UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D. C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2004
Commission file number 333-63432
Atlantic Wine Agencies Inc.
(Exact name of small business issuer as specified in its charter)
Florida 65-110237
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
64 Knightsbridge
London, UK
SW1X
(Address of principal executive offices)
011 44 207 887 6015
(Issuer's telephone number)
Check whether the issuer (1) has 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|_|
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date.
The number of shares of the issuer's outstanding common stock, which is the only
class of its common equity, on February 14, 2005 was 104,063,027.
ITEM 1 FINANCIAL STATEMENTS
Description Page No.
FINANCIAL INFORMATION:
Financial Statements
Consolidated Balance Sheets at December 31, 2004 (Unaudited).......... F-1
Consolidated Statement of Operations (Unaudited)...................... F-2
Consolidated Statements of Cash Flows (Unaudited) .................... F-3
Notes to Consolidated Financial Statements (Unaudited)................ F-4
2
ITEM 1. FINANCIAL STATEMENTS
ATLANTIC WINE AGENCIES, INC. and SUBSIDIARIES
(Formerly New England Acquisitions, Inc.)
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2004
CURRENT ASSETS
Cash $ 187,510
Accounts receivable 2,213,439
Inventory 1,725,272
Work in progress 95,800
Prepaid expenses 11,964
------------
Total Current Assets 4,233,985
OTHER ASSETS
Property, plant and equipment, net 10,892,575
Trademarks and goodwill 3,681,478
------------
$ 18,808,038
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 1,608,689
Notes payable to bank 3,061,040
Accrued expenses 1,799,082
------------
Total Current Liabilities 6,468,811
LONG-TERM DEBT
Due to principal stockholders 3,200,000
STOCKHOLDERS' EQUITY
Common stock authorized 150,000,000
shares; $0.00001 par value; issued
and outstanding 104,063,027 shares 1,041
Additional contributed capital 12,862,839
Deficit accumulated during Development Stage (1,344,414)
Comprehensive loss (2,380,239)
------------
Total Stockholders' Equity 9,139,227
------------
$ 18,808,038
============
See accompanying notes to financial statements.
F-1
ATLANTIC WINE AGENCIES, INC. and SUBSIDIARIES
(Formerly New England Acquisitions, Inc.)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
Period
For the Three For the Nine December 16, 2003
Months Ended Months Ended (Inception) to
December 31, December 31, December 31,
2004 2004 2004
------------ ------------ ------------
NET SALES $ 700,670 $ 3,456,840 $ 3,484,683
COSTS AND EXPENSES
Cost of goods sold 729,027 2,601,967 2,609,289
Selling, general and administrative 425,527 1,570,533 1,611,660
Stock based compensation 140,000
Depreciation and amortization 106,844 406,432 408,148
------------ ------------ ------------
Total Costs and Expenses 1,261,398 4,578,932 4,769,097
------------ ------------ ------------
NET OPERATING LOSS (560,728) (1,122,092) (1,284,414)
OTHER EXPENSE
Interest expense 20,000 60,000 60,000
------------ ------------ ------------
20,000 60,000 60,000
------------ ------------ ------------
NET LOSS $ (580,728) $ (1,182,092) $ (1,344,414)
============ ============ ============
NET LOSS PER SHARE, basic and diluted $ (0.01) $ (0.02)
============ ============
Weighted average number of common shares outstanding 89,330,887 89,330,887
============ ============
Note: The Company had no operating abilities for the comparable period ending
December 31, 2003.
See accompanying notes to financial statements.
F-2
ATLANTIC WINE AGENCIES, INC. and SUBSIDIARIES
(Formerly New England Acquisitions, Inc.)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Period
For the Nine December 16, 2003
Months Ended (Inception) to
December 31, December 31,
CASH FLOWS FROM OPERATING ACTIVITIES 2004 2004
----------- -----------
Net loss for period $ (580,728) $(3,484,683)
Non-cash item included in net loss:
Stock based compensation 140,000
Depreciation and amortization 100,844 408,148
Changes in operating assets and liabilities:
Accounts receivable (2,213,439) (2,213,439)
Inventory (1,821,072) (1,821,072)
Accounts payable 1,608,689 1,608,689
Accrued expenses 1,799,082 1,799,082
Increase in due to principal stockholders 1,469,899 3,200,000
----------- -----------
Net Cash (Used In) Provided by Operating
Activities 363,275 363,275
CASH FLOWS FROM INVESTING ACTIVITIES (2,899,645) (2,899,645)
----------- -----------
Net Cash Used in Investing Activities (2,899,645) (2,899,645)
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contributor 2,723,880 2,723,880
----------- -----------
Net Cash Provided by Financing Activities 2,723,880 2,723,880
----------- -----------
NET INCREASE IN CASH 187,510 187,510
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD
----------- -----------
CASH AT END OF PERIOD $ 187,510 $ 187,510
=========== ===========
See accompanying notes to financial statements.
F-3
ATLANTIC WINE AGENCIES, INC. and SUBSIDIARIES
(Formerly New England Acquisitions, Inc.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2004
NOTE A - BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements
have been prepared in accordance with generally accepted
accounting principles for interim financial information.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring
accruals) considered necessary in order to make the financial
statements not misleading have been included. Results for the
nine months ended December 31, 2004 are not necessarily
indicative of the results that may be expected for the year
ending March 31, 2005. For further information, refer to the
financial statements and footnotes thereto included in the
Atlantic Wine Agencies, Inc., formerly New England
Acquisitions, Inc., annual report on Form 10-KSB for the year
ended March 31, 2004 and the form 8-K/A filed in January 2005.
NOTE B -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's 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 minimal net assets, is considered a capital
transaction. Accordingly, for accounting purposes, the
acquisition has been created as an acquisition of New Heights
560 Holdings, LLC by Atlantic Wine Agencies, Inc. and a
recapitalization of such. Since the merger is a
recapitalization of Atlantic Wine Agencies, Inc. and not a
business combination, pro-forma information is not presented.
NOTE C - DUE TO PRINCIPAL STOCKHOLDERS
At December 31, 2004, principal stockholders have advanced the
Company approximately $3,200,000 for working capital. As of
October 8, 2004, the Board of Directors has agreed to make the
stockholder loan a convertible demand promissory note maturing
December 1, 2005. Such loans are non-interest bearing and on
September 18, 2004, Atlantic Wine Agencies, Inc. ("Company")
entered into an agreement to issue 20,000,000 shares of its
common stock to the stockholder 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 $3,136,202.87 Australian
dollars to National Australian Bank to settle a loan facility
held by Dominion Wines, Ltd, advance Dominion Wines $223,797.18
Australian dollars for working capital, and assume a
$4,081,387.21 Australian dollar 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.
NOTE E - SUBSEQUENT EVENT
In January 2005, the Company closed on a line of credit in
which the Company can borrow up to 80% of its combined
Australian sales not to exceed $4,000,000 Australian dollars.
The line will be secured by the Australian subsidence sales and
assets. The loan bears interest at the rate of 1% over libor
rate.
F-4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
The following should be read in conjunction with our financial statements and
the related notes that appear elsewhere in this Annual Report. The discussion
contains forward-looking statements that reflect our plans, estimates and
beliefs. Our actual results could differ materially from those discussed in the
forward-looking statements. Factors that could cause or contribute to these
differences include, but are not limited to, those discussed below.
Overview
Atlantic Wine Agencies Inc acquired its first premium wine estate Mount Rozier
in the Stellenbosch region of the Western Cape, South Africa.
The Company has been in a development stage for the last year, developing and
producing branded wines from the market and upgrading the vineyards and
property. No sales of a material nature were made, since inception, however
potential sales are likely in the second quarter of 2005, with the additional
benefit of sales from our Australian operation (See Dominion Acquisition below)
coming through in the first quarter of 2005.
2005 is a key year for Atlantic Wine Agencies and its subsidiaries. We are
aiming to consolidate and integrate our businesses through sharing and
implementing best practices and to improve overall operating and control
procedures. As part of this process we have streamlined our operations by
computerising as much as possible both in administration and production - the
full benefit of which will not be seen until the later part of 2005.
Our strategy is to combine our resources and, where possible, source on a global
basis with the support of a limited network of local suppliers. This will enable
us to fully utilise economies of scale for the benefit of the group.
Domestic sales have already started Australia and are in line with our projected
budgets. We anticipate that 2005 will see a significant increase in sales of
wines in the UK, Europe, USA and the Far East as we introduce the wines to the
markets and widen our distribution network.
There have also been major changes in not only improving the vineyards and
quality of fruits and wines but also commencement of phase 1 of our leisure and
lifestyle development. Substantial resource has been invested into these
projects by strengthening the management team and laying down the foundations
for the business to grow further.
Additionally, considerable investments have been put into the upgrade of the
winery and tasting area raising the standard of the facility to compete with
premium international operations.
A brand concept has been developed in three distinct categories under the Mount
Rozier label, being premium quality high end wines; Rozier Bay a distinct mid
priced range and Rozier Reef the lower but quality end of the wines. Our goal is
to have all wines over-deliver in their price range.
During the year the Company secured the services of two highly respected and
regarded professionals within the wine trade, Christopher Burr MW and Larry
Cherubino, to oversee best practice and strategy on the wine quality and brand
building side of our business. With the addition of expert and strategic
management, Mount Rozier range has already started winning awards through the
industry a cited by such publications as the "Platter Guide" and "Decanter
Magazine" which further endorses our belief that we are located in the best
viticulture growing area within the Western Cape.
3
Finished products are now in the UK and the full range will be available in the
UK through strategic outlets, followed by sales in Germany and the Netherlands.
On the leisure side we are looking to commence the development on our property
in Stellenbosh with the upgrade of the winery and infrastructure improvements.
This will subsequently facilitate the implementation of a world-class
development, thus improving and increasing the overall value of our assets.
Feasibility studies for the hotel and leisure development are advanced and
underway for a complete hotel and leisure development within planning constrains
in Western Cape on the Mount Rozier Estate. Phase 2 and 3 will commence probably
in the latter part of 2005.
Dominion Acquisiton
In the 3rd quarter of 2004, we further acquired and merged with the Dominion
Wine Estates and Property in Australia, a `State of the art' winery located in
550 hectares of land known as Alexander Park in the Strathbogie region approx
150km North of Melbourne, Australia. In exchange for all of the issued and
outstanding shares of each of those entities the Company issued 20,000,000
shares of its common stock to the shareholders of the Dominion entities.
Additionally, the Company agreed to make payments of $3,136,202.87 Australian
dollars to National Australian Bank to settle a loan facility held by Dominion
Wines, Ltd., advance Dominion wines $223,797.13 Australian dollars for working
capital and assume a $4,081,387.11 Australian dollar loan held by the
commonwealth Bank of Australia. The Company also cancelled 20,000,000 shares of
its common stock held by certain stockholders.
The property in Australia has been identified as an ideal location for the
production of premium wine grapes. At full capacity the Australian winery is
able to process up to 7,500 tons of fruit. It has two key functions. The first
is the production our own brands, (Alexander Park and Vinus) and the second
function is to provide contract winemaking services for numerous Australian wine
companies, presently including Southcorp. There are synergies which compliment
each business therefore the merger allows Atlantic Wine Agencies to open up each
other, markets where Mount Rozier get distribution exposure in the growing Asian
market, Singapore, China. Japan , Malaysia and Vietnam, and Dominion Wines to
get Exposure to the European Markets.
Plan of Operation
The business plan calls for the consolidation of Mount Rozier in South Africa
and Dominion Wines in Australia, after a year of acquisitions and developments.
Mount Rozier has developed 3 tiers price pointed ranges of wines, each distinct
in character, in total there are 15 SKUs in the Ranges. Dominion Wines have
already established premium branded wines through their Vilnus and Alexander
Park ranges.
2005 will see sales in volume in the UK, Australia, Vietnam, Singapore, Denmark;
with target markets in Germany, Netherlands, China, Japan and other Far East and
European Countries following thereafter.
At our vineyard in Stellenbosh considerable investments were made in 2004 after
the acquisition both in the vineyards and barrel store Area including a state of
the art wine tasting area which will improve the overall quality of our wines as
well as increase the asset value of the property. Initial stage of the
4
The company is dependent on further working capital and structured financing in
order to meets its obligations and deliver the business plan in 2005.
Negotiations are underway with strategic banks to facilitate a part of the
requirement.
The company is evaluation and carrying out a number of feasibility studies
regarding development of the leisure facilities in South Africa with Architects
and surveyors, restructuring of the South African Operations means that there is
a dedicated Development Director in place to oversee the day to day
developments. These studies take into account social, environmental, and
economic impact in the region as a result of the proposed development. The aim
is to see the economic and profitability of the project for the Company. The
study are for:
- Water and power requirements for the farm and the leisure
development
- Development of a 20 unit/apartment development
- Development of a 50/70 luxury hotel and leisure centre
- Development of a themed picnic/events area on the farm
- Wine tasting and retail area
- Expansion of the barrel and storage area on the estate in South
Africa
- Upgrading offices and convention centre (underway 50% completed)
- Computerisation of the accounting, logistics production and
distribution services.
A number of trade shows will be attended to show our wines both from Australia
and South Africa,The south African wines have already been granted favourable
reviews attaining 4 star plus status in the trade platters guide. Keen interest
has been shown in our products across all the ranges in South Africa, UK, and
other European countries.
The Company envisages that certain wine making equipment will have to be
purchased in order to expand the winery in a 100 ton production boutique winery,
significant changes have already been made.
We have invested in additional management team in South Africa and Australia
with further appointments likely in the first quarter of 2005. These will be key
positions in the organisation. We operate on a flat structure
It is likely that further funding will be required to continue operating,
however cash-flow and profitability should not be confused, the products are
profitable but due to the upfront costs additional capital will be required in
order to produce next years wines, but the investment is not as heavy as the
initial production costs for the first batch of wines as most of the set up
costs incurred are a one off.
The first half of 2005 will see sales in the UK with Australia delivering volume
sales in the first half of 2005 as well. Theis should continue through the year
with a major impact after the wine trade show in Dusseldorf, Germany in Late
March 2005.
RESULTS OF OPERATIONS
We are currently in the development stage and have generated $3,456,840 from
sales of our wines for the nine months ending December 31, 2004. We have
financed our operations to date through the sale of our securities and loans
from our shareholders.
Operating costs for the period from inception to December 31, 2004 aggregated
$4,749,097. The majority of these costs were maintenance and marketing expenses
related to our South African and Australian vineyard operations. As a result of
the above we realized a cumulative loss of $1,284,414 or .010 per share.
5
Operating costs for the nine-month period ended December 31, 2004 aggregated
$4,578,932. Again, the majority of these costs were due to maintaining the South
African and Australian winery operations. As a result of the above we realized a
loss of $1,122,092 for the nine-month period ended December 31, 2004 or $.009
per share.
Atlantic's Board of Directors added Messrs. Andrew Bayley and Carl Voss both of
whom are expected to enhance Atlantic's position in the wine industry. In
addition to the aforementioned individuals, Messrs. Harry Chauhan and Adam
Mauerberger complete the membership of the Board.
LIQUIDITY AND CAPITAL RESOURCES
From inception through December 31, 2004, net cash used to fund operating
activities totaled $2,723,880, net cash utilized by investing activities totaled
$(2,899,645). For the nine-month period ended December 31, 2004, net cash used
to fund operating activities totaled $2,723,880.
The Company has generated minimal revenues and has financed its operations to
date primarily through the capital contributions of certain stockholders and the
assumption of debt from certain stockholders. To date the company owes
$3,200,000 to stockholders in the form of a demand convertible promissory note
which is interest free and convertible at the market. Such Note matures on
December 1, 2005. As a result, cash on hand was $187,510 as of December 31,
2004.
6
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The Company's discussion and analysis of its financial condition and results of
operations are based upon the its financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United
States. The preparation of these financial statements requires the Company to
make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. On an on-going basis, the Company evaluates its estimates,
including those related to bad debts, income taxes and contingencies and
litigation. The Company bases its estimates on historical experience and on
various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.
New accounting rules in both Australia and South Africa will have a material
impact on both the consolidated balance sheet and at entity level due to sgara
rule in Australia and Biological Assets rule in South Africa where vines can no
longer be written off in the year of purchase, but re-valued on an annual basis
with the difference being liable to corporate tax or refund. However, due to tax
losses incurred it is highly unlikely that we will be in a position to pay
corporate tax in the near future.
Item 3. Controls and Procedures.
(a) Our principal executive officer and principal financial officer has
evaluated the effectiveness of our disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) as
of a date within 90 days prior to the filing date of this quarterly
report and has concluded that our disclosure controls and procedures
are adequate.
(b) There were no significant changes in our internal controls or in
other factors that could significantly affect these controls
subsequent to the date of their evaluation, including any corrective
actions with regard to significant deficiencies and material
weaknesses.
(c) Not applicable
7
PART II
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
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. Exhibit Index
Exhibit 99.1 Certification of President and Principal Financial Officer
Exhibit 99.2 Certification of President and Principal Financial Officer
8
b. Reports on Form 8-K
On October 28, 2004, the Company filed an 8-K with the Securities and Exchange
Commission with respect to the addition of Messrs. Andrew Bayley and Carl Voss
to the Company's Board of Directors.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ATLANTIC WINE AGENCIES INC.
/s/ Adam Mauerberger
------------------------------------------
Name: Adam Mauerberger
Title: President and Chairman of the Board
Date: February 18, 2005
9