YARRAMAN WINERY, INC. - FORM 10-Q

Attached files

file	filename
EX-32.2 - YARRAMAN WINERY, INC.	v195501_ex32-2.htm
EX-32.1 - YARRAMAN WINERY, INC.	v195501_ex32-1.htm
EX-31.1 - YARRAMAN WINERY, INC.	v195501_ex31-1.htm
EX-31.2 - YARRAMAN WINERY, INC.	v195501_ex31-2.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: March 31, 2010

o	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from: to

Commission File No.: : 000-28865

GLOBAL BEVERAGES, INC.

(Exact name of registrant as specific in its charter)

Nevada		88-0373061
(State or Other Jurisdiction of Incorporation		(I.R.S. Employer Identification No.)
or Organization)

700 YARRAMAN ROAD, WYBONG
UPPER HUNTER VALLEY
NEW SOUTH WALES, AUSTRALIA 2333
	(Address of Principal Executive Offices)

	(+61) 2 6547-8118
	(Registrant's Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ¨ Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “small reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¨		Accelerated filer ¨

Non-accelerated filer ¨ (Do not check if a smaller reporting company)		Smaller reporting company þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No þ

The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant on August 30, 2010 was $44,984,590 based on the average closing bid and ask price of $0.50 for such common stock as of August 30, 2010.

As of August 30, 2010, there were 89,969,180 shares of the registrant’s common stock outstanding.

GLOBAL BEVERAGES, INC.

REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2009

Contents

PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.		F-1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation.		4
Item 3. Quantitative and Qualitative Disclosures About Market Risk		7
Item 4T. Controls and Procedures.		7
PART II – OTHER INFORMATION
Item 1. Legal Proceedings		9
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		9
Item 3. Defaults Upon Senior Securities		9
Item 5. Other Information		9
Item 6. Exhibits		9

FORWARD-LOOKING STATEMENTS

Some of the statements in this Quarterly Report on Form 10-Q are forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by forward-looking statements.

In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “proposed,” “intended,” or “continue” or the negative of these terms or other comparable terminology. You should read statements that contain these words carefully, because they discuss our expectations about our future operating results or our future financial condition or state other “forward-looking” information. There may be events in the future that we are not able to accurately predict or control. You should be aware that the occurrence of any of the events described in this Quarterly Report could substantially harm our business, results of operations and financial condition, and that upon the occurrence of any of these events, the trading price of our securities could decline and you could lose all or part of your investment. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, growth rates, levels of activity, performance or achievements. We are under no duty to update any of the forward-looking statements after the date of this Quarterly Report to conform these statements to actual results.

Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. These factors include among others:

·	The risks associated with the production and sale of wines;

·	Our ability to raise capital to fund capital expenditures;

·	Grape and other fruit price volatility;

·	Our ability to find and retain skilled personnel;

·	Regulatory developments; and

·	General economic conditions.

On December 17, 2009, we changed our corporate name from Yarraman Winery, Inc. to Global Beverages, Inc. All references in this Form 10-Q to the “Company,” “Global Beverages,” “Yarraman,” “we,” “us” or “our” are to Global Beverages, Inc. and its subsidiary, Yarraman Estate Pty Limited. Except as otherwise noted, all references to “$” shall mean United States dollars.

PART I

FINANCIAL INFORMATION

Item 1 – Financial Statements

GLOBAL BEVERAGES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	March 31,			June 30,
	2010			2009
	(Unaudited)			(Audited)
				(As Restated)

ASSETS

Current Assets

Cash	$	401,147		$	-
Accounts receivable, net		2,216,077			760,313
Due from related parties		631,252			-
Inventory		5,486,586			3,362,528
Other receivables		1,160,854			-
Other assets		1,393,388			824,741
Total Current Assets		11,289,304			4,947,582

Property, plant and equipment, net		3,909,939			3,528,013

Intangible assets		26,809,352			1,911,943

	$	42,008,595		$	10,387,538

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Accounts payable and accrued expenses	$	4,201,017		$	1,929,056
Loan payable		92,669			13,095
Line of credit		620,990			-
Convertible notes payable, net		431,780			-
Deferred revenue		6,512			-
Cash deficit		-			38,816
Capital lease		7,393			42,539
Shares to be issued		8,983			-
Due to related parties		6,478,869			3,396,616
Total Current Liabilities		11,898,213			5,420,122

Long Term Liabilities:
Long-term debt		5,519,661			4,627,379
Total Long Term Liabilities		5,519,661			4,627,379

Total Liabilities		17,417,874			10,047,501

Stockholder's Equity
Preferred stock, Series A, $.001 par value, 381,600 shares authorized 381,600 shares issued and outstanding		386			-
Preferred stock, Series B, $.001 par value, 55,000 shares authorized 55,000 shares issued and outstanding		55			55
Common stock, $.001 par value, 90,000,000 shares authorized 89,969,180 and 39,390,476 shares issued and outstanding respectively		89,969			39,390
Additional paid in capital		40,641,519			13,938,282
Statutory reserve		41,466			-
Subscription receivable		(49,500	)		(66,000	)
Other comprehensive income		(874,121	)		(456,752	)
Accumulated deficit		(15,259,053	)		(13,114,938	)
Total Stockholder's Equity		24,590,721			340,037

	$	42,008,595		$	10,387,538

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F-1

GLOBAL BEVERAGES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

	For the three months ended						For the nine months ended
	March 31,						March 31,
	2010			2009			2010			2009

Sales, net	$	4,253,194		$	814,488		$	9,417,276		$	1,902,001
Cost of sales		3,478,449			389,087			7,776,177			1,484,767
Gross profit		774,745			425,401			1,641,099			417,234

Operating Expenses
Selling, general and administrative expenses		885,640			239,302			2,173,345			959,125
Amortization of intangibles		234,739			-			677,659			-
Bad debt		18,368			-			41,835			-
Total operating expenses		1,138,747			239,302			2,892,839			959,125

Income (Loss) from operations		(364,002	)		186,099			(1,251,740	)		(541,891	)

Other (Income) Expense
Interest income		(3	)		(455	)		(36	)		(3,576	)
Interest expense		256,592			133,758			868,855			411,443
Acquisition costs		(261,870	)		-			(120,754	)		-
Other (income) expenses net		(3,886	)		(2,442	)		(15,252	)		(10,964	)
Gain on sale of fixed asset		-			95			427			(1,833	)
Transaction gain (loss) on foreign currency		3,060			(1,413	)		(45,579	)		21,265
Total Other (Income) Expense		(6,107	)		129,543			687,661			416,335

Income (Loss) before income taxes		(357,895	)		56,556			(1,939,401	)		(958,226	)

Provision for income taxes		204,714			-			204,714			-

Net Income (loss)		(562,609	)		56,556			(2,144,115	)		(958,226	)

Other comprehensive income (loss)
Foreign currency translation		320,890			(89,006	)		(417,369	)		(89,941	)

Comprehensive income (loss)	$	(241,719	)	$	(32,450	)	$	(2,561,484	)	$	(1,048,167	)

Net income (loss) per share:
Basic	$	(0.006	)	$	0.001		$	(0.02	)	$	(0.03	)
Diluted	$	(0.006	)	$	0.001		$	(0.02	)	$	(0.03	)

Weighted average number of shares outstanding:
Basic		88,497,213			38,000,000			88,497,213			38,000,000
Diluted		88,497,213			38,000,000			88,497,213			38,000,000

Weighted average of dilutive securities has not been calculated since the effect of dilutive securities is anti-dilutive

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F-2

GLOBAL BEVERAGES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTH PERIODS ENDED MARCH 31, 2010 AND 2009

	2010			2009

CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss	$	(2,144,115	)	$	(958,226	)
Adjustments to reconcile net loss to net cash used in operating activities:
Bad debt		41,835			-
Depreciation and amortization		822,334			188,018
Salary exchange for stock payment		16,500			16,500
(Increase) / decrease in assets:
Accounts receivables		(827,065	)		636,069
Inventory		(996,669	)		(501,764	)
Other receivables		(595,812	)		20,729
Deposits and prepaid expenses		33,956
Other assets		(81,581	)		(194,842	)
Increase in liabilities:
Accounts payable and accrued expenses		1,741,267			162,165
Income tax payable		203,724			-
Deferred revenue		(7,952	)		-
Total Adjustments		350,537			326,875

Net cash used in operations		(1,793,578	)		(631,351	)

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of subsidiaries, net of cash acquired		147,380			-
Acquisition of property and equipment		(21,699	)		(20,020	)
Acquisition of intangible		-			(267	)
Net cash provided by (used in) investing activities		125,681			(20,287	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt		297,603			-
Proceeds from loan payable		607,500			-
Procceds (payment) from line of credit		74,162			-
Cash deficit financing		-			(2,960	)
Capital lease payments		(39,497	)		(68,824	)
Receivable from related party		254,483			-
Payable to related party		274,450			-
Loans payable - related party		720,874			1,380,308
Net cash provided by financing activities		2,189,575			1,308,524

Effect of exchange rate changes on cash and cash equivalents		(81,715	)		(656,886	)

Net increase in cash and cash equivalents		439,963			-

Cash and cash equivalents, beginning balance		(38,816	)		-

Cash and cash equivalents, ending balance	$	401,147		$	-

SUPPLEMENTAL DISCLOSURES:
Cash paid for:
Income tax payments	$	990		$	-
Interest payments	$	853,850		$	310,679

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F-3

Global Beverages, Inc.

Notes to Condensed Consolidated Financial Statements

March 31, 2010

NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Our Condensed Consolidated Balance Sheet as of March 31, 2010, the Condensed Consolidated Statements of Operations and Comprehensive Income for the three and nine months ended March 31, 2010 and 2009, and the Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2010 and 2009 have not been audited. These statements have been prepared on a basis that is substantially consistent with the accounting principles applied in our Annual Report on Form 10-K for the fiscal year ended June 30, 2009, which was filed on April 9, 2010. In our opinion, these financial statements include all normal and recurring adjustments necessary for a fair presentation. The results for the nine months are not necessarily indicative of the results expected for the full year.

The following information is unaudited. This report should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended June 30, 2009.The following is a list of our subsidiaries:

Yarraman Estate, Pty., Ltd., Australia

Global Beverages Hong Kong, Ltd., Hong Kong

Asia Distributions Solutions Limited, Cayman Islands, and its subsidiaries (“ADSL” or “Asia Distributions Solutions”):

Vitality Development holdings Limited – British Virgin Islands

Vitality Tianjin Beverage Co Ltd – People’s Republic of China

Highland Mist Holdings Ltd – British Virgin Islands

Tropical Splendor International Ltd – British Virgin Islands

Chendu Gao Li Yuan – People’s Republic of China

TBC Shanghai Ltd – People’s Republic of China

Global Beverages Asia Limited - Hong Kong

Global Beverages China Co Ltd – People’s Republic of China

Shanghai Runke Trading Co Ltd – People’s Republic of China

Panda Express China Limited – British Virgin Islands

Panda Xpress International Co Pte Ltd - Singapore

F-4

Note 2 – SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation going concern

At March 31, 2010 the Company has a working capital deficiency of $700,250. For the three months ended March 31, 2010, the Company had a loss from operations of $364,002 of which $258,607 was from non-cash items. For the nine months ended March 31, 2010, the reported loss from operations was $1,251,740 including non-cash expenses of $880,669. Non-cash expenses consisted of $822,334 in amortization of intangibles and depreciation, $41,835 in bad debts and $16,500 from non-cash share based compensation. These conditions taken in conjunction with the Company’s history of operating losses raises doubt regarding the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is highly dependent upon management’s ability to increase operating cash flows, continued availability on its line of credit and the ability to obtain alternative financing to fund capital requirements and/or debt repayments coming due in the next twelve months. The accompanying financial statements do not include any adjustments that may result from the outcome of this uncertainty.

Principles of consolidation:

The consolidated financial statements included the accounts of the Company and all of its subsidiaries in which a controlling interest is maintained. All significant inter-company accounts and transactions have been eliminated in consolidation. For those consolidated subsidiaries where Company ownership is less than 100%, the outside stockholders' interests are shown as minority interests. Investments in affiliates over which the Company has significant influence but not a controlling interest are carried on the equity basis.

Use of estimates:

The preparation of these financial statements in accordance with accounting principles generally accepted in the United States (US GAAP) requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. These estimates form the basis for judgments made about the carrying values of assets and liabilities that are not readily apparent from other sources. Estimates and judgments are based on historical experience and on various other assumptions that the Company believes are reasonable under the circumstances. However, future events are subject to change and the best estimates and judgments routinely require adjustment. US GAAP requires estimates and judgments in several areas, including those related to impairment of goodwill and equity investments, revenue recognition, recoverability of inventory and receivables, the useful lives long lived assets such as property and equipment, the future realization of deferred income tax benefits and the recording of various accruals. The ultimate outcome and actual results could differ from the estimates and assumptions used.

F-5

Note 3 - INVENTORIES

	March 31		June 30,
	2010		2009
Work in progress	$	1,623,094	$	354,350
Bulk wine and cider		2,100,826		2,249,660
Finished goods		1,574,972		635,814
Winemaking and packaging materials		187,694		122,704
Total	$	5,486,586	$	3,362,528

Note 4 – INTANGIBLE ASSETS AND GOODWILL

Intangible assets that have finite useful lives are amortized over their estimated useful lives. The latest impairment assessment of goodwill and indefinite lived intangible assets was completed in the fiscal fourth quarter of 2009. Future impairment tests for goodwill and indefinite lived intangible assets will be performed annually in the fiscal fourth quarter of each year, or sooner, if warranted. Allocations of the purchase price for the acquisition of ADSL has been completed on a preliminary basis subject to year end valuation.

	March 31			June 30,
	2010			2009
Non amortizable intangibles	$	1,691,029		$	209,248

Amortizable intangibles		20,546,724			1,702,695
Accumulated amortization		(677,659	)		-
Net amortizable intangibles		19,869,065			1,702,695
Total intangibles	$	21,560,094		$	1,911,943

Goodwill	$	5,249,258		$	-

Intangibles and Goodwill	$	26,809,352		$	1,911,943

Note 5 – RESTATEMENT

The accompanying consolidated balance sheet, for the year ended June 30, 2009 has been restated to correct an error related to the improper accounting method used to record the Sale Agreement with Yarraman Road Trust on May 26, 2009. We are required to account for this transaction in accordance with SAB 48 “the transfer of Nonmonetary assets by Promoters or Shareholders”, which requires the assets exchanged for the Series B Preferred stock to be valued at the carrying value of the holder. Accordingly we have reduced Intangible assets by $16,913,525 and Additional Paid in Capital by the same amount.

F-6

Note 6 – CONVERTIBLE NOTES PAYABLE

In the fiscal second quarter of 2010 the Company entered in three convertible promissory notes due from October 1, 2011-December 2, 2011, for net proceeds of $607,500. The Notes are convertible into the Company’s common stock at prices ranging from $0.38-$.40 per share. As a result of the issuance of all of these Notes, the Company recorded a discount on the Convertible Debt of $160,099. The discount was amortized to interest expense during the three and nine months ended March 31, 2010 in the amount of $20,012 and $34,379, respectively.

Note 7 – LONG TERM DEBT AND LINE OF CREDIT

On December 21, 2005, Yarraman Australia entered into a loan arrangement with a financial institution located in Australia. As of March 31, 2010 and June 30, 2009 the total amount due under this facility, inclusive of interest, is $5,519,661 and $4,627,379. This loan facility requires monthly interest payments due on the 15th of each month at the rate of 10% per annum, rising to 16% per annum if the Company is late in its payments. The principal balance was originally due and payable on December 31, 2007. The loan is secured by certain property, plant and equipment of the Company as well as a guaranteed by the Yarraman Road Trust, a shareholder of the Company. This loan facility has been extended through to August 30, 2011 by the lender.

The Company has a line of credit with a bank in London with interest from 2% plus bank sterling base rate with various due dates. The loans are personally guaranteed by a director of the Company. As of March 31, 2010, outstanding balance was approximately $620,990.

Note 8 – RECEIVABLES AND PAYABLES TO RELATED PARTIES

The Company has various loans payable to a shareholder of the Company in the amount of $3,662,599. These loans range in annual interest rate from 6.5% to 20%.

The Company has a loan payable to a shareholder of the Company in the amount of $966,856, no interest, due on demand.

The Company has loan payable to a shareholder of the Company in the amount of $1,849,414, no interest, due on demand.

The Company has $631,252 receivable from a shareholder of the Company related to funds advanced to him by ADSL prior to being acquired by the Company. These amounts are due on demand.

Note 9 – BUSINESS SEGMENTS

The Company had two principal operating segments during the nine months ended March 31, 2010 which were: winery and distribution. These operating segments were determined based on the nature of the products offered. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision-maker in deciding how to allocate resources and in assessing performance. The Company's chief executive officer and chief financial officer have been identified as the chief operating decision makers. The Company’s chief operating decision makers direct the allocation of resources to operating segments based on the profitability, cash flows, and other measurement factors of each respective segment.

F-7

The Company evaluates performance based on several factors, of which the primary financial measure is business segment income before taxes. The segments’ accounting policies are the same as those described in the summary of significant accounting policies. The following table shows the operations of the Company's reportable segments for the three months and nine months ended March 31, 2010. Prior to July 1, 2009 and the acquisition of ADSL the company operated in one segment:

	9 Months Ended			3 Months Ended
	March 31, 2010			March 31, 2010
Revenues from unaffiliated customers:
Winery	$	2,048,573		$	1,120,583
Distribution		7,368,703			3,132,611
Consolidated	$	9,417,276		$	4,253,194
Operating income (loss):
Winery	$	(559,477	)	$	(259,512	)
Distribution		319,457			164,801
Corporation (1)		(1,011,720	)		(269,291	)
Consolidated	$	(1,251,740	)	$	(364,002	)
Net income (loss) before taxes:
Winery	$	(1,413,583	)	$	(524,275	)
Distribution		386,301			248,183
Corporation (1)		(912,119	)		(81,801	)
Consolidated	$	(1,939,401	)	$	(357,893	)
Net income (loss) :
Winery	$	(1,413,583	)	$	(524,275	)
Distribution		181,588			43,469
Corporation (1)		(912,120	)		(81,801	)
Consolidated	$	(2,144,115	)	$	(562,607	)
Identifiable assets: (2)
Winery	$	9,979,510		$
Distribution		10,379,978
Corporation (1)		21,649,108
Consolidated	$	42,008,596		$
Depreciation and amortization: (3)
Winery	$	142,346		$	75,391
Distribution		2,329			751
Corporation (1)		677,659			234,739
Consolidated	$	822,334		$	310,881
Capital expenditures: (3)
Winery	$	-		$	-
Distribution		(21,699	)		-
Corporation (1)		-			-
Consolidated	$	(21,699	)	$	-

F-8

(1). Unallocated loss from Operating income (loss) and Net income (loss) before taxes are primarily related to general corporate expenses.

(2)Total identifiable assets are the owned or allocated assets used by each business. Corporate assets consist of cash and cash equivalents, unallocated fixed assets of support divisions and common facilities, and certain other assets.

(3) Capital expenditures and depreciation and amortization expense include items attributable to the unallocated fixed assets of support divisions and common facilities.

Also, because all of the Company’s sales are derived from the sales of products outside of the United States, all long-lived assets are located outside the United States.

Note 10 – ISSUANCE OF PREFERRED SHARES

In June 2009 the Company issued 55,000 shares of Series B Convertible Preferred Stock (par value $.001 per share). Each preferred share is immediately convertible into 1,000 shares of common stock upon the Company increasing its number of authorized common shares.

In the first quarter of fiscal 2010 the Company issued 381,600 shares of Series A Convertible Preferred Stock (par value $.001 per share). Each preferred share is immediately convertible into 10 shares of common stock at upon the Company increasing its number of common shares authorized.

Note 11 – EARNINGS PER SHARE

Earnings per share are calculated in accordance with ASC 260. Net loss per share for all periods presented has been stated to reflect the adoption of ASC 260. Basic net loss per share is computed by dividing loss available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted net loss per share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. For the three months and nine months ended March 31, 2010 and 2009 the Company’s common stock equivalents have not been included for earning per share calculations as they are anti-dilutive.

Note 12 – BUSINESS COMBINATION

During the fiscal first quarter of 2010, the Company acquired Asia Distributions Solutions Limited, a Cayman limited liability company publicly traded in the United Kingdom, with operations in China with specific focus in the beverage industry, for a purchase price of $26,637,465 which purchase price was paid by the Company through the issuance of an aggregate of 59,561,535 shares of Common Stock, of which 8,982,831 shares have not yet been issued, and 381,600 shares of Series A Convertible Preferred Stock.

F-9

The transaction was accounted for under the purchase method of accounting. The Company purchased $4,204,101 in assets and assumed $2,624,929 in liabilities and recorded goodwill and other intangible assets of $25,058,293. This is a preliminary purchase price allocation, which is subject to adjustment. The measurement period for purchase price allocation ends as soon as information on the facts and circumstances become available, but will not exceed 12 months. Adjustment in the purchase price allocation may require a recasting of the amounts allocated to goodwill retroactive to the period in which the acquisition occurred.

Note 13 – BOARD RESOLUTION

On December 31, 2009 the Board of Directors passed a resolution to increase the authorized share capital to 410,000,000 shares, of which 400,000,000 will be common shares and 10,000,000 will be preferred shares. The Company expects completion of this process in September 2010.

Note 14 – SUBSEQUENT EVENTS

Pursuant to Financial Accounting Standards Board Accounting Standards Codification 855-10, we have evaluated all events or transactions that occurred from April 1, 2010 through the filing with the SEC.

On August 26, 2010, the Company filed a Notice of Exempt Offering of Securities on Form D for a proposed offering of securities pursuant to Rule 506 of Regulation D. The securities referred to in the foregoing will not be registered under the Securities Act of 1933, as amended (the “Securities Act”), and, unless so registered, may not be offered or sold in the United States absent registration or an applicable exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and other applicable securities laws. The foregoing disclosure shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. This notice is being provided pursuant to and in accordance with Rule 135(c) under the Securities Act.

F-10

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation.

Three Months Ended March 31, 2010 Compared to Three Months Ended March 31, 2009

Results of Operations

The following table sets forth, for the periods indicated, certain operating information expressed as a percentage of revenue. All amounts in the following presentation are in U.S. Dollars unless otherwise indicated.

	For the three months ended
	March 31,
	2010					2009

Sales, net	$	4,253,194		100	%	$	814,488	100	%
Cost of sales	$	3,478,449		82	%	$	389,087	48	%
Gross profit (loss)	$	774,745		18	%	$	425,401	52	%
Total operating expenses	$	1,138,747		27	%	$	239,302	29	%
Other (income) expense	$	(6,107	)	0	%	$	129,543	16	%
Loss before income taxes	$	(357,895	)	-8	%	$	56,556	7	%
Provision for income taxes	$	204,714		5	%	$	-	0	%
Net Income (loss)	$	(562,609	)	-13	%	$	56,556	7	%

Revenue. Revenue was $4,253,194 in the three months ended March 31, 2010 compared to $814,488 in the three months ended March 31, 2009. The increase in revenues of $3,438,706 or approximately 422% was primarily related to the inclusion of revenues generated by the business units acquired in the Asia Distribution Solutions transaction, and revenue generated from sale of grapes in the Australian operations.

Cost of Sales. Cost of revenue was $3,478,449 in the three months ended March 31, 2010 compared to $389,087 in the three months ended March 31, 2009, an increase of $3,089,362. As a percentage of revenue, cost of revenue was 82% in the three months ended March 31, 2010 compared to 48% in the three months ended March 31, 2009. The increase in cost was primarily related to the following items: the inclusion of the business units acquired in the Asia Distribution Solutions transaction, and operating costs for the Jugiong vineyard in Australia.

Gross Profit. Gross profit was $774,745 in the three months ended March 31, 2010 compared to $425,401 in the three months ended March 31, 2009. As a percentage of revenues, gross profit was 18% in the three months ended March 31, 2010 and 52% in the three months ended March 31, 2009. The decrease in gross profit as a percentage of revenues is primarily related to the following items: the business units acquired in the Asia Distribution Solutions transaction, which are currently selling predominantly lower margin local product, along with the sale of grapes in the Australian operations, which generates lower margins than sales of finished product.

Operating Expenses. Operating expenses were $1,138,747 in the three months ended March 31, 2010 compared to $239,302 in the three months ended March 31, 2009. This is an increase of $899,445 or approximately 376% from the 2009 period to the 2010 period.

As a percentage of revenues, operating expenses were approximately 27% in the three months ended March 31, 2010 compared to 29% in the three months ended March 31, 2009. The acquisition of Asia Distribution Solutions created intangible assets that generated amortization expense. Amortization for the three months ended March 31, 2010 was $234,739 compared to $0 in the three months ended March 31, 2009. Without the amortization expense, operating expense decreased by 8%.

Other (Income) Expense. Other income was $(6,107) in the three months ended March 31, 2010 compared to $129,543 in the three months ended March 31, 2009. The decrease in other expense of $135,652 was primarily due to reduction in previously recorded acquisition cost of Asia Distribution Solutions.

Net Income (Loss). Our net loss was $(562,609) in the three months ended March 31, 2010 compared to a net income of $56,556 in the three months ended March 31, 2009. This increase in loss was primarily attributable to income tax of $204,714 and amortization expense of intangible assets of $234,739.

Nine Months Ended March 31, 2010 Compared to Nine Months Ended March 31, 2009

Results of Operations

	For the nine months ended
	March 31,
	2010					2009

Sales, net	$	9,417,276		100	%	$	1,902,001		100	%
Cost of sales	$	7,776,177		83	%	$	1,484,767		78	%
Gross profit (loss)	$	1,641,099		17	%	$	417,234		22	%
Total operating expenses	$	2,892,839		31	%	$	959,125		50	%
Other (income) expense	$	687,661		7	%	$	416,335		22	%
Loss before income taxes	$	(1,939,401	)	-21	%	$	(958,226	)	-50	%
Provision for income taxes	$	204,714		2	%	$	-		0	%
Net income (loss)	$	(2,144,115	)	-23	%	$	(958,226	)	-50	%

Revenue. Revenue was $9,417,276 in the nine months ended March 31, 2010 compared to $1,902,001 in the nine months ended March 31, 2009. The increase in revenues of $7,515,275 or approximately 396%, was primarily related to the inclusion of revenues generated by the business units acquired in the Asia Distribution Solutions transaction, and revenue generated from sale of grapes in the Australian operations.

Cost of sales. Cost of revenue was $7,776,177 in the nine months ended March 31, 2010 compared to $1,484,767 in the nine months ended March 31, 2009, an increase of $6,291,410. As a percentage of revenue, cost of revenue was 83% in the nine months ended March 31, 2010 compared to 78% in the nine months ended March 31, 2009. The increase in cost was primarily related to the following items: the inclusion of the business units acquired in the Asia Distribution Solutions transaction, and operating costs for the Jugiong vineyard in Australia.

Gross Profit (Loss). Gross profit was $1,641,099 in the nine months ended March 31, 2010 compared to $417,234 in the nine months ended March 31, 2009. As a percentage of revenues, gross profit was 17% in the nine months ended March 31, 2010 compared to 22% in the nine months ended March 31, 2009. The decrease in gross profit as a percentage of revenues is primarily related to the following items: the business units acquired in the Asia Distribution Solutions transaction, which are currently selling predominantly lower margin local product, along with the sale of grapes in the Australian operations, which generates lower margins than sales of finished product.

Operating Expenses. Operating expenses were $2,892,839 in the nine months ended March 31, 2010 compared to $959,125 in the nine months ended March 31, 2009. This is an increase of $1,933,714 or approximately 202% from the 2009 period to the 2010 period. The acquisition of Asia Distribution Solutions added significant additional revenue with comparatively low additional Sales, General and Administrative costs.

As a percentage of revenues, operating expenses were approximately 31% in the nine months ended March 31, 2010 compared to approximately 50% in the nine months ended March 31, 2009.

Amortization for the nine months ended March 31, 2010 was $677,659 compared to $0 in the nine months ended March 31, 2009.

Other (Income) Expense. Other expense was $687,661 in the nine months ended March 31, 2010 compared to $416,335 in the nine months ended March 31, 2009. The increase in other expense of $271,326 was primarily due to the increase in interest expenses from $411,443 to $868,855 from loans.

Net Loss. Our net loss was $2,144,115 in the nine months ended March 31, 2010 compared to a net loss of $958,226 in the nine months ended March 31, 2009. This increase in loss was primarily attributable to an increase in income tax of $204,714, amortization of intangible assets of $677,659 and other expenses as described above.

Liquidity and Capital Resources

As of March 31, 2010, we had $401,147 of cash and cash equivalents and $(700,250) of working capital as of March 31, 2010.

During the nine months ended March 31, 2010 and 2009, net cash used in operating activities was $(1,793,578) and $(631,351), respectively. Net cash provided by investing activities totaled $125,681 for the nine months ended March 31, 2010, compared with $(20,287) for the same period ended March 31, 2009. Net cash provided by financing activities totaled $2,189,575 for the nine months ended March 31, 2010, compared to $1,308,524 for the same period ended March 31, 2009. The net change in our cash balance was $439,963 and $0 for the nine ended March 31, 2010 and 2009, respectively.

During our third fiscal quarter of 2010, we entered into three convertible notes payable for a total of $607,500. Please see Note 6 of Item 1 for further details of the terms of these notes.

Our lack of liquidity could result in an interruption of our business and has led our management to express doubt about our ability to continue as a going concern as listed in our auditor’s report on our financial statements for the year ended June 30, 2009.

The Company is currently authorized to issue 90,000,000 shares of Common Stock. However, the Company has commitments to issue 152,680,585 shares of Common Stock. This includes 3,816,000 shares of Common Stock issuable upon conversion of the Series A Convertible Preferred Stock, 55,000,000 shares of Common Stock issued upon conversion of the Series B Convertible Preferred Stock.

On December 31, 2009, the Board of Directors approved an amendment to the Company's Articles of Incorporation to increase the number of authorized shares of capital stock to 410,000,000 shares, of which 400,000,000 shares are Common Stock and 10,000,000 shares are Preferred Stock which may be issued in one or more series or classes as designated by the Board of Directors, from time to time, without the approval of stockholders. On July 21, 2010, the holders of a majority of the Company's outstanding voting securities approved the Articles of Amendment which will become effective after the Company has given notice to the remaining shareholders of the Company that the amendment is being effectuated.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

Item 4T. Disclosure Controls and Procedures

Evaluation of Disclosure Controls and Procedures.

We maintain "disclosure controls and procedures" as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934. In designing and evaluating our disclosure controls and procedures, our management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Our management, including our Chief Executive Officer and our Chief Financial Officer, have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on such evaluation, and as discussed in greater detail below, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were not effective:

to give reasonable assurance that the information required to be disclosed by us in reports that we file under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and

to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our CEO and our Treasurer, to allow timely decisions regarding required disclosure.

Management's Report on Internal Control Over Financial Reporting.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934. Our internal control system was designed to provide reasonable assurance to our management and the Board of Directors regarding the preparation and fair presentation of published financial statements. Our internal control over financial reporting includes those policies and procedures that:

pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets,

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorization of management and directors, and

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal control over financial reporting as of March 31, 2010. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control-Integrated Framework. Based on the assessment using those criteria, our management concluded that the internal control over financial reporting was not effective at March 31, 2010.

While we have designed a system of internal controls to supplement our existing controls, we have been unable to complete testing of these controls and accordingly lack the documented evidence that we believe is necessary to support an assessment that our internal control over financial reporting is effective. Without such testing, we cannot conclude that there are any significant deficiencies or material weaknesses, nor can we appropriately remediate any such deficiencies that might have been detected.

This report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Our management's report is not subject to attestation by our registered public accounting firm.

Changes in Internal Control over Financial Reporting.

There have been no changes in our internal control over financial reporting during our third fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II

OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 5. Other Information

None.

Item 6. Exhibits

31.1+

Chief Executive Officer's Certificate, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2+

Chief Financial Officer's Certificate, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1+

Chief Executive Officer's Certificate, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2+

Chief Financial Officer's Certificate, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

+ Filed Herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	GLOBAL BEVERAGES, INC.

Date: August 30, 2010	By:	/s/ Ian Long
		Ian Long, President

Date: August 30, 2010	By:	/s/ Lawrence Lichter
		Lawrence Lichter, Chief Financial Officer

YARRAMAN WINERY, INC. - FORM 10-Q - August 30, 2010

Attached files

YARRAMAN WINERY, INC. Reports