Danielle Cheese Slips Through Araldica's Fingers -- FYI...new story just filed...some new, other a re-cap.
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Danielle Cheese Slips
Through Araldica's Fingers
Events Latest Setback
For Troubled Company
Araldica Wineries Ltd. has turned up empty-handed in its attempt to purchase the Danielle Cheese Distributors, Inc. from its owner, Jon Swan.
"Any discussions with Araldica about the purchase of Danielle Cheese are at an end," Swan's attorney, Michael Matsler told Wine Investment News today. The final shoe dropped Friday, Oct. 23 when Swan's law firm filed for complete dismissal of an April lawsuit Araldica filed against Swan to compel him to sell Danielle to it.
These recent events are just the latest in a series of woes for a company
that:
* Has never registered its securities,
* Does not have the proper licenses to sell wine.
* Regularly issues news releases and financial information that they
know are incorrect.
* Suffers from serious balance sheet and income statement
problems caused by booking acquisitions that have not completed
or which are no longer being pursued.
* Has a looming shareholder disaster that could dilute outstanding
shares by 5-to-1.
Danielle Litigation
Araldica filed suit against Danielle Cheese in April, charging breach of a
sale agreement which Swan insists was never an agreement at all. On
June 23, a New York Supreme Court judge denied Araldica a
preliminary injunction to compel Swan to sell Danielle to Araldica. At
that time the judge ruled that: Araldica's "papers do not demonstrate to
the Court's satisfaction that it was able to perform its end of the
bargain," namely paying $100,000 and stock valued at 40 cents a share
on closing.
After denial of the preliminary injunction, the breach of conduct lawsuit
was continued by the court with discovery and interrogatories to be
exchanged between the parties and a new hearing in court next month.
On August 4, Araldica issued a news release saying that they had
reached an "agreement in principal" with Swan to sell Danielle Cheese
for $2,200,000: $700,000 in cash, and the assumption of $1,500,000
of Danielle's corporate debt. The Araldica news release said the deal was
supposed to close in September, but Swan said he never received
Araldica's downpayment. In addition, Matsler said they had received no
response to their court interrogatories.
Because of these factors, Swan has asked the court to dismiss Araldica's
suit and to re-pay Swan his court costs and attorney's fees. They've
asked for a Nov. 17 court hearing on the matter.
Araldica's President Frank J. Landi, Jr. did not return WIN's faxed request for comment.
In fact, Landi has not returned more than two dozen telephone calls,
faxes and e-mails sent to him regarding these and a number of other
issues.
Araldica Shares Unregistered
History, though, seems to be repeating itself. In the Com/Link matter,
the SEC nailed Landi on charges of selling unregistered securities. And
now, according to SEC spokesman John Heine, Araldica has never filed a
registration with the agency or a request for an exemption from filing.
The SEC record division also had no registrations from all of Araldica's
previous corporate names, San Diego Wood Recycling, HPI Recycling or
HP Industries.
And according to Andrew Kandel, chief of the New York State Bureau of
Investor Protection and Securities, Araldica has filed nothing at all there
as well.
How could this be? After all, it is traded on the OTC:BB? Well, NASD's
Scott Peterson said they don't check to make sure that quoted stocks
are actually in legal compliance with registration requirements and that
means the OTC market could be an even Wilder West than most people
imagine.
No License To Sell Wine
On the other hand, it may not pay to cross the people who issue liquor
licenses. New York State Liquor Authority spokeswoman Maris Hart
confirmed that they are investigating Araldica because there is serious
doubt as to whether Araldica can legally sell wine at all. While Araldica's
press releases say it has been "engaged (since 1993) in the importation,
sale and distribution of premium Italian wines...."
Hart said the SLA had no record of Araldica having the appropriate
license to sell wine until March 4, 1998 when the liquor license of
Staten-Island-based All Brands Discount Wines & Liquors was
transferred to it. But even that license may be in doubt because Araldica
is no longer doing business at the Staten Island address. "A license to
sell wine or liquor is valid only for the specific address to which it was
issues," Hart said. Selling wine without a license is a felony in New York.
Hart also said that said that except in rare instances, people convicted of
felonies cannot manage or own companies with liquor licenses. "They
would need special approval by our board members," said Hart who
confirmed that no such special permission had been requested for
Araldica.
Misleading News Releases
With all these problems, it's hardly a surprise that Araldica's news
releases are not as candid as those of a Big Board company. The
company has issued -- and never retracted or corrected -- news
releases of acquisitions that never happened, big-name board members
who never joined the board and financial numbers that they have never
been able to get a CPA firm to audit despite repeated promises that
audited numbers would be provided.
One recent example of this was posted on their web site on Sept. 24,
announcing that they had "completed the legal and financial
arrangements required for it to assume operational control of its Italian
winery and vineyard subsidiary, known as "Azienda Agricola
Antogianni, S.r.l.", located in central Tuscany...." They had previously
announced the acquisition of this winery, owned in part by former
Westinghouse Chairman Paul Lego.
But Lego told WIN that Araldica has no more operational control or
ownership over his winery today than they did last November. "There
is a signed letter of intent and if they can come up with the money this
time, then we'll do the deal."
Lego explained that this is Araldica's third attempt at buying the
winery, but "they have never been able to come up with the money." In
fact, Lego says that Araldica has defaulted on $120,000 in
down-payments from the two previous unsuccessful purchase attempts.
On Dec. 4, 1997, Araldica issued a news release which said they had
"completed the acquisition" of the winery and further that Lego would
be joining the AWLT board. Lego said those were not true. The news
release has remained uncorrected on the Araldica Web site
(http://www.araldica.com) long after Araldica was aware that they
were incorrect.
Another misleading news release which has remained uncorrected is an
unaudited balance sheet and income statement released by Araldica on
March 12, 1998 claiming that revenues increased from $1 million in
1996 to $8.4 million in 1997 primarily through the acquisition of seven
companies including a cheese company and a winery in Italy. But
according to Louis De Santis, Araldica's Executive Vice President,
Secretary & Director, none of the acquisitions have closed; three and
possibly four of the companies are no longer being worked on as
acquisitions and two of them are subjects of legal action.
In addition to Lego's winery, the acquisitions announced by Araldica
include: Super City Gourmet, Deer Park, N.Y. , a specialty foods
distributor, Club Dieta Mediterranea, S.r.l., Avezzano (Pescara), Italy, a
distributor of gourmet foods; All-Brands Discount Wines & Liquors,
Staten Island, N.Y., a wine retailer Willcox Inn of Aiken, S.C., Gold Coast
Traders, Inc., a Bethel, Conn., distributor of gourmet foods and
beverages and Danielle Cheese Distributors Inc. of Goshen, N.Y., So far
the only company whose owner will confirm that a sale has actually been
completed is John Caparimo, former owner of All Brands.
Louis De Santis, (then President and CEO), confirmed in a July
interview with WIN that the failure of that deal to close also caused the
failure of its attempts to acquire Gold Coast Traders.
"Danielle is one of the reasons why Antogianni is not completed, because
if Danielle was completed, then we'd have the funding based on
Danielle's assets. So it's a domino effect." De Santis said the Danielle
acquisition was key because it would provide Araldica with assets it
could borrow against to use in completing other acquisitions." Despiute
the news release on his web site, DeSantis told me he "never heard of"
the announced Willcox Inn acquisition.
Finally, in an attempt to discredit Wine Investment News,, Araldica
issued a news release on Sept. 2, claiming that it "engaged the New York
City law firm of Robson and Miller to file a lawsuit against the "Wine
Investment News" newsletter, of Sonoma, California, for libel,
defamation and slander." No legal action has yet been filed and there
have been no communicatoons with any law firm concerning it.
Balance Sheet Problems
The AWLT balance sheet, which shows total assets of $11,313,377,
contains a single item -- $5 million for "prepaid television time" -- which
by all estimates may worth as little as $120,000.
On August 7, 1997, Araldica said it traded 2 million shares of its common
stock to a company called Access America for a "$5 million block of
network broadcast time, which it plans to use this Fall [1997] to
introduce its proprietary line of premium Italian specialty foods." That
campaign has not yet started.
The announcement seems like an attempt to pump up the asset side of
its balance sheet. According to the news release: "The planned television
exposure is expected to vastly expand our direct response reach, and
allows ARALDICA to increase its asset base immediately by $5 million,
which brings the Company closer to its goal of filing for NASDAQ listing
before the end of 1997." No such listing has been applied for says the
NASD. And even though Araldica stock was trading at about $0.40 at
the time, the company valued shares at $2.50, a price it has never
traded at.
Access America, according to its VP Dick Wharton, is a part-time
operation operated out of Wharton's small advertising agency, Nuss
Wharton Advertising, in the Philadelphia suburb of Havertown. And
instead of "network broadcast time" which implies major network
access, Wharton said Araldica's commercials, if they are ever produced,
would air on low-power and UHF TV as well as local access cable and
direct satellite broadcast channels.
When asked how Araldica would assess whether or not it was getting full
value for its stock barter deal, Wharton said, "There's no way to find
out," because, he said, there is no Neilsen-type rating system evaluating
the market which Araldica's ads might reach.
As if all that wasn't bad enough, the validity of the $5 million carried on
the Araldica balance sheet seems to have no basis in reality. Liz Fender,
spokeswoman for the American Institute of CPAs in New York, said that
while prepaid expenses can be legitimate assets, the standards for
valuing this type of non-monetary transaction are "generally the fair
market value of what you got or what you gave for the asset whichever
is the most easily determined."
While not commenting on the Araldica case specifically, Fender said that
in a case like this "the most obvious value would be the market value of
the stock." Using these standards, the proper balance sheet value of the
pre-paid television time asset would be a small fraction of that claimed
by Araldica or about $80,000 at its recent trading price.
Massive Dilution Problems For Shareholders
What's more, the an interview with C. Elvin Feltner of New York, who
owns Access America indicates a different structure for the deal which
has serious implications for Araldica's existing shareholders. Feltner said
he "will get $5 million in Araldica stock" regardless of the stock price.
"They'll have to issue make-good shares," he said if the stock price does
not trade at the $2.50 valuation placed on the shares in the original
agreement. If he were to close on the television time deal at Araldica's
recent trading price of about $0.04 Feltner would be owed 125 million
shares. According to Interwest Stock Transfer, there are 25,685,072
shares issued.
President Convicted of Fraud
Records from the SEC, the U.S. Attorney's office for the Southern
District of New York and the Federal Bureau of Prisons show that Landi
was sentenced to eight years at the country-club-like Danbury (Conn.)
federal prison on June 2, 1983 after being convicted of 13 counts of mail
and wire fraud in connection with a company called Com/Link
International Corp. of New Rochelle, N.Y. Landi, as founder, President
and CEO of Com/Link defrauded "a total of approximately $2,860,600
from several hundred public investors" in connection with a cordless
phone scheme.
The SEC would not comment on whether it is investigating or not; the
New York State Liquor Authority said it is investigating; Kandel said
that his office is following up on leads but that they "don't have the time
or the personnel" to devote more resources to the case. |
