
the Company at $.05 per Warrant, at any time prior to their expiration on not
less than 30 days written notice, if the closing bid price of the common stock
equals or exceeds $10.00 per share for 30 consecutive trading days ending within
10 days of the notice of redemption.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
GENERAL
The Company's current portfolio of beers consists of the following line
of beers produced in the People's Republic of China by Tsingtao Brewery No. 3, a
brewery owned and operated by Tsingtao Brewery Co., Ltd., Red Dragon Draft, Red
Dragon Light, and Red Dragon Amber. The Company's marketing strategy for its
line of Chinese beer is to first introduce its Red Dragon product line to
Asian-theme restaurants (primarily Chinese restaurants), stressing the fact that
the Company's line of Chinese beer products will provide the restaurateur with a
product that he or she currently does not have, which is a diversified light,
amber and draft Chinese beer line.
With its wine products, the Company's objective is to successfully
introduce a profitable line of imported wines into the United States retail
market. 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.
During the balance of 1999, the Company plans to expand the number of
alcoholic beverage products under its management, as well as increase the number
of distribution channels for its products. This expansion may be accomplished by
the acquisition of other importers and/or distributors of alcoholic beverage
products. Currently, the Company is involved in negotiation to acquire a
distributor of alcoholic beverage products. These negotiations have not been
finalized, and there is no assurance that they will be finalized.
The Company intends on continuing three basic principal objectives:
(1) aggressively manage and market its current portfolio of beers,
wines and spirits in specific niche markets of the overall alcoholic beverage
industry;
(2) expand its management and administrative personnel to support
its alcoholic beverage product lines; and
(3) expand its product line and distribution channels through
strategic alliances and/or through acquisitions of other importers and
distributors of alcoholic beverage products or through the acquisition of
producers of alcoholic beverage products.
<PAGE>
RESULTS OF OPERATIONS
During the nine month period ending September 30, 1999, the Company
increased its revenues $15,759, or approximately 25%, compared to revenues
during the comparable period of 1998. The increased revenues resulted primarily
from an increase in sales, which is a direct result of the Company's overall
marketing efforts. A portion of the Company's revenues ($22,900) constituted
rent from a portion of the Company's new facility, which is leased to an
airline. The Company did not own this facility, and, accordingly, did not
receive rent as a result of the lease, during the first nine months of 1998.
Management believes that continued implementation and expansion of the
Company's use of beer distributors and an increase in wine and liquor sales by
using a similar method will have a positive result on sales and revenues in the
future. The Company is pursuing additional marketing opportunities, which
management anticipates will have a positive impact in the future.
With reference to the various alcoholic products marketed both on a
wholesale basis and as a distributor, profit percentages for various products
vary depending on which product is being marketed and depending on which venue
it is marketed through; i.e., whether to a wholesaler or marketed directly to
retailers by the Company acting in some instances as its own distributor.
Usually, beer products marketed to other distributors have approximately 25% to
30% profit, while wine and spirit products should have between 35% to 40%
profit. These gross profit margins represent an amount over and above the cost
of goods sold including all shipping, freight and duty (U.S. Custom charges).
When the Company acts as its own distributor, the gross margins are higher due
to the Company capturing the profit margins the distributor adds on to goods
which are sold to retailers, which is usually an additional 25% to 30%. Thus on
goods sold by the Company, acting as its own distributor will result in a gross
profit margins of approximately 45% to 55%.
Overhead and cost of operations, office, warehouse, marketing expense
and administrative staff, etc., is paid out of the revenues generated through
the traditional and/or non-traditional means described above. It is a primary
concern of the Company to keep all expenses to as much of a minimum as possible
without sacrificing the quality of marketing of any products or any areas which
need to be explored. This is why the Company has limited the amount of
administrative staff and why many duties which are normally delegated are being
performed by management. Essentially the philosophy of management is to be as
professional as possible in the marketing of products and establishment of
distributors and simultaneously to be frugal as possible with the limited funds
it has available.
FINANCIAL CONDITION
The Company's balance sheet for the period ended September 30, 1999,
reflects the acquisition of a new building. Management concluded that in both
short and long term, it was more financially prudent to own its own facility
than to pay a total rent which was higher than the resulting mortgage. There is
no assurance that management will be successful in raising additional working
capital. Management believes that if the Company resolves its working capital
shortage, sales and revenues will significantly increase.
LIQUIDITY AND CAPITAL RESOURCES
The Company's products, particularly its beer products, are receiving
market acceptance. Sales growth has been and continues to be constrained by the
Company's shortage of working capital. The Company's suppliers require payment
at or before time of shipment and the Company's customers do not pay for the
products until they receive them. The Company does not have adequate working
capital to import sufficient products to meet market demand. As a result of this
capital shortage, management has obtained export credit insurance for a portion
of its purchases from France. At the end of the third quarter 1999, management
finalized a distribution alliance with a major wine producer located in Beaune,
France. The result of these two credit facilitations will enable the Company to
increase revenues and resulting profits.
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-QSB contains statements relating to
future results, which are forward-looking statements as that term is defined in
the Private Securities Litigation Reform Act of 1995. Forward-looking statements
include statements concerning plans, objectives, goals, strategies, future
events or performance and underlying assumptions and other statements which are
other than statements of historical assumptions or facts. Specifically, this
report contains forward-looking statements regarding anticipated future sales
and revenues and the methods and strategies of increasing those sales and
revenues. Actual results may differ materially from those anticipated as a
result of certain risks and uncertainties, including but not limited to,
management's ability to implement its marketing strategy, the availability of
capital through sale of additional common stock or other means, including the
availability of products for sale through credit insurance and distribution
alliances, changes in general economic conditions, foreign exchange rate
fluctuations, competitive product and pricing pressures, the impact of tax
increases with respect to alcoholic beverage products, regulatory developments,
as well as other risk and uncertainties detailed from time to time in the
Company's Securities and Exchange Commission filings. The Company's
expectations, beliefs and projections are expressed in good faith and are
believed by the Company to have a reasonable basis, including without
limitation, data contained in the Company's records and other available data
from third parties, but there can be no assurance that management's
expectations, beliefs or projections will result, or be achieved, or be
accomplished.
<PAGE>
PART II.
ITEMS 1 THROUGH 6.
None
SIGNATURES
Pursuant to the requirements of 'the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CUIDAO HOLDING CORP.
(registrant)
Dated: November 15, 1999 By /s/ C. Michael Fisher
------------------------------------
C. Michael Fisher
President
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
INTERIM UNAUDITED FINANCIAL STATEMENTS OF CUIDAO HOLDING CORP. FOR THE THE THREE
MONTHS PERIOD ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH (B) FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 34,927
<SECURITIES> 0
<RECEIVABLES> 39,913
<ALLOWANCES> 0
<INVENTORY> 61,520
<CURRENT-ASSETS> 155,890
<PP&E> 589,918
<DEPRECIATION> 5,720
<TOTAL-ASSETS> 764,406
<CURRENT-LIABILITIES> 607,367
<BONDS> 0
0
0
<COMMON> 236
<OTHER-SE> 660,918
<TOTAL-LIABILITY-AND-EQUITY> 764,406
<SALES> 79,112
<TOTAL-REVENUES> 79,112
<CGS> 62,498
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 184,912
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (168,298)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (168,298)
<EPS-BASIC> (0.71)
<EPS-DILUTED> (0.71)
</TABLE>
