Nascent Foodservice Reports Second Quarter 2008 Financial Results

  
    
  
  
    
      Nascent Wine Co. Inc. (OTC BB: NCTW) (dba Nascent Foodservice), 
      announced today financial results for the three and six months ended 
      June 30, 2008.
    
    
      Second Quarter 2008 Financial and Operational Highlights:
    
    
      
        Net sales increased 76% to $6.5 million from $3.7 million
      
      
        Added 2 new brands including Rockstar Energy Drink and Fusion Energy 
        Drink
      
      
        Received certification from the California Milk Board to use the “Real 
        Cheese” logo on its private label Nery 
        Cheese products
      
      
        Engaged in review of strategic options for its Palermo Italian Foods 
        business resulting in sale of Palermo Italian Foods to AIP, Inc.
      
      
        After strategic review of business, classified Grupo Sur and Pasani 
        and Eco Pak businesses as discontinued operations
      
      
        Company Expects to receive approximately $2.4 million over the next 6 
        months based on termination agreements with the discontinued business 
        lines
      
    
    
      “The second quarter was a transitional quarter 
      for the Company as we completed a thorough review of our strategic 
      priorities with a focus on delivering future profitable growth,” 
      stated Sandro Piancone, Chief Executive Officer of Nascent Foodservice. “Following 
      this review, we completed the sale of Palermo Italian Foods to a group 
      of investors led by Palermo’s President and 
      classified the Pasani and Eco Pak and Grupo Sur businesses as 
      discontinued operations which we estimate will result in the return of 
      approximately $2.4 million based on termination agreements over the next 
      six months. While our second quarter results were impacted by several 
      one-time items associated with the restart of our business, through the 
      actions taken over the past several months we are creating a more 
      streamlined organization focused on building value in our core 
      businesses, which we believe will improve the Company’s 
      overall financial position over the long term. By refocusing our efforts 
      on our initial goal of identifying and securing brands, purchasing food 
      products globally and distributing these products in Mexico, we believe 
      we can continue to build upon our position as the leading distributor of 
      imported products in Mexico.”
    
    
      Mr. Piancone continued, “During the second 
      quarter we entered into two new distribution agreements including Fusion 
      Energy Drink and Rockstar Energy Drink. The addition of these 
      well-recognizable and desirable brands to our portfolio reflects our 
      ongoing commitment to delivering a comprehensive portfolio of high 
      quality food and beverage products to the Mexican marketplace. With the 
      addition of these brands to our portfolio, we will look to replicate our 
      success in expanding the market share of other leading brands within our 
      portfolio such as Miller Beer, Cora and Ferrarelle. While we will 
      continue to focus our efforts on securing exclusive rights to 
      well-recognized, desirable branded products, we recognize that our 
      growth is somewhat limited by our current cash and working capital 
      constraints. As such, we remain intently focused on obtaining a working 
      capital credit facility to fund our ongoing operations and support the 
      continued expansion of our business.”
    
    
      Mr. Piancone concluded, “We continue to 
      believe that significant value exists in our current operations through 
      the execution of our long-term business opportunities. Looking forward, 
      we will continue to utilize our existing distribution network and 
      technology infrastructure to leverage our operations and drive future 
      organic and acquired growth.”
    
    
      Second Quarter 2008 Versus Second Quarter 2007
    
    
      Sales
    
    
      Net sales in the second quarter of 2008 were $6.5 million compared with 
      net sales of $3.7 million in the second quarter of 2007. The second 
      quarter sales increase was driven by three major acquisitions completed 
      in 2007.
    
    
      Gross Profit
    
    
      For the second quarter of 2008, gross profit decreased to a deficit of 
      $390,000, compared to gross profit of $562,000 in the prior year period. 
      The decrease in gross profit was largely attributable to an inventory 
      impairment charge of approximately $0.7 million which the Company 
      recorded in the second quarter of 2008.
    
    
      Selling, General and Administrative Expenses
    
    
      Selling, general and administrative expenses were $8.1 million in the 
      second quarter of 2008, an increase of approximately 200% from $2.7 
      million in the prior year period. The increase in SG&A for the second 
      quarter reflects the three major acquisitions completed in 2007 and 
      additional investments made in the Company’s 
      infrastructure including the opening of 17 distribution centers, the 
      leasing of 48 new trucks and distribution equipment, increased 
      professional fees, communications costs and insurance costs and 
      strengthening the finance organization. In addition, during the second 
      quarter of 2008, the Company recorded a reserve for bad debts of 
      approximately $0.4 million and an impairment on its intangible assets of 
      $5.3 million, which are included in the Company’s 
      operating expenses for the three and sixth months ended June 30, 2008.
    
    
      Other Income (Expense)
    
    
      In the second quarter of 2008, the Company recorded other expense of 
      $1.8 million compared to other expense of $405,000 in the prior year 
      period. During the second quarter of 2008, the Company incurred 
      approximately $1.0 million in management fees and recorded a reserve for 
      notes payable of approximately $1.3 million which are included in the 
      Company’s other income (expense) for the 
      three and sixth months ended June 30, 2008.
    
    
      Operating Income (Loss)
    
    
      Loss from continuing operations was $10.2 million in the second quarter 
      of 2008 compared to $2.5 million in the second quarter of 2007. Included 
      in the Company’s loss from operations for the 
      second quarter of 2008 are one time adjustments of $8.7 million.
    
    
      Net Income (Loss)
    
    
      Net loss was $7.2 million, or $0.04 per diluted share, in the second 
      quarter of 2008 compared with a net loss of $2.3 million, or $0.00 per 
      diluted share, in the prior year period. The Company’s 
      net loss for the second quarter of 2008 includes income from 
      discontinued operations of approximately $0.2 million, an intangible 
      asset impairment charge of approximately $1.4 million and a gain on the 
      sale of the Palermo Italian Food business of approximately $4.3 million.
    
    
      Six Months ended June 30, 2008 Versus Six Months Ended June 30, 2007
    
    
      Sales
    
    
      Net sales in the first six months of 2008 were $12.4 million compared 
      with net sales of $5.9 million in the first six months of 2007. This 
      increase was primarily driven by three major acquisitions completed in 
      2007.
    
    
      Gross Profit
    
    
      For the six months ended June 30, 2008, gross profit decreased to 
      approximately $807,000, compared to gross profit of $1.1 million for the 
      sixth months ended June 30, 2007. The decrease in gross profit was 
      largely attributable to an inventory impairment charge of approximately 
      $700,000 which the Company recorded in the second quarter of 2008.
    
    
      Selling, General and Administrative Expenses
    
    
      Selling, general and administrative expenses were $9.8 million in the 
      first six months of 2008, an increase of 162% from $3.8 million in the 
      prior year period. The increase in SG&A for the first half of 2008 
      reflects the three major acquisitions completed in 2007 and additional 
      investments made in the Company’s 
      infrastructure including the opening of 17 distribution centers, the 
      leasing of 48 new trucks and distribution equipment, increased 
      professional fees, communications costs and insurance costs and 
      strengthening the finance organization. In addition, during the second 
      quarter of 2008, the Company recorded a reserve for bad debts of 
      approximately $400,000 and an impairment on its intangible assets of 
      $5.3 million, which are included in the Company’s 
      operating expenses for the three and sixth months ended June 30, 2008.
    
    
      Other Income (Expense)
    
    
      In the first half of 2008 the Company recorded other expense of $1.3 
      million compared to other expense of approximately $950,000 in the prior 
      year period. During the second quarter of 2008, the Company incurred 
      approximately $1.0 million in management fees and recorded a reserve for 
      notes payable of approximately $1.3 million which are included in the 
      Company’s other income (expense) for the 
      three and sixth months ended June 30, 2008.
    
    
      Operating Income (Loss)
    
    
      Operating loss for the six months ended June 30, 2008 was $10.3 million 
      in compared to a loss of $3.6 million in the six months ended June 30, 
      2007. Included in the Company’s loss from 
      operations for the first half of 2008 are one time adjustments of $8.7 
      million.
    
    
      Net Income (Loss)
    
    
      Net Loss was $7.2 million, or $0.04 per diluted share, in the six months 
      ended June 30, 2008 compared with a net loss of $3.8 million, or $0.00 
      per diluted share, in the prior year period. The Company’s 
      net loss for the first half of 2008 includes income from discontinued 
      operations of approximately $0.3 million, an intangible asset impairment 
      charge of approximately $1.4 million and a gain on the sale of the 
      Palermo Italian Food business of approximately $4.3 million.
    
    
      As of June 30, 2008, the Company had cash of approximately $892,000 and 
      a working capital of approximately $432,000. The Company is currently in 
      discussions with several lending institutions for a working capital 
      credit facility and additional financings. The Company believes these 
      credit facilities in conjunction with internally generated funds should 
      be sufficient to fund operations for the next twelve months.
    
    
      About Nascent Wine Company Inc.
    
    
      Nascent Wine Company Inc. dba Nascent Foodservice is the only nationwide 
      distributor of imported products in Mexico, marketing and distributing 
      over 2,000 national and proprietary brand food and non-food products. 
      Nascent Foodservice also has the exclusive right to distribute Miller 
      Beer in Baja California, Mexico. In addition, Nascent sells select 
      products from Nestle, Ferrarelle Water, Cora Italian Food Products, 
      Mitsuki Asian products, Bonet European products, Rockstar Energy Drink 
      and Fusion Energy Drink, and Jolly Rancher Soda, Spark’s 
      energy drink, Nery’s cheese products, among 
      others.
    
    
      Nascent is focused on acquiring the most profitable and well positioned 
      distributors in Mexico with the best food and beverage portfolios in the 
      country. Nascent is currently servicing over 240,000 sales points 
      including supermarkets, convenience stores and foodservice accounts like 
      Wal-Mart, Costco, Soriana, Comercial Mexicana, AM/PM, 7-ELEVEN, OXXO and 
      many more. Nascent Foodservice trades on the OTC Bulletin Board as 
      Nascent Wine Company, Inc., ticker symbol NCTW.OB. For more information 
      about Nascent Foodservice, go to www.nascentfoodservice.com.
    
    
      Forward Looking Statements
    
    
      Statements made in this press release that express the Company's or 
      management's intentions, plans, beliefs, expectations or predictions of 
      future events, are forward-looking statements. Those statements are 
      based on many assumptions and are subject to many known and unknown 
      risks, uncertainties and other factors that could cause the Company's 
      actual activities, results or performance to differ materially from 
      those anticipated or projected in such forward-looking statements. In 
      light of significant risks and uncertainties inherent in forward-looking 
      statements included herein, the inclusion of such statements should not 
      be regarded as a representation by the Company that it will achieve such 
      forward-looking statements. For further details and a discussion of 
      these and other risks and uncertainties, please see our most recent 
      reports on Form 10-KSB and Form 10-QSB, as filed with the Securities and 
      Exchange Commission, as they may be amended from time to time. The 
      Company undertakes no obligation to publicly update any forward-looking 
      statement, whether as a result of new information, future events, or 
      otherwise.