Too all:
I just finished uplaoding all this to the site under: araldica.com or its printed below (it is easier to read off the web site!).
Matthew
TO: All Shareholders
FROM: Frank J. Landi, Sr., President
DATE: 4 May 1999
SUBJECT: Company Status Report/Financial Statements
AZIENDA AGRICOLA ANTOGIANNI, S.r.l.
Finally, after 69 months of effort, we have successfully concluded the acquisition of the winery in
Italy, at a closing in Pittsburgh on Monday, 12 April. The company's current plans are to be in Italy
by Mid May, to (i) take over the operation of the winery, and (ii) conclude a long-term mortgage on
the property in Italy, for between $500,000 and$750,000. Proceeds of the mortgage funding will be
used primarily as operating reserves for the company, but may also be used to acquire one or two
additional small companies as well as to (a) expand the winery's operations, (b) expand Super City's
operations, and (c) commence the introduction of the company's proprietary "Club Dieta
Mediterranea" product line, via a national television campaign.
JADE ENTERPRISES, INC.
Simultaneously with the Antogianni closing, we also completed the Jade acquisition. Jade functions as
the exclusive worldwide sales agent for the Antogianni product line (premium wines and olive oils).
Immediately upon the contract closing, Jade presented Araldica with an order for twenty containers
of Antogianni brand wines (forty foot containers), which represents approximately 40,000 cases, to
be shipped to an Asian customer. This customer order is conditional upon the company being able to
satisfy the buyer that it can successfully accommodate orders of this magnitude, on an ongoing basis
(this is repeat business). Management believes that it will be able to demonstrate the required
capabilities since (i) the winery has previously operated at such levels, and (ii) the existing capacity of
the physical plant is far in excess of such production requirements.
SUPER CITY GOURMET, INC.
This subsidiary, a Long Island distributor of specialty foods, continues to operate profitably while it
expands; the company believes that it is poised for substantial growth, with new chain store orders
in-house, and requires only the company's continuing provision of expansion capital from time to
time. The company has committed to make the required new funds available next month from the
pending Antogianni mortgage proceeds.
CLUB DIETA MEDITERRANEA, S.r.l.
After substantial delays- all due to 1998's private placement defaults by certain investment entities-
the company has finally been able to make the necessary financial arrangements for this Italian
subsidiary to acquire substantial landed inventories of its product line, in anticipation of (i) the many
chain store purchase orders it has received (and heretofore been unable to accept), and (ii) the
orders that will result from its new and expanded internet and television advertising activities, to
commence in earnest later this year.
ALL BRANDS DISCOUNT WINES AND LIQUORS, INC.
We regret to inform you that this acquisition is no longer functioning, and will be a total write-off of
the $300,000+ that was invested therein. The company plans to institute litigation against the seller
later in 1999, but has no realistic hope of recovering damages; the point of any such litigation will
primarily be the discovery process, through which we will learn precisely what occurred during the
short period of time that we allowed the seller to function as the general manager of this 20 year old
retail liquor establishment before its demise (within months of its acquisition by the company).
Upon the successful completion of the Antogianni acquisition (12 April), the company is no longer
legally allowed to hold- as a wine manufacturer- the retail license acquired in the All Brands
purchase. Thus, the company voluntarily surrendered its retail license to the New York State Liquor
Authority in the preceding week. Further, because of its recent Lionstone agreement, the company
no longer needs retail sales licenses in each of the states in which it makes, or plans to make, direct
mail wine sales to consumers.
PROPOSED NEW OPERATIONS AND JOINT VENTURES
The company is actively pursuing a proposed joint venture with a major firm in Brasil which has
proposed that we allow it to construct a state-of-the-art distillery facility on its property in Italy. (This
contract, anticipated to be executed within the next thirty days, will be officially announced at that
time.) The joint venture partner will finance, construct and manage the facility, and is to also
committed to provide the customers to whom 100% of its wine alcohol production will be sold.
The company has also been asked to consider acquiring [3] new Italian liqueur products, as its own
proprietary, brands (exclusively manufacturing such in the future, and owning the patents, trademarks,
brand names and formulas); two are presently being manufactured in Italy on a subcontract basis,
and one is currently not in production. Barring the receipt of any negative information in our discovery
process on each, the company plans to go forward with at least one of these proposed new
products, before the end of this year, since all three [including the product currently not in
production] appear to have strong consumer brand loyalty and continuing sales and inquiries sufficient
to justify such a positive decision.
PENDING OFFICER, DIRECTOR, PROFESSIONAL ADVISOR CHANGES
The company will shortly be announcing the engagement of a new accounting firm as well as new
auditors. It is hoped that these changes will enable the company to provide audited financial
statements on a regular basis in the future, as well as to become a fully reporting company shortly.
The fact that these new firms are based in the metropolitan New York City area should allow the
company- as it was not able to do in the past- to make immediate, continuing and substantive
progress on these important matters.
The company has conditional commitments from new professional managers to join the company, as
soon as its new [mortgage] financing has been completed, which we expect will be no later than next
month. At such time, the appointment of these new officers (to include a new CEO, COO and CFO)
and directors will formally be announced. To state the obvious, the company has long needed such a
team to successfully develop and implement its plans, and we anticipate much more rapid attainment
of the company's goals in the future as a result of these changes.
For your information, in re our staffing, it has been pointed out to us that we have neglected to advise
you that, primarily as a result of the Lionstone agreement, the company has now "outsourced" the
majority of its previously in-house functions (e.g., telemarketing, consumer promotions, order
processing, order fulfillment, inventory control and a host of associated record keeping activities). As
a result, our staff- which never numbered above six- has been reduced to two full time people, no
more than one of which is in our new Manhattan offices at all times.
We regret that you are more likely now than heretofore be put through, on your calls, to our voice
mail system (which happens automatically when we are in the office, and on the telephones); suffice
to say that having no available humans for you to speak to, much of the time, does not mean that
Araldica Wineries, Ltd. is out- or going out- of business, as some have suggested.
HISTORICAL FINANCIAL STATEMENTS AND PROJECTIONS
Attached hereto are selected current finical statements (unaudited) for your company; a Balance
Sheet and an Income Statement have been produced to date.
These will be expanded, updated and published more regularly from this point in time. We are also
preparing three year projections, which should better enable you to evaluate your continuing
investment in the stock of the company; these will be posted on our web site (www.araldica.com)
before the end of next month.
INTERNET ACTIVITIES
Our on-line information and sales activities have proven ineffective to date, primarily due to the
company's continued lack of cash resources in the last year. Without standing, domestic inventories
of all products (e.g., $40,000 for a wine container; $35,000 for a container of Italian specialty foods;
$25,000 per container for our most popular domestic food products), we have been unable to
aggressively market our products, whether to consumers or store chains, for fear that we would be
unable to fulfill orders from our previously small available inventories.
We will shortly be announcing that we have turned over the development and management of our
proposed, expanded web site to a highly regarded and experienced web site developer; we are at
this time drafting the contract for the parties. This progress has been facilitated by a combination of
recent positive developments, primary among them (i) the Lionstone contract, and (ii) the Antogianni
winery purchase and the critical cash infusion it has enabled, through our acquisition of millions of
dollars of new and unencumbered hard assets.
LITIGATION
The aborted Danielle Cheese Distributors, Inc. acquisition remains in active litigation, on appeal; the
company and its counsel believe that we stand a much greater chance at success, now that we have
proceeded through and out of the local court system, where- inexplicably- the company's position
was discounted, despite substantial documentation supporting its claims against the defendants.
The company has no other current litigation pending, either as a plaintiff or as a defendant, of any
substance; certain normal course of business matters are, as a result of our previous short stay under
bankruptcy court protection, being resolved at this time, a small amount of which involve various
court proceedings. All such are in the process of being settled, and most have already been settled.
Attached are Araldica's currently available [unaudited] financial statements (BALANCE SHEET and
INCOME STATEMENT).
A complete NOTES section, and a STATEMENT OF CASH FLOWS, are presently in
preparation, and will require some additional weeks to complete and publish; the generalized Notes
attached hereto are a management recap of the major negative events of 1998, to remind you that (i)
the company has survived, and (ii) already paid the price for these misadventures.
These preliminary figures have been posted to our web site to give shareholders some- rather than
no- current financial information.
For your further information, the company is also working to complete and publish new three year
projections, which will include (i) the [in-house] 40,000 case order recently received by the
Antogianni winery (a repeat order valued, at a minimum, of $1,000,000 in new annual sales), with
order fulfillment to commence in the late 2nd quarter of 1999; (ii) the Lionstone direct mail contract,
which the company has valued, in its initial year, at $1,000,000 in new custom-labeled wine sales (a
projected 4% response rate on 200,000 mailing pieces, or 8,000 orders [cases] at an average price
of $129.95), with order fulfillment to commence in the late 3rd quarter of 1999; (iii) the introduction
of our proprietary Club Dieta Mediterranea product fine of Italian specialties, via a long-awaited
national television campaign, projected in its initial year at a minimum of $500,000 (order fulfillment
to commence in the 3rd quarter of 1999); and (iv) the expansion of our Super City Gourmet
subsidiary's operation, which now has new chain store purchase orders in-house, which are
projected to add a minimum of an additional $500,000 in new sales in the next twelve months (order
fulfillment to continence in the late 2nd quarter of 1999).
The projected sales increases above, valued at $3,000,000 in new annual sales, all of which will start
in 1999) exclude (a) two proprietary new products which we anticipate announcing by the Summer
(both are Italian liqueurs), and (b) a new long-term wine alcohol production contract, for which we
currently have no projections. These latter three contracts should all be formally announced within the
next ninety days.
ARALDICA WINERIES, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
As Of 15 April 1999
ASSETS
CURRENT ASSETS:
Cash
$ 39,955
Accounts receivable (net)
109,117
Notes receivable
10,000
Inventories
147,232
Total current assets
306,304
FIXED ASSETS (net of accumulated depreciation):
Land and buildings
810,000
Vehicles
77,000
Machinery and equipment
304,000
Furniture and fixtures
134,000
Improvements
121,000
Software/hardware
27,000
Total Fixed Assets
1,473,000
OTHER ASSETS:
Investments in subsidiaries
450,000
Patents and trademarks
500,000
Prepaid television time
618,000
Goodwill
250,000
Contract/lease prepayments/deposits
16,600
Total Other Assets
1,834,600
TOTAL ASSETS:
$ 3,613,904
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable
$ 79,113
Current portion, long-term debt
328,000
Other
0
Total current liabilities
407,113
LONG-TERM LIABILITIES:
Mortgage payable
0
Acquisition notes payable
1,475,000
Seed investor notes payable
258,000
Other
0
Total long-term liabilities
1,733,000
TOTAL LIABILITIES:
2,140,113
STOCKHOLDERS' EQUITY:
Common stock, par value $.001
Authorized shares 50,000,000
Outstanding shares 19,785,072
19,785
Additional paid-in capital
1,786,242
Retained earnings (deficit)
(332,236)
Total stockholders' equity
1,473,791
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY:
3,613,904
ARALDICA WINERIES, LTD.
CONSOLIDATED STATEMENT OF INCOME
(unaudited)
FOR THE TWELVE MONTHS ENDED 15 APRIL 1999
NET SALES:
$ 911,508
COST OF SALES:
639,628
GROSS MARGIN:
271,880
EXPENSES:
Selling and shipping
126,775
General and administrative
296,166
Total
422,941
INCOME FROM OPERATIONS:
(151,061)
OTHER INCOME/EXPENSE:
Interest expense (net)
(87,900)
Nonrecurring expenses
(325,000)
Total
(412,900)
Total Fixed Assets
1,473,000
>NET INCOME (LOSS) BEFORE INCOME TAXES:
(563,961)
INCOME TAXES:
0
NET INCOME APPLICABLE TO COMMON STOCK:
(563,961)
EARNINGS PER SHARE OF COMMON STOCK:
($0.0285)
WEIGHTED AVERAGE SHARES OUTSTANDING USED TO
COMPUTE NET EARNINGS PER SHARE:
19,785,072
NOTES: To the consolidated, unaudited financial statements as at 15 April 1999
MANAGEMENT COMMENTARY:
Three major negative events in 1998 were primarily responsible for the company's poor showing;
they were:
(i) The default of Grespinet Investments, Inc. on a $500,000 [debt] private placement, which
canceled or delayed many of the company's acquisition plans, and which also caused the collapse of
the trading price of the company's shares, when the private placement loan collateral was
misappropriated and sold into the public market.
(ii) The defaulted acquisition of Danielle Cheese Distributors, Inc., which was contracted and then
reneged upon by the seller, resulting in a lawsuit (still pending on appeal) filed by the company.
(iii) The 100% writeoff of the All Brands Discount Wines & Liquors, Inc. acquisition, which
$325,000 cost is a total loss. The failure of this 20 year old retail sales outlet, within months of its
acquisition by the, company, may only be explained, eventually, by the planned litigation which the
company anticipates filling, later in 1999, against the seller.
Of note is the reduction in the valuation of the company's prepaid television time, from its original
$5,000,000 to the current $618,000. While there existed an acceptable basis for the original figure
(which was approved by the company's accounting firm), management has arbitrarily made the
decision to reduce the amount to the current figure, which represents $100 per minute of time
purchased (6,180 minutes in total, having a station rate card value of between $480 and $1,150 per
minute; an average of $809 per minute, valued in total at $4,999,620 and for which the company
issued 2,000,000 of its shares, then valued at $2.50 per share [its recent trading price at the time was
$2.25 per share] by the parties to the contract).
The company believes that the consequences of these events have already been suffered, and that by
building upon its successes in the future (4 successful acquisitions and the Lionstone agreement), it
will be able, commencing in 1999, to report sales and earnings more in accord with shareholder
expectations.
The imminent availability of additional operating capital (derived from the mortgaging of the
Antogianni winery property, in the range of $500,000 to $750,000 in total) will enable the company
to shortly install an expanded senior management team, all of whom are experienced and professional
managers who have already committed, conditional only upon the arrival of the anticipated new
funds.
To complement the new executive team, with whom we plan to contract- and then announce- in the
2nd quarter of 1999, the company also anticipates expanding its Board of Directors with a majority
of new outside Directors, each with substantial experience in business in general and/or specifically in
the wine, food and direct mail industries. |
