AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON October 23,
2000 REGISTRATION NO.__________________
====================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------------
CUIDAO HOLDING CORP.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
FLORIDA 5182 65-0639616
(STATE OR OTHER (PRIMARY (I.R.S. EMPLOYER
JURISDICTION OF STANDARD IDENTIFICATION NO.)
INCORPORATION OR INDUSTRIAL
ORGANIZATION) CLASSIFICATION
CODE NUMBER)
2951 SIMMS STREET
HOLLYWOOD, FLORIDA 33020-1510
(954) 924-0047
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
------------------------
MR. C. MICHAEL FISHER
2951 SIMMS STREET
HOLLYWOOD, FLORIDA 33320-1510
(954) 924-0047
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
------------------------
COPIES TO:
MERCEDES TRAVIS, ESQ.
MINTMIRE & ASSOCIATES
265 SUNRISE AVENUE, SUITE 204
PALM BEACH, FLORIDA 33480
(561) 832-5696
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement
-------------------------------------
<PAGE>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
<S> <C> <C> <C> <C>
Proposed Proposed
Maximum Maximum
Title of Shares Amount to be Aggregate Price Aggregate Amount of
to be Registered registered per Share Offering Price Registration Fee
(1) (2)
Common Stock, 2,822,667 $1.81 $5,109,027 $1,349
$.0001 par value
(3)
Common Stock, 500,000 $1.81 $905,000 $239
$.0001 par value
(4)
</TABLE>
(1) The number of shares to be registered for resale by the Selling
Shareholders is contained in a registration rights agreements covering
the Notes issued and Warrants granted to the Selling Shareholders,
which shares have not been adjusted to reflect a 3 to 1 forward split
with a record date of October 16, 2000 and an effective date of October
26, 2000 (the "Forward Split").
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c), based on the closing price quoted on the
OTC BB for the Company's Common Stock under the symbol "CDAO" as of
October 20, 2000, which is within five (5) days prior to the date of
filing of this registration statement.
(3) Common Stock issuable upon conversion of the Issuer's Notes including
interest for the term to be held by Selling Shareholders if all of the
money committed to the Company under the Loan Agreement dated April 5,
2000 is borrowed from the Selling Shareholders, which Notes include
anti-dilution provisions which will result in an adjustment to the
number by virtue of the Forward Split.
(4) Common Stock issuable upon exercise of Issuer's Warrants to be held by
Selling Shareholders if all of the money committed to the Company under
the Loan Agreement dated April 5, 2000 is borrowed from the Selling
Shareholders, which Warrants include anti- dilution provisions which
will result in an adjustment to the number by virtue of the Forward
Split.
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
<PAGE>
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
The information in the preliminary prospectus is not complete and may be
changed. The Selling Shareholders may not sell these securities until the
registration statement filed with the Securities and Exchange Commission is
effective. This preliminary prospectus is not an offer to sell these securities
and is not soliciting an offer to buy these securities in any state where the
offer or sale is not permitted.
===========================================================================
<TABLE>
<CAPTION>
CUIDAO HOLDING CORP.
CROSS REFERENCE SHEET
<S> <C> <C>
ITEM NUMBER AND CAPTION PROSPECTUS HEADING
------------------------------------------ ---------------------------------
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.......... Not Applicable
6. Dilution................................. Dilution
7. Selling Security Holders................. Selling Shareholders
8. Plan of Distribution..................... Plan of Distribution
9. Legal Proceedings........................ Legal Proceedings
10. Directors, Executive Officers, Promoters
and Control Persons...................... Management
11. Security Ownership of Certain Beneficial
Owners and Management.................... Principal Shareholders
12. Description of Securities
to be Registered......................... Description of Securities
13. Interest of Named Experts and Counsel.... Legal Matters and Experts
14. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.............................. Certain Provisions of Florida Law and
The Company's Articles of Incorporation
and Bylaws
15. Organization Within Last Five Years...... Certain Relationships and Related
Transactions
16. Description of Business.................. The Company
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
17. Management's Discussion and Analysis or
Plan of Operation........................ Management's Discussion and Analysis or
Plan of Operation
18. Description of Property.................. The Company's Property
19. Certain Relationships and Related
Transactions............................. Certain Relationships and Related
Transactions
20. Market for Common Equity and Related
Stockholder Matters...................... Market for Common Equity and Related
Shareholder Matters
21. Executive Compensation................... Management
22. Financial Statements..................... Financial Statements
23. Changes In and Disagreements With
Accountants on Accounting and Financial
Disclosure............................... Changes In and Disagreements With
Accountants on Accounting and Financial
Disclosure
</TABLE>
<PAGE>
3,322,667 Shares
CUIDAO HOLDING CORP.
Common Stock
The 3,322,667 shares of Cuidao Holding Corp. ("Cuidao" or the "Company")
Common Stock covered by this prospectus are all being offered for the account of
the Selling Shareholders listed on page2. Cuidao will not receive any of the
proceeds from any sales of these securities. The number of shares offered has
not been adjusted to reflect a 3 to 1 forward split with a record date of
October 16, 2000 and an effective date of October 22, 2000 (the "Forward
Split"). The shares offered hereby will be increased by the Forward Split.
Each of the Selling Shareholders may offer and sell from time to time
shares of Cuidao's Common Stock directly or through broker-dealers or
underwriters who may act solely as agents, or who may acquire shares as
principals. The price to the public and the net proceeds to the Selling
Shareholders from the sale of the shares will depend on the nature and timing of
the sales and therefore will not be known until the sales are actually made.
Cuidao's Common Stock is quoted on the OTC BB under the symbol "CDAO". On
October 20, 2000, the closing price for Cuidao's Common Stock as quoted on the
OTC BB was $1.81 per share.
See "Risk Factors" on page 16 to read about factors you should consider
before buying shares of the Company's Common Stock.
The Company's principal executive offices are located at 2951 Simms Street,
Hollywood, FL 33020-1510; and its telephone number is (954) 924-0047, and its
facsimile number is (954) 924- 8171.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
=====================================================================
PRICE TO UNDERWRITING DISCOUNTS PROCEEDS TO
PUBLIC(1) AND COMMISSIONS COMPANY(2)
--------------------------------------------------------------------------------
Per Share............ NA $0.00 $0.00
--------------------------------------------------------------------------------
Total Minimum....... NA $0.00 $0.00
--------------------------------------------------------------------------------
Total Maximum..... NA $0.00 $0.00
=====================================================================
<PAGE>
(5) Each of the Selling Shareholders may offer and sell from time to time
shares of Cuidao's Common Stock directly or through broker-dealers or
underwriters who may act solely as agents, or who may acquire shares as
principals. The price to the public and the net proceeds to the Selling
Shareholders from the sale of the shares will depend on the nature and
timing of the sales and therefore will not be known until the sales are
actually made.
(6) Cuidao will not receive any of the proceeds from any sales of
these securities.
The Company is a reporting company under the Securities Exchange Act of
1934, as amended.
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.
THE DATE OF THIS PROSPECTUS IS OCTOBER 23, 2000
<PAGE>
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 the Company's Common
Stock. 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 occurred automatically upon the closing on October 28, 1998 of a
registered offering which became effective May 1, 1998 (the "Previous
Registration") and (iv) assumes no exercise of the previous warrants or the
placement agent's unit purchase option given as part of the Previous
Registration (the "Previous Warrants" and the "Placement Agent's Options"
respectively). The information in this Prospectus does not reflect the
adjustments which will result from the Forward Split.
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 2951 Simms Street, Hollywood, FL
33020- 1510; and its telephone number is (954) 924-0047.
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 an importer and a supplier of a variety of beers, wines and
spirits.
The Company's current product portfolio encompasses three principal product
lines: imported beer, wine and spirits. 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. See "The Company".
1
<PAGE>
SELLING SHAREHOLDERS
All of the 3,322,667 shares of Cuidao's Common Stock covered by this
Prospectus are being offered for the account of Infinity Financial Group, Inc.
("IFG") as Lender (the "Selling Shareholders") under a Loan Agreement dated
April 5, 2000 and the related Registration Rights Agreement dated April 5, 2000.
See "Selling Shareholders".
RISK FACTORS
An investment in the Company's Common Stock 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."
USE OF PROCEEDS
All of the shares of Cuidao's Common Stock covered by this Prospectus are
being offered for the account of the Selling Shareholders listed herein. The
Company will not receive any proceeds from this offering. See "Use of Proceeds".
SELECTED FINANCIAL DATA
The statement of operations and balance sheet information set forth below
as of December 31, 1998 and 1999 and for the years ended December 31, 1998 and
1999, 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, 1998 and 1999, and the report thereon, are included elsewhere in
this Prospectus. 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.
2
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Year Year Development
Ended Ended Stage February
December December 12, 1996 to
31, 1999 31, 1998 December 31,
1999 (1)
STATEMENT OF OPERATIONS
Revenues $ 125,057 $ 68,387 $ 220,515
Net Income (loss) (438,488) (170,591) (774,069)
Net Income (loss) per share $ (.186) $ (.076) $ (.142)
Number of Shares used in calculation of net loss 2,356,427 2,244,363 2,356,301
per share (2)
December 31,
1999
BALANCE SHEET DATA
Working Capital (deficit)
Total Assets $ 946,647
Total Shareholder's Equity (deficit) $ (5,017)
</TABLE>
(1) Cumulative totals for development stage operations of the Company from
February 12, 1996 (date of inception) to December 31, 1999.
(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.
See "Management's Discussion and Analysis or Plan of Operations" and
"Financials".
THE COMPANY
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
3
<PAGE>
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 2951 Simms Street,
Hollywood, FL 33020-1510; and its telephone number is (954) 924-0047.
The Company is a development stage corporation which was formed to
participate in specific niche segments of the United States alcoholic beverage
market by acting as an importer and supplier of a variety of beers, wines and
spirits.
Industry
The alcoholic beverage industry in the United States consists of suppliers,
wholesalers and retailers. Over the past five years there has been increasing
consolidation at the supplier, wholesaler and, in certain markets, retailer
tiers of the alcoholic beverage industry. During the 1990s, the overall per
capita consumption of alcoholic beverage products in the United States declined
slightly; however, consumption of table wines, in particular varietal table
wines, and imported beers has increased during the period.
The following table sets forth the industry unit volume for shipments of
alcoholic beverage products in the three product lines in which the Company
intends to participate in the United States. Data shown is for the five years
ended December 31, 1998:
Product 1998 1997 1996 1995 1994
--------- ------ ------ ------ ------ ------
Wine (1)(2) 216.61 213.7 208.9 197.5 193.0
Imported
Beer (3) 194.2 192.5 171.8 156.0 144.5
Distilled
Spirits (2) 140.6 138.7 138.8 137.3 140.0
-------------
(1) Includes domestic and imported table, sparkling and dessert wine, wine
coolers and vermouth.
(2) Units are in millions of 9-liter case equivalents (2.378 gallons per case).
(3) Units are in millions of 2.25 gallon cases.
4
<PAGE>
Wine
The United States wine industry consists of the domestic and foreign (most
notably French and Italian) production of three basic wine groups. These groups
are table wines (wines consumed with a meal), dessert wines (usually sweet wines
consumed after a meal) and sparkling wines (champagnes). From 1994 to 1998,
shipments of wine in the United States increased at an average compound annual
growth rate of approximately 3%. In 1998, wine shipments increased by 1.4% when
compared to 1997, led by increased shipments of table wine. Management estimates
that table wine accounted for approximately 90% of the total United States wine
market in 1998. 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 United States dietary guidelines, new packaging regulations
and a strong economy.
Beer
Beer has the largest share of the United States alcoholic beverage market
with a total of 179,600,000 31-gallon barrels being sold in the United States in
1998. Imported beer sales were up 1% in 1998, to 16,316,000 31-gallon barrels.
This rise in imported beer sales follows a 12.04% increase in 1997 and a 10.13%
climb in 1996.
Spirits
Although shipments of spirits in the United States declined between 1994
and 1997, 1998 shipments now exceed 1994 levels; however during the same period
of decline, certain types of spirits, such as vodka, rum, tequila, brandy and
prepared cocktails have increased. In 1998, shipments of spirits increased by
1.4% from 1997. The Company believes shipments of certain types of spirits may
have been negatively affected by concerns in the United States about drinking
and driving and a shift in consumer preference toward lower alcohol or lighter
tasting products like imported beer and varietal table wines.
Product Portfolio
The Company's current product portfolio encompasses three principal product
lines: imported beer, wine and spirits.
Imported Beer
The Company's imported beer products currently consist of four crafted
beers brewed for the Company by the Tsingtao Brewery No. 3 in the People's
Republic of China. The four beer products are a draft, light, extreme and amber
beer which are bottled and sold under the Company's own "Red Dragon" label.
5
<PAGE>
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 owner and operator of Tsingtao Brewery No. 3 is Tsingtao, China's most
famous beer producer. Tsingtao's regular beer product, "Tsingtao Beer", is the
number one Chinese Beer imported in the United States and ranks among the top 50
imported beers (out of over 600 brands) in the United States.
To increase its beer line, in July 2000, the Company entered into an
agreement with Reu- Dom Investments and Holdings, Inc. d/b/a World Class Beer
Importers ("WCBI"). WCBI is in the business of exclusively importing, selling,
marketing and distributing imported beers and similar malt beverages. This
agreement was subsequently canceled when its was determined that the parties
could not agree on the valuation of certain balance sheet items.
Wine
The Company's wine portfolio consists of two current categories of wine.
One is distributed for maximum earning potential throughout the State of Florida
while the other has been obtained for the purpose of nationwide importation and
sub-distribution rights. Wine that was originally targeted during 1998 for mass
distribution became a secondary target under management's direction in 1999.
With the ability to import and also distribute in the State of Florida in
1999, management focused its efforts on the Bordeaux Region Chateaus and wine
from the Beaune area of France, which is known for its top of the line Burgundy
wines.
The Company's portfolio of wines currently consists of wines from the
following producers: Maison Riviere Fils, Savas, Sa Cave Du Haut Poitou,
Patriarche, and Remy Pannier. In addition, the Company represents many petite
chateaus from throughout the bordeaux region. In August 2000, the Company added
the lines of Spanish wines imported by Beacon Wine Company Inc. and obtained the
rights to distribute California wines from the Willow Cove Winery, an original
winery of the Golden State Vintners, in the State of Florida and the Caribbean.
During 1999, the Company also imported South African wines from Laibach
Vineyards. Met with uncertainty from the retailing community as to the demand
for South African wines, management is currently evaluating this part of its
portfolio.
6
<PAGE>
The Company sources its wine products through a network of producers and
negotiants. Through its active role in the sourcing decision, the Company makes
its own determination as to the quality and price characteristics of the wines
that the Company adds to its product portfolio, and thereby is assured of its
ability to offer wines of quality and value.
Spirits
During 1999, with insufficient working capital available, the Company was
unable to properly develop its spirits portfolio. The Company, with the
appointment of its nationwide distribution contract by F.X. De Beukelaer in
1998, still has the rights to import, distribute and develop the De Beukelaer
product line in the market place. In addition to its multiple flavored fruit
vodka products, De Beukelaer produces vodka, gin and other prepackaged
cocktails. Management, upon obtaining sufficient capitalization and after
obtaining government approvals which are expected in the fourth (4) quarter of
2000, will enter the spirits marketplace.
Business Strategy
The Company's strategy is to become a leading importer, developer, manager
and distributor of a portfolio of brands of beer, wines and spirits which serve
special niche alcoholic beverage markets. Key elements of the Company's strategy
include:
Making selective product acquisitions in the alcoholic beverage
industry to expand its product portfolio.
Improving market position and capitalizing on growth trends within the
industry.
Improving operating efficiencies through reduced product and
organizational costs.
Capitalizing and improving on strong alliance and wholesaler
relationships.
Developing brand identification for its portfolio of products.
Expanding distribution into new markets and increasing penetration of
existing 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.
Marketing and Distribution
Presently, the primary goal of the Company's marketing strategy is to
develop a broad regional distribution network and to develop brand awareness for
its products.
The Company expects to sell its products to independent beverage
distributors and
7
<PAGE>
wholesalers for resale to retailers who sell alcoholic beverages to the
consumer. Currently, the Company has contractual relations with seven (7)
independent wholesale distributors covering twelve (12) states and six (6)
Caribbean Islands. Independent wholesale distributors (all of whom may carry
other beverage products that compete with the Company's products) are formally
appointed by the Company in a variety of ways throughout the states in which the
Company does business. There are variations in appointment procedures which are
directly attributable to state alcoholic beverage laws mandating territorial
appointment (some exclusive and some non-exclusive), restricting in various ways
the Company's ability to terminate or not renew the services of wholesale
distributors and providing varying periods and methods of resolving contractual
disputes. Generally, these state laws vary from a requirement that good cause be
shown for the action taken to a requirement that compensation be paid to the
terminated distributor for the fair market value of the lost business.
In each of its targeted markets, the Company attempts to select its
distributors based on a number of factors including: (i) market strength
measured in terms of financial resources and number and size of accounts served,
(ii) commitment to expend resources to educate consumers and retailers about the
quality and tastes of the Company's beer, wine and spirits products, (iii)
reputation for customer service, including the ability to frequently service
retail accounts and to merchandise the Company's products aggressively and (iv)
commitment to community involvement.
The Company's marketing and sales program calls for the Company to pursue
promotional strategies that are designed to create strong brand awareness built
on quality products, service to distributors and product imaging. The Company
believes that grass root promotion, word-of-mouth reputation and an identifiable
and favorable price to quality value quotient are the principal elements which
influence consumer product selection. As a result, the Company anticipates
devoting considerable effort, through tasting sessions 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 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.
8
<PAGE>
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 also will 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 a wide range of other spirits products such as
vodka, gin and prepared cocktails. The principal competitive factors affecting
the market for the Company's products include product quality and taste,
packaging, price, brand recognition and distribution capabilities. The Company
believes that its products will compete favorably overall with respect to these
factors. However, absolutely no assurance can be given that the Company or its
products, based on these and other factors, will be able to compete successfully
against current and future competitors.
The Company competes with a variety of importers and suppliers of alcoholic
beverage products, many of whom have significantly greater financial,
management, administrative, distribution and marketing resources and a higher
level of brand recognition than the Company. With respect to its Red Dragon
brand, the Company anticipates competition from Monarch Import Co., Inc. the
importers and distributors of China's most famous brand, Tsingtao Beer and
Barton Beers Ltd. With respect to its wine and spirits products, the Company
expects to compete with major importers, distributors and suppliers of domestic
and foreign wines such as Allied Domecq Spirits and Wine, Canandaigua Brands,
Inc., Brown-Forman Corporation and Kobrand Corporation.
The Company anticipates increased competition in all of the product markets
that it serves. Increased competition could result in price reductions, reduced
margins and loss of market share, all of which could have a material adverse
affect on the Company.
Government Regulation
The alcoholic beverage industry is highly regulated by federal, state and
local laws and regulations. Extensive and complex regulation at the federal and
state levels has resulted in what is known as the "three-tier licensing system".
The industry is regulated at the federal level by the Federal Bureau of Alcohol,
Tobacco and Firearms ("ATF").
9
<PAGE>
At the first tier are manufacturers and importers who are licensed to sell
to the second tier, the wholesalers. Wholesalers in turn supply the third tier,
the retailers, who ultimately sell to the public. Each tier is subject to
various restrictions on its activities. The Company currently is in the second
tier.
In addition to the foregoing, federal and state laws and regulations govern
trade and pricing practices, permitted and required labeling, advertising,
promotion and marketing practices, relationships with distributors and related
matters. For example, federal and state regulators require warning labels and
signage on the Company's products.
The Company has obtained all regulatory permits and licenses necessary to
operate its business in the states where the Company's products are to be
distributed. Failure on the part of the Company to comply with federal, state or
local regulations could result in the loss or revocation or suspension of the
Company's licenses, permits or approvals and accordingly could have a material
adverse affect on the Company's business. The Company does not expect compliance
with such laws and regulations to materially affect the Company's capital
expenditures, earnings or competitive position.
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 had been filed by Desnoes &
Geddes, Ltd., a Jamaican corporation ("Desnoes & Geddes") which distributes beer
products under the brand names of Dragon Stout and Midnight Dragon. The Desnoes
& Geddes notice of opposition claimed that the Company's Red Dragon mark is
confusingly and deceptively similar to the Dragon Stout and Midnight Dragon
names and therefore the purchasing public is likely to be confused into wrongly
believing that the Company's goods originate with, or are sponsored by, Desnoes
& Geddes.
On June 1, 1998, the Company responded to the Desnoes & Geddes notice of
opposition in a manner designed to cause the PTO to determine that the Desnoes &
Geddes notice of opposition is without merit and that the Company's Red Dragon
mark should be registered. As of the date of this report, no determinations have
been made by the PTO with respect to this matter.
Should the Company be unable to register its Red Dragon mark, then the
Company may be required to obtain some form of license or other proprietary
right as a third party from Desnoes & Geddes in connection with the use of the
Company's Red Dragon mark. No assurance can be given that any licenses or
arrangements required for the use of the Red Dragon mark would be made available
on terms acceptable to the Company, if at all.
The inability of the Company to use its Red Dragon mark may adversely
affect the Company's beer distribution business. Further, the inability of the
Company to use its Red Dragon
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mark in connection with its beer business may require the Company to develop and
implement alternative trademarks for its beer products, which may require the
Company to incur substantial costs related to such development and
implementation.
The Company believes that an important aspect of its business will relate
to the ongoing development of its own house brands. As such, the Company expects
to pursue registration of additional trademarks whenever possible and to oppose
vigorously any infringement of its marks. As a result of the foregoing, the
Company may in the future receive communications from other parties asserting
that the Company is infringing certain trademark rights of others. No assurance
can be given that any such claims will not result in protracted and costly
litigation and that damages for infringement will not be assessed. Further,
there can be no assurance that any of the Company's trademarks will not be
infringed upon or designed around by others, or that the Company can adequately
prosecute or defend any infringements.
Distribution Agreements
In addition to products that may be sold under trademarks owned by the
Company, the Company also imports and distributes alcoholic beverage products
under exclusive distribution agreements with suppliers of such products.
Significant producer/source agreements currently include
(1) a three (3) year import and distribution agreement with Cave
du Vignoble Gursonnais appointing the Company the exclusive
distributor in North America and the Caribbean Islands of all
wine products produced by Cave du Vignoble Gursonnais (which
agreement expired in 1999 and automatically renewed for
additional terms of ten (10) years, since neither party gave
the other sufficient written notice of non-renewal);
(2) a three (3) year import and distribution agreement with Les
Chais du Prevot appointing the Company the exclusive
distributor in North America and the Caribbean Islands of all
wine products produced by Les Chais du Prevot (which agreement
expired in 1999 and automatically renewed for an additional
term of three (3) years, since neither party gave the other
sufficient written notice of non-renewal);
(3) a ten (10) year import and distribution agreement with
Vignerons De Buzet appointing the Company the exclusive
distributor in the United States (excluding the State of New
York) and the Caribbean Islands of all wine products produced
by Vignerons De Buzet (which agreement expires in 2007 and
will automatically renew for an additional terms of five (5)
years, unless either party gives the other sufficient written
notice of non-renewal);
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(4) a five (5) year import and distribution agreement with Godet
Freres appointing the Company the exclusive distributor in
North America and the Caribbean Islands of all champagne
products produced by Godet Freres (which agreement expires in
2002 and automatically renews for additional terms of five (5)
years each, unless either party gives the other sufficient
written notice of non-renewal).
Prior to their expiration, the foregoing referenced agreements may be
converted into non- exclusive agreements if the Company fails to meet certain
performance criteria. The Company believes that there is a substantial
likelihood, since it has failed to meet the performance criteria established in
its agreements with Cave du Vignoble, Les Chais du Prevot and Godet Freres, that
such agreements will convert to non-exclusive agreements. However, to date, the
Company has not received any notice that any of these agreements are being
converted to non-exclusive status. The Company believes that given the current
development-stage nature of its business, the conversion of the foregoing
referenced agreements into non-exclusive agreements will not have a materially
adverse affect on the Company's business and its prospects.
During the balance of 2000, the Company plans to expand the number of
alcoholic beverage products under its management, as well as to 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.
The Company entered into an agreement dated July 18, 2000 WCBI. WCBI is in
the business of exclusively importing, selling, marketing and distributing
imported beers and similar malt beverages. The agreement been canceled due to
the inability of the parties to agree as to the valuation of certain balance
sheet items. Under the agreement Cuidao was to serve as the sole and exclusive
sales and marketer of all brands currently sold and any future products. The
Company was to operate under WCBI's licenses and permits in the various
jurisdictions in which WCBI is licensed. The WCBI agreement was for a term of
five (5) years and was automatically renewal for successive three (3) years
terms unless the parties have terminated their arrangement. Under the agreement,
Cuidao was to pay the laid-in cost of such inventory out of receipts from
customers for inventory up to the value of $119,000. All inventory over $119,000
was to be paid for at the laid-in cost in the Common Stock of the Company, the
number of which shares would have been determined by dividing the monthly cost
of inventory sold by the average offer price of the Company's shares during the
month the product was sold. The shares were to have been issued within seven (7)
days of the close of the monthly books. Since the date of the agreement, the
Company took an inventory and determined that it does not exceed $119,000. The
Company had agreed to assume WCBI's lease for its premises in Oakland Park,
Florida and to satisfy any and all current existing accounts payable and other
obligations of WCBI.
On July 19, 2000 the Company entered into a service agreement with Reubin
Share ("Share"), a principal of WCBI. In addition to the WCBI agreement and the
Share service agreement, the Company entered into termination option agreement
dated July 19, 2000 which provided that the other agreements are
inter-dependent. This agreement allowed that if one
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agreement was terminated, then either party may elect to terminate the other
agreement. Due to the cancellation of the WCBI agreement, all three agreements
are now null and void.
In addition, the Company has numerous regional and State of Florida letters
of appointment for exclusive distribution of wine produced or for exclusive
marketing, which appointments include the following companies or cave: Maison
Riviere Fils, Savas, SA Cace Du Haut Poitou, Patriarche (Sovidis), Laibach
Vineyards. These letters of appointment are for terms of one (1) to three (3)
year and Management will evaluate each brand and its renewal priorities prior to
the expiration of each letter of appointment.
Effective July 13, 2000, the Company entered into a three (3) year
distribution agreement with Dominion Wine Group LTD and Remy Pannier appointing
the Company the exclusive distributor of all wines produced by Remy Pannier
wines in the State of Florida and the Caribbean Islands. This agreement expires
in 2003 and automatically renews for an additional term of five (5) years,
unless either party gives the other sufficient written notice of non-renewal.
By letter of appointment dated August 7, 2000, the Company became the
exclusive distributor for the State of Florida for the line of Spanish wines
imported by Beacon Wine Company, Inc. This agreement is for a term of three (3)
years and may be extended upon the written agreement of the parties.
Effective August 21, 2000, the Company entered into a three (3) year
distribution agreement with Dominion Wine Group LTD and Willow Cove Winery
appointing the Company the exclusive distributor of all wines produced by Willow
Cove wines in the State of Florida and the Caribbean Islands. This agreement
expires in 2003 and automatically renews for an additional term of five (5)
years, unless either party gives the other sufficient written notice of
non-renewal.
Employees and Consultants
As of December 31, 1999, the Company employed five (5) persons other than
its executive officers. One of these five persons is Robert K. Walker, whom the
Company considers to be a key employee. As of the date hereof, the Company has
six (6) employees.
ROBERT K. WALKER has been General Manager of the Company since its
inception, 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 sun care products
distributor. Mr. Walker holds a BA degree from Virginia Wesleyan College. Mr.
Walker's father is a Director of the Company. See "Management" and "Certain
Relationships and Related Transactions."
The Company has formed a team of consultants with which it may consult on
various matters
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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:
CORPORATE ANALYSIS GROUP INC. ("CAG") provides corporate management,
strategic planning, corporate development, financial accounting and forecasting,
marketing, structuring investor relations programs, contract negotiations and
general administrative duties for the Company in relation to its activities
worldwide with the exception of Europe. Under the terms of an advisory service
agreement dated April 4, 2000 and automatically renewed on October 4, 2000, Dan
Campbell, a shareholder in CAG and the person in CAG responsible for performing
or overseeing the performance of CAG received a total of 687,500 shares of Form
S-8 free trading Common Stock valued at $687,500 which has been and will be
applied for billing services through April 3, 2000. The initial term of the
agreement was six (6) months with an automatic six (6) month renewal unless
notice was given by either party thirty (30) days prior to the renewal date. The
shares were issued under the Company's 2000 Stock Plan registered with the Sec
in May 2000. See "Principal Shareholders" and "Certain Relationships and Related
Transactions".
ST. MARTIN EQUITY GROUP INC. ("St. Martin") provides comparable services to
the Company as CAG with relation to Europe. Under the terms of an advisory
service agreement dated April 4, 2000 and automatically renewed on October 4,
2000, Dan Campbell, who is not a shareholder, officer or director of St. Martin
but is the person responsible for performing or overseeing the performance of
St. Martin received a total of 250,000 shares of Form S-8 free trading Common
Stock valued at $250,000 which has been and will be applied for billing services
through April 3, 2000. The initial term of the agreement was six (6) months with
an automatic six (6) month renewal unless notice was given by either party
thirty (30) days prior to the renewal date. The shares were issued under the
Company's 2000 Stock Plan registered with the Sec in May 2000. See "Principal
Shareholders" and "Certain Relationships and Related Transactions".
STEPHEN H. DURLAND, CPA provides financial consulting services for the
Company which encompass Securities and Exchange Commission ("SEC") accounting
and reporting, capital funding accounting and reporting as well as merger and
acquisition accounting and reporting. Under the terms of the retainer effective
August 1, 2000, Mr. Durland received 5,000 shares of Form S-8 free trading
Common Stock shares of the Company valued at $15,000 which will be applied to
billing costs per hour and related approved cost disbursements. The term of the
agreement is for six (6) months which term may be extended by the agreement of
the parties. The shares were issued under the Company's 2000 Stock Plan
registered with the SEC in May 2000. See "Certain Relationships and Related
Transactions".
KRISTENE P. KLEIN has been engaged by the Company to design and create
labeling and advertising for the Company's products which comply with regulatory
requirements. Under the
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terms of a service agreement effective August 1, 2000, Ms. Klein will be paid on
a job for job basis. The agreement is for a term of one (1) year. Ms. Klein
received 2,500 shares of Form S-8 free trading Commons Stock shares of the
Company valued at $7,500 which will be applied toward payments due under this
agreement. Such shares were issued under the 2000 Stock Plan filed registered
with the SEC in May 2000. See "Certain Relationships and Related Transactions".
YASMIN REGER RAIA has been engaged by the Company to find the source,
review and evaluate new products for the Company to distribute from Belgium and
South Africa. Under the terms of a service agreement effective July 31, 2000,
Ms. Raia will be paid on a job for job basis. The agreement is for a term of one
(1) year. Ms. Raia received 5,000 shares of Form S-8 free trading Commons Stock
shares of the Company valued at $15,000 which will be applied toward payments
due under this agreement. Such shares were issued under the 2000 Stock Plan
filed registered with the SEC in May 2000. See "Certain Relationships and
Related Transactions".
THE COMPANY'S PROPERTY
In January 1999, the Company used $110,190 of the proceeds from the
offering of the Units issued under the Previous Registration towards the
purchase of an approximate 9,600 square foot office/warehouse facility in an
area of Hollywood, Florida known as the South Florida Industrial Park. The
Company considered the use of the proceeds towards the purchase of the
office/warehouse facility to be a material, but necessary, change in the use of
proceeds as described in the Company's prospectus relating to the offer and sale
of the Units. The Company believes that acquisition of the office/warehouse
facility has assisted the Company in its stated objectives of developing a
distribution network (the Company's ability to inventory and warehouse its
products allows it to more timely meet the delivery requirements of its
distributors) and realizing certain operating efficiencies and product cost
reductions. The acquired facility is approximately twenty-five (25) years old
and is considered to be in excellent condition. The facility is adequately
covered by insurance. This facility is used as the Company's headquarters and a
portion of it provides rental income to the Company.
The Company acquired the facility from Sebastiano and Nunzia Salemi, a
husband and wife ("Sellers") for a total purchase price of $575,000. For
purposes of financing the purchase of the facility, the Company entered into two
separate promissory notes. The first promissory note was entered into by and
between the Company and Em-Star Mortgage which was subsequently assigned to
Sandra Cooper, Lake Worth, Florida, in the principal amount of $350,000 (the
"First Note"). The second promissory note was entered into by and between the
Company and the Sellers in the principal amount of $130,000 (the "Second Note").
The First Note bears interest at a rate of 12.5% per annum for three years.
The First Note provides for interest only monthly payments of $3,645.83, with
the balance of $353,645.84 (assuming no prepayments) due and payable on February
1, 2002. The First Note is secured by a first mortgage and security agreement
against the facility and in favor of Sandra Cooper.
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The Second Note bore interest at a rate of 12% per annum for two years. The
Second Note provided for principal and interest monthly payments of $1,300 per
month, with all principal and interest due and payable on January 22, 2001. The
Second Note was secured by a second mortgage against the facility and in favor
of the Sellers. The Company was in default on this Second Note and foreclosure
proceedings were taken against the Company. To forestall foreclosure, a deposit
was made to purchase the Second Note and 30-day extension granted. On August 31,
2000, under a convertible note acquisition arrangement with one of its existing
shareholders, the Company received proceeds sufficient to pay off the Second
Note and has secured a price guarantee within the agreement with a new Mortgage
Note and Mortgage and Security Agreement. The Second Note as been discharged.
See "Legal Proceedings" and "Certain Relationships and Related Transactions."
Effective September 26, 2000, the Company entered into a second convertible
note acquisition arrangement with the same party as the first. Under this
agreement, the proceeds, which are payable on or before October 31, 2000, will
be used to pay off the First Note. This price guarantee within this agreement is
supported by a new Mortgage Note and Mortgage and Security Agreement which are
being held in escrow pending payment of the full purchase price. See "Certain
Relationships and Related Transactions."
As of December 31, 1999, 4,800 square feet of the facility previously
leased to Laker Airways, Inc was vacant. In November of 1999, Laker Airways,
Inc. defaulted on its lease obligations, vacated the premises and, to the best
of managements knowledge, ceased operations in the United States. The facility
remained vacant until July 1, 2000 when the Company entered into a lease with
Goodyear Tire & Rubber Co. ("Goodyear"). This lease is for a term of two (2)
years. Rent is at the rate of $2,500 per month plus the fixed sum of $500 per
month for the first two years as additional rent for the pro rata share of real
estate taxes and building insurance. The tenant may extend the lease for one
additional period of two (2) years at a base rent of $2,600 per month plus the
sum of $500 per month as additional rent for the pro rata share of real estate
taxes and building insurance, which pro rata share is subject to annual
adjustment in the extended period. The Company granted Goodyear a right of first
refusal to purchase or lease its property if it receives a bona fide offer from
a third party during the term or extended term of the lease.
RISK FACTORS
An investment in the Common Stock 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 Company's Common Stock. 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.
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Development Stage Company; Limited Revenues. The Company is a development
stage company with limited product sales and operating revenues. The Company has
incurred cumulative losses from its inception and as of December 31, 1998 and
December 31, 1999, had an accumulated deficit of $(335,581) and $(774,812)
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
continue 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
"Management Discussion and Analysis or Plan of Operation - Quarter Ended June
30, 2000."
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 "Management Discussion and Analysis or Plan of Operation
- General."
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 Monarch
Import Co., Brown-Forman Company, Barton Beers Ltd., Kobrand Corporation,
Canandaigua Brands, Inc. 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
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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
affect on the Company's business, financial condition and results of operations.
See "The Company - Competition."
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 "Financials."
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 substantially all 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
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consumer tastes and preferences, government regulation or other factors would
have a material adverse affect 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 "The Company."
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, Les Vignerons De Buzet, Cave du Vignoble Gursonnais, Godet Freres, Remy
Pannier, in the United States by Willow Cove Winery and in South Africa by
Laibach. 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, Les Vignerons De Buzet, Cave du Vignoble Gursonnais
and Godet Freres, and the Red Dragon beer brands only (consisting of a draft,
light, extreme and amber beer) produced by Tsingtao Brewery No. 3 and in the
State of Florida and in the Caribbean, the Remy Pannier and Willow Cove wines.
Pursuant to the terms of each Import and Distribution Agreement entered into
between the Company and the Producers, the Company is required to make certain
minimum annual purchases of product from the Producers. During the 1999 calendar
year, the Company did not meet any of its minimum annual purchase requirements.
Failure by the Company to meet its minimum annual purchase requirements could
result in the Import and Distribution Agreements converting from exclusive
agreements to non-exclusive agreements; however, to date, the Company has not
received notice that any of these agreements are being converted to
non-exclusive agreements.
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
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
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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 affect the Company's revenues and goodwill
and would therefore have a material adverse affect on the Company's business,
financial condition and results of operations. See "The Company - Product
Portfolio; and - Distribution Agreements."
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 affects 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 "The
Company - Product Portfolio."
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 affect on the Company. See "The
Company - Product Portfolio."
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
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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 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 "The
Company - 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 affect on
the Company's business, operating results and financial condition. See "The
Company - Product Portfolio."
21
<PAGE>
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 competent 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 affect on the Company's
results of operations or financial condition. See "Management Discussion and
Analysis or Plan of Operation - General."
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 affect on the Company's business, operating results and financial
condition. See "The Company - Employees and Consultants" and "Management."
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 "The Company."
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 may require additional
22
<PAGE>
funding from IFG and other sources to develop and market its initial products,
to expand its management team and for further marketing and product development.
Other than the funding provided under the Loan Agreement with IFG, there can be
no assurance that additional capital from any source other than that which is
available under the Loan Agreement 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.
Government Regulation. Federal, state and local authorities extensively
regulate the production and distribution of beer, wine and spirits. ATF and
various state alcohol authorities regulate matters such as licensing, trade and
pricing practices, labeling, 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 "The Company - 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 labeling 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 affect on
the Company's financial results. See "The Company."
Control by Existing Management and Stockholders. Notwithstanding the
offering by the Selling Shareholders, 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
Shareholders" and "Description of Securities."
Lack of a Majority of Independent Directors. At the current time, the
Company's board of directors has only four (4) independent directors [one of
which is the father of the General Manager], and which constitutes a majority of
the board. The Company's directors are 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."
23
<PAGE>
Lack of Experience of Management. Potential purchasers of the Company's
Common Stock 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. 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 Mintmire & Associates.
Donald F. Mintmire, the sole owner of Mintmire & Associates, is the beneficial
owner of 50,000 shares of Common Stock. Mr. Mintmire received the 50,000 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 and preparation of various
Company agreements, including but not limited to the Company's preparation of
its reports under the Securities Exchange Act of 1934, as amended. The Company
filed a registration statement on Form S-8 under which the shares for the 2000
Stock Plan, including the shares granted to Mr. Mintmire, were registered.
Because of Mr. Mintmire's status as a 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 "Certain
Relationships and Related Transactions" and "Legal Matters."
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 Company's Common
Stock whose decision to invest in the Common Stock 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. With the exception of Mr. Share, 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
"The Company - Employees and Consultants" and "Management."
24
<PAGE>
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 "The Company - Employees and
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. As of
September 30, 2000, assuming conversion of all of the shares and exercise of all
of the warrants by the Selling Shareholders, the Company will have 7,033,842
shares of Common Stock outstanding. Of such shares, 6,678,884 shares currently
outstanding (including the 3,322,667 shares registered herein) are 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 entered into an agreement with the Company and the Placement Agent
under the Previous Registration (the "Lock-Up Agreement") pursuant to which such
stockholders 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 entered into an agreement with the Company (the
"Promotional Share Lock-In Agreement") pursuant to which such stockholders
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 affect 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 "Principal Shareholders, " "Selling Shareholders" 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
25
<PAGE>
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 PTO, 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 "The Company - Trademarks."
Dilution. 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 "Dilution,", "Management -
Stock Option Plans" and "Description of Securities."
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 Outstanding. Upon completion of the
Previous Registration, the Company had 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
26
<PAGE>
the Company to raise equity capital on favorable terms, and such Placement Agent
Unit Purchase Option may be exercised at any time, although none have been
exercised to date.
Potential Adverse Affect of Redemption of Previous Warrants. Commencing on
the date of the Previous Registration, the Previous Warrants could 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 Previous Warrants, the
closing bid price of the Common Stock shall have averaged $10.00 per share or
above for thirty (30) consecutive trading days ending within ten (10) days of
the notice. Redemption of the Previous Warrants could force the holders (i) to
exercise the Previous 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
Previous Warrants at the then current market price when they might otherwise
wish to hold the Previous Warrants or (iii) to accept the nominal redemption
price which, at the time the Previous Warrants are called for redemption, is
likely to be substantially less than the market value of the Previous Warrants.
To date, the Company has not redeemed any of the Previous Warrants. See
"Description of Securities - Previous Warrants."
Registration and State Registration to Exercise Warrants. The holders of
the Previous Warrants are able to exercise their warrants only if (i) a
Registration 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 Previous Warrants
reside. Although the Company undertook and will use its best efforts to maintain
current the prospectus covering the securities underlying the Previous Warrants
required by federal securities laws, there can be no assurance that the Company
will be able to do so in the future. The value of the Previous Warrants may be
greatly reduced if the prospectus covering the securities issuable upon the
exercise of the Previous 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 reside. Persons holding Previous 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 Previous 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 - Previous Warrants."
Secondary Trading of the Company's Shares May Not Be Possible in Some
States. Secondary trading in the Company's Common Stock will not be possible in
each state until the shares of Common Stock are qualified for sale under the
applicable securities laws of the state or the Company verifies that an
exemption, such as listing in certain recognized securities manuals, is
available for secondary trading in the state. There can be no assurance that the
Company will be successful in registering or qualifying the Common Stock for
secondary trading, or availing itself of an exemption for secondary trading in
the Common Stock, in any state. If the Company fails to register or qualify, or
obtain or verify an exemption for the secondary trading of its Common Stock in
any particular state, the shares of Common Stock could not be offered or sold
to, or purchased by,
27
<PAGE>
a resident of that state. In the event that a significant number of states
refuse to permit secondary trading in the Company's Common Stock, a public
market for the Common Stock will fail to develop and the shares could be
deprived of any value. The Company has been published in Standard & Poor's
Manual since May 31, 2000. This listing should qualify the Company in those
states that recognize such a listing as an exemption.
Risks of Low-Priced Stocks; Possible Effect of "Penny Stock" Rules on
Liquidity of the Common Stock and Warrants. The Common Stock and Warrants
offered hereby may become subject to certain rules and regulations promulgated
by the SEC pursuant to the Securities Enforcement Remedies and Penny Stock
Reform Act of 1990 (the "Penny Stock Act") which impose strict sales practice
requirements on broker-dealers who sell such securities to persons other than
established customers and certain "accredited investors." For transactions
covered by the Penny Stock Act, 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 act may affect the
ability of broker-dealers to sell the Company's 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 Act generally define a "penny stock" to be any security not
listed on an exchange or not authorized for quotation on the Nasdaq Stock Market
that 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
act requires delivery, prior to a transaction in a penny stock, of a risk
disclosure document relating to the market for the penny stocks. Disclosure also
is required to be made about compensation payable to both the broker-dealer and
the registered representative and current quotations for the securities must be
provided. 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
Common Stock if such securities are listed on an exchange or quoted on the
Nasdaq Stock Market, it has a 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 Common Stock will qualify for exemption from the Penny Stock Act. 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 SEC the authority
to prohibit any person who 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 SEC finds that such a
restriction would be in the public interest. At such time as the Company's
Common Stock are subject to the rules on penny stocks, the market liquidity for
the Company's Common Stock could be severely adversely affected.
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<PAGE>
USE OF PROCEEDS
All of the shares of Cuidao's Common Stock covered by this Prospectus are
being offered for the account of the Selling Shareholders listed herein. The
Company will not receive any proceeds from this offering.
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
The Company reserved an aggregate of 5,000,000 shares of its Common Stock
for its officers, directors, employees and consultants to purchase or for awards
pursuant to its Stock Option and Incentive Plans. As of the date of this
Prospectus, the Company has not issued any options pursuant to the terms of its
Stock Option Plans, but has awarded and issued the 1,000,000 shares registered
for the 2000 Stock Option Plan. The remaining reserve of 4,000,000 shares will
cover any shares underlying options which may be granted by the Company pursuant
to these plans. The issuance of shares of the Company's Common Stock or options
which are then exercised upon 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 or
awards. See "Management - Stock Option Plans."
CAPITALIZATION
The following tables set forth at December 31, 1999 and June 30, 2000 the
actual capitalization of the Company. The table should be read in conjunction
with the Financial Statements and Notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
<S> <C>
DECEMBER 31, 1999
-----------------
AUDITED (1)
---------------
Stockholders' equity (deficit):
Common Stock, $.0001 par value, 100,000,000 shares
authorized; 2,402,175 shares outstanding.............. $ 240
Additional paid-in capital................................ 768,812
Accumulated deficit in development stage.................... (774,069)
---------
Total stockholders' equity............................. (5,017)
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
-------
Total capitalization.............................. $ (5,017)
======
JUNE 30, 2000
---------------
UNAUDITED (1)
---------------
Stockholders' equity (deficit):
Common Stock, $.0001 par value, 100,000,000 shares
authorized; 3,158,374outstanding................ $ 316
Common Stock Held in Escrow (23)
Additional paid-in capital............................. 768,760
Accumulated deficit in development stage................. (962,741)
---------
Total stockholders' equity.......................... $(193,688)
---------
Total capitalization........................... $(193,688)
======
----------------
</TABLE>
(1) Derived from the Financial Statements of the Company included elsewhere in
this Prospectus.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
General
The Company's current portfolio of beers consists of a line of beers
produced in the People's Republic of China by Tsingtao Brewery No. 3, a brewery
owned and operated by Tsingtao Brewery Co., Ltd. [Red Dragon Draft, Red Dragon
Xtreme, Red Dragon Light, and Red Dragon Amber]. The Company's marketing
strategy for its line of Chinese beer first is to 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, that is,
a diversified light, amber and draft Chinese beer line. The Company's Red Dragon
Xtreme has been well received by the consumer. It is distributed through the
Company's distributors to the off-premise retail stores and retail chains.
With its wine products, the Company has been successfully introducing its
imported wines throughout the State of Florida. Regional state-wide distribution
on the East coast began in the second quarter of year 2000 and will continue
into the third quarter through distributors and sub-distributors. The Company's
marketing and sales strategy with respect to its wine products will be to
provide the off- premise merchandise market with quality products at a
reasonable cost to the
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<PAGE>
retailer and the consumer. Some of the Company's wine portfolio suppliers
include Patriarche, Cave Du Haut Poitou, Savas, Maison Riviere, Remy Pannier and
Willow Cove. The Company has had moderated success in its introduction of its
wines imported from South Africa produced Laibach Vineyards.
The Company currently is awaiting several wine label approvals from the
ATF, so that it might begin to distribute certain items in its wine portfolio.
The Company has contractual rights to several spirit products. Upon ATF label
approval and compliance, which are expected by the third or fourth quarter of
2000, these products will begin to be distributed by the Company.
During the balance of 2000, the Company plans to expand the number of
alcoholic beverage products under its management, as well as to 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. The arrangement with WCBI were to have begun this
process. These distributors include beer and/or wine distributors throughout the
East coast. Upon review of suitable acquisitions, management will diligently
pursue and acquire a minimum of two (2) acquisitions per year. The Company
believes that when such acquisitions are combined with its other product
portfolio, benefits will arise from consolidating expenses, which will in turn
enhance its profit structure.
The Company intends to continue 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) to
expand its management and administrative personnel to support its alcoholic
beverage product lines; and (3) to 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.
December 31, 1999 and 1998
Results of Operations
During the twelve month period ending December 31, 1999, the Company
increased its revenues $94,928 or approximately 138%, compared to revenues
during the comparable period of 1998. The increased revenues resulted primarily
from an increase in sales, which were a direct result of the Company's overall
marketing efforts. A portion of the Company's revenues ($37,628) constituted
rent from a portion of the Company's new facility, which was leased to an
airline. During the twelve months of 1998, the Company did not own this
facility, and accordingly, did not receive rent as a result of the lease.
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.
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<PAGE>
With reference to the various alcoholic products marketed both on a
wholesale basis and as a distributor, profit percentages for various products
vary depending upon which product is being marketed and depending upon 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 attain approximately
25% to 30% gross profit, while wine and spirit products attain between 35% to
40% gross 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 should add approximately an
additional 25% to 30%. Thus goods sold by the Company acting as its own
distributor should result in a gross profit margins of approximately 45% to 55%.
Overhead and cost of operations, office, warehouse, marketing expense and
administrative staff and other expenses are 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 and
without diminishing 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 as frugal as possible
with the limited funds it has available.
Financial Condition
The Company's balance sheet for the period ended December 31, 1999,
reflects the acquisition of a new building. Management concluded that in both
short and long term, it was more financially prudent to own its own facility
than to pay a total rent which was higher than the resulting mortgage. During
the fourth quarter of 1999 the tenant occupying the adjacent space to the
Company began experiencing financial difficulty and was forced to cease
operations in the first part of the year 2000. This left one side of the
building unoccupied. The Company secured a new tenant, but such tenancy did not
commence until July 2000. Therefore, the Company had an additional financial
hurdle of the shortfall created by this vacancy. Management concluded that the
prudent immediate solution was to refinance the building at a more desirable
interest rate and on more desirable terms. It was anticipated that this action
whould result in a lower monthly debt service and not only solve the immediate
issue but greatly enhance the long range outlook.
In addition the Company realized during the Fourth Quarter of 1999, that
its Notes Receivable and other sums due from Investors Conceptual Services
Incorporated. were seriously delinquent. Management was advised to write these
sums due off its balance sheet. Management
32
<PAGE>
is pursuing the collection of this debt through legal action. This delinquency
of repayment to the Company left the Company with a shortage of working capital
in the fourth quarter of 1999 and the first quarter of 2000. Management sought
resolution to this problem and finalized the loan arrangement under which the
Loan Agreement with the Selling Shareholders was completed. However, should the
Company need additional capital beyond this loan arrangement, there is no
assurance that management will be successful in raising additional working
capital. Management believes that the Loan Agreement provides the necessary
working capital so that it is now in a position for sales and revenues to
increase significantly.
Liquidity and Capital Resources
The Company's products, particularly its beer products, are receiving
significant market acceptance. Prior to the loan arrangement with IFG, sales
growth has been 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. As yet,
the Company does not have adequate working capital to import sufficient products
to meet market demand. At the end of the third quarter 1999, management
finalized a distribution alliance with a major wine producer located in Beaune,
France. The Company believes that these two credit facilities will enable the
Company to increase revenues and resulting profits. Management sought funds from
the Selling Shareholders to sufficiently capitalize the Company's growth plans.
June 30, 2000 and 1999
Results of Operations for the Three Months Ending June 30, 2000 and 1999
During the three month period ending June 30, 2000 and 1999, the Company
had revenues of $54,485 and $31,564 respectively. This is an increase in revenue
of $22,921, or approximately 73%, compared to revenues during the comparable
period of 1999. The increased revenues resulted primarily from an increase in
sales, which were a direct result of the Company's overall marketing efforts.
The Company did not receive rent revenue during the three month period
ending June 30, 2000 from that portion of the Company's new facility which was
leased to the airline. The Company executed a new lease on this portion of its
facility with Goodyear Tire & Rubber, Co. The lease term commenced July 1, 2000.
During the three month period ending June 30, 2000 and 1999, the Company
had General and Administrative operating expenses of $123,274 and $66,987,
respectively. This increase was due primarily to the Company's increased
marketing efforts and inventory storage and handling costs.
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
33
<PAGE>
positive result on sales and revenues in the future. Through its distributiion
alliance with WCBI, the Company expected to maximize the rollout of its Red
Dragon beer products by reaching more retail and specialty stores, without the
need to increase the Company's personel or payroll expenses. However, due to the
cancellation of the WCBI deal, the Company is now seeking other avenues for such
distribution. In addition, personel and payroll expenses will be increased since
the Company intends to hire an Asian brand development/salesperson to work
specifically with the on-premise accounts and to assist out-of-state
distributors on a part time basis.
With reference to the various alcoholic products marketed both on a
wholesale basis and as a distributor, profit percentages for various products
vary depending upon which product is being marketed and depending upon 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 attain approximately 25%
to 30% gross profit, while wine and spirit products attain between 35% to 40%
gross 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 should add approximately an
additional 25% to 30%. Thus on goods sold by the Company, acting as its own
distributor it is anticipated that it will achieve gross profit margins of
approximately 45% to 55%.
Overhead and cost of operations, office, warehouse, marketing expense and
administrative staff and other expenses are 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 and
without diminishing 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 as frugal as possible
with the limited funds it has available.
Financial Condition
The Company's balance sheet for the period ended June 30, 2000, 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
rent which was higher than the resulting mortgage.
The Company executed a loan agreement with IFG. which it believes will
provide it with the necessary initial working capital required to effectively
execute its business plan. The Company believes that by expanding its product
distribution and thereby increasing sales revenues it will generate internally
sufficient working capital to enable management to continue its goal to increase
the number of distribution channels for its products. It is the Company's belief
that once it is able to expand its product line and distribution channels it
will be able to rely on its own internally generated cash flow to support its
operations.
34
<PAGE>
Forward-looking Statements
This Prospectus 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.
LEGAL PROCEEDINGS
The Company filed a lawsuit against Investors Conceptual Services
Incorporated. ("ICS"). This action is for non-payment of funds owed to the
Company by ICS. The amount of this debt was specified in an agreement between
the Company and ICS. ICS interposed a defense and made a motion on the
pleadings. The Company is in the process of filing an amended complaint. Under
the agree ment, ICS was issued 25,000 shares of the Company's Common Stock in
December 1999, but the Company did not receive the full proceeds for the sale of
shares. See "Certain Relationships and Related Transactions."
As of December 31, 1999, the Company had a disputed bill relating to
printing charges with Bowne of Los Angeles. As of the date of this Prospectus,
Company is in the process of attempting to reach an equitable settlement with
reference to this disputed amount. Bowne secured a judgment against the Company
ofr approximately $85,000. The Company filed a notice of appeal and has filed
its appellate brief. Bowne has indicated that it will seek to enforce the
California judgment in Florida. At such time as the Company is served with any
such enforcement attempt, it intends to seek a stay of enforcement pending the
outcome of the California appeal.
35
<PAGE>
As of June 30, 2000, the Company was in default under the terms of the
Second Note which by its terms had been brought current the Company's First
Note. In addition, the monthly payments for February though June of 2000 were in
arrears. A lease with a national credit tenant for fifty percent (50%) of the
Company's building was signed with Goodyear. The tenancy commenced July 1, 2000.
On July 12, 2000, a summary judgement was entered by Broward Circuit Court
in favor on the Second Note holders in the amount of $172,756.93. Sale of the
property was scheduled for August 2000. The Company arranged for a current
shareholder to make a deposit while a refinancing package could be completed.
This shareholder made an initial deposit of $25,000 and the sale was postponed
for 30 days. On August 31, 2000, through a convertible note acquisition
agreement with the existing shareholder, the Company received proceeds
sufficient to pay of the Second Note. Effective September 26, 2000, the Company
entered a second convertible note agreement with this shareholder under which
the proceeds, which are due on or before October 31, 2000 unless extended, will
be used to pay off the First Note. Both convertible note arrangements, the
Company has given a price guarantee which is supported by a Mortgage Note and a
Mortgage and Security Agreement. See "Certain Relationships and Related
Transactions."
MANAGEMENT
Directors and Executive Officers
The directors and executive officers of the Company, their ages and
positions held as of the date of this Prospectus are set forth below:
NAME AGE POSITION(S) HELD
--------- ------ --------------------------
C. Michael Fisher 46 Chairman of the Board, President,
Chief Financial Officer and
Director
Robert K. Walker (1) 45 General Manager
Francis J. Hornik, Jr. 59 Director
Robert H. Walker 66 Director
Thomas J. Dobson 50 Director
Carl E. Schubert 46 Director
----------------
36
<PAGE>
(1) Mr. Walker is not an executive officer of the Company, but is listed by
reason of his status as General Manager.
C. MICHAEL FISHER has been Chairman of the Board, President and a Director
of the Company since March 31, 1997. Mr. Fisher became Chief Financial Officer
of the Company on March 30, 1998. Mr. Fisher 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 fifteen (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.
ROBERT K. WALKER has been General Manager of the Company since its
inception, served as the Company's President from the Company's inception to
March 1997 and has been a Director since January 26, 2000. 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 sun care products distributor. Mr. Walker holds
a BA degree from Virginia Wesleyan College. Mr. Walker's father is a Director.
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.
ROBERT H. WALKER has been a Director since January 26, 2000. Since 1960,
Mr. Walker has been the President of Walker & LaBerge Co., Inc. of Norwalk,
Virginia. Mr. Walker's son is the General Manager of the Company.
THOMAS J. DOBSON has been a Director of the Company since January 26, 2000.
Since 1985, Mr. Dobson has been the sole proprietor of numerous restaurants in
the Tidewater area of Virginia.
CARL E. SCHUBERT has been a Director of the Company since January 26, 2000.
Mr. Schubert has been the President and owner of Towne Development Corp. since
1985.
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.
37
<PAGE>
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 1999 .
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Restricted Securities LTIP All
Name and Annual Stock Underlying Pay- Other
Principal Year Salary Bonus Compen Award(s) Options/ outs Compen
Position ($) ($) -sation ($) SARs (f) -sation
($) ($)
C. Michael 1999 $ 2,692 $0 $0 $0 $0 $0 $0
Fisher,
Chairman
of the
Board and
President
Robert K. 1999 $44,200 $0 $0 $0 $0 $0 $0
Walker
General
Manager
----------------- ----------- ------------ ------------- -------------- --------------- ----------------- -------------- --------
</TABLE>
Employment Agreements
With the cancellation of the WCBI agreement, the Company has no outstanding
employment agreements with any officer, manager or director of the Company.
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
38
<PAGE>
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
39
<PAGE>
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 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 Previous Registration 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 previously registered.
1999 Equity Incentive Plan
In February 1999, the Company amended the 1997 Incentive Stock Option Plan
by adopting the 1999 Equity Inventive Plan. The revisions adopted by the Board
of Directors provide, at the discretion of the Board, for the grant of stock
options, appreciation rights, restricted stock awards, performance shares and
performance units to directors, officers, key employees and consultants of the
Company. The plan authorizes the issuance of up to 3,000,000 shares of the
Company's Common Stock.
2000 Employee/Consultant Stock Compensation Plan
The Company adopted the 2000 Employee Consultant Stock Compensation Plan
effective April 1, 2000. Under this plan, the Company can compensate consultants
and certain other Employees who have provided bona fide services to the Company,
through the award of Common Stock of the Company. The plan authorizes the
issuance of up to 1,000,000 shares of the Company's Common Stock. The Company
filed a registration statement with the SEC on Form S-8 to cover this plan on
May 22, 2000. All 1,000,000 shares have been awarded under this plan.
40
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information as of September 30, 2000
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. As of September 30, 2000, there were 4,033,875 shares of the
Company's Common Stock outstanding. This number inckudes 622,700 shares held in
escrow against the conversion of the Notes, exercise of the Warrants and
pursuant to the terms of the convertible note transactions, the proceeds of
which are for the purpose of paying off the First Note and the Second Note on
the Company's Property. The percentage of beneficial ownership calculation below
is based upon the 3,411,175 shares that currently are entitled to vote on all
shareholder issues.
<TABLE>
<CAPTION>
<S> <C> <C>
Name and
Address of Percent
Beneficial Number of Beneficially
Owner Shares Owned Owned
------------- ------------ ------------
C. Michael Fisher (1)(2) 394,000 11.55%
1717 Jermyn Lane
Virginia Beach, VA 23454
Robert K. Walker (3) 719,200 21.08%
3835 S.W. 56th Street
Ft. Lauderdale, FL 33312
Francis J. Hornik, Jr. (2) 1,200 00.04%
3307 Cricket Hollow Lane
Chesapeake, VA 23321
Robert H. Walker (2)(4) 61,200 01.79%
2852 Chargleman Drive
Virginia Beach, VA 23451
Thomas J. Do 28,600 00.84%
4054 N. Witchduck Road
Virginia Beach, VA 23455
Carl E. Schubert (2) 8,200 00.24%
1100 C Madison Plaza
Chesapeake, VA 23320
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
John W. Martin (6) 400,000 11.73%
5777 West Century Blvd.
Suite 1540
Los Angeles, CA 90045
Infinity Financial Group
("IFG")(7) 00.00%
5320 NW 10th Terrace
Fort Lauderdale, FL 33309
W.M. Properties of South 00.00%
Florida, Inc. (8)
1800 N. Dixie Highway
Hollywood, FL 33020
Daniel Campbell (9) 689,650 20.22%
1304 SW 160 Avenue
Suite 294
Sunrise, FL 33326
All officers and directors
as a group (5 persons) 493,200 (10) 14.46%
--------------------
</TABLE>
(1) Includes 156,000 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 (1/2 of 440,000) held by Paris
International Holding, Ltd., a corporation in which Mr. Fisher is the
beneficial owner of one-half (1/2) of the shares of common stock of such
corporation and 800 shares owned by Katie Fisher and Lauren Fisher, the
children of Mr. Fisher.
(2) Each of the Directors was granted 1,200 shares on September 15, 2000.
(3) Includes 220,000 shares (1/2 of 440,000) 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.
(4) Mr. Walker acquired 60,000 of his shares prior to March 1997 and prior to
becoming a Director in 2000.
42
<PAGE>
(5) Includes 10,000 shares Mr. Dobson ownes as joint tenants with his wife.
(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.
(7) As of the date hereof, IFG holds 322,700 shares in escrow and has made
advances totally $177,245.40 under the Loan Agreement. Assuming that the
622,7000 shares held in escrow were able to vote, such 322,700 shares would
represent 8.00% of the voting shares of the Company. See "Selling
Shareholders."
(8) As of the date hereof, W.M. Properties of South Florida Inc. has advanced
and committed to advance $525,000 to the Company for the purpose of paying
off the First Note and the Second Note. The arrangements include a price
guarnatee and are supported by convertible mortgage notes with mandatory
conversion features into shares. A total of 300,000 shares are held in
escrow for such conversion. Assuming that the 622,7000 shares held in
escrow were able to vote, such 300,000 shares would represent 7.44% of the
voting shares of the Company. See "Certain Relationships and Related
Transactions."
(9) Mr. Campbell received a total of 937,500 shares of Form S-8 Common Stock as
a result of the Company's agreements with CAG and St. Martin for the
initial term and the renewal term of the agreements since he is the primary
person who will perform or oversee the performance of both of these
agreements. While Mr. Campbell is a shareholder of CAG, he is not an
officer, director or shareholder of St. Martin. Mr. Campbell has sold or
exchanged 248,000 shares received to cover the costs and expenses of
services provided by CAG and St. Martin under the agreements. See "Certain
Relationships and Related Transactions."
(10) Since Mr. Robert Walker is not an officer or director of the Company, his
shareholdings have not been included in this calculations. However, by
virtue of his position as General Manager, it is expected that he will
support the positions taken by the officers and directors. If his shares
were to be included in the calculation, a total of 1,212,400 shares would
be voted by Management. This would represent beneficial ownership of 35.54%
in the hands of current management.
43
<PAGE>
SELLING SHAREHOLDERS
All of the 3,322,667 shares of Cuidao's Common Stock covered by this
Prospectus are being offered for the account of IFG as Lender under a Loan
Agreement dated April 5, 2000 and the related Registration Rights Agreement
dated April 5, 2000. The shares covered by this Prospectus have not been
adjusted for the Forward Split although the Loan Agreement and related documents
contain anti-dilution provisions which will cause the adjustment of this number.
Under the Loan Agreement, IFG agreed to make loans to the Company of up to
$1,825,000 in installments for a period commencing with the date of the
agreement and ending on April 4, 2004 (the "IFG Loan Commitment"). Under the
terms of the IFG Loan Commitment, each installment is supported by a convertible
note and security agreement and the Lender is granted warrants to purchase
shares of the Company's Common Stock. Both the notes and the warrants contain
anti- dilution provisions which allow for an adjustment to the number of shares
when certain enumerated events occur. A forward split is such an event. The
notes bear interest at 8% per annum, run for a term of two years and are
convertible at the fixed rate of $.75 per share. The warrants are exercisable
for two years at a price of $1.50 per share. Further, initially 20,027 shares
were held by IFG in escrow for the potential conversion of the initial note,
interest for the term and exercise of the initial warrant. Under the terms of
the IFG Loan Agreement, an initial loan of $11,000 was made on April 5, 2000.
Further instalments were made to the Company and shares placed in escrow; to
wit, a loan of $28,245 on April 26, 2000 with 51,425 shares placed in escrow;
$20,000 on June 7, 2000 with 36,413 shares placed in escrow; $35,000 on June 15,
2000 with 63,722 shares placed in escrow; $35,000 on June 28, 2000 with 63,722
shares placed in esrow; $20,000 on July 6, 2000 with 36,413 shares placed in
escrow; and a loan of $28,000 on August 17, 2000 with 50,978 shares placed in
escrow. The Company granted IFG registration rights and was obligated to file a
registration statement within one hundred and eighty days (180) days of the
agreement. This Prospectus is part of the registration statement required by the
registration rights granted to IFG. It covers the 3,322,667 shares of the
Company's Common Stock which will be issued if all notes are issue and
converted, including interest at the rate of 8% per annum for two (2) years at a
fixed conversion price of $0.75 per share and if all of the Warrants are
granted, which warrants are exercisable at $1.50. The issuance of the securities
was made pursuant to Regulation D, Rule 506 of the Act.
Under the terms of the Registration Rights Agreement, Cuidao is to pay all
of the registration expenses incurred in connection with the registration of the
shares and the reasonable fees and expenses of one (1) counsel for the Selling
Shareholders, except that IFG is to pay all selling commissions, underwriting
discounts and disbursements, transfer taxes and fees and expenses of separate
counsel applicable to their sale of Cuidao's Common Stock to be issued pursuant
to the agreements underlying the IFG Loan Commitment. The agreements provides
that Cuidao must keep current and effective the registration statement covering
these shares for the greater of (i) a period of at least four (4) years from the
closing date and (ii) a period of at least ninety (90) days after all of the
notes have been converted or paid and all the warrants have been exercised or
have expired.
Prior to the IFG Loan Commitment, neither IFG nor any of its officers,
directors or principal shareholders have held any position or office nor have
any of them had a material relationship with Cuidao or any of its affiliates
within the past three (3) years.
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As of September 30,2000, the Company had 4,033,875 shares outstanding,
which includes 322,700 shares held in escrow by IFG for loans made through
September 30, 2000 and 300,000 shares held in escrow for W.M. Properties of
South Florida Inc.
Assuming that all the other shares registered hereby are issued, the total
outstanding as of September 30, 2000 (including the escrowed shares), with no
other shares issued, would be 7,033,842. In such event, IFG's ownership of
3,322,667 shares would represent 47.24% of the total voting shares of the
Company and a controlling interest in it.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From March 31, 1996 to May 31, 1996, the Company issued 3,540,000 (of which
2,221,600 were subsequently cancelled) shares of its Common Stock to 5 persons
for an aggregate cash purchase price of $4,040. Of the 1,318,400 remaining,
purchasers of these shares included Robert K. Walker (488,400 shares), Euro
Imperial Group Inc., of which C. Michael Fischer is the beneficial owner
(156,000 shares) and Paris International Holding. Ltd. of which Mr. Walker and
Mr. Fischer equal own 50% ( 440,000 shares).
On April 29, 1996, the Company issued 400,000 shares of its common stock to
John W. Martin in consideration for legal services rendered to the Company by
the Law Offices of John W. Martin valued at $21,085. John W. Martin, the sole
proprietor of the Law Office of John W. Martin was a director of the Company at
the time of the issuance. The legal services rendered to the Company by the Law
Office of John W. Martin included the rendering of general corporate advice, and
preparing various corporate documents and plans, in connection with the
formation and organization of the Company, the negotiation and preparation of
various Company agreements, including but not limited to the Company's
agreements with its producers and distributors, and the rendering of advice, and
the preparation of documents, in connection with the private and public offering
of the Company's securities in accordance with applicable federal and state
securities laws.
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 $111,397. Purchasers of the 443,600 shares included Kristopher Walker,
the minor child of Robert K. Walker, who acquired 800 shares of common stock for
an aggregate purchase price of $200, Katie and Lauren Fisher, the minor children
of C. Michael Fisher, who acquired 800 shares of common stock for an aggregate
purchase price of $200 and Robert H. Walker, the father of Robert K. Walker, who
acquired 60,000 shares of common stock for an aggregate purchase price of
$15,000.
On March 31, 1997, the Company acquired R&R (Bordeaux) Imports, Inc., a
Florida corporation and wholly owned subsidiary of the Company. In the
acquisition of R&R (Bordeaux) Imports, Inc., the Company issued 60,000 shares of
its common stock having an aggregate value of $15,000 to three persons. One of
the recipients of the 60,000 shares was Robert K. Walker, who received 10,000
shares of common stock.
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From July 30, 1997 to October 1997, the Company issued 38,000 shares of its
Series A Preferred Stock to five persons for an aggregate purchase price of
$95,000. Purchasers of the 38,000 shares of Series A Preferred Stock included C.
Michael Fisher, who purchased 16,000 shares for an aggregate purchase price of
$40,000 and Euro Imperial Group, Ltd., which purchased 8,000 shares for an
aggregate purchase price of $20,000. On November 5, 1998, each outstanding share
of Series A Preferred Stock was converted into one share of common stock.
Pursuant to the Previous Registration, the Company sold 96,175 Units for
gross proceeds of $553,000. The Company issued 96,175 shares of Common Stock and
granted warrants to purchase a total of 96,175 shares pursuant to the terms of
the Previous Warrants.
On December 28, 1999, the Company issued 25,000 shares of common stock. Of
these 25,000 shares were issued to ICS for an aggregate purchase price of
$80,000. The Company did not receive all of the proceeds from this sale and has
instituted legal action against ICS on the agreement. See "Legal Proceedings."
Also, in consideration for loans made to the Company in the amount of $21,644,
Mr. Fisher received 16,000 shares of Common Stock and for consulting services,
Ken Callihan, a former consultant to the Company received 5,000 shares for
services rendered to the company valued at $6,250.
On April 4, 2000, the Company entered into an advisory service agreement
with CAG to provide corporate management, strategic planning, corporate
development, financial accounting and forecasting, marketing, structuring
investor relations programs, contract negotiations and general administrative
duties for the Company in relation to its activities worldwide with the
exception of Europe. Under the terms of the agreement which was automatically
renewed on October 4, 2000, Dan Campbell, a shareholder in CAG and the person in
CAG responsible for performing or overseeing the performance of CAG received a
total of 687,500 shares of Form S-8 free trading Common Stock valued at $687,500
which has been and will be applied for billing services through April 3, 2000.
The shares were valued at $1 based upon the trading price of the Company's
Common Stock for the thirty (30) day period prior to the agreement. The initial
term of the agreement was six (6) months with an automatic six (6) month renewal
unless notice was given by either party thirty (30) days prior to the renewal
date. The shares were issued under the Company's 2000 Stock Plan registered with
the Sec in May 2000. CAG and IFG share common offices; however they are not
affiliated companies. None of the shareholders in CAG owns shares in IFG and
vice versus. Other than sharing offices, the only commonality between CAG and
IFG is that a shareholder, director and officer of IFG acts as the director of
CAG. Mr. Campbell has no affiliation with IFG, other than to provide certain
bookkeeping services.
By an agreement dated April 4, 2000, the Company entered into an advisory
service agreement with St. Martin to provide comparable services to the Company
as CAG with relation to Europe. Under the terms of the agreement which was
automatically renewed on October 4, 2000, Dan Campbell, who is not a
shareholder, officer or director of St. Martin but is the person responsible for
performing or overseeing the performance of St. Martin received a total of
250,000 shares of Form S-8 free trading Common Stock valued at $250,000 which
has been and will be applied for billing services through April 3, 2000. The
shares were valued at $1 based upon the
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trading price of the Company's Common Stock for the thirty (30) day period prior
to the agreement. The initial term of the agreement was six (6) months with an
automatic six (6) month renewal unless notice was given by either party thirty
(30) days prior to the renewal date. The shares were issued under the Company's
2000 Stock Plan registered with the Sec in May 2000. None of the shareholders in
St. Martin owns shares in IFG or CAG and vice versus. Other than the services by
Mr. Campbell, there are no other commonalities between St. Martin and CAG.
In April 5, 2000, the Company entered into the Loan Agreement and
Registration Rights Agreement with IFG which cover the shares registered herein.
Through September 30, 2000, 332,700 shares were issued and held in escrow. See
"Selling Shareholders".
Mintmire & Associates is presently retained by the Company as its outside
general counsel. On May 22, 2000 the Company registered 1,000,000 shares on Form
S-8 its 2000 Stock Award Plan. Pursuant to this plan, the Company issued a total
of 50,000 shares of its registered Common Stock to Donald F. Mintmire, the sole
owner of Mintmire & Associates in consideration for legal services rendered to
the Company by the firm, which legal services included the rendering of general
corporate advice, and preparing various corporate documents and plans, and
preparation of various Company agreements, including but not limited to the
rendering of advice, and the preparation of documents, in connection with the
Company's reporting requirements under the Exchange Act of 1934. The shares were
valued at $1.00 each which was the most recent closing price of the shares prior
to the Form S-8 registration filing. See "Legal Matters."
In July 2000, the Company committed to issue 25,000 shares to Rueben Share
pursuant to the service agreement as a sign on bonus. This was part of the WCBI
transaction. When the WCBI transaction was canceled, the Company's rescinded
such issuance.
In August 2000, the Company committed to issue a total of 12,500 shares
registered under the 2000 Stock Awards Plan to three (3) consultants. These
shares are to be issued to Mr. Durland (5,000 shares valued at $15,000), Ms.
Klein (2,500 shares valued at $7,500) and Ms. Raia (5,000 shares valued at
$15,000).
Effective August 31, 2000, the Company agreed to issue 102,000 shares of
its Common Stock into escrow for the conversion of a convertible note in the
amount of $255,000. The Company entered into a convertible note acquisition
agreement with W.M. Properties, an exiting shareholder of the Company. The
proceeds of the agreement, $179,506 where used to pay off the Second Note. Under
the terms of the agreement, the Company has guaranteed the value of its shares
for a period of twenty-one months at $2.50 per share. To support this price
guarantee, the Company issued a convertible mortgage note (the "Morgage Note")
and mortgage and security agreement (the "Mortgage and Security Agreement").
W.M. Properties executed a release which is held in escrow pending completion of
the Company's obligations under the agreement and related documents (the
"Release").
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The Mortgage Note is dated August 31, 2000 and is due and payable twenty
four (24) months from its issuance. Commencing on September 1, 2001 and
continuing for the next eight (8) successive months, W.M. Properties is required
each such month to convert a portion of the Mortgage Note into shares of the
Company's Common Stock, the mandatory conversion dates and number of shares to
be issued on each mandatory conversion date are set forth in a schedule to the
agreement (the "Monthly Allocation"). Commencing on September 30, 2001 and
continuing on the last day of each of the next eight (8) successive months, the
principal amount of the Mortgage Note is to be reduced by the greater of (i) the
actual gross proceeds received by W.M. Properties for sale of the Monthly
Allocation and any previously issued Monthly Allocation shares not sold during
the applicable month during the applicable month made in accordance with Rule
144, or (ii) the average of the closing price for the Company's Common Stock
from the 1st day of the applicable month to the next to last day of the
applicable month as quoted on the OTC BB times the Monthly Allocation (the
greater of subsection (i) or (ii) hereinafter referred to as the "Incremental
Mortgage Reduction Amount"). In the event that Incremental Mortgage Reduction
Amount is less than the Monthly Allocation times $2.50 per share during the
applicable month (the "Target Reduction Amount"), the difference between the
Target Reduction Amount and the Incremental Mortgage Reduction Amount realized
shall bear interest at the rate of 11.11% per annum until paid. To assist
Company in making this calculation, W. M. Properties agrees to provide evidence
of all sales made in the applicable month to the Company by the tenth (10th) day
of the succeeding month. Each successive Incremental Mortgage Reduction Amount
is to be applied first to accrued but unpaid interest and thereafter as a
reduction to principal. At the end of the term of the Mortgage Note, all unpaid
principal and accrued interest not otherwise paid by the incremental reductions
to principal is due and payable. In the event that incremental reductions pay
off the entire Mortgage Note and any accrued but unpaid interest prior to the
end of the term, any Monthly Allocation shares not previous issued to W. M.
Properties are to be immediately issued, the Mortgage Note is to be canceled and
any unsold shares delivered to or held by W. M. Properties, if any, may be
retained or sold by W.M. Properties pursuant to Rule 144 as it so elects. If at
any time during the term of the Mortgage Note the aggregate of all of the
Incremental Mortgage Reduction Amounts is equal to or above $255,000, or at the
end of the term at such time as the Company pays all unpaid principal and
accrued but unpaid interest, the entire Mortgage Note and Mortgage and Security
Agreement shall be released and satisfied and W.M. Properties (1) authorizes
Mintmire & Associates, the escrow agent for the Release, to provide the Company
with the Release executed simultaneously with the Agreement and being held in
escrow by them; (2) authorizes the Company to record the Release; and (3) agrees
to cancel and return the original Mortgage Note to the Company. Interest, if
any, shall be calculated on the basis of a year of 360 days. Any unpaid
principal or accrued but unpaid interest due at the end of the term shall be
payable at W.M. Properties' Principal Office. The Mortgage Note has anti-
dilution provisions and piggy-back registration rights.
On September 15, 2000, the Board approved the issuance of 9,000 shares of
restricted Common Stock to seven (7) persons, which shares were valued at
$14,301. Of the seven (7) persons, each of the five (5) Directors received 1,200
shares and two (2) employees received a total of 3,000 shares.
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Effective September 26, 2000, the Company entered into a second convertible
note acquisition agreement with W.M. Properties. All documents were exchanged on
that date and are held in escrow pending payment of the purchase price of
$345,493.21 on or before October 31, 2000, unless extended by the parties. Under
this second acquisition, 198,000 shares of the Company's Common Stock are held
in escrow on the second mortgage note in the amount of $495,000 in support of
the price guarantee. All other terms of the second arrangement are identical to
the first agreement. The proceeds from the second agreement are to be used to
pay off the First Note.
By an agreement dated October 2, 2000, the Company agreed to issue 20,000
shares of restricted Common Stock to WallStreet West.com, LLC ("WSW") to provide
investor relations services to the Company. WSW was brought to the Company by
CAG as part of its structuring of an investor relations program for the Company.
By agreement dated October 2, 2000, WSW entered into a second agreement with CAG
since WSW required additional payment in the Form of S-8 shares that it could
not receive from the Company. Dan Campbell agreed to transfer 17,000 shares of
his Form S-8 shares to WSW. However, previously and mistakenly, WSW had entered
into an agreement in the name of IFG and a first agreement with the Company. WSW
was advised that IFG had nothing to do with the arrangement and insisted upon
termination of the IFG and the first agreement with the Company. Rather than
enter into simple termination, WSW insisted upon a recitation of the earlier
agreements in the October 2, 2000 agreements on the mistaken belief that there
was at least one principal of IFG common to IFG and CAG. Other than Mr. Vazquez
who is a shareholder, officer and director of IFG and a director of CAG and
sharing of offices, there is no commonality by which CAG and IFG are affiliates.
WSW has issued press releases that recite incorrect information. The Company
attempted to have WSW rectify the mistaken information; however, has not been
able to resolve its differences with WSW. In addition, under the terms of the
WSW agreement with the Company, the Company has no control over the services to
be provided on its behalf since WSW claims all of such obligations under the
revised CAG agreement. The Company has been unable to resolve matters with WSW
and has elected to terminate its relationship with WSW. The restricted Common
Stock under the Company's agreement had an approximate value of $41,000 on the
execution date of the agreement and the Form S-8 shares had an approximate value
of $34,000.
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.
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PLAN OF DISTRIBUTION
The Selling Shareholders may effect the distribution of the shares in one
or more transactions that may take place through block trades or ordinary
broker's transactions, or through privately negotiated transactions, an
underwritten offering, or a combination of any such methods of sale. Sales of
shares will be made at market prices prevailing at the time of sale or at
negotiated prices. Selling Shareholders may pay usual and customary or
specifically negotiated brokerage fees or commissions in connection such sales.
Cuidao has agreed to pay registration expenses incurred in connection with this
registration of approximately $49,088.
The aggregate proceeds to the Selling Shareholders from the sale of the
shares will be the purchase price of the Cuidao's Common Stock sold less the
aggregate agents' commissions and underwriters' discounts, if any. The Selling
Shareholders and any dealers or agents that participate in the distribution of
the shares may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933 (the "Act"), and any profit from the sale of shares by
them and any commissions received by any such dealers or agents might be deemed
to be underwriting discounts and commissions under the Act.
In order to comply with the securities laws of certain states, if
applicable, the securities may be sold only through registered or licenses
brokers or dealers. In addition, in certain states, the securities may not be
sold unless they have been registered or qualified for sale in such state or any
exemption from such registration or qualification requirement is available and
the sale is made in compliance with the requirements.
Cuidao has agreed to indemnify the Selling Shareholders in certain
circumstances, against certain liabilities arising under the Act. The Selling
Shareholders have agreed to indemnify Cuidao and its directors and officers who
sign the registration statement against certain liabilities, including
liabilities arising under the Act.
MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The Company's common stock is quoted on the OTC Bulletin Board under the
symbol "CDAO". Quotation of the Company's common stock commenced on March 5,
1999. The high and low per share sales price for each quarter since commencement
are as follows:
High/Ask Low/Bid Avg. Close
-------- ------- ----------
1st Quarter 1999 $7.00 $6.00 $6.88
2nd Quarter 1999 $7.00 $3.75 $5.40
3rd Quarter 1999 $5.75 $4.38 $5.36
4th Quarter 1999 $5.75 $1.25 $4.55
1st Quarter 2000 $1.25 $1.00 $1.08
2nd Quarter 2000 $3.50 $1.00 $2.58
3rd Quarter 2000 $3.06 $1.25 $2.34
The quotations may reflect inter-dealer prices, without retail mark-up,
mark-down or commissions and may not reflect actual transactions.
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As of September 30, 2000, there were 116 holders of record of the 4,033,875
shares of the Company's Common Stock outstanding (of which 322,700 shares are
held in escrow by IFG for loans made through September 30, 2000 and 300,000 are
held in escrow against the conversion of the first and second convertible note
to W.M. Properties of South Florida, Inc.).
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. As of September 30, 2000, giving effect to the loans equal to
$1,825,000 under the IFG Loan Commitment with conversion of all of the Notes
plus interest for the term and exercise of all of the Warrants by the Selling
Shareholder and the mandatory conversion of the mortgage notes to W.M.
Properties of South Florida Inc, there will be outstanding 7,033,842 shares of
Common Stock without consideration of an adjustment for the Forward Split.
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 Previous Registration and other
documents filed with the Securities and Exchange Commission under the Exchange
Act of 1934.
Units
Units were offered under the Previous Registration. Each Unit consists of
one share of Common Stock and one Previous Warrant. The Common Stock and the
Previous Warrant are immediately detachable and separately transferable. The
Company issued a total of 96,175 Units as a result of the offering made under
the Previous Registration.
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. Prior to
conversion, shares held in escrow by IFG and the shares held for W.M. Properties
do not have voting rights.
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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 had 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 were issued, but such
shares were converted to Common Stock in November 1998. As of the date of this
Prospectus, none of the Preferred shares are outstanding.
The Series A Preferred Stock ranked senior to the Common Stock with respect
to dividends. Holders of shares of Series A Preferred Stock were entitled to
receive dividends at the rate of $0.25 per share per annum, payable out of funds
legally available therefore. Such dividends were payable only when, as, and if
declared by the Board of Directors and were non-cumulative. Upon any
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary, before any distribution or payment was 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
would have been 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 was to convert automatically 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, were to 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. As a result of
the Previous Registration, the Series A Preferred Stock was converted to Common.
However, while the Series A Preferred Stock is no longer outstanding, the Board
is authorized to issue other series of Preferred Shares.
Warrants
Previous Warrant. Each Previous Warrant under the Previous Registration
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
May 1, 2001. Commencing immediately after the date of the prospectus filed in
the Previous Registration, the Previous Warrant were 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
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within 10 days of the notice of redemption. The Company presently expects to
call all of the Previous Warrant for redemption as soon as the trading price of
its Common Stock meets the minimum amount for 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 Previous Warrant within the period set
forth in the notice of redemption or accept the redemption price.
The Previous Warrant under the Previous Registration were 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 are evidenced by warrant certificates in registered form.
The Previous Warrant provides 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 Previous Warrant. The holder of a Previous Warrant does not
possess any rights as a shareholder of the Company until such holder exercises
the Previous Warrant.
The exercise price of the Previous Warrants was determined by the Company
and should not be construed to be predictive of or to imply that any price
increase in the the Company's shares will occur.
The Company 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 Previous Warrants. A Previous Warrant may be exercised upon
surrender of the Previous 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 Previous 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 Previous Warrant is
being exercised. Shares of Common Stock issued upon exercise of Previous
Warrants and payment in accordance with the terms of the Previous Warrants will
be fully paid and nonassessable. For the life of the Previous 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 Previous Warrants are outstanding, the terms on
which the Company could obtain additional capital may be adversely affected. The
holders of Previous 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 Previous Warrants. As of the date of this Prospectus, none of the Previous
Warrants have been exercised.
Escrowed Shares. The transaction under which these shares were issued arose
in April 5, 2000, when the Company executed the Loan Agreement with IFG, whereby
IFG agreed to make loans to the Company of up to $1,825,000 in installments
during the period commencing with the date of the agreement and ending on April
4, 2004. The Loan Agreement permits installments
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aggregating $250,000 in any 90-day period. The proceeds of the loan are for
working capital purposes. The Loan Agreement provides that the offering was
conducted under Regulation D of the Securities Act of 1933, as amended (the
"Act"). Under the terms of the Loan Agreement, each installment is supported by
a convertible note and security agreement and the Lender is granted warrants to
purchase shares of the Company's Common Stock. Prior to each instalment, the
Company is obligated to escrow shares under the terms of an escrow agreement.
The convertible Note bears interest at 8% per annum and may be prepaid at any
time. The Notes issued under the Loan Agreement are convertible at any time at
the option of IFG at a conversion price of $0.75 per share. The security
agreement grants IFG a security interest in all of the Company's equipment,
inventory, accounts, contract rights, chattel paper and instruments, and the
proceeds of any of the collateral. The Lender's warrants granted with the each
installment are exercisable at $1.50 per share, subject to defined adjustments.
The warrants are exercisable 20% immediately and at the rate of an additional 1%
for each $9,125 of principal borrowed. The Company was obligated to issue 20,027
shares of its Common Stock to be held in escrow for the potential conversion of
the notes or exercise of the warrants. IFG acts as escrow agent for the shares
and is authorized to release such shares upon receipt of a notice of note
conversion or warrant exercise. The Company granted IFG registration rights and
is obligated to file a Form SB-2 within sixty (60) days of the agreement. This
Prospectus is part of the registration statement required and under the terms of
the agreement covers 3,322,667 shares which would cover all of the Notes if
issued and converted plus interest for the term and all of the Warrants if
granted and exercised. In the event the Company's registration statement is not
declared effective within one hundred twenty (120) days of a specified deadline,
the Company is required to pay a penalty equal to $1000 per month, to be
adjusted pro rata for less periods. Under the terms of the Loan Agreement, an
initial loan of $11,000 was made on April 5, 2000, the Lender was granted a
warrant to purchase 3,014 shares. Further instalments were made to the Company
and shares placed in escrow; to wit, a loan of $28,245 on April 26, 2000 with
51,425 shares placed in escrow; $20,000 on June 7, 2000 with 36,413 shares
placed in escrow; $35,000 on June 15, 2000 with 63,722 shares placed in escrow;
$35,000 on June 28, 2000 with 63,722 shares placed in esrow; $20,000 on July 6,
2000 with 36,413 shares placed in escrow; and $28,000 on August 17, 2000 with
50,978 shares placed in escrow. The issuance of the securities was made pursuant
to Regulation D of the Act. See "Risk Factors - Registration and State
Registration to Exercise Warrants."
In addition to the Escrowed Shares to IFG, a total of 300,000 shares are
held in escrow for W.M. Properties of South Florida Inc. as part of the
convertible mortgage notes issued to secure the proceeds to pay off the First
and Second Note on the Company's Property.
Dividend Policy
The holders of the issued and outstanding shares of the Company's Common
Stock are entitled to receive dividends when, as and if declared by the
Company's Board of Directors out of any funds lawfully available therefore. The
Company has never declared a cash dividend on its Common Stock. The Board of
Directors intends to retain future earnings to finance the development
54
<PAGE>
and expansion of the Company's business and does not expect to declare any
dividends in the foreseeable future.
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 Previous 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:
(1) 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
55
<PAGE>
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 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.
Further, Section 607.0902 of the Florida Business Corporation Act prohibits
the voting of shares in a publicly-held Florida corporation that are acquired in
a "control share acquisition" unless the holders of a majority of the
corporation's voting shares (exclusive of shares held by officers of the
corporation, inside directors or the acquiring party) approve the granting of
voting rights as to the shares acquired in the control share acquisition or
unless the acquisition is approved by the corporation's board of directors,
unless the corporation's articles of incorporation or bylaws specifically state
that this section does not apply. A "control share acquisition" is defined as an
acquisition that immediately thereafter entitles the acquiring party to vote in
the election of directors
56
<PAGE>
within each of the following ranges of voting power: (i) one-fifth or more, but
less than one-third of such voting power: (ii) one-third or more, but less than
a majority of such voting power; and, (iii) more than a majority of such voting
power. The Articles of Incorporation of the Company do not exclude the
ramifications of Section 607.0902 as they apply to control-share acquisitions of
shares of the Company.
SHARES ELIGIBLE FOR FUTURE SALE
As of September 30, 2000, 2000, 3,356,175 of the 4,033,175 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 and 354,300 of the 4,033,175 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. The balance of the 4,033,175 shares which are held in escrow,
322,700 shares are registered under this Prospectus and 300,000 shares are
"restricted securities". Assuming no other issuances, as of September 30, 2000,
if the Notes plus interest thereon for the term are converted, Warrants granted
to the Selling Shareholder are exercised and the escrowed shares to W.M.
Properties of South Florida Inc. are distributed, and upon the effective date of
this Prospectus, the Company will have 7,033,842 shares of stock outstanding, of
which 6,678,884 will be freely tradeable and 3,550,000 will be subject to Rule
144 restrictions.
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 also are subject to certain limitations on manner of
sale, notice requirements, and the 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.
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
non-affiliates do not lose their status as restricted securities.
57
<PAGE>
As a result of the provisions of Rule 144, all of the restricted securities
issued prior to the Previous Registration were available for sale in the public
market beginning 90 days after the date of the Prospectus for the Previous
Registration.
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"),
pursuant to the terms of the Previous Registration, agreed, pursuant to 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 the prospectus for the Previous Registration; 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 the prospectus for the Previous
Registration; 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 the
prospectus for the Previous Registration; 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).
The Lock-In Agreement with regard to the Promotional Shares is still in
force.
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"),
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:
58
<PAGE>
(1) Upon the prior written consent of the Placement Agent named in
the Previous Registration; or
(2) Upon the expiration of 30 months after the date of the prospectus
filed with the Previous Registration; 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 the prospectus for the
Previous Registration.
Since more than thirty (30) months has expired since the prospectus for the
Previous Registration was filed, the Lock-Up Agreement for the Lock-Up Shares
has expired by the passsage of time and these shares are no longer subject to
these restrictions.
The Company is quoted on the OTC BB. 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.
CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The Company has had no changes of accountants since inception or
disagreements with its accountants with regard to any accounting or financial
disclosure issues.
LEGAL MATTERS
The validity of the securities being offered hereby will be passed upon for
the Company by the Mintmire & Associates, Palm Beach, Florida. Donald F.
Mintmire, the sole owner of the firm is the beneficial owner of 50,000 shares of
Common Stock.
59
<PAGE>
EXPERTS
The Financial Statements of the Company as of December 31, 1998 and 1999
and for the years ended December 31, 1998 and 1999, 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.
WHERE YOU CAN FIND MORE INFORMATION
Cuidao files annual, quarterly and current reports and other information
with the Securities and Exchange Commission (the "SEC"). Such information may
read and any such document may be copied from the SEC at their public reference
facilities in Room 1024 at 450 Fifth Street N.W., Washington, DC 20549 or at
regional offices located at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511 and 7 World Trade Center, 13th Floor, New York, New York
10048. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. Cuidao's SEC filings also are available to the public on
the SEC Internet site at http://www.sec.gov.
Cuidao filed with the SEC a registration statement on Form SB-2 under the
Act which registered the shares covered by this Prospectus for resale by the
Selling Shareholders. This Prospectus is only part of the registration
statement. It does not contain all of the information shown in the registration
statement because the SEC rules and regulations allow Cuidao to include certain
information in the filing, but permit Cuidao to omit certain information from
the Prospectus. Statements contained in this Prospectus as to any contract or
other documents' contents are not necessarily complete. In each instance, if the
contract or document is filed as an exhibit to the registration statement, the
affected statement is qualified, in all aspects by reference to the applicable
exhibit to the registration statement. For further information about Cuidao or
its shares, please refer to the registration statement and the exhibits that may
be obtained from the SEC at its principal office the SEC is paid the prescribed
fee, or such information can be obtained through the Internet site listed above.
The SEC allows Cuidao to "incorporate by reference" the information it
files with them. This means that Cuidao can disclose important information by
referring the reader to these documents. The information Cuidao incorporates by
reference is an important part of this Prospectus, and information that Cuidao
files later with the SEC will update or supercede automatically this
information. Cuidao incorporates by reference the following documents, which it
has filed already with the SEC, and any future filings Cuidao makes with the SEC
under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act until the
termination of the offering under this Prospectus.
- Cuidao's Annual Report on Form 10KSB for the year ended December 31,
1999.
- Cuidao's Quarterly Reports on Form 10QSB for the quarter ended June
30, 2000.
60
<PAGE>
- The Company has not filed any current reports on Form 8K.
- The description of the Company's Common Stock, par value $.0001 per
share is contained in its Previous Registration Statement filed under
the Act on Form SB-2 (Registration Number 333-43457).
The reader should rely only on the information Cuidao includes or
incorporates by reference in this Prospectus and any applicable prospectus
supplement. Cuidao has not authorized anyone to provide information different
from that contained in this Prospectus. The information contained in this
Prospectus or the applicable prospectus supplement is accurate only as of the
date on the front of those documents, regardless of the time of delivery of this
Prospectus or the applicable prospectus supplement or of any sale of our
securities.
Any statement contained in this Prospectus or in a document incorporated or
deemed to be incorporated by reference in this Prospectus is deemed to be
modified or superseded for purposes of this Prospectus to the extent that any of
the following modifies or superseded a statement in this Prospectus or
incorporated by reference in this Prospectus:
- in the case of a statement in a previously filed document
incorporated by reference or deemed to be incorporated by
reference in this Prospectus, a statement contained in this
Prospectus;
- a statement contained in any accompanying prospectus supplement
relating to a specific offering of shares; or
- a statement contained in any other subsequently filed document
that modifies or supersedes a statement in this Prospectus.
Any modified or superseded statement will not be deemed to constitute a
part of this Prospectus or any accompanying prospectus supplement, except as
modified or superseded. Except as provided by the above mentioned exceptions,
all information appearing in this Prospectus and each accompanying prospectus
supplement is qualified in its entirety by the information appearing in the
documents incorporated by reference.
Cuidao will provide, without charge to each person to whom a copy of this
Prospectus is delivered, after their written or oral request, a copy of any or
all of the documents incorporated by reference into this Prospectus, other than
exhibits to the documents, unless the exhibits are incorporated specifically by
reference in the documents. Requests may be made by writing or telephoning the
following person:
Nicole Pompilio
Investor Relations
Cuidao Holding Corp.
2951 Simms Street
Hollywood, FL 33020-1510 (954) 924-0047.
61
<PAGE>
<TABLE>
<CAPTION>
INDEX TO THE FINANCIAL STATEMENTS
<S> <C>
Page
Independent Auditor's Report F-1
Consolidated Balance Sheets as of December 31, 1999 and 1998 F-2
Consolidated Statements of Operations for the two years ended December 31, 1999
and 1998 and cumulative totals for development stage operations from February
12, 1996 (date of inception)
to December 31, 1999 F-4
Consolidated Statements of Stockholders' Equity for the two years ended December
31, 1999 and 1998 and cumulative totals for development stage operations from
February 12, 1996 (date
of inception) to December 31, 1999 F-5
Consolidated Statements of Cash Flows for the two years ended December 31, 1999
and 1998 and cumulative totals for development stage operations from February
12, 1996 (date of inception) to
December 31, 1999 F-6
Notes to Financial Statements F-8
Condensed Consolidated Balance Sheets (Unaudited) for the quarter ending
June 30, 2000 F-13
Condensed Consolidated Statements of Operations for the Six Months ended
June 30, 2000 and June 30, 1999 (Unaudited) F-14
Condensed Consolidated Statement of Operations for the Three Months ended
June 30, 2000 and June 30, 1999 (Unaudited) F-15
Consolidated Statements of Cash Flow for the Six Months ended
June 30, 2000 and June 30, 1999 (Unaudited) F-16
Notes to Condensed Consolidated Financial Statements, June 30, 2000
(Unaudited) F-17
</TABLE>
63
<PAGE>
BAUM & COMPANY, P.A.
Certified Public Accountants
1515 University Drive - Suite 209
Coral Springs, Florida 33071
(954) 752-1712
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
of Cuidao Holding Corp.
Hollywood, Florida
We have audited the accompanying consolidated balance sheets of Cuidao Holding
Corp. and its wholly-owned subsidiaries as of December 31, 1999 and 1998, and
the related consolidated statements of operations, stockholders' equity and cash
flows for the years then ended. These consolidated financial statements are the
responsibility of management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Cuidao Holding
Corp. and its wholly-owned subsidiaries as of December 31, 1999 in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 8 of the
financial statements, the company has suffered losses from operations for the
past years which raise substantial doubt about it ability to continue as a going
concern. The financial statements do not include any adjustment that might
result from the outcome of this uncertainty.
May 12, 2000
Coral Springs, Florida
F-1
<PAGE>
<TABLE>
<CAPTION>
CUIDAO HOLDING CORP.AND ITS WHOLLY-OWNED SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
December 31, 1999 AND 1998
<S> <C> <C>
A S S E T S
1999 1998
-------- --------
Current Assets
Cash and Cash Equivalents $ 1,533 $ 353,281
Accounts Receivable 27,422 24,226
Inventory 304,346 - 0 -
Prepaid Expenses - 0 - 32,444
------------ ----------
Total Current Assets 333,301 409,951
------------ ----------
Plant and Equipment - (Net of $22,113
and $6,220 of accumulated depreciation
at December 31, 1999 and 1998) 584,873 18,782
------------ ----------
Other Assets
Goodwill (net of $13,333 and $8,333
of accumulated amortization at
December 31, 1999 and 1998) 1,667 6,667
Organizational Costs (Net of $1,048 and
$740 of accumulated amortization at
December 31, 1999 and 1998) 492 800
Deferred Loan Costs (Net of $3,500 of
accumulated amortization at December 31, 1999 7,000 - 0 -
Deposits and escrow balances 19,314 18,157
------------ ----------
Total Other Assets 28,473 25,624
------------ ----------
Total Assets $ 946,647 $ 454,357
======= ======
</TABLE>
(Continued)
F-2
<PAGE>
<TABLE>
<CAPTION>
CUIDAO HOLDING CORP. AND ITS WHOLLY-OWNED SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
December 31, 1999 and 1998
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities
Notes and Loans Payable $ 48,324 $ 50,070
Accounts Payable and Accrued Expenses 386,301 78,714
Taxes Payable 31,315 - 0 -
Security Deposits Held 5,724 - 0 -
---------- -----------
471,664 128,784
---------- -----------
Long Term Liabilities
Mortgage Payable 480,000 -0-
---------- -----------
Stockholders' Equity
Common Stock, $.0001 par value:
Authorized shares - 100,000,000
Issued and outstanding shares -
2,402,175 at December 31, 1999
and 2,356,175 at December 31, 1998 240 236
Preferred Stock, $.0001 par value:
Authorized shares - 10,000,000
None issued and outstanding shares
Additional Paid-In Capital 768,812 660,918
Accumulated Deficit during Development Stage (774,069) (335,581)
--------- ---------
Total Stockholders' Equity (5,017) 325,573
--------- ---------
Total Liabilities and Stockholders' Equity $946,647 $454,357
======= =======
</TABLE>
See Accompanying Auditor's Report and Notes to Financial Statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
CUIDAO HOLDING CORP. AND ITS WHOLLY-OWNED SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<S> <C> <C> <C>
Development Stage
Year Ended Year Ended February 12, 1996
December 31 December 31 to December 31,
1999 1998 1999
------------ -------------- -----------------
Revenues $ 125,057 $ 68,387 $ 220,515
Cost of goods sold 46,154 40,359 113,963
----------- ----------- --------------
Gross Profit 78,903 28,028 106,552
Operating Expenses 426,450 197,365 778,799
------------ ----------- --------------
Net income (loss) before other
income (expenses) (347,547) (169,337) (682,247)
Other income (expenses)
Interest expense (net) (56,880) (1,254) (57,761)
Rental income 33,631 - 0 - 33,631
Miscellaneous (3,663) - 0 - (3,663)
Write-off of uncollectible loan (64,029) - 0 - (64,029)
---------- ----------- --------------
(90,941) (1,254) (91,822)
---------- ----------- --------------
Net income (loss) before provision
for income taxes (438,488) (170,591) (774,069)
Provision for income taxes (Note 1) - 0 - - 0 - - 0 -
---------- ----------- --------------
Net loss $ (438,488) $(170,591) $ (774,069)
======= ======= =======
Income (loss) per common share $ (.186 ) $ (.076) $ (.142)
======= ======= =======
Weighted average common
shares outstanding 2,356,427 2,244,363 2,356,301
======= ======= =======
</TABLE>
See Accompanying Auditor's Report and Notes to Financial Statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
CUIDAO HOLDING CORP. AND ITS WHOLLY-OWNED SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
CUMULATIVE TOTALS FOR DEVELOPMENT STATE
OPERATIONS From February 12, 1996 (Date of Inception)
To December 31, 1999
<S> <C> <C> <C> <C> <C> <C>
Deficit
Accumulated
During the
Common Stock Preferred Stock Paid-In Development
# Shares Amount # Shares Amount Capital Stage
---------- ---------- ---------- ---------- --------- ------------
Balance December 31, 1996 4,154,400 $ 415 $ 78,810 $ (44,009)
Cancellation of original (2,221,600) (221) 221
Additional shares issued
in subscription offering 229,200 23 38,000 4 152,274
Shares issued for acquisition
of subsidiary 60,000 6 14,994
Net loss for the year ended
December 31, 1997 (120,982)
--------- ----- -------- ------- --------- ------------
Balance December 31 1997 2,222,000 223 38,000 4 246,299 (164,991)
Exchange of preferred stock
for common stock 38,000 4 (38,000) (4) -0-
Issuance of common stock 96,175 9 -0- -0- 414,619
(Net of offering expenses
of$132,706)
Net Loss for the year
ended December 31, 1998 (170,590)
--------- ----- --------- ------- --------- ------------
Balance December 31, 1998 2,356,175 236 -0- -0- 660,918 (335,581)
Issuance of common stock 46,000 4 -0- -0- 107,894
Net loss for the year (438,488)
--------- ----- --------- ------- --------- ------------
Balance December 31, 1999 2,402,175 $ 240 $ -0- $ -0- $ 768,812 $(774,069)
======= ==== ==== === ====== =======
</TABLE>
See Accompanying Auditor's Report and Notes to Financial Statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
CUIDAO HOLDING CORP. AND ITS WHOLLY-OWNED SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 AND
CUMULATIVE TOTALS FOR DEVELOPMENT STAGE OPERATIONS
FROM February 12, 1996 (Date of Inception) to December 31, 1999
<S> <C> <C> <C>
Year Ended Year Ended Development Stage
December 31, December 31, February 12, 1996
1999 1998 to December 31, 1999
---------------- ---------------- --------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (438,488) $ (170,591) $ (774,070)
Adjustments to Reconcile Net Cash Used in
Operating Activities
Depreciation and amortization 26,465 8,951 41,759
Issuance of common stock for legal
services -0- - 0 - 21,085
(Increase) Decrease in accounts receivable (3,196) (4,593) (27,422)
(Increase) Decrease in inventory (304,346) 3,220 (304,346)
(Increase) Decrease in organization costs -0- - 0 - (1,540)
(Increase) Decrease in deferred offering
costs -0- 35,162 -0-
(Increase) Decrease in prepayments &
deposits 31,287 (47,409) (19,314)
Increase in accounts payables and accruals 307,587 73,337 386,301
Increase in taxes payable 31,315 -0- 31,315
Increase in security deposits held 5,724 -0- 5,724
----------- ------------ -----------
Net Cash Flow from Operating Activitie (343,652) (101,923) (640,508)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of fixed assets (233,748) (12,834) (258,749)
----------- ------------ -----------
Net Cash Used in Investing Activities (233,748) (12,834) (258,749)
</TABLE>
(Continued)
F-6
<PAGE>
<TABLE>
<CAPTION>
CUIDAO HOLDING CORP. AND ITS WHOLLY-OWNED SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
AND CUMULATIVE TOTALS FOR DEVELOPMENT STAGE
OPERATIONS FROM February 12, 1996 (Date of Inception)
to December 31, 1999
<S> <C> <C> <C>
Year Ended Year Ended Development Stage
December 31, December 31, February 12, 1996
1999 1998 to December 31, 1999
---------------- ---------------- --------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in mortgage payable 130,000 -0- 130,000
Increase in deferred loan costs (10,500) -0- (10,500)
Increase (Decrease)in loans payable (1,746) 47,570 48,324
Proceeds from issuing common stock - net 107,898 414,628 637,966
Proceeds from issuing preferred stock -0- -0- 95,000
------------ ------------- -----------------
Net Cash Used in Financing Activities 225,652 462,198 900,790
------------ ------------- -----------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (351,748) 347,441 1,533
CASH AND CASH EQUIVALENTS-BEGINNING
OF PERIOD 353,281 5,840 -0-
------------ ------------- -----------------
CASH AND CASH EQUIVALENTS-END
OF PERIOD $ 1,533 $ 353,281 $ (1,533)
======= ======= ========
CASH PAID FOR INTEREST EXPENSE $ 59,559 $ -0- $ 61,895
CASH PAID FOR INCOME TAXES -0- -0- -0-
</TABLE>
See Accompanying Auditor's Report and Notes to Financial Statements.
F-7
<PAGE>
CUIDAO HOLDING CORP. AND ITS WHOLLY-OWNED SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Organization and Operations
Cuidao Holding Corp. (the "Company") was organized under the laws of the
State of Florida on February 12, 1996. On June 27, 1996, the Company formed
Cuidao (USA) Import Co., Inc., a wholly owned subsidiary incorporated under the
laws of the State of Florida.
On March 31, 1997, the Company acquired all of the issued and outstanding
common stock of R & R (Bordeaux) Imports, Inc., a Florida corporation, making R
& R (Bordeaux) Imports, Inc., a wholly owned subsidiary of the Company. At the
time of the acquisition, Robert K. Walker, a major beneficial owner of Cuidao
Holding Corp., was also a beneficial owner of R & R (Bordeaux) Imports, Inc. In
acquiring R & R (Bordeaux) Imports, Inc., the Company issued 60,000 shares of
its common stock, which common stock was valued at $15,000. The results of
operations of R & R (Bordeaux) Imports, Inc. as presented in these financial
statements are for the period March 31, 1997 (date of inception) to December 31,
1998. The acquisition of R & R (Bordeaux) Imports, Inc. by the Company resulted
in acquired goodwill valued at $15,000. The goodwill is being amortized by the
Company over a three year life using the straight-line method.
The Company is a development stage Company which imports, develops, manages
and distributes a portfolio of international and regional brands of beer, wine
and spirits.
Note 2 - Significant Accounting Policies
Basis of Accounting
The Company's policy is to use the accrual method of accounting and to
prepare and present financial statements which conform to generally accepted
accounting principles.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All material intercompany transactions have
been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the period.
Actual results could differ from those estimates.
F-8
<PAGE>
CUIDAO HOLDING CORP. AND ITS WHOLLY-OWNED SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 - Significant Accounting Policies (Continued)
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, cash in banks, and any
highly liquid investments with a maturity of three months or less at the time of
purchase.
The Company maintains cash and cash equivalent balances at a financial
institution which is insured by the Federal Deposit Insurance Corporation up to
$100,000. At December 31, 1999 and 1998 there is no concentration of credit risk
from uninsured bank balances.
Equipment
Equipment is stated at cost and depreciated over its estimated allowable
useful life (5-7 years), using the double declining balance method. Expenditures
for major renewals and betterments that extend the useful lives of fixed assets
are capitalized. Expenditures for maintenance and repairs are charged to expense
as incurred.
Organizational Costs
The Company has incurred certain federal and state filing and registration
fees, legal and promotional fees in its formation and capitalization, which will
benefit the Company in future periods. These costs are being amortized over a
five year life using the straight-line method.
Deferred Offering Costs
Deferred offering costs include the costs associated with the initial
public offering (effective in November 1998). The costs related to the initial
public offering were capitalized and netted against the amount received from the
public offering.
Income Taxes
In February 1992, the Financial Standards Board issued Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes." Under
SFAS No. 109, deferred assets and liabilities are recognized for the estimated
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective basis.
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
F-9
<PAGE>
CUIDAO HOLDING CORP. AND ITS WHOLLY-OWNED SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 - Significant Accounting Policies (Continued)
Income Taxes (Continued)
recognized in income in the period that includes the enactment date.
Net Loss per Common Share
Net loss per common share is computed by dividing net loss by the weighted
average number of common share outstanding during the period.
Note 3 - Property, Plant and Equipment
Property, Plant and Equipment at December 31, 1999 and 1998 are summarized
as follows:
1999 1998
--------- ---------
Building $ 587,677 $ - 0 -
Machinery and Equipment 19,309 25,002
Less Accumulated Depreciation (22,113) (6,220)
Net Property, Plant and Equipment $ 584,873 $ 18,782
======== ======
Depreciation expense amounted to $18,377 and $4,059, respectively, for the
years ended December 31, 1999 and 1998.
Note 4 - Commitments
Bank Line of Credit
In July 1998, the company obtained a $50,000 revolving line of credit from
a bank. This bank line of credit accrues interest at 10.50% per annum.
Note 5 - Stock Options and Incentive Plans
In October 1997, the Board of Directors and stockholders of the Company
approved two stock option plans; an incentive stock option plan ("Incentive
Plan") and a directors' stock option plan ("Directors' Plan"). The Incentive
Plan covers employees of the Company (including officers and employee
directors), and the Directors' Plan covers nonemployee directors of the Company.
F-10
<PAGE>
CUIDAO HOLDING CORP. AND ITS WHOLLY-OWNED SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A total of 750,000 shares of common stock of the company are reserved for
issuance under the Incentive Plan. The Incentive Plan provides for the granting
of "statutory incentive stock options" within the meaning of Section 422 of the
Internal Revenue code of 1986, and for the granting to employees and consultants
of nonstatutory stock options.
A total of 250,000 shares of Common Stock are reserved for issuance under
the Directors' Plan. The Directors' Plan provides only for the grant of
nonstatutory stock options.
At December 31, 1999, there were no stock options outstanding under either
the Incentive Plan or the Directors' Plan.
In February 1999, the Company amended the 1997 Incentive Stock Option Plan,
with the Equity Incentive Plan. This revision, provides for, at the discretion
of the Board of Directors, stock options, stock appreciation rights, restricted
stock awards, performance shares and performance units to directors, officers,
key employee and consultants of the Company. An aggregate of 3,750,000 shares of
common stock has been reserved for issuance under these plans.
Note 6 - Equity
On December 30, 1997, the Company filed a Registration Statement on Form
SB-2 with the Securities and Exchange Commission to offer up to 260,000 Units to
the general public. Each Unit consisted of one share of the Company's common
stock and one common stock purchase warrant ("Warrant"). Each Warrant entitles
the holder thereof to purchase one share of common stock at an exercise price of
$8.00, subject to adjustment, at any time over a three year period commencing on
the effective date of the Registration Statement. The Warrants may be redeemed
by the Company at $.05 per Warrant, at any time prior to their expiration on not
less than 30 days' written notice, if the closing bid price of the common stock
equals or exceeds $10.00 per share for 30 consecutive trading days ending within
10 days of the notice of redemption.
On May 1, 1998, the Company's Registration Statements was declared
effective by the Securities and Exchange commission, and in November 1998, the
Company completed its public offering of Units. A total of 96,175 Units were
sold at a price of $5.75 per Unit. After payment of commissions and other
expenses of the offering, the Company received net proceeds from the offering of
approximately $519,000.
As part of the offering agreement, the 38,000 shares of outstanding
Preferred stock was converted to 38,000 shares of common stock.
F-11
<PAGE>
CUIDAO HOLDING CORP. AND ITS WHOLLY-OWNED SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7 - Concentration of Risk
The Company's Red Dragon beer product is brewed and bottled by Tsingtao
Brewery No. 3, located in the People's Republic of China. The foreign production
of goods is subject to a number of risks, including transportation delays and
interruptions, political and economic disruptions, the imposition of tariffs,
quotas and other import or export controls, and changes in governmental
policies. China currently enjoys most favored nation trading status with the
United States. No assurance can be given that China will continue to enjoy most
favored nation status in the future. The Company believes that if Tsingtao
Brewery No. 3 was no longer able to brew and bottle the Company's beer products,
it would be able to obtain its beer products from other producers located in the
People's Republic of China. The Company believes this would not have a near-term
severe impact on it's financial position or results of operations.
Note 8 - Going Concern Considerations
The Company has an accumulated deficit of $774,069, and has suffered losses
of $438,488 in the current year. Additionally, the negative working capital at
December 31, 1998 of $138,363 and for the year ended December 31, 1999, raise
substantial doubt as to its ability to continue as a going concern. Management
has advised us that a venture capital company has expressed an interest in
infusing equity capital into the company.
F-12
<PAGE>
<TABLE>
<CAPTION>
CUIDAO HOLDING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<S> <C> <C>
ASSETS JUNE 30, DECEMBER 31,
2000 1999
(UNAUDITED) (AUDITED)
Current Assets:
Cash and Cash Equivalents $ 1,284 $ 1,533
Accounts Receivable 23,312 27,422
Inventory 167,913 304,346
----------------- ------------------
Total Current Assets 192,509 333,301
----------------- ------------------
Property, Plant and Equipment (Net of $31,289 and $22,113
accumulated depreciation at June 30, 2000 and
December 31, 1999) 581,735 584,873
----------------- ------------------
Other Assets:
Goodwill (Net of $15,000 and $13,333 accumulated
amortization at June 30, 2000 and December 31, 1999) - 1,667
Organizational Costs (Net of $1,202 and $1,048 accumulated
amortization at June 30, 2000 and December 31, 1999) 338 492
Deferred Loan Costs (Net of $5,250 and $3,500 accumulated
amortization at June 30, 2000 and December 31, 1999) 5,250 7,000
Deposits and Escrow Balances 5,326 19,314
----------------- ------------------
Total Other Assets 10,914 28,473
----------------- ------------------
Total Assets $ 785,158 $ 946,647
================= ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable and Accrued Expenses $334,692 $417,616
Security Deposits - 5,724
Notes Payable - Current Portion 49,909 48,324
----------------- -------------------
Total Current Liabilities 384,601 471,664
Long Term Liabilities:
Notes Payable 594,245 480,000
----------------- ------------------
Total Liabilities 978,846 951,664
----------------- ------------------
Stockholders' Equity:
Common Stock, $.0001 Par Value; 100,000,000
Shares Authorized; 3,158,374 and 2,402,175 Issued and
Outstanding at June 30, 2000 and December 31, 1999 316 240
Common Stock Held in Escrow (23)
Additional Paid In Capital 768,760 768,812
Accumulated Deficit (962,741) (774,069)
----------------- --------------------
Total Stockholders' Equity (193,688) (5,017)
---------------- --------------------
Total Liabilities and Stockholders' Equity $ 785,158 $ 946,647
================= ====================
</TABLE>
F-13
<PAGE>
<TABLE>
<CAPTION>
CUIDAO HOLDING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30,
(UNAUDITED)
<S> <C> <C>
2000 1999
---- ----
Revenues $ 148,362 $ 56,247
Cost of Goods Sold 68,670 46,123
------------- --------------
Gross Profit 79,692 10,124
Operating Expenses:
General and Administrative 225,969 168,962
------------- --------------
Income (Loss) Before Interest Income (Expense) (146,277) (158,838)
Interest Income (Expense) (42,395) (413)
-------------- --------------
Net Income (Loss) $ (188,672) $ (159,251)
============= ==============
============= ==============
Loss Per Common Share $ (0.0708) $ (0.0680)
============= ==============
============= ==============
Weighted Average Common Shares Outstanding 2,664,675 2,356,175
============= ===============
============= ===============
</TABLE>
F-14
<PAGE>
<TABLE>
<CAPTION>
CUIDAO HOLDING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30,
(UNAUDITED)
<S> <C> <C>
2000 1999
---- ----
Revenues $ 54,485 $ 31,564
Cost of Goods Sold 20,522 26,203
-------------- -----------------
Gross Profit 33,963 5,361
Operating Expenses:
General and Administrative 123,274 66,987
-------------- -----------------
Income (Loss) Before Interest Income (Expense) (89,311) (61,626)
Interest Income - -
Interest (Expense) (24,011) (36)
--------------- ------------------
Total Interest Income (Expense) (24,011) (36)
--------------- ------------------
Net Income (Loss) $ (113,322) $ (61,662)
=============== ==================
Loss Per Common Share $ (0.0472) $ (0.0262)
=============== ==================
Weighted Average Common Shares Outstanding 2,402,175 2,356,175
=============== ==================
</TABLE>
F-15
<PAGE>
<TABLE>
<CAPTION>
CUIDAO HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30,
(UNAUDITED)
<S> <C> <C>
2000 1999
---- ----
Cash Flow from Operating Activities:
Net (Loss) $ (188,672) $ (159,251)
Adjustments to Reconcile Net Loss to Net Cash Used For
Operating Activities:
Depreciation and Amortization 12,747 8,843
Changes in Assets and Liabilities:
(Increase) Decrease in Accounts Receivable 4,110 2,319
(Increase) Decrease in Inventory 136,433 (36,597)
(Increase) Decrease in Prepayments and Deposits 13,988 15,154
Increase (Decrease) in Accounts Payable and Accrued Expenses (82,923) (2,504)
Increase (Decrease) in Security Deposits (5,724) -
------------ --------------
Net Cash Used in Operating Activities (110,041) (172,036)
------------ --------------
Cash Flow from Investing Activities:
Acquisition of Equipment and Building (6,038) (595,311)
------------ --------------
Cash Flow from Financing Activities:
Increase in Loans Payable 115,830 7,430
Increase in Mortgage Payable - 480,000
------------ --------------
Net Cash Used in Financing Activities 115,830 487,430
------------ --------------
Net increase (decrease) in Cash (249) (279,917)
Cash - Beginning 1,533 353,281
Cash - Ending $ 1,284 $ 73,364
=========== ==============
</TABLE>
F-16
<PAGE>
CUIDAO HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(UNAUDITED)
GENERAL
Basis of Presentation - The unaudited condensed consolidated financial
statements include the accounts of the Company and its subsidiary. Intercompany
balances have been eliminated in consolidation.
Interim Financial Information - The financial information contained herein is
unaudited but includes all normal and recurring adjustments which, in the
opinion of management, are necessary to present fairly the information set
forth. The unaudited condensed consolidated financial statements should be read
in conjunction with the consolidated financial statements, which are included in
the Company's Annual Report on Form 10-KSB for the year ended December 31,
1999.The Company's results for interim periods are not necessarily indicative of
results to be expected for the fiscal year of the Company ending December 31,
2000. The Company believes that this Quarterly Report filed on Form 10-QSB is
representative of its financial position, its results of operations and its cash
flows for the periods ended June 30, 2000 and 1999 covered thereby.
Comprehensive Income - In June 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 130 ("SFAS 130"),
"Reporting Comprehensive Income." SFAS 130 requires companies to disclose
comprehensive income and its components. The Company currently has no items of
other comprehensive income and therefore SFAS 130 does not apply.
LEGAL PROCEEDINGS
As of June 30, 2000, the Company was in default under the terms of its Second
Mortgage Promissory Note. In addition the monthly payments due February through
June 2000 are in arrears. A lease with a national credit tenant for fifty
percent of the Company's building was executed on June 13, 2000. This lease
begins on July 1, 2000 and terminates on June 30, 2002. The Lessee, The Goodyear
Tire & Rubber Company, will be paying a monthly rent of $2,500. It is the
Company's goal to refinance its Second Mortgage Promissory Note to reduce the
overall debt of the Company by paying down the amount being financed and also
secure said loan at a more competitive interest rate. In the event that
refinancing is not immediately accomplished, bridge financing has been arranged
to bring payments current.
The Company has filed a lawsuit against Investors Conceptual, Inc. This action
is for non-payment of funds owned to the Company and default by Investors
Conceptual, Inc. Settlement negotiations are presently ongoing in the above
cause of action.
The Company received a judgement against it due to non-payment of an obligation
to a vendor. The Company's legal council feels there is a good chance that the
judgement will be adjusted favorably on appeal. The Company also is
investigating whether the vendor will accept a settlement offer although the
Company has proceeded to file an appeal of the prior judgment.
F-17
<PAGE>
No person is authorized in connection with any offering of the shares to
give any information or to give any representation not contained in this
Prospectus, and the reader should not rely on any such information or
representation as having been authorized by Cuidao or any Selling Shareholder.
Neither the delivery of this Prospectus nor any sale made hereunder shall under
any circumstances create any implication that the information contained in this
Prospectus is correct as of any time subsequent to the date of this Prospectus.
Until the later of April 4, 2004 or ninety (90) days after all Notes have
been converted or paid and all Warrants have been exercised or expired, all
dealers that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver a Prospectus. This is
in addition to the dealer's obligation to deliver a Prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions.
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
Page No.
Prospectus Summary 1
The Company 3
The Company's Property 15
Risk Factor 16
Use of Proceeds 28
Dividend Policy 29
Dilution 29
Capitalization 29
Management's Discussion and Analysis
or Plan of Operation 30
Legal Proceedings 35
Management 36
Principal Shareholders 41
Selling Shareholders 43
Certain Relationships and Related
Transactions 45
Plan of Distribution 49
Market for Common Equity and
Related Shareholder Matters 50
Description of Securities 51
Page No.
Certain Provisions of Florida Law
and the Company's Articles of
Incorporation and Bylaws 55
Shares Eligible for Future Sale 57
Changes and Disagreements with
Accountants on accounting and
financial disclosure 59
Legal Matters 59
Experts 59
Where You Can Find More Information 60
PROSPECTUS
3,322,667 Shares of Common Stock
CUIDAO HOLDING CORP.
This Prospectus is dated October 23, 2000.
<PAGE>
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:
(i) 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);
(ii) 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
(iii) 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
62
<PAGE>
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.
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.
63
<PAGE>
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:*
SEC Registration Fee.................................... $1,588
Blue Sky fees and expenses.............................. 5,000
Transfer Agent and Registrar fees....................... 1,000
Printing and engraving expenses......................... 10,000
Legal fees and expenses................................. 20,000
Accounting fees and expenses............................ 1,500
Miscellaneous........................................... 10,000
-------
Total............................................. $49,088
=======
------------
* All amounts other than the SEC registration fee are estimated.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
<TABLE>
<CAPTION>
Within the past three years, the Registrant sold securities without
registration under the Securities Act of 1933, as amended (the "Act") as
follows:
<S> <C> <C> <C>
SECURITIES NAMES OF CONSIDERATION EXEMPTION
SOLD INVESTORS RECEIVED FROM REGISTRATION
--------------- ----------------- ---------------------- ---------------------------
38,000 Shares of 5 Persons(1) $95,000 Section 3(b) of the
Series A Preferred Stock Securities Act and Rule 504
of Regulation D promulgated
thereunder.
46,000 Shares of 3 Person (2) $107,894 Section 4(2) of the Securities
Common Stock Act and Rule 506 of
Regulation D promulgated
thereunder.
322,700 Shares of 1 Person (3) $177,245 Section (4)(2) of the
Common Stock Securities Act and Rule
506 of Regulation D
promulgated thereunder.
300,000 Shares of 1 Person (4) $525,000 Section (4)(2) of the
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Common Stock
Securities Act and Rule
506 of Regulation D
promulgated thereunder.
9,000 Shares of 7 Persons (5) $14,301 Section (4)(2) of the
Common Stock Securities Act and Rule
506 of Regulation D
promulgated thereunder
-------------
</TABLE>
(1) 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. These shares converted to Common
Stock after the Previous Registration.
(2) One investor acquired 25,000 at a cost of $80,000, 1600 were issued to Mr.
Fisher as repayment of loans to the Company in the amount of $21,644 and
the balance where granted to a former consultant in lieu of services valued
at $6,250. The Company never received the full proceeds on the 25,000
shares and brought suit against the investor.
(3) These shares are the number of shares held in escrow as of September 30,
2000 against the conversion of the outstanding Notes plus interest for the
term under the Loan Agreement for the installments and for the exercise of
the Warrants granted with the issuance of the Notes.
(4) Total Shares to be issued in exchange for funds used to pay off the second
mortgage and for funds to be provided to pay off the first mortgage.
(5) Each director was granted 1,200 shares in September 2000 and two employees
were granted a total of 3,000 shares.
ITEM 27. EXHIBITS
<TABLE>
<CAPTION>
<S> <C>
EXHIBIT
NUMBER DESCRIPTION
------------- --------------------
1.1 Placement Agent Agreement[1]
1.2 Escrow Agreement by and between Cuidao Holding Corp. and Imperial Trust
Company[1]
1.3 Warrant Agreement by and between Cuidao Holding Corp. and Florida Atlantic
Stock Transfer[1]
</TABLE>
65
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
3.0 Amended and Restated Articles of Incorporation of Cuidao holding Corp.[1]
3.1 Bylaws of Cuidao Holding Corp.[1]
4.0 Specimen Stock Certificate[1]
5.2 * Opinion of Mintmire & Associates as to legality
10.0 Cuidao Holding Corp. 1997 Incentive Stock Option Plan [1] amended to the
Cuidao Holding Corp. 1999 Equity Incentive Plan[2]
10.1 Cuidao Holding Corp. 1997 Directors' Stock Option Plan[1]
10.2 Import and Distribution Agreement by and between Cuidao Holding Corp. and
the People's Republic of China, Tsingtao Brewery No. 3 Co., Ltd.[1]
10.3 Import and Distribution Agreement by and between Cuidao Holding Corp. and
Cave du Vignoble Gursonnais[1]
10.4 Import and Distribution Agreement by and between Cuidao Holding Corp. and
Les Chais du Prevot[1]
10.5 Import and Distribution Agreement by and between Cuidao Holding Corp. and
Vignerons De Buzet[1]
10.6 Import and Distribution Agreement by and between Cuidao Holding Corp. and
Godet Freres[1]
10.7 Form of Lock-Up Agreement by and between the Cuidao Holding
Corp., West America Securities Corp. and certain shareholders of Cuidao
Holding Corp.[1]
10.8 Form of Promotional Share Lock-In Agreement by and between Cuidao Holding
Corp. and certain shareholders of Cuidao Holding Corp.[1]
10.9 Promissory Note and Mortgage and Security Agreement dated January 22, 1999
by and between Cuidao Holding Corp. and Em-Star Mortgage Co. [2]
10.10 Promissory Note dated January 22, 1999 by and between Cuidao Holding Corp.
and Sebastiano Salemi and Nunzia Salemi, as husband and wife. [2]
10.12 Assignment of Lease Agreement dated January 22, 1999 by and between
Sebastiano Salemi and Nunzia Salemi, as husband and wife, and Cuidao
Holding Corp. [2]
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C>
10.13 Loan Agreement dated April 5, 2000 including the Promissory Note, Security
Agreement, Registration Rights Agreement and Escrow Agreement [3]
10.14 Exclusive Sales and Marketing Agreement effective July 15, 2000 with WCBI
[3]
10.15 Employment Agreement with Ruebin Share dated July 19, 2000 [3]
10.16 Termination Option Agreement dated July 19, 2000 [3]
10.17 Goodyear Tire & Rubber Company Lease [3]
10.18 * Advisory Service Agreement dated April 4, 2000 with Corporate Analysis Group
Inc.
10.19 * Advisory Service Agreement dated April 4, 2000 with St. Martin Equity
Group Inc.
10.20 * Import and Distribution Agreement dated July 13, 2000 with Dominion Wine
Group Ltd and Remy Pannier
10.21 * Retainer Agreement with Stephen S. Durland CPA effective August 1, 2000
10.22 * Service Agreement with Kristine P. Klein effective August 1, 2000
10.23 * Service Agreement with Yasmine Reger Raia effective July 31, 2000
10.24 * Letter of Appointment from Beacon Wine Company, Inc. dated August 7,
2000
10.25 * Distribution Agreement dated August 21, 2000 with Dominion Wine Group
Ltd. and Willow Cove Winery
10.26 * Convertible Note Acquisition Agreement effective August 31, 2000
10.27 * Second Convertible Note Acquisition Agreement dated September 26, 2000
10.35 Cuidao Holding Corp. 2000 Employee/Consultant Stock Compensation Plan [4]
23.5 * Consent of Baum & Company, independent certified public accountants
23.6 * Consent of Mintmire & Associates (included in Exhibit 5.2)
27.0 * Financial Data Schedule
---------------
</TABLE>
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<PAGE>
* Filed herewith
[1] Previously filed with the Company's Registration Statement on Form SB2
(Registration Number 333-43457)
[2] Previously filed with the Companys' Form 10KSB for the Year Ending December
31, 1998
[3] Previously filed with the Company's Form 10QSB for the Quarter ending June
30, 2000.
[4] Previously filed with the Company's Form S-8 on May 22, 2000
ITEM 28. UNDERTAKINGS
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
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<PAGE>
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.
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
Hollywood, State of Florida, on the 23rd day of October, 2000.
CUIDAO HOLDING CORP.
/s/ C. MICHAEL FISHER
---------------------------
C. Michael Fisher
Chairman of the Board, President and
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>
<S> <C> <C>
SIGNATURE TITLE DATE
----------------- -------- --------
/s/ C. MICHAEL FISHER Chairman of the Board, October 23, 2000
-------------------------------- President, Chief
C. Michael Fisher Financial Officer and
Director
/s/ FRANCIS J. HORNIK Director October 23, 2000
--------------------------------
Francis J. Hornik
/s/ ROBERT H. WALKER Director October 23, 2000
--------------------------------
Robert H. Walker
/s/ THOMAS J. DOBSON Director October 23, 2000
--------------------------------
Thomas J. Dobson
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ CARL E. SCHUBERT Director October 23, 2000
-------------------------------
Carl E. Schubert
</TABLE>
[Signature Page - Form SB-2]
70
