SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31, 2000
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ____________ to ____________
Commission File Number: 333-43497
CUIDAO HOLDING CORP.
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(Exact name of small business issuer as specified in its charter)
FLORIDA 65-0639616
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2951 SIMMS STREET
HOLLYWOOD, FL 33020-1510
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (954) 924-0047
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange
on which registered
None None
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Securities to be registered under Section 12(g) of the Act:
Common Stock, $.0001 par value per share
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(Title of class)
Copies of Communications Sent to:
Mintmire & Associates
265 Sunrise Avenue, Suite 204
Palm Beach, FL 33480
Tel: (561) 832-5696 - Fax: (561) 659-5371
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Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days:
Yes x No
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by court.
Yes No
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APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: At March 31, 2000, the
registrant had outstanding 2,402,175 shares of common stock, par value $0.0001,
which is the registrant's only class of common stock.
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Part I. FINANCIAL INFORMATION
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CUIDAO HOLDING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 2000 DECEMBER 31,
(UNAUDITED) 1999
(AUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents $ - $ 1,533
Accounts Receivable 20,631 27,422
Inventory 231,867 304,346
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Total Current Assets 252,498 333,301
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Property, Plant and Equipment (Net of $26,701 and $22,113
accumulated depreciation at March 31, 2000 and
December 31, 1999) 586,323 584,873
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Other Assets:
Goodwill (Net of $15,000 and $13,333 accumulated
amortization at March 31, 2000 and December 31, 1999) - 1,667
Organizational Costs (Net of $1,125 and $1,048 accumulated
amortization at March 31, 2000 and December 31, 1999) 415 492
Deferred Loan Costs (Net of $4,375 and $3,500 accumulated
amortization at March 31, 2000 and December 31, 1999) 6,125 7,000
Deposits and Escrow Balances 8,895 19,314
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Total Other Assets 15,435 28,473
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Total Assets $ 854,256 $ 946,647
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Cash Overdraft $ 10,148 $ -
Accounts Payable and Accrued Expenses 387,401 417,616
Security Deposits 2,700 5,724
Notes Payable - Current Portion 179,279 48,324
Unearned Revenue 3,024 -
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Total Current Liabilities 582,552 471,664
Long Term Liabilities:
Notes Payable 352,072 480,000
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Total Liabilities 934,624 951,664
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Stockholders' Equity:
Common Stock, $.0001 Par Value; 100,000,000
Shares Authorized; 2,402,175 Issued and
Outstanding 240 240
Additional Paid In Capital 768,812 768,812
Accumulated Deficit (849,420) (774,069)
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Total Stockholders' Equity (80,368) (5,017)
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Total Liabilities and Stockholders' Equity $ 854,256 $ 946,647
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CUIDAO HOLDING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
2000 1999
<S> <C> <C>
Revenues $ 93,877 $ 24,683
Cost of Goods Sold 37,897 19,920
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Gross Profit 55,980 4,763
Operating Expenses:
General and Administrative 112,948 101,975
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Income (Loss) Before Interest Expense (56,968) (97,212)
Interest Expense 18,383 377
Net Income (Loss) $ (75,351) $ (97,589)
================ ================
Loss Per Common Share $ (0.0271) $ (0.0410)
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Weighted Average Common Shares Outstanding 2,402,175 2,356,175
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CUIDAO HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
2000 1999
<S> <C> <C>
Cash Flow from Operating Activities:
Net (Loss) $ (75,351) $ (97,589)
Adjustments to Reconcile Net Loss to Net Cash Used For
Operating Activities:
Depreciation and Amortization 7,207 7,017
Changes in Assets and Liabilities:
(Increase) Decrease in Accounts Receivable 6,791 (10,022)
(Increase) Decrease in Inventory 72,479 (17,472)
(Increase) Decrease in Prepayments and Deposits 10,419 29,054
Increase (Decrease) in Cash Overdraft 10,148 -
Increase (Decrease) in Accounts Payable and
Accrued Expenses (30,215) 5,177
Increase (Decrease) in Security Deposits (3,024) -
Increase (Decrease) in Unearned Revenue 3,024 -
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Net Cash Used in Operating Activities 1,478 (83,835)
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Cash Flow from Investing Activities:
Acquisition of Equipment and Building (6,038) (593,057)
Cash Flow from Financing Activities:
Increase in Loans Payable 3,027 8,209
Increase in Mortgage Payable - 480,000
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Net Cash Used in Financing Activities 3,027 488,209
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Net increase (decrease) in Cash (1,533) (188,683)
Cash - Beginning 1,533 353,281
Cash - Ending $ - $ 164,598
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CUIDAO HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 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 March 31, 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 March 31, 2000, the Company was in default under the terms of its Second
Mortgage Promissory Note. In addition the monthly payments for February and
March of 2000 are in arrears. A lease with a national credit tenant for fifty
percent of the Company's building is out for signature. It is the goal of such
refinancing 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.
Full execution of this lease is expected during May of 2000. In such 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 with reference to non-payment and default on the part of Investors
Conceptual, Inc., as to funds owed to the Company.
The Company received a judgement against it due to non-payment of an obligation
to a vendor. The Company's legal council feels that there is a good chance to
have the judgement adjusted favorably in appeal. The Company is also
investigating if the vendor will be willing to accept a settlement offer in lieu
of an appeal.
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Item 2. Management's Discussion and Analysis
General
The Company's current portfolio of beers consists of the following
line of beers produced in the People's Republic of China by Tsingtao Brewery No.
3, a brewery owned and operated by Tsingtao Brewery Co., Ltd., Red Dragon Draft,
Red Dragon Light, and Red Dragon Amber. The Company's marketing strategy for its
line of Chinese beer is to first introduce its Red Dragon product line to
Asian-theme restaurants (primarily Chinese restaurants), stressing the fact that
the Company's line of Chinese beer products will provide the restaurateur with a
product that he or she currently does not have, which is a diversified light,
extreme, amber and draft Chinese beer line.
With its wine products, the Company's objective is to successfully
introduce a profitable line of imported wines into the United States retail
market. The Company's marketing and sales strategy with respect to its wine
products will be to provide the off premise merchandise market with quality
products at a reasonable cost to the retailer and the consumer.
During the balance of 2000, the Company plans to expand the number of
alcoholic beverage products under its management, as well as increase the number
of distribution channels for its products. This expansion may be accomplished by
the acquisition of other importers and/or distributors of alcoholic beverage
products. Currently, the Company is involved in negotiation to acquire a
distributor of alcoholic beverage products. These negotiations have not been
finalized, and there is no assurance that they will be finalized.
The Company intends on continuing three basic principal objectives:
(1) aggressively manage and market its current portfolio of beers,
wines and spirits in specific niche markets of the overall alcoholic beverage
industry;
(2) expand its management and administrative personnel to support its
alcoholic beverage product lines; and
(3) expand its product line and distribution channels through
strategic alliances and/or through acquisitions of other importers and
distributors of alcoholic beverage products or through the acquisition of
producers of alcoholic beverage products.
Results of Operations
During the three month period ending March 31, 2000, the Company
increased its revenues $69,194, or approximately 280%, compared to revenues
during the comparable period of 1999. The increased revenues resulted primarily
from an increase in sales, which is a direct result of the Company's overall
marketing efforts. The Company did not receive rent revenue from a portion of
the Company's new facility, which was at one time leased to an airline. This
portion of the Company's new facility and is presently vacant.
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. In the Company's pursuit of additional maketing opprotunities,
management has entered a short-term trial distribution alliance with another
South Florida based beer importer and distributor. Through it's distributiion
alliance with World Class Beer Imports, the Company expects to maximize its
rollout of the RED DRAGON beer products by reaching more retail and specialty
stores, without increasing the Company's personel enumeration. Personel
enumeration will be increased by hiring 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.
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With reference to the various alcoholic products marketed both on a
wholesale basis and as a distributor, profit percentages for various products
vary depending on which product is being marketed and depending on which venue
it is marketed through; i.e., whether to a wholesaler or marketed directly to
retailers by the Company acting in some instances as its own distributor.
Usually, beer products marketed to other distributors have approximately 25% to
30% profit, while wine and spirit products should have between 35% to 40%
profit. These gross profit margins represent an amount over and above the cost
of goods sold including all shipping, freight and duty (U.S. Custom charges).
When the Company acts as its own distributor, the gross margins are higher due
to the Company capturing the profit margins the distributor adds on to goods
which are sold to retailers, which is usually an additional 25% to 30%. Thus on
goods sold by the Company, acting as its own distributor will result in a gross
profit margins of approximately 45% to 55%.
Overhead and cost of operations, office, warehouse, marketing expense
and administrative staff, etc., is paid out of the revenues generated through
the traditional and/or non-traditional means described above. It is a primary
concern of the Company to keep all expenses to as much of a minimum as possible
without sacrificing the quality of marketing of any products or any areas which
need to be explored. This is why the Company has limited the amount of
administrative staff and why many duties which are normally delegated are being
performed by management. Essentially the philosophy of management is to be as
professional as possible in the marketing of products and establishment of
distributors and simultaneously to be frugal as possible with the limited funds
it has available.
Financial Condition
The Company's balance sheet for the period ended March 31, 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 total rent which was higher than the resulting mortgage. There is
no assurance that management will be successful in raising additional working
capital. Management believes that if the Company resolves its working capital
shortage, sales and revenues will significantly increase.
Liquidity and Capital Resources
The Company's products, particularly its beer products, are receiving
market acceptance. Sales growth has been and continues to be constrained by the
Company's shortage of working capital. The Company's suppliers require payment
at or before time of shipment and the Company's customers do not pay for the
products until they receive them. The Company does not have adequate working
capital to import sufficient products to meet market demand. As a result of this
capital shortage, management has obtained export credit insurance for a portion
of its purchases from France. At the end of the third quarter 1999, management
finalized a distribution alliance with a major wine producer located in Beaune,
France. The result of this credit facilitation and renewing our previously
partial credit arrangements with our beer supplier will increase revenue,
inventory terms, and resulting profits.
Management, subsequent to the end of this quarterly filing, has
negotiated and entered into an advisory agreement with Infinity Consulting
Group, Inc. of Ft. lauderdale, Florida, to assist the Company in general
business and financial issues, consulting the introduction of the Company to
public relations firms and others that may assist the Company in raising equity
capital via debentures, private placements, or secondary public offerings.
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Forward-looking Statements
This Quarterly Report on Form 10-QSB contains statements relating
to future results, which are forward-looking statements as that term is defined
in the Private Securities Litigation Reform Act of 1995. Forward-looking
statements include statements concerning plans, objectives, goals, strategies,
future events or performance and underlying assumptions and other statements
which are other than statements of historical assumptions or facts.
Specifically, this report contains forward-looking statements regarding
anticipated future sales and revenues and the methods and strategies of
increasing those sales and revenues. Actual results may differ materially from
those anticipated as a result of certain risks and uncertainties, including but
not limited to, management's ability to implement its marketing strategy, the
availability of capital through sale of additional common stock or other means,
including the availability of products for sale through credit insurance and
distribution alliances, changes in general economic conditions, foreign exchange
rate fluctuations, competitive product and pricing pressures, the impact of tax
increases with respect to alcoholic beverage products, regulatory developments,
as well as other risk and uncertainties detailed from time to time in the
Company's Securities and Exchange Commission filings. The Company's
expectations, beliefs and projections are expressed in good faith and are
believed by the Company to have a reasonable basis, including without
limitation, data contained in the Company's records and other available data
from third parties, but there can be no assurance that management's
expectations, beliefs or projections will result, or be achieved, or be
accomplished.
Part II.
Item 1. Legal Proceedings
The Company has filed a financial lawsuit against Investors
Conceptual Services Incorporated. This action is with reference to non-pyment on
the part of Investors Conceptual Services Incorporated, as to funds owed to the
Company. The amount of this debt was specified within an obligatory agreement,
which was agreed to, by and between the Company and Investors Conceptual
Services Incorporated.
As of December 31, 1999, the Company had a disputed bill relating to
printing charges with Bowne of Los Angeles. As of the date of this filing the
Company is in the process of attempting to resolve an equitable settlement with
reference to this disputed amount. Upon an unsatisfactory resolvement as to a
settlement, the Company anticipates filing an appeal with the appropriate Court
in California.
As of March 31, 2000, the Company was in default under the terms of
its Second Mortgage Promissory Note. In addition the monthly payments for
February and March of 2000 are in arrears. A lease with a national credit tenant
for fifty percent of the Company's building is out for signature. It is the goal
of such refinancing 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. Full execution of this lease is expected during May of 2000. In such event
that refinancing is not immediately accomplished, bridge financing has been
arranged to bring payments current.
<PAGE>
The Company received a judgement against it due to non-payment of an
obligation to a vendor. The Company's legal council feels that there is a good
chance to have the judgement adjusted favorably in appeal. The Company is also
investigating if the vendor will be willing to accept a settlement offer in lieu
of an appeal.
Item. 2. Changes in Securities and Use of Proceeds
NONE
Item 3. Defaults upon Senior Securities
NONE
Item 4. Submission of Matters to a Vote of Security Holders
NONE
Item 5. Other Information
NONE
Item 6. Exhibits and Reports on Form 8-K
(a) The exhibits required to be filed herewith by Item 601 of Regulation
S-B, as described in the following index of exhibits, are
incorporated herein by reference, as follows:
Exhibit No. Description
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3.0 Amended and Restated Articles of Incorporation of Cuidao Holding Corp.(1)
3.1 Bylaws of Cuidao Holding Corp.(1)
4.0 Specimen Stock Certificate(1)
10.0 Cuidao Holding Corp. 1999 Equity Incentive Plan(1)
10.1 Cuidao Holding Corp. 1997 Directors' Stock Option Plan(1)
10.2 Import and Distribution Agreement by and between Cuidao Holding Corp. and the
People's Republic of China, Tsingtao Brewery No. 3 Co., Ltd.(1)
10.3 Import and Distribution Agreement by and between Cuidao Holding Corp. and Cave
duVignoble Gursonnais(1)
10.4 Import and Distribution Agreement by and between Cuidao Holding Corp. and Les Chais
du Prevot(1)
10.5 Import and Distribution Agreement by and between Cuidao Holding Corp. and Vignerons
De Buzet(1)
</TABLE>
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<S> <C>
10.6 Import and Distribution Agreement by and between Cuidao Holding Corp. and Godet
Freres(1)
10.7 Form of Lock-Up Agreement by and between Cuidao Holding Corp., West America
Securities Corp. and certain shareholders of Cuidao Holding Corp.(1)
10.8 Form of Promotional Share Lock-In Agreement by and between Cuidao Holding Corp.
and certain shareholders of Cuidao Holding Corp.(1)
10.9 Promissory Note and Mortgage and Security Agreement dated January 22, 1999 by and
between Cuidao Holding Corp. and Em-Star Mortgage Co.
10.10 Promissory Note dated January 22, 1999 by and between Cuidao Holding Corp. and
Sebastiano Salemi and Nunzia Salemi, as husband and wife.
10.12 Assignment of Lease Agreement dated January 22, 1999 by and between
Sebastiano Salemi and Nunzia Salemi, as husband and wife, and Cuidao
Holding Corp.
21.0 Subsidiaries of Cuidao Holding Corp.
27.0 * Financial Data Schedule
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(1) Incorporated herein by reference to the Company's Registration Statement on
Form SB- 2 filed on December 30, 1997.
* Filed herewith
(b) No Reports on Form 8-K were filed during the quarter ended March 31,
2000.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CUIDAO HOLDING CORP.
(registrant)
Dated: May 17, 2000 By: /s/ C. Michael Fisher
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C. Michael Fisher
President & Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001018765
<NAME> CUIDAO HOLDING CORP.
<MULTIPLIER> 1
<CURRENCY> U.S. Currency
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1999
<PERIOD-END> Mar-31-1999
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 20,631
<ALLOWANCES> 0
<INVENTORY> 231,867
<CURRENT-ASSETS> 252,498
<PP&E> 586,323
<DEPRECIATION> 26,701
<TOTAL-ASSETS> 854,256
<CURRENT-LIABILITIES> 582,552
<BONDS> 0
0
0
<COMMON> 240
<OTHER-SE> (80,368)
<TOTAL-LIABILITY-AND-EQUITY> 854,256
<SALES> 0
<TOTAL-REVENUES> 93,877
<CGS> 37,897
<TOTAL-COSTS> 37,897
<OTHER-EXPENSES> 112,948
<LOSS-PROVISION> (56,968)
<INTEREST-EXPENSE> 18,383
<INCOME-PRETAX> (75,351)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (75,351)
<EPS-BASIC> (0.027)
<EPS-DILUTED> 0
</TABLE>
