SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB [ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1999 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT For the transition period from ____________ to ____________ Commission File Number 333-43497 CUIDAO HOLDING CORP. (Exact name of small business issuer as specified in its charter) FLORIDA 65-0639616 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 2951 SIMMS STREET HOLLYWOOD, FL 33020-1510 (Address of principal executive offices) (954) 924-0047 (Issuer's telephone number) NOT APPLICABLE (Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes x No --- --- APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by court. Yes No --- --- APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: At September 30, 1999, the registrant had outstanding 2,356,175 shares of common stock, par value $0.0001, which is the registrant's only class of common stock. PART I. FINANCIAL INFORMATION CUIDAO HOLDING CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (UNAUDITED) DECEMBER 31, 1998 AND SEPTEMBER 30, 1999 December 31, September 30, 1998 1999 ------------ ------------- (Unaudited) ASSETS Current Assets Cash and Cash Equivalents ................................. $ 353,281 $ 34,927 Accounts Receivable ....................................... $ 24,226 $ 39,913 Inventory ................................................. 0 $ 61,520 Prepaid Expenses .......................................... $ 32,444 $ 19,530 --------- --------- Total Current Assets ................................... $ 409,951 $ 155,890 Property & Equipment (Net of $6,220 and $15,332 of accumulated depreciation at December 31, 1998 and September 30, 1999) ................................ $ 18,782 $ 589,918 --------- --------- Other Assets Goodwill (Net of $8,333 and $9,280 of accumulated amortization at December 31, 1998 and September 30, 1999) ................................ $ 6,667 $ 5,720 Organizational Costs (Net of $740 of accumulated amortization at December 31, 1998 and September 30, 1999) ........... 800 730 Deferred Offering Costs ................................... 0 0 Prepayments and Deposits .................................. 18,157 8,235 Total Other Assets ..................................... 25,624 3,913 --------- --------- Total Assets ....................................... $ 454,357 $ 764,406 --------- --------- LIABILITIES Current Liabilities Accounts Payable and Accrued Expenses ................... $ 78,714 $ 76,867 Loan Payable ............................................ 50,500 50,500 Mortgage Payable ........................................ 0 480,000 --------- --------- Total Current Liabilities .......................... $ 128,784 $ 607,367 --------- --------- STOCKHOLDERS' EQUITY Preferred Stock, $.0001 par, 10,000,000 shares authorized, none issued ............................................ 0 0 Common Stock, $.0001 par, 100,000,000 shares authorized, 2,356,175 issued and outstanding at December 31, 1998 and September 30, 1999 ................................. $ 236 $ 236 Additional Paid-In Capital ............................... 660,918 660,918 Deficit Accumulated ...................................... (335,581) (503,879) --------- --------- Total Stockholders' Equity ......................... 202,439 157,039 --------- --------- Total Liabilities and Stockholders' Equity ......... $ 454,357 $ 764,406 --------- --------- See accompanying notes to condensed consolidated financial statements. CUIDAO HOLDING CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR 9 MONTHS ENDING SEPTEMBER 30, 1998 AND SEPTEMBER 30,1999 (UNAUDITED) Nine Months Ending September 30, ------------------------------ 1998 1999 ---- ---- Revenues .............................. $ 63,317 $ 79,112 Cost of Revenues ...................... 36,065 62,498 ----------- ----------- Gross Profit .......................... 27,252 16,614 Operating Expenses: General and Administrative ......... 149,154 184,912 ----------- ----------- Income (Loss) Before Interest Income ............................. (121,902) (168,298) Interest Income ....................... 0 0 Net Comprehensive Income (Loss)........ $ (121,902) $ (168,298) ----------- ----------- Income (Loss) Per Common Share .............................. $ (.055) $ (.071) Weighted Average Common Shares Outstanding ................. 2,222,000 2,356,175 Comprehensive Income Items ............ 0 0 See accompanying notes to condensed consolidated financial statements. CUIDAO HOLDING CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE 9 MONTHS ENDING SEPTEMBER 30, 1998 AND 9 MONTHS ENDING SEPTEMBER 30,1999 Nine Months Ended September 30, --------------------------------- 1998 1999 ----------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss .................................................... $(121,902) $(168,298) Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities: Depreciation ......................................... 2,830 15,332 Amortization ......................................... 4,606 9,280 Issuance of Common Stock for Legal Services .......... 0 0 (Increase) Decrease in accounts receivable ............ (4,593) 35,222 (Increase) Decrease in Inventory ...................... 1,655 0 (Increase) Decrease in Organizational Costs ........... 0 0 (Increase)Decrease in Deferred Offering Costs ......... (3,504) 0 (Increase)Decrease in Prepayments and Deposits........ (1,359) 0 (Increase) Decrease in loan closing fee ............... (5,000) 0 Increase in Accounts Payable ......................... 34,839 76,867 (Increase) Decrease in Accrued Expenses ............... 8,733 0 Increase in loans payable ............................ 87,689 530,500 --------- --------- Net Cash Used in Operating Activities .............. 3,994 31,497 CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of Equipment and Building .................. (12,000) (123,024) --------- --------- Net cash Used in Investing Activities .............. (12,000) (123,024) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from Issuing Common Stock ..................... 0 0 Proceeds from Issuing Preferred Stock .................. 0 0 --------- --------- Net Cash Provided by Financing Activities .......... 0 0 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .............................. (8,006) (91,577) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .................................... 5,840 353,281 CASH AND CASH EQUIVALENTS AT END OF PERIOD .......................................... 2,166 34,927 See accompanying notes to condensed consolidated financial statements. CUIDAO HOLDING CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY (UNAUDITED) FROM DECEMBER 31, 1998 TO SEPTEMBER 30, 1999 Deficit Accumulated During the Paid-In Development Common Stock Preferred Stock Capital Stage ------------ --------------- ------- ----- Shares Amount Shares Amount Capital ------ ------ ------ ------ ------- Balance at December 31, 1998 2,356,175 $ 236 $ 660,918 $ 335,581 Net loss, (168,298) September 30, 1999 Balance, September 30, 1999 2,356,175 236 660,918 (503,879) See accompanying notes to condensed consolidated financial statements. CUIDAO HOLDING CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30,1999 (UNAUDITED) NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES THE COMPANY CUIDAO HOLDING CORP. (the "Company") is a development stage company which imports, develops, manages and distributes a portfolio of international and regional brands of beer, wine and spirits. The Company was organized under the laws of the State of Florida on February 12, 1996. On June 27, 1996, the Company formed Cuidao (USA) Import Co., Inc., a wholly owned subsidiary incorporated under the laws of the State of Florida. On March 31, 1997, the Company acquired all of the issued and outstanding common stock of R&R (Bordeaux) Imports, Inc., a wholly owned subsidiary of the Company. The accompanying condensed consolidated financial statements presented include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated. BASIS OF PRESENTATION The condensed consolidated balance sheet as of September 30, 1999, the statements of operations for the nine-month periods ended September 30, 1999 and 1998, the related condensed consolidated statement of stockholders' equity for the nine-month period ended September 30, 1999, and the related condensed consolidated statements of cash flows for the nine-month periods ended September 30, 1999 and 1998 are unaudited. In the opinion of management, all adjustments necessary consisted of normal recurring items. Interim results may not be indicative of results for a full year. The condensed consolidated financial statements and notes are presented as permitted on Form 10-QSB and do not contain information included in the Company's annual consolidated statements and notes. The year-end condensed consolidated balance sheet, was derived from the Company's financial statements, but may not include all disclosures required by generally accepted accounting principles. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in the Company's December 31, 1998 financial statements. CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash on hand, cash in banks, and any highly liquid investment with a maturity of three months or less at the time of purchase. OFFICE EQUIPMENT Office equipment is stated at cost aid depreciation over its estimated allowable useful life (7 years), using the double declining balance method. Expenditure for major renewals and betterments that extend the useful lives of fixed assets are capitalized. Expenditures for the maintenance and repairs are charged to expense as incurred. ORGANIZATIONAL COSTS The Company has incurred certain federal and state filing and registration fees, legal and promotional fees in its formation and capitalization, which will benefit the Company in future periods. These costs are being amortized over a five year life using the straight-line method. NOTE 2 RELATED PARTY LOANS On March 1, 1999, the Company had loans outstanding from officers, directors and shareholders of the Company totaling $7,500. As of September 30, 1999, this loan had been paid off. NOTE 3 STOCKHOLDERS' EQUITY The Company's authorized and outstanding $.0001 par value capital stock as of June 30, 1999 was as follows: Shares Shares Authorized Outstanding Series A Preferred Stock 10,000,000 -0- Common Stock 100,000,000 2,356,175 On December 30, 1997, the Company filed a Registration Statement with the Securities and Exchange Commission to offer up 260,000 units to the general public. Each unit consists of one share of the Company's Common Stock and one common stock purchase warrant ("Warrant"). Each Warrant entitles the holder thereof to purchase one share of common stock at an exercise price of $8.00 subject to adjustment, at any time over a three year period commencing on the effective date of the Registration Statement. The Warrants may be redeemed by the Company at $.05 per Warrant, at any time prior to their expiration on not less than 30 days written notice, if the closing bid price of the common stock equals or exceeds $10.00 per share for 30 consecutive trading days ending within 10 days of the notice of redemption. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS GENERAL The Company's current portfolio of beers consists of the following line of beers produced in the People's Republic of China by Tsingtao Brewery No. 3, a brewery owned and operated by Tsingtao Brewery Co., Ltd., Red Dragon Draft, Red Dragon Light, and Red Dragon Amber. The Company's marketing strategy for its line of Chinese beer is to first introduce its Red Dragon product line to Asian-theme restaurants (primarily Chinese restaurants), stressing the fact that the Company's line of Chinese beer products will provide the restaurateur with a product that he or she currently does not have, which is a diversified light, amber and draft Chinese beer line. With its wine products, the Company's objective is to successfully introduce a profitable line of imported wines into the United States retail market. The Company's marketing and sales strategy with respect to its wine products will be to provide the off premise merchandise market with quality products at a reasonable cost to the retailer and the consumer. During the balance of 1999, the Company plans to expand the number of alcoholic beverage products under its management, as well as increase the number of distribution channels for its products. This expansion may be accomplished by the acquisition of other importers and/or distributors of alcoholic beverage products. Currently, the Company is involved in negotiation to acquire a distributor of alcoholic beverage products. These negotiations have not been finalized, and there is no assurance that they will be finalized. The Company intends on continuing three basic principal objectives: (1) aggressively manage and market its current portfolio of beers, wines and spirits in specific niche markets of the overall alcoholic beverage industry; (2) expand its management and administrative personnel to support its alcoholic beverage product lines; and (3) expand its product line and distribution channels through strategic alliances and/or through acquisitions of other importers and distributors of alcoholic beverage products or through the acquisition of producers of alcoholic beverage products. RESULTS OF OPERATIONS During the nine month period ending September 30, 1999, the Company increased its revenues $15,759, or approximately 25%, compared to revenues during the comparable period of 1998. The increased revenues resulted primarily from an increase in sales, which is a direct result of the Company's overall marketing efforts. A portion of the Company's revenues ($22,900) constituted rent from a portion of the Company's new facility, which is leased to an airline. The Company did not own this facility, and, accordingly, did not receive rent as a result of the lease, during the first nine months of 1998. Management believes that continued implementation and expansion of the Company's use of beer distributors and an increase in wine and liquor sales by using a similar method will have a positive result on sales and revenues in the future. The Company is pursuing additional marketing opportunities, which management anticipates will have a positive impact in the future. With reference to the various alcoholic products marketed both on a wholesale basis and as a distributor, profit percentages for various products vary depending on which product is being marketed and depending on which venue it is marketed through; i.e., whether to a wholesaler or marketed directly to retailers by the Company acting in some instances as its own distributor. Usually, beer products marketed to other distributors have approximately 25% to 30% profit, while wine and spirit products should have between 35% to 40% profit. These gross profit margins represent an amount over and above the cost of goods sold including all shipping, freight and duty (U.S. Custom charges). When the Company acts as its own distributor, the gross margins are higher due to the Company capturing the profit margins the distributor adds on to goods which are sold to retailers, which is usually an additional 25% to 30%. Thus on goods sold by the Company, acting as its own distributor will result in a gross profit margins of approximately 45% to 55%. Overhead and cost of operations, office, warehouse, marketing expense and administrative staff, etc., is paid out of the revenues generated through the traditional and/or non-traditional means described above. It is a primary concern of the Company to keep all expenses to as much of a minimum as possible without sacrificing the quality of marketing of any products or any areas which need to be explored. This is why the Company has limited the amount of administrative staff and why many duties which are normally delegated are being performed by management. Essentially the philosophy of management is to be as professional as possible in the marketing of products and establishment of distributors and simultaneously to be frugal as possible with the limited funds it has available. FINANCIAL CONDITION The Company's balance sheet for the period ended September 30, 1999, reflects the acquisition of a new building. Management concluded that in both short and long term, it was more financially prudent to own its own facility than to pay a total rent which was higher than the resulting mortgage. There is no assurance that management will be successful in raising additional working capital. Management believes that if the Company resolves its working capital shortage, sales and revenues will significantly increase. LIQUIDITY AND CAPITAL RESOURCES The Company's products, particularly its beer products, are receiving market acceptance. Sales growth has been and continues to be constrained by the Company's shortage of working capital. The Company's suppliers require payment at or before time of shipment and the Company's customers do not pay for the products until they receive them. The Company does not have adequate working capital to import sufficient products to meet market demand. As a result of this capital shortage, management has obtained export credit insurance for a portion of its purchases from France. At the end of the third quarter 1999, management finalized a distribution alliance with a major wine producer located in Beaune, France. The result of these two credit facilitations will enable the Company to increase revenues and resulting profits. FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-QSB contains statements relating to future results, which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements which are other than statements of historical assumptions or facts. Specifically, this report contains forward-looking statements regarding anticipated future sales and revenues and the methods and strategies of increasing those sales and revenues. Actual results may differ materially from those anticipated as a result of certain risks and uncertainties, including but not limited to, management's ability to implement its marketing strategy, the availability of capital through sale of additional common stock or other means, including the availability of products for sale through credit insurance and distribution alliances, changes in general economic conditions, foreign exchange rate fluctuations, competitive product and pricing pressures, the impact of tax increases with respect to alcoholic beverage products, regulatory developments, as well as other risk and uncertainties detailed from time to time in the Company's Securities and Exchange Commission filings. The Company's expectations, beliefs and projections are expressed in good faith and are believed by the Company to have a reasonable basis, including without limitation, data contained in the Company's records and other available data from third parties, but there can be no assurance that management's expectations, beliefs or projections will result, or be achieved, or be accomplished. PART II. ITEMS 1 THROUGH 6. None SIGNATURES Pursuant to the requirements of 'the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. CUIDAO HOLDING CORP. (registrant) Dated: November 15, 1999 By /s/ C. Michael Fisher ------------------------------------ C. Michael Fisher President Chief Financial Officer