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 June 30, 2005
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.)
Golden Cross House
8 Duncannon Street, London, United Kingdom WC2N 4JF
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: 011-44-207-484-5005
(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 August 18, 2005 was 84,838,027.
1
ITEM 1 FINANCIAL STATEMENTS
Description Page No.
----------- --------
FINANCIAL INFORMATION:
Financial Statements
Consolidated Balance Sheets at June 30, 2005
(Unaudited)............................................................. 3
Consolidated Statement of Operations for the Three Months
Ended June 30, 2005 and 2004, respectively (Unaudited).................. 4
Consolidated Statements of Cash Flows for the Three Months
Ended June 30, 2005 and 2004, respectively (Unaudited) ................. 5
Notes to Consolidated Financial Statements (Unaudited)..................... 6
2
ITEM 1. FINANCIAL STATEMENTS
ATLANTIC WINE AGENCIES, INC. and SUBSIDIARIES
(Formerly New England Acquisitions, Inc.)
CONSOLIDATED BALANCE SHEET
JUNE 30, 2005
CURRENT ASSETS
Cash $ 47,939
Accounts receivable 191,492
Inventory 1,420,757
Receivable from officer 48,761
Prepaid expenses and other 13,334
-------------
Total Current Assets 1,722,283
OTHER ASSETS
Property, plant and equipment, net 2,749,439
Intangibles net of amortization 41,034
-------------
$ 4,512,756
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 212,603
Due to Dominion Wines 344,381
Accrued expenses 136,737
-------------
Total Current Liabilities 693,721
LONG-TERM DEBT
Due to principal stockholders 3,018,323
STOCKHOLDERS' EQUITY
Common stock authorized 150,000,000
shares; $0.00001 par value; issued
and outstanding 84,838,027 shares 849
Additional contributed capital 3,999,531
Other comprehensive income (182,596)
Deficit in retained earnings (3,017,072)
-------------
Total Stockholders' Equity 800,712
-------------
$ 4,512,756
=============
See accompanying notes to financial statements.
3
ATLANTIC WINE AGENCIES, INC. and SUBSIDIARIES
(Formerly New England Acquisitions, Inc.)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended
June 30,
-----------------------------
2005 2004
------------ ------------
NET SALES $ 94,302 $ 56,143
COSTS AND EXPENSES
Cost of goods sold 111,025 128,107
Stock Based Compensation 536,500
Selling, general and administrative 418,995 148,858
Depreciation and amortization 18,789 5,543
------------ ------------
Total Costs and Expenses 548,809 819,008
------------ ------------
NET LOSS $ 454,507 $ 762,865
============ ============
NET LOSS PER SHARE, basic and diluted $ (0.01) $ (0.02)
============ ============
Weighted average number of common shares
outstanding 84,838,027 67,799,291
============ ============
See accompanying notes to financial statements.
4
ATLANTIC WINE AGENCIES, INC. and SUBSIDIARIES
(Formerly New England Acquisitions, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended
June 30,
---------------------------
CASH FLOWS FROM OPERATING ACTIVITIES 2005 2004
------------ ------------
Net loss for period $ (454,507) $ (762,865)
Non-cash item included in net loss:
Stock based compensation 536,500
Depreciation and amortization 18,789 5,574
Changes in operating assets and liabilities:
Accounts receivable (154,437) (4,610)
Inventory 122,700 (57,931)
Accounts payable 111,222 58,872
Prepaid expenses and other 30,626
Accrued expenses 22,985 (13,500)
Accrued payroll taxes (65,181)
Increase in due to principal stockholders 297,054 298,618
------------ ------------
Net Cash (Used In) Provided by
Operating Activities (70,749) 60,658
CASH FLOWS FROM FINANCING ACTIVITIES
Cash acquired in acquisition 120,742
------------ ------------
Net Cash Provided by Financing
Activities 120,742
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditure (11,250)
------------ ------------
Net Cash Used in Investing Activities (11,250)
------------ ------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 32,491 128,544
------------ ------------
NET (DECREASE) INCREASE IN CASH (49,508) 309,944
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 97,487
------------ ------------
CASH AT END OF PERIOD $ 47,939 $ 309,944
============ ============
See accompanying notes to financial statements.
5
ATLANTIC WINE AGENCIES,
INC. and SUBSIDIARIES
(Formerly New England Acquisitions, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2005
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 three months ended June 30, 2005 are not
necessarily indicative of the results that may be expected for the
year ending March 31, 2006. 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, 2005.
NOTE B - GOING CONCERN
As indicated in the accompanying financial statements, the Company
has incurred cumulative net operating losses of $3,017,072 since
inception. 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.
NOTE C - DUE PRINCIPAL STOCKHOLDERS
During the quarter ended June 30, 2005, the principal stockholders
continued to advance funds for working capital. The amount advanced
during the quarter approximated $300,000.
NOTE D - RECEIVABLE FROM OFFICER
At June 30, 2005, the Company had advanced $48,761 to the President
which was repaid in July 2005.
NOTE H - TRANSACTIONS WITH DOMINION WINES PTY, LTD AND DOMINION ESTATES PTY,
LTD
On September 14, 2004, the Company entered into an agreement to
acquire two Australian companies - Dominion Wines, Pty Ltd and
Dominion Estates, Pty Ltd (hereafter referred to as "Dominion"). The
terms of the agreement were as follows: (1) the issuance of
20,000,000 shares of the Company's common stock, (2) retire the
National Australian Bank loan in the amount of $2,508,962 (Aus
$3,136,202) (3) arrange for an additional investment of $179,037
(Aus $223,797) and (4) assume the Commonwealth Bank of Australia
loan in the amount of $3,265,109 (Aus $4,081,387).
6
ATLANTIC WINE AGENCIES,
INC. and SUBSIDIARIES
(Formerly New England Acquisitions, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
June 30, 2005
NOTE H - TRANSACTIONS WITH DOMINION WINES PTY, LTD AND DOMINION ESTATES PTY,
LTD (CONTINUED)
Subsequent to December 31, 2004, the Company determined that such
acquisition was not in its best interest and agreed with Dominion to
unwind the transaction. During this period, Dominion borrowed
approximately $3,000,000 from General Electric Credit Australia to
replace the Commonwealth Bank of Australia loan and lent $344,381 to
a subsidiary of the Company.
The agreement to unwind the acquisition requires (1) the return of
the 20,000,000 shares of Company common stock which is currently
held in escrow, (2) the signing of a novation agreement to forgive
the $344,381 note payable by the company's Subsidiary to Dominion,
and (3) the issuance of a note to the Company's principal
shareholder in the amount of $2,560,000 (Aus $3,200,000) for the
retirement of the National Australian Bank loan.
At the date of this report, the transaction has been agreed to by
the shareholders and management of each company and is awaiting the
securitization of property as collateral for the note agreement to
the Company's principal shareholder. Management believes that the
transaction will be successfully unwound and accordingly, the
assets, liabilities and results of operations for the year ended
March 31, 2005 of Dominion have not been included in these
consolidated financial statements.
NOTE G- EMPLOYMENT CONTRACTS
The company has executed 5 year employment contracts with key
employees with annual salary commitments ranging from $184,000 in
the first year with annual escalation increasing salary commitments
to $247,000 in year five. In addition, the controlling stockholders
gave 19,960,000 shares from their holdings to one employee and
1,500,000 shares to another. Accordingly, stock based compensation
in the amount of $536,500 based upon a per share valuation of $0.025
per shares, was recorded in the financial statements
7
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation
In July 2005, our wines won a total of 6 medals in the International Wine &
Spirit Competition 2005. Of note, our Mount Rozier Shiraz 2003 and Rozier Bay
Chardonnay 2004 were each awarded a "Gold - Best In Class". Additionally, four
of our wines were awarded Bronze medals in the same competition.
RESULTS OF OPERATIONS
We are currently in the early stages of our first sales cycle and generated
$94,302 for the three months ended June 20, 2005 compared to $56,143 for the
three months ended June 30, 2004, respectively. Total costs and expenses for the
three months ended June 30, 2005 were $548,809 as compared to $1,281,508 for the
three months ended June 30, 2004. Our net loss for the three months ended June
30, 2005 as compared to the three months ended June 30, 2004, was $454,507 and
$1,225,365, respectively. The primary reason for the decrease in losses was a
result of the lack of $536,500 in stock based compensation for the reporting
period in 2005.
We have financed our operations to date primarily through loans made to us by
our shareholders and their affiliates.
Our wine distribution began in earnest after the end of the reporting period and
we anticipate significant sales during the following quarters as a result of our
increased presence in the marketplace.
LIQUIDITY AND CAPITAL RESOURCES
For the three months ended June 30, 2005, net cash used to fund operating
activities totaled $(70,749) as compared to $60,658 for the corresponding three
months ended June 30, 2004. Net cash utilized by investing activities for the
three month period ended June 30, 2005 totaled $(11,250 compared to $0 for the
three months ended June 30, 2004.
The cash available at June 30, 2005 was $47,939 as compared to $309,944 for the
corresponding three months ended June 30, 2004.
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.
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
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 31.1 Certification of President and Principal Financial Officer
Exhibit 32.1 Certification of President and Principal Financial Officer
b. Reports on Form 8-K
On April 6, 2005, the Company filed an 8-K with the Securities and Exchange
Commission with respect to our placing a wholly-owned subsidiary, Dominion
Estates Pty Ltd into voluntary liquidation in Australia.
On June 10, 2005, the Company filed an amended 8-K with the Securities and
Exchange Commission updating the public as to the status of our discussions with
certain parties regarding the unwind of our acquisitions of Dominion Wines Ltd
and Dominion Estates Pty Ltd.
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, Chief Financial Officer and Chairman of the Board
Date: August 22, 2005