UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 2, 2005 (May 4, 2004)
ATLANTIC WINE AGENCIES, INC.
(Exact name of registrant as specified in its charter)
Atlantic Wine Agencies Inc.
64 Knightsbridge
Florida London, UK SW1X 65-1102237
(State or other jurisdiction (Address of Principal (I.R.S. Employer
of incorporation or Executive Offices) Identification No.)
organization)
Registrant's telephone number, including area code: 011-44-797-9057-242
=======================================================================
The Company is filing this Amendment No. 2 to its Form 8-K dated May 19,
2004, as previously filed with the SEC on that date, to include certain
financial statements pursuant to Item 9.01 of the Form 8-K, commencing on Page
F-1 immediately following the signatures.
Item 2.01. Change in Control
On May 4, 2004 the Company acquired all of the issued and outstanding
shares of New Heights 560 Holdings LLC, a Cayman Islands limited liability
corporation ("New Heights"), in exchange for One Hundred Million shares of its
restricted common stock which is equal to 99.9% of the total outstanding shares
of the Company's common stock (this transaction shall be referred to as the
"Merger"). As a result of the Merger, the Company now has two wholly owned
subsidiaries, Mount Rozier Estates (Pty) Limited and Mount Rozier Properties
(Pty) Limited. Such companies own a world class vineyard in the Stellenbosch
region of Western Cape, South Africa. The vineyard and surrounding properties
consist of 105 hectares of arable land for viticultural as well as residential
and commercial purposes. In the opinion of the management the site is a world
class site in terms of location, soil composition and future development
potential.
Mount Rozier Estates (Pty) Limited and Mount Rozier Properties (Pty)
Limited produces top end quality wines on a boutique vineyard basis.
We intend to become a notable producer of quality wines from South Africa
by further: (i) developing and expanding our wine cellars through better crop
management; (ii) enhancing our strategic distribution channels with Atlantic
Wine Agencies Limited; and (iii) brand development efforts.
The launch of the wines under new patent branded labeling and marketing
are expected to be launched internationally in the second half of 2004.
Our wines will be initially issued in three tiers: Mount Rozier a top
quality premium brand; Rozier Reef a mid price range wine; and Rozier Bay a mass
market product.
Item 7.01 Regulation FD Disclosure
On February 22, 2004 the Company formed Atlantic Wine Agencies Limited, a
wholly owned subsidiary in the United Kingdom for the purposes of exclusive
distribution rights of wines and products in the United Kingdom, the European
Community and the United States of America in perpetuity.
In addition to the Merger, Atlantic Wine Agencies Ltd. has also contracted
the services of Mr. Christopher Burr a wine master internationally respected for
his opinion and knowledge of wines and a former managing director of Christies
Auction House in London, as well as hired a specialist wine maker, a
professional viticulturalist and an experienced estate manager. Turner Townsend
Plc has been retained as the construction supervision manager due to its
international reputation for experience in project property development and
agricultural management.
Although not yet formalized, the Company is studying the feasibility of
leisure and residential development on our vineyard properties as an additional
revenue stream and asset enhancement project.
Exhibit 99.01 Share Exchange Agreement between New Heights 560 Holdings LLC and
Atlantic Wine Agencies Inc., dated May 4, 2004 - Filed as an exhibit to Form 8-K
which was filed with the Securities and Exchange Commission on May 19, 2004
Item 9.01 Financial Statements
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.
Atlantic Wine Agencies Inc.
Date: August 9, 2005
/s/ Adam Mauerberger
------------------------
Mr. Adam Mauerberger, President
ATLANTIC WINE AGENCIES, INC.
(A DEVELOPMENT STAGE COMPANY)
AND SUBSIDIARIES
AUDITED FINANCIAL STATEMENTS
APRIL 30, 2004
CONTENTS
--------------------------------------------------------------------------------
Report of Independent Registered Public Accounting Firm Page 1
Consolidated Balance Sheet 2
Consolidated Statement of Operations 3
Consolidated Statement of Stockholders' Equity 4
Consolidated Statement of Cash Flows 5
Notes to Consolidated Financial Statements 6
MEYLER & COMPANY, LLC
CERTIFIED PUBLIC ACCOUNTANTS
ONE ARIN PARK
1715 HIGHWAY 35
MIDDLETOWN, NJ 07748
Report of Independent Registered Public Accounting Firm
Board of Directors
Atlantic Wine Agencies, Inc. and Subsidiaries
London, United Kingdom
We have audited the accompanying consolidated balance sheet of Atlantic Wine
Agencies, Inc. and Subsidiaries as of April 30, 2004 and the related
consolidated statements of operations, stockholders' equity and cash flows for
the two months then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). 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 amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of April 30,
2004 and the results of its operations and its cash flows for the two months
then ended, in conformity with U.S. generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note A to the
consolidated financial statements, the Company has incurred cumulative losses of
$162,322 since inception, and there are existing uncertain conditions the
Company faces relative to its ability to obtain capital and operate
successfully. These conditions raise substantial doubt about its ability to
continue as a going concern. Management's plans regarding those matters are also
described in Note A. The financial statements do not include any adjustments
that might result from the outcome of these uncertainties.
Meyler & Company, LLC
Middletown, NJ
October 8, 2004
Atlantic Wine Agencies, Inc.
(A Development Stage Company)
and Subsidiaries
Consolidated Balance Sheet
April 30, 2004
Assets
Current Assets
Cash $ 113,086
Accounts receivable 15,851
Inventory 227,058
-----------
Total Current Assets 355,995
Property and equipment, net of accumulated depreciation
of $1,311 2,469,829
Other Assets
Trademarks, net of accumulated amortization of $405 48,128
-----------
$ 2,873,952
Liabilities and Stockholders' Equity (Deficit)
Current Liabilities
Accounts payable and accrued expenses $ 16,445
Loan from principal stockholder 154,982
-----------
171,427
Stockholders' Equity
Common stock authorized 150,000,000
shares; $0.00001 par value; issued and
outstanding 104,063,027 shares at
April 30, 2004 1,041
Paid-in capital 2,862,839
Accumulated deficit (162,322)
Accumulated other comprehensive income 967
-----------
Total Stockholders' Equity 2,702,525
-----------
$ 2,873,952
See accompanying notes to financial statements.
Atlantic Wine Agencies, Inc.
(A Development Stage Company)
and Subsidiaries
Consolidated Statement of Operations
Two Months Inception
Ended April 30, December 15, 2003
2004 to April 30, 2004
----------- -----------
Net Sales $ 27,843 $ 27,843
Costs and Expenses
Cost of sales 7,314 7,314
Selling, general and administrative 41,127 41,127
Stock based compensation 140,000
Depreciation and amortization 1,716 1,716
----------- -----------
Total Costs and Expenses 50,157 190,157
----------- -----------
Loss from operations (22,314) (162,314)
----------- -----------
Other Expense
Interest expense (8) (8)
----------- -----------
Net Loss $ (22,322) $ (162,322)
=========== ===========
Net Loss Per Common
Share (Basic and Diluted) $ (0.35) $ (0.09)
=========== ===========
Weighted Average Common Shares Outstanding 1,718,763 1,718,763
=========== ===========
See accompanying notes to financial statements.
Atlantic Wine Agencies, Inc.
(A Development Stage Company)
and Subsidiaries
Consolidated Statement of Stockholders' Equity
April 30, 2004
Common Stock Accumulated
------------------------------ Paid in Accumulated Comprehensive
Shares Amount Capital Deficit Income Total
------------- ------------- ------------- ------------- -------- -------------
New Heights 560 Holdings, LLC
capital contribution December
15, 2003 - Note A 50,000 $ 50,000 $ 50,000
Additional capital contribution
March 2004 $ 2,673,880 2,673,880
------------- ------------- ------------- ------------- -------- -------------
Total New Heights 560 Holdings,
LLC prior to reverse merger 50,000 50,000 2,673,880 2,723,880
Merger with Atlantic Wine Agencies,
Inc.:
Cancellation of New Heights 560
Holdings, LLC outstanding shares (50,000) (50,000) 50,000
Equity of Atlantic Wine Agencies,
Inc. at March 31, 2004 63,027 1 69,355 (69,356)
Capitalization of Atlantic Wine
Agencies, Inc. accumulated deficit (69,356) 69,356
Issuance of 100,000,000 shares to
acquire New Heights 560 Holdings,
LLC 100,000,000 1,000 (1,000)
Issuance of common stock to consul-
tants @ $0.035 per share 4,000,000 40 139,960 (140,000) 140,000
Net loss for the two months ended
April 30, 2004 (22,322) $ 967 (161,355)
------------- ------------- ------------- ------------- -------- -------------
100,063,027 $ 1,041 $ 2,862,839 $ (162,322) $ 967 $ 2,702,525
============= ============= ============= ============= ======== =============
See accompanying notes to financial statements.
Atlantic Wine Agencies, Inc.
(A Development Stage Company)
and Subsidiaries
Consolidated Statement of Cash Flows
Two Months Inception
Ended April 30, December 15, 2003
2004 to April 30, 2004
----------- -----------
Cash Flows From Operating Activities
Net loss $ (22,322) $ (162,322)
Adjustments to reconcile net loss to
cash flows used in operating activities:
Stock based compensation 140,000
Depreciation and amortization 1,716 1,716
Increase in accounts receivable (15,851) (15,851)
Increase in inventory (227,058) (227,058)
Increase in accrued expenses 16,445 16,445
----------- -----------
Net Cash Flows Used in Operating Activities (247,070) (247,070)
----------- -----------
Cash Flows From Investing Activities
Cash paid for property and equipment (2,471,140) (2,471,140)
Cash paid for trademarks 48,532 48,532
----------- -----------
Net Cash Flows Used in Operating Activities (2,519,672) (2,519,672)
----------- -----------
Cash Flows From Financing Activities
Loan from principal stockholder 154,982 154,982
Capital contributions 2,723,879 2,723,879
----------- -----------
Cash Flows Provided by Financing Activities 2,878,861 2,878,861
----------- -----------
Effect of Exchange Rate Changes on Cash 967 967
----------- -----------
Increase in cash 113,086 113,086
Cash, Beginning of Period
----------- -----------
Cash, End of Period $ 113,086 $ 113,086
=========== ===========
Supplemental Cash Flow Information:
Cash Paid for Interest $ 8 $ 8
=========== ===========
See accompanying notes to financial statements.
Atlantic Wine Agencies, Inc.
(A Development Stage Company)
and Subsidiaries
Notes to Consolidated Financial Statements
April 30, 2004
NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Atlantic Wine Agencies, Inc., formerly New England Acquisitions, Inc.,
(the Company), is a company in the development stage and was organized
under the laws of the State of Florida. The Company acquired New Heights
560 Holdings, LLC, a Cayman Island Limited Liability Company, on May 4,
2004 which owns two subsidiaries in South Africa and has world class
vineyard producing high quality wines to be marketed principally in
Europe. New Heights had no operations prior to May 4, 2004.
Reverse Merger
On May 4, 2004, the stockholders of New Heights 560 Holdings, LLC a Cayman
Island Limited Liability Company, acquired 100,000,000 shares of Atlantic
Wine Agencies, Inc. common stock in an exchange of shares, thereby
obtaining control of the company. Subsequent to the acquisition, New
Heights 560 Holdings, LLC controlled 99% of the outstanding common stock
of the company. In this connection, New Heights 560 Holdings, LLC became a
wholly owned subsidiary of Atlantic Wine Agencies, Inc. and its officers
and directors replaced New Heights 560 Holdings', LLC officers and
directors. Prior to the acquisition, Atlantic Wine Agencies, Inc. was a
non-operating public shell corporation. Pursuant to Securities and
Exchange Commission rules, the merger or acquisition of a private
operating company into a non-operating public shell corporation with
nominal net assets is considered a capital transaction. Accordingly, for
accounting purposes, the acquisition has been treated as an acquisition of
New Heights 560 Holdings, LLC by the Company and a recapitalization of
Atlantic Wine Agencies, Inc. Since the merger is a recapitalization of
Atlantic Wine Agencies, Inc. and not a business combination, pro-forma
information is not presented.
Going Concern
As indicated in the accompanying financial statements, the Company has
incurred cumulative net operating losses of $162,322 since inception and
is considered a company in the development stage. Management's plans
include the raising of capital through the equity markets to fund future
operations and the generating of revenue through its business. Failure to
raise adequate capital and generate adequate sales revenues could result
in the Company having to curtail or cease operations. Additionally, even
if the Company does raise sufficient capital to support its operating
expenses and generate adequate revenues, there can be no assurances that
the revenue will be sufficient to enable it to develop business to a level
where it will generate profits and cash flows from operations. These
matters raise substantial doubt about the Company's ability to continue as
a going concern. However, the accompanying financial statements have been
prepared on a going concern basis, which contemplates the realization of
assets and satisfaction of liabilities in the normal course of business.
These financial statements do not include any adjustments relating to the
recovery of the recorded assets or the classification of the liabilities
that might be necessary should the Company be unable to continue as a
going concern.
Foreign Currency Translation
The Company considers the South African Rand to be its functional
currency. Assets and liabilities were translated into US dollars at the
period-end exchange rates. Statement of operations amounts were translated
using the average rate during the period. Gains and losses resulting from
translating foreign
Atlantic Wine Agencies, Inc.
(A Development Stage Company)
and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
April 30, 2004
NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Foreign Currency Translation (Continued)
currency financial statements were accumulated in other comprehensive
income, a separate component of stockholders' equity.
Cash Equivalents
For purposes of reporting cash flows, cash equivalents include investment
instruments purchased with a maturity of three months or less.
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
disclosure of contingent assets and liabilities at the date of the
financial statements and reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Property and Equipment and Depreciation
Property and equipment is stated at cost and is depreciated using the
straight line method over the estimated useful lives of the respective
assets. Routine maintenance, repairs and replacement costs are expensed as
incurred and improvements that extend the useful life of the assets are
capitalized. Costs incurred in developing vineyards, including related
interest costs, are capitalized until the vineyards become commercially
productive. When property and equipment is sold or otherwise disposed of,
the cost and related accumulated depreciation are eliminated from the
accounts and any resulting gain or loss is recognized in operations. The
Company computes depreciation using the straight line method. Leasehold
improvements are analyzed over the estimated useful lives of the
improvements.
Inventory
Inventory is valued at the lower of cost or market based on the average
cost method.
Revenue Recognition
Revenue from the sale of goods is recognized when the significant risks
and rewards of ownership are transferred to the buyer.
Consolidated Financial Statements
The consolidated financial statements include the Company and its wholly
owned subsidiaries. All significant intercompany transactions and balances
have been eliminated in consolidation.
Atlantic Wine Agencies, Inc.
(A Development Stage Company)
and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
April 30, 2004
NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Comprehensive Income (Loss)
SFAS No. 130 establishes standards for the reporting and disclosure of
comprehensive income and its components which will be presented in
association with a company's financial statements. Comprehensive income is
defined as the change in a business enterprise's equity during a period
arising from transactions, events or circumstances relating to non-owner
sources, such as foreign currency translation adjustments and unrealized
gains or losses on available-for-sale securities. It includes all changes
in equity during a period except those resulting from investments by or
distributions to owners. Comprehensive income is accumulated in
accumulated other comprehensive income (loss), a separate component of
stockholders' equity (deficit.)
Business Combinations and Goodwill
In July 2001, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 141, "Business Combinations". SFAS No. 141 requires the purchase
method of accounting for business combinations initiated after June 30,
2001 and eliminates the pooling-of-interests method.
In July 2001, the FASB issued SFAS NO. 142, "Goodwill and Other Intangible
Assets", which the Company adopted during 2003. SFAS No. 142 requires,
among other things, the discontinuance of goodwill amortization. In
addition, the standard includes provisions for the reclassification of
certain existing recognized intangibles as goodwill, reassessment of the
useful lives of existing recognized intangibles, reclassification of
certain intangibles out of previously reported goodwill and the
identification of reporting units for purposes of assessing potential
future impairment of goodwill.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets". SFAS No. 144 changes the
accounting for long-lived assets to be held and used by eliminating the
requirement to allocate goodwill to long-lived assets to be tested for
impairment, by providing a probability weighted cash flow estimation
approach to deal with situations in which alternative courses of action to
recover the carrying amount of possible future cash flows and by
establishing a primary-asset approach to determine the cash flow
estimation period for a group of assets and liabilities that represents
the unit of accounting for long-lived assets to be held and used. SFAS No.
144 changes the accounting for long-lived assets to be disposed of other
than by sale by requiring that the depreciable life of a long-lived asset
to be abandoned be revised to reflect a shortened useful life and by
requiring the impairment loss to be recognized at the date a long-lived
asset is exchanged for a similar productive asset or distributed to owners
in a spin-off if the carrying amount of the asset exceeds its fair value.
SFAS No 144 changes the accounting for long-lived assets to be disposed of
by sale by requiring that discontinued operations no longer be recognized
at a net realizable value basis (but at the lower of carrying amount or
fair value less costs to sell), by eliminating the recognition of future
operating losses of discontinued components before they occur, and by
broadening the presentation of discontinued operations in the income
statement to include a component of an entity rather than a segment of a
business. A component of an entity comprises operations and cash flows
that can be clearly distinguished operationally, and for financial
reporting purposes, from the rest of the entity.
Atlantic Wine Agencies, Inc.
(A Development Stage Company)
and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
April 30, 2004
NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Net Loss Per Common Share
The Company computes per share amounts in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share".
SFAS No. 128 requires presentation of basic and diluted EPS. Basic EPS is
computed by dividing the income (loss) available to Common Stockholders by
the weighted-average number of common shares outstanding for the period.
Diluted EPS is based on the weighted-average number of shares of Common
Stock and Common Stock equivalents outstanding during the periods.
Stock-Based Compensation
SFAS No. 123, "Accounting for Stock-Based Compensation" prescribes
accounting and reporting standards for all stock-based compensation plans,
including employee stock options, restricted stock, employee stock
purchase plans and stock appreciation rights. SFAS No. 123 requires
employee compensation expense to be recorded (1) using the fair value
method or (2) using the intrinsic value method as prescribed by accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB25") and related interpretations with pro forma disclosure
of what net income and earnings per share would have been had the Company
adopted the fair value method. The Company accounts for employee stock
based compensation in accordance with the provisions of APB 25.
Income Taxes
The Company has adopted Financial Accounting Statement SFAS No. 109,
Accounting for Income Taxes. Under this method, the Company recognizes a
deferred tax liability or asset for temporary differences between the tax
basis of an asset or liability and the related amount reported on the
financial statements. The principal types of differences, which are
measured at the current tax rates, are net operating loss carry forwards.
At April 30, 2004, these differences resulted in a deferred tax asset of
approximately $3,500. SFAS No. 109 requires the establishment of a
valuation allowance to reflect the likelihood of realization of deferred
tax assets. Since realization is not assured, the Company has recorded a
valuation allowance for the entire deferred tax asset, and the
accompanying financial statements do not reflect any net asset for
deferred taxes at April 30, 2004.
The Company's net operating loss carry forwards amounted to $162,322 which
will expire through 2019.
NOTE B INVENTORY
Inventory at April 30,2004 consists of:
Work in process $152,270
Bottled wine 74,788
--------
$227,058
Atlantic Wine Agencies, Inc.
(A Development Stage Company)
and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
April 30, 2004
NOTE C PROPERTY AND EQUIPMENT
Property and equipment at April 30, 2004 consists of:
Useful Life
--------------
Land and buildings $2,129,392 45 years
Vineyards 302,161 40 years
Furniture, fixtures and equipment 39,587 3 to 10 years
--------------
2,471,140
Less: accumulated depreciation 1,311
-----------
$2,469,829
NOTE D LOAN FROM PRINCIPAL STOCKHOLDER
At April 30, 2004, the principal stockholder advanced the company,
$154,982 for working capital. The loan is non- interest bearing and has no
stated maturity date.
NOTE E STOCKHOLDERS' EQUITY
On February 14, 2004, the Company entered into a consulting agreement with
Benjamin Mauerberger, whose brother Adam Mauerberger is deemed to be a
related party, to locate a merger partner and consult on all aspects of
the merger, to advise the Company on hiring of senior management personnel
and to develop growth initiatives for the Company. Compensation for this
agreement was the issuance of 4,000,000 shares of the company's common
stock valued at $0.035 per share. On May 27, 2004, the Company filed a
registration statement with the Securities and Exchange Commission to
register these shares on Form S-8.
NOTE F EMPLOYMENT CONTRACTS
In March 2004, the Company entered into employment contracts with key
employees for a one year term which can be automatically renewed on their
anniversary dates. The total commitment to the Company under the
agreements aggregates $217,000 plus expenses which have a ceiling of
approximately $6,000 per month. In addition the controlling stockholders
gave 24,960,000 shares (25% of the Company) from their holdings to one
employee and 15,000,000 shares to another.
NOTE G ACQUISITION OF AUSTRALIAN WINERY AND VINEYARD
On September 13, 2004, Atlantic Wine Agencies, Inc. entered into an
agreement to issue 20,000,000 shares of its common stock to the
stockholders of Dominion Wines, Ltd. and Dominion estates Pty., Ltd. in
exchange for all of the issued and outstanding shares of each of those
entities. Additionally, the Company agreed to make payments of $2,508,962
to National Australian Bank to settle a loan facility held by Dominion
Wines, Ltd. to advance Dominion wines $179,038 for working capital, and
assume a $3,265,110 loan held by the Commonwealth Bank of Australia. The
Company also canceled 20,000,000 shares of its common stock which were
held by certain stockholders.
Atlantic Wine Agencies, Inc.
(A Development Stage Company)
and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
April 30, 2004
NOTE G ACQUISITION OF AUSTRALIAN WINERY AND VINEYARD
Because the Company is currently in the process of completing its
acquisition audit and obtaining asset valuations, the effect of this
transaction has not been included in the Company's pro-forma financial
statement as at April 30, 2004. Preliminary and unaudited financial data
is presented below:
Balance Sheet:
Current assets $ 3,771,605
Fixed assets, net 11,623,064
Trademarks 37,566
-----------
Total Assets 15,432,235
Less: current liabilities
Bank debt 5,953,110
Other liabilities 1,904,246
-----------
Net Assets $ 7,574,879
===========
Preliminary and unaudited operating data for the year ended June 30, 2004
is as follows:
Total revenue $3,728,564
Cash and expenses:
Costs of goods sold 2,419,478
General and administrative expense 1,280,479
----------
Total Expense 3,699,957
Net Income $ 28,607
==========
NEW HEIGHTS 560 HOLDINGS, LLC
AUDITED FINANCIAL STATEMENTS
APRIL 30, 2004
CONTENTS
--------------------------------------------------------------------------------
Report of Independent Registered Public Accounting Firm Page 1
Consolidated Balance Sheet 2
Consolidated Statement of Operations 3
Consolidated Statement of Stockholders' Equity 4
Consolidated Statement of Cash Flows 5
Notes to Consolidated Financial Statements 6
F-2
MEYLER & COMPANY, LLC
CERTIFIED PUBLIC ACCOUNTANTS
ONE ARIN PARK
1715 HIGHWAY 35
MIDDLETOWN, NJ 07748
Report of Independent Registered Public Accounting firm
Board of Directors
New Heights 560 Holdings, LLC and Subsidiaries
London, United Kingdom
We have audited the accompanying consolidated balance sheet of New Heights 560
Holdings, LLC and Subsidiaries as of April 30, 2004 and the related consolidated
statements of operations, changes in member equity and its cash flows for the
two months then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with the auditing standards of the Public
Company Accounting Oversight Board (United States). 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 amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of New Heights 560 Holdings, LLC
and Subsidiaries as of April 30, 2004 and the results of its operations and its
cash flows for the two months then ended, in conformity with U.S. generally
accepted accounting principles.
Meyler & Company, LLC
Middletown, NJ
October 8, 2004
F-3
New Heights 560 Holdings, LLC and Subsidiaries
Consolidated Balance Sheet
April 30, 2004
Assets
Current Assets
Cash $ 113,086
Accounts receivable 15,851
Inventory 227,058
-----------
Total Current Assets 355,995
Other Assets
Property and equipment, net of depreciation 2,469,829
Trademark, net of accumulated analyzation of $405 48,128
-----------
$ 2,873,952
Liabilities and Member's Equity
Current Liabilities $ 16,445
-----------
Total Current Liabilities 16,445
Long-Term Debt
Due to member 2,828,459
Member's Equity
Capital contributed 50,000
Accumulated deficit (21,917)
Comprehensive income 965
-----------
Total Member's Equity 29,048
-----------
$ 2,873,952
===========
See accompanying notes to financial statements.
F-4
New Heights 560 Holdings, LLC and Subsidiaries
Consolidated Balance Sheet
April 30, 2004
Other Total
Capital Accumulated Comprehensive Member's
Contributed Deficit Income Equity
-------- -------- -------- --------
Balance at March 1, 2004
Capital Contributed $ 50,000 ~~ ~~ $ 50,000
Net loss for the two months
ended April 30, 2004 ~~ $(21,917) $ 965 (20,952)
-------- -------- -------- --------
Balance at April 30, 2004 $ 50,000 $(21,917) $ 965 $ 29,048
======== ======== ======== ========
See accompanying notes to financial statements.
F-5
New Heights 560 Holdings, LLC and Subsidiaries
Consolidated Balance Sheet
April 30, 2004
Net Sales $ 27,843
Costs and Expenses
Cost of sales 7,314
Selling, general and administrative 41,127
Depreciation and amortization 1,311
--------
Total Costs and Expenses 49,752
--------
Net Operating Loss (21,909)
--------
Other Expense
Interest expense (8)
--------
Net Other Expense (8)
--------
Net Loss $(21,917)
========
See accompanying notes to financial statements.
F-6
New Heights 560 Holdings, LLC and Subsidiaries
Consolidated Balance Sheet
April 30, 2004
Cash Flows From Operating Activities
Net loss $ (21,917)
Adjustments to reconcile net loss to
cash flows used in operating activities:
Depreciation and amortization 1,311
Increase in accounts receivable (15,851)
Increase in inventory (227,058)
Increase in accrued expenses 16,445
-----------
Net Cash Flows Used in Operating Activities (247,070)
-----------
Cash Flows From Investing Activities
Cash paid for property and equipment (2,471,140)
-----------
Net Cash Flows Used in Operating Activities (2,471,140)
-----------
Cash Flows From Financing Activities
Advances from member 2,780,331
Capital contributions 50,000
-----------
Cash Flows Provided by Financing Activities 2,830,331
-----------
Effect of Exchange Rate Changes on Cash 965
-----------
Increase in cash 113,086
Cash, Beginning of Period
-----------
Cash, End of Period $ 113,086
===========
Cash Paid for Interest $ 8
===========
See accompanying notes to financial statements.
F-7
New Heights 560 Holdings, LLC and Subsidiaries
Notes to Consolidated Financial Statements
April 30, 2004
NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
New Heights 560 Holdings, LLC ("Company") was organized as a limited
liability company in the Cayman Islands on December 15, 2003. The
Company through its wholly owned subsidiaries Mount Rosier Estate
(Proprietary) Limited and Mount Rosier Properties (PTY) LTD owns and
operates a vineyard and winery in South Africa.
The financial statements include only the income and expenses of the
Company and its subsidiaries.
Foreign Currency Translation
The Company considered the South African Ranch to be its functional
currency. Assets and liabilities were translated into US dollars at
the period-end exchange rates. Statement of operations amounts were
translated using the average rate during the period. Gains and
losses resulting from translating foreign currency financial
statements were accumulated in other comprehensive income, a
separate component of member's equity.
Cash Equivalents
For purposes of reporting cash flows, cash equivalents include
investment instruments purchased with a maturity of three months or
less. There were no cash equivalents in 2003 or for the six months
ended June 30, 2004.
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 disclosure of contingent assets and liabilities at
the date of the financial statements and reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Property and Equipment and Depreciation
Property and equipment is stated at cost and is depreciated using
the straight line method over the estimated useful lives of the
respective assets. Routine maintenance, repairs and replacement
costs are expensed as incurred and improvements that extend the
useful life of the assets are capitalized. When property and
equipment is sold or otherwise disposed of, the cost and related
accumulated depreciation are eliminated from the accounts and any
resulting gain or loss is recognized in operations. The Company
depreciates the furniture, fixtures, and equipment over three to six
years.
Inventory
Inventory is valued at the lower of cost or market on the average
cost method.
Revenue Recognition
Revenue from the sale of goods is recognized when the product is
shipped.
F-8
New Heights 560 Holdings, LLC and Subsidiaries
Notes to Consolidated Financial Statements
April 30, 2004
NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Consolidated Financial Statements
The consolidated financial statements include the Company and its
wholly owned subsidiaries. All significant intercompany transactions
and balances have been eliminated in consolidation.
Comprehensive Income (Loss)
SFAS No. 130 establishes standards for the reporting and disclosure
of comprehensive income and its components which will be presented
in association with a company's financial statements. Comprehensive
income is defined as the change in a business enterprise's equity
during a period arising from transactions, events or circumstances
relating to non-owner sources, such as foreign currency translation
adjustments and unrealized gains or losses on available-for-sale
securities. It includes all changes in equity during a period except
those resulting from investments by or distributions to owners.
Comprehensive income is accumulated in accumulated other
comprehensive income (loss), a separate component of stockholders'
equity (deficit.)
Business Combinations and Goodwill
In July 2001, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 141, "Business Combinations". SFAS No. 141 requires
the purchase method of accounting for business combinations
initiated after June 30, 2001 and eliminates the
pooling-of-interests method.
In July 2001, the FASB issued SFAS NO. 142, "Goodwill and Other
Intangible Assets", which the Company adopted during 2003. SFAS No.
142 requires, among other things, the discontinuance of goodwill
amortization. In addition, the standard includes provisions for the
reclassification of certain existing recognized intangibles as
goodwill, reassessment of the useful lives of existing recognized
intangibles, reclassification of certain intangibles out of
previously reported goodwill and the identification of reporting
units for purposes of assessing potential future impairment of
goodwill.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets". SFAS No. 144 changes
the accounting for long-lived assets to be held and used by
eliminating the requirement to allocate goodwill to long-lived
assets to be tested for impairment, by providing a probability
weighted cash flow estimation approach to deal with situations in
which alternative courses of action to recover the carrying amount
of possible future cash flows and by establishing a primary-asset
approach to determine the cash flow estimation period for a group of
assets and liabilities that represents the unit of accounting for
long-lived assets to be held and used. SFAS No. 144 changes the
accounting for long-lived assets to be disposed of other than by
sale by requiring that the depreciable life of a long-lived asset to
be abandoned be revised to reflect a shortened useful life and by
requiring the impairment loss to be recognized at the date a
long-lived asset is exchanged for a similar productive asset or
distributed to owners in a spin-off if the carrying amount of the
asset exceeds its fair value. SFAS No 144 changes the accounting for
long-lived assets to be disposed of by sale by requiring that
discontinued operations no longer be recognized at a net realizable
value basis (but at the lower of carrying amount or fair value less
costs to sell), by eliminating the recognition of future operating
losses of discontinued components before they occur, and by
broadening the presentation of discontinued operations in the income
statement to include a component of an entity rather than a segment
of a business. A component of an entity comprises operations and
cash flows that can be clearly distinguished operationally, and for
financial reporting purposes, from the rest of the entity.
F-9
New Heights 560 Holdings, LLC and Subsidiaries
Notes to Consolidated Financial Statements
April 30, 2004
NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes
The Company has elected to be taxed as a partnership and as such is
not a taxpaying entity, thus no income tax expense has been recorded
in the financial statements. Income from the Company is taxed to the
member in its corporate tax return.
NOTE B INVENTORY
Inventory at April 30,2004 consists of:
Work in process $152,270
Bottled 74,788
--------
$227,058
========
NOTE C PROPERTY AND EQUIPMENT
Property and equipment at April 30, 2004 consists of:
Land and buildings $2,129,392
Vineyards 302,161
Furniture, fixtures and equipment 39,587
----------
2,471,140
Less: accumulated amortization 1,311
----------
$2,469,829
==========
NOTE D DUE TO MEMBER
Due to Member represents advances to acquire the Company's
subsidiaries. The advances are non-interest bearing and have no
stated terms of repayment.
F-10