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 September 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 November 16, 2005 was 84,838,027.
ITEM 1 FINANCIAL STATEMENTS
Description Page No.
FINANCIAL INFORMATION:
Financial Statements
Consolidated Balance Sheets at September 30, 2005
(Unaudited).............................................................................................. 3
Consolidated Statement of Operations for the Six Months Ended September 30, 2005 and 2004,
respectively (Unaudited)................................................................................. 4
Consolidated Statements of Cash Flows for the Six Months Ended September 30, 2005 and 2004, respectively
(Unaudited) ................................................................................................ 5
Notes to Consolidated Financial Statements (Unaudited)...................................................... 6
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ITEM 1. FINANCIAL STATEMENTS
ATLANTIC WINE AGENCIES, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2005
CURRENT ASSETS
Cash $ 110,534
Accounts receivable 24,165
Inventory 149,230
Receivable from officer 5,540
Interest receivable 79,139
-----------
Total Current Assets 368,608
OTHER ASSETS
Property, plant and equipment, net 2,618,452
Trademarks, net 40,012
-----------
$ 3,027,072
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Overdraft $ 1,044
Accounts payable 533,789
-----------
Total Current Liabilities 534,833
LONG-TERM DEBT
Due to principal stockholders 940,000
STOCKHOLDERS' EQUITY
Common stock authorized 150,000,000
shares; $0.00001 par value; issued
and outstanding 84,838,077 shares 849
Additional contributed capital 6,037,241
Accumulated other comprehensive income (776,338)
Accumulated deficit (3,709,513)
-----------
Total Stockholders' Equity 1,552,239
-----------
$ 3,027,072
===========
See accompanying notes to financial statements.
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ATLANTIC WINE AGENCIES, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
2005 2004 2005 2004
------------ ------------ ------------ ------------
NET SALES $ 237,058 $ 78,730 $ 331,360 $ 134,973
COSTS AND EXPENSES-
Cost of goods sold 167,115 (27,659) 278,140 100,448
Selling, general and administrative 495,785 231,786 914,780 380,644
Stock based compensation 536,500
Depreciation and amortization 16,599 2,335 35,388 7,878
------------ ------------ ------------ ------------
Total Costs and Expenses 679,499 206,462 1,228,308 1,025,470
------------ ------------ ------------ ------------
NET LOSS $ (442,441) $ (127,732) $ (896,948) $ (890,497)
============ ============ ============ ============
NET (LOSS) PER COMMON SHARE -
(Basic and diluted) $ (0.01) $ (0.01) $ (0.01) $ (0.01)
============ ============ ============ ============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 84,838,077 85,830,887 84,838,077 85,830,887
============ ============ ============ ============
See accompanying notes to consolidated financial statements.
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ATLANTIC WINE AGENCIES, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended
September 30,
---------------------------
CASH FLOWS FROM OPERATING ACTIVITIES 2005 2004
----------- -----------
Net loss for period $ (896,948) $ (890,497)
Non-cash items included in net loss:
Stock based compensation 536,500
Depreciation and amortization 35,388 7,878
Changes in operating assets and liabilities:
Accounts receivable 12,890 (30,000)
Inventory 1,394,227 (1,145,949)
Receivable from officer 43,221
Interest receivable (79,139)
Prepaid and other 43,960
Overdraft 1,044
Accounts payable 432,408 659,423
Accrued expenses (113,752) 2,197
Accrued payroll taxes (65,181) 895,152
----------- -----------
Net Cash Provided by Operating
Activities 808,118 34,704
CASH FLOWS FROM INVESTING ACTIVITIES
Net Disposals (Purchase) of Property, Plant and
Equipment 104,161 (2,602,475)
----------- -----------
Net Cash Provided by Investing Activities 104,161 (2,602,475)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net capital contribution 6,441 2,723,880
Due to Dominion (344,381)
----------- -----------
Net Cash Provided by Financing Activities (337,940) 2,723,880
----------- -----------
EFFECT OF RATE CHANGE ON CASH (561,292)
NET INCREASE IN CASH 13,047 156,109
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 97,487
----------- -----------
CASH AT END OF PERIOD $ 110,534 $ 156,109
=========== ===========
See accompanying notes to financial statements.
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ATLANTIC WINE AGENCIES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 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 six
months ended September 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. 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 $3,709,513 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.
NOTE C - DUE TO PRINCIPAL STOCKHOLDERS
At September 30, 2005, principal stockholders have advanced the Company
$940,000 for working capital. Such loan bears interest at a rate of 5%,
matures on September 30, 2006 and may be extended for another year at
mutual agreement of the Company and the stockholders holding the Note.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation
Despite Atlantic Wine Agencies showing a loss for end of quarter September 30th
2005 the business has made excellent progress from development stage with
several new regional wholesalers within Europe now marketing our South African
brands. Significant developments which will be reflected in our next quarter
include distribution agreements into the multiple off-trade including UNWINS
(381 stores primarily located in the south of England) and Liquor City, a
leading South African drink specialist. These results have been created from the
momentum in July 2005 when 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. Recently, a double gold was achieved in the prestigious South
African Veritas competition including a further 4 medals. The board notes that
after significant investment into Mount Rozier, our flagship Estate in South
Africa, asset valuations after nearly 2 years development does not reflect true
market value and are conservative. The business is now stronger since the recent
Dominion unwind in Australia, having extinguished $2.6 million in the previous
promissory note and capitalizing proceeds. As a result of our Dominion
settlement, our public float was further reduced by 20 million shares. The
business will continue to focus on new acquisitions within growing categories to
build net asset value. Currently our key objective of raising profile for Mount
Rozier is starting to deliver dividends with the following independent recent
press quotes from leading trade publications:
o THE HERALD - Joe Fattorini "Every wine writer wants to find the next big
thing, and this would be my bet for the next couple of years. The Mount
Rozier craftsman-made wines especially are incredibly impressive"
o DRINKS INTERNATIONAL - David Longfield "Mount Rozier makes rapid ascent"
o HARPERS - "Rozier has a golden glow."
RESULTS OF OPERATIONS
We are currently in the early stages of our first sales cycle and generated
$331,360 for the six months ended September 30, 2005 compared to $134,973 for
the six months ended September 30, 2004, respectively. Total costs and expenses
for the six months ended September 30, 2005 were $1,228,308 as compared to
$1,025,470 for the six months ended September 30, 2004. Our net loss for the six
months ended September 30, 2005 as compared to the six months ended September
30, 2004, was $896,948 and $890,497, 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 and an increase in sales.
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 six months ended September 30, 2005, net cash used to fund operating
activities totaled $808,118 as compared to $34,704 for the corresponding three
months ended September 30, 2004. Net cash utilized by investing activities for
the six month period ended September 30, 2005 totaled $(104,161) compared to
$2,602,475 for the six months ended September 30, 2004.
The cash available at September 30, 2005 was $110,534 as compared to $156,109
for the corresponding six months ended September 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 financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States.
7
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
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b. Reports on Form 8-K
On August 9, 2005, the Company filed a current report on Form 8-K/A with the
Securities and Exchange Commission which amended an 8-K originally filed on May
4, 2004.
On August 26, 2005, the Company filed a current report on Form 8-K with the
Securities and Exchange Commission disclosing that the Company entered into a
settlement agreement effectively unwinding 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: November 16, 2005
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