**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**FORM
      10-KSB**


(Mark
      One)





x
            ANNUAL
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934




FOR
      THE
      FISCAL YEAR ENDED DECEMBER 31, 2006





 ̈
            TRANSITION
                REPORT UNDER SECTION13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934




FOR
      THE
      TRANSITION PERIOD FROM __________ TO __________





COMMISSION
      FILE NUMBER: *0-50092*




**360
      Global Wine Company**


(Name
      of
      small business issuer in its charter)





**Nevada**
              (State
                or other jurisdiction of incorporation or organization)
            **93-0231440**
              (I.R.S.
                Employer Identification No.)




**25200
      Arnold Drive, Sonoma, CA 95476**


(Address
      of principal executive offices) (Zip Code)





Issuer’s
      telephone Number: **(707)
      934-4039**





Securities
      registered under Section 12(b) of the Exchange Act: None.





Securities
      registered under Section 12(g) of the Exchange Act: Common Stock, $.0001 par
      value





Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act.  ̈





Check
      whether the issuer (1) 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 **T** No  ̈





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of registrant’s knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-KSB or any
      amendment to this Form 10-KSB.  ̈





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes  ̈ No **T**





State
      issuer’s revenues for its most recent fiscal year. $17,268,132





The
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates, computed by reference to the average bid and asked price of
      such
      common equity as of March 31, 2007, was $3,367,424





As
      of
      March 31, 2007, the issuer had 8,619,389 outstanding shares of Common
      Stock.





**DOCUMENTS
      INCORPORATED BY REFERENCE: NONE**





Transitional
      Small Business Disclosure Format (check one): Yes  ̈ No **T**










TABLE
      OF
      CONTENTS




PagePART IItem
                1.
            Description
                of Business
            1Item
                2.
            Description
                of Property
            8Item
                3.
            Legal
                Proceedings
            8Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            10PART
                IIItem
                5.
            Market
                for Common Equity and Related Stockholder Matters
            11Item
                6.
            Management’s
                Discussion and Analysis or Plan of Operation
            12Item
                7.
            Financial
                Statements
            20Item
                8.
            Changes
                In and Disagreements With Accountants on Accounting and
                Financial
            20DisclosureItem
                8A.
            Controls
                and Procedures
            20Item
                8B.
            Other
                Information
            20PART
                IIIItem
                9.
            Directors,
                Executive Officers, Promoters and Control Persons; Compliance with
                Section
                16(a) of the Exchange Act
            20Item
                10.
            Executive
                Compensation
            22Item
                11.
            Security
                Ownership of Certain Beneficial Owners, and Management and Related
                Stockholder Matters
            24Item
                12.
            Certain
                Relationships and Related Transactions
            25Item
                13.
            Exhibits
            26Item
                14.
            Principal
                Accountants Fees and Services
            29Signatures
            30










**PART
      I.**





**CAUTIONARY
      STATEMENT REGARDING FORWARD-LOOKING INFORMATION**





Under
      the
      Private Securities Litigation Reform Act of 1995, companies are provided with
      a
“safe harbor” for making forward-looking statements about the potential risks
      and rewards of their strategies. Some of the statements contained in this Annual
      Report on Form 10-KSB are forward-looking statements about 360 Global Wine
      Company (“we,” “us” “360” or the “Company”), including but not limited to those
      specifically identified as such, that involve risks and uncertainties. The
      statements contained in the Report on Form 10-KSB that are not purely historical
      are forward looking statements within the meaning of Section 27A of the
      Securities Act and Section 21E of the Exchange Act, including, without
      limitation, statements regarding our expectations, beliefs, intentions or
      strategies regarding the future. In some cases, you can identify forward-looking
      statements by terminology such as “may,” “will,” “should,” “expects,” “plans,”
“anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or
      the negative of these terms or other comparable terminology.




Our
      ability to achieve our goals depends on many known and unknown risks and
      uncertainties, including risks and uncertainties specific to our Company, our
      recent Chapter 11 filing, our industry, and changes in general economic and
      business conditions. These factors could cause our actual performance and
      results to differ materially from those described or implied in forward-looking
      statements. Although we believe that the expectations reflected in the
      forward-looking statements are reasonable, we cannot guarantee future results,
      levels of activity, performance or achievements. Moreover, neither we nor any
      other person can assume responsibility for the accuracy and completeness of
      such
      statements.




All
      forward-looking statements included in this Report on Form 10-KSB are based
      on
      information available to us on the date hereof, and we assume no obligation
      to
      update any such forward-looking statements, beyond those obligations required
      by
      law.




**Other
      Information**





On
      March
      7, 2007 (the “Petition Date”), we filed a voluntary petition for reorganization
      under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy
      Code”) in the United States Bankruptcy Court for the District of Nevada (the
“Bankruptcy Court”). No assurance can be given as to what values, if any, will
      be ascribed in our bankruptcy proceedings to our various pre-petition
      liabilities, common stock and other securities. As of the date of the
      Chapter 11 filing, virtually all pending litigation (including actions
      described below) is stayed, and absent further order of the Bankruptcy Court,
      no
      party, subject to certain exceptions, may take any action, also subject to
      certain exceptions, to recover on pre-petition claims against us. At this time
      it is not possible to predict the outcome of the Chapter 11 filings or
      their effect on our business.




**ITEM
      1. DESCRIPTION OF BUSINESS.**




**Overview**




360
      Global Wine Company is a Sonoma-based marketer of alcoholic beverage brands
      in
      the wine category. Management believes that there is an abundance of small
      and
      mid-sized wineries that lack effective sales, marketing, and branding strength,
      creating an opportunity to consolidate wineries and build an efficient
      operation. If successful, such an operation could maximize economies of scale,
      increase utilization of production assets, and provide a more streamlined and
      effective sales, marketing, and distribution group. We believe that by adopting
      and applying consumer beverage marketing principles within the wine industry,
      we
      can further enhance operating results, creating a competitive advantage over
      other small and mid-sized wineries.




For
      a
      brief period of time earlier this year, we diversified into a mineral extraction
      operation for kaolin. However, our Board of Directors has decided to concentrate
      our efforts on our core wine business and we implemented plans to discontinue
      our extractive operations and disposed of our kaolin operation. In addition,
      in
      May 2006, our Board decided to discontinue our involvement with KKLLC, a Napa
      Valley, California-based wine operation in which we held a 50% interest. We
      were
      not able to integrate this operation into our other wine business and,
      therefore, did not realize our anticipated operating efficiencies. In September
      2005, KKLLC filed for protection under Chapter 11 of the Federal Bankruptcy
      Code. As of the date of this Form 10-KSB, these activities are recorded as
      discontinued operations.





We
      have
      grown predominantly through acquisitions. Through these acquisitions, we believe
      that we have become more competitive by: (1) diversifying our product offering;
      (2) developing strengthening market positions in the wine category; (3)
      strengthening our relationships with wholesalers and retailers; (4) expanding
      our distribution capabilities; (5) enhancing our production capabilities; and
      (6) acquiring additional management, operational, marketing, and research and
      development expertise. While not all of our acquisitions have been as successful
      as anticipated, we believe we have better defined the characteristics necessary
      in target companies.





1




**Mergers,
      Acquisitions and Divestitures**





*Springer
      Mining Company*





On
      March
      31, 2006, we attempted to expand our operations into another business segment
      -
      extractive minerals and processing. We acquired all of the stock of Springer
      Mining Company (“Springer”) for $3,000,000. The purchase price consisted of
      $600,000 in cash and a note issued by us for $2,400,000 to the prior owner
      of
      Springer (General Electric Company). We did not make the required note payment
      and General Electric Company foreclosed on the Springer shares held in escrow.
      As a result, we have recorded a loss on our investment in Springer of $900,000
      in 2006. This loss includes approximately $300,000 of direct costs and fees
      related to this transaction. We believe that our $2,400,000 note payable issued
      in this transaction and the related accrued interest have been satisfied by
      the
      General Electric Company foreclosure of the Springer stock from the
      escrow.





Related
      to the Springer transaction and at the same time in March 2006, we entered
      into
      an agreement to purchase the processing rights to the mineral Kaolin. The
      acquisition agreement with the holder of the mineral processing rights required
      us to issue them 6,800,000 shares of our common stock. The seller was unable
      to
      deliver the mineral processing rights; so, we terminated the agreement. We
      did
      not physically deliver the 6,800,000 shares to the seller of the mineral
      processing rights and have entered into an agreement whereby both parties have
      relinquished all potential claims against the other.





*First
      Montauk Financial*





In
      the
      first quarter of 2005, we agreed to acquire 18.7% of the outstanding shares
      of
      First Montauk Financial Corp. (FMFC) from a group of individuals and an entity
      (BMAC). We retained 360 Global Financial LLC2 (360GF) (not a related party)
      to
      provide investment banking services in our acquisition of the shares of FMFC
      common stock. The agreement with 360GF provided for the payment of 1,200,000
      shares of our common stock payable in three separate payments of 400,000 shares
      based upon the completion of certain milestones. We issued the first 400,000
      shares of our common stock with a fair value of $2,735,005. BMAC, the entity
      that was selling the FMFC shares to us, was not able to deliver its shares
      as
      contemplated in the original agreement. Accordingly, the FMFC share acquisition
      transaction has been cancelled and we instructed our transfer agent that the
      shares issued to BMAC are to be cancelled and are currently awaiting the receipt
      of the stock certificate issued to 360GF for cancellation.




*Kirkland
      Knightsbridge LLC*





In
      April
      2004 we acquired a 50% interest in Kirkland Knightsbridge LLC (KKLLC), a wine
      producer located in Napa Valley, California. As a result of unsatisfactory
      relations with our joint venture partner, our inability to realize anticipated
      costs savings and efficiencies, and the lack of market acceptance due to less
      than expected wine quality, we decided in May 2006 to discontinue our interest
      in KKLLC. In September 2006, KKLLC filed for protection under Chapter 11 of
      the
      Federal Bankruptcy Code. We, therefore, report KKLLC as a discontinued operation
      in our financial statements included in this Form 10-QSB. We have guaranteed
      a
      $22 million loan in favor of KKLLC which is currently in default. All of the
      assets of KKLLC have been used to secure the note payable. We believe that
      the
      value of the assets of KKLLC will be sufficient to satisfy this debt and we
      will
      not incur any loss related to this guarantee. Our initial agreement with our
      joint venture partner included our guarantee of the value of shares of our
      common stock issued for the benefit of an individual related to our joint
      venture partner in the amount of $10 million. KKLLC declared a forfeiture of
      our
      membership interests, which eliminated our $10 million guarantee. Therefore,
      we
      transferred this obligation to additional paid-in capital at September 30,
      2006.




Also,
        in
        2004, we entered into an operating agreement with Kirkland Ranch, LLC ("KR")
        thereby creating Kirkland Knightsbridge, LLC ("KKLLC"). The Operating Agreement
        contains numerous provisions with respect to the parties' respective rights
        and
        obligations. In or about July 2005, we acquired 360 Viansa, LLC. Viansa is
        a
        winery with physical operations in Sonoma, California. However, Viansa sells
        its
        wines worldwide through its wine clubs and online sales, which account for
        the
        bulk of Viansa's revenues.
 
 Towards
        the end of 2005, however, Viansa and KKLLC entered into a bottling agreement
        and
        a custom crush agreement (collectively, the "Wine Processing Agreements")
        with
        respect to Viansa's wine.  Neither the bottling agreement nor the custom
        crush agreement reference the Operating Agreement and neither document
        incorporates any terms related thereto, or involves us. Viansa and KKLLC
        operated pursuant to the Wine Processing Agreements for a little over one
        (1)
        year, at which time a dispute arose between KKLLC and Viansa with respect
        to
        amounts owed by Viansa to KKLLC pursuant to the Wine Processing
        Agreements.  KKLLC asserted that the Wine Processing Agreements provide
        KKLLC with a lien on Viansa's assets in KKLLC's possession in the event of
        nonpayment by Viansa, which KKLLC has
        asserted.  In fact, KKLLC provided Viansa with notice of its intent to
        foreclose on its collateral (i.e., Viansa's wine) and sell such collateral
        through a foreclosure sale.  Viansa disputed the foregoing and
        contended that it has made payments to KKLLC and was not obligated to KKLLC.
        Based on KKLLC's refusal to turn over Viansa's wine, on October 5, 2006,
        Viansa
        initiated an adversary proceeding by filing a Complaint for Turnover of Property
        against KKLLC, pursuant to which Viansa sought a turnover of its wine and
        related assets.  In response to the Complaint, KKLLC filed an answer and a
        counterclaim against Viansa and Global, asserting that Viansa and Global
        are
        alter egos and that Global is liable to KKLLC for damages stemming from the
        Operating Agreement. Trial was scheduled on an expedited basis for December
        12,
        2006 (trial lasted through December 13, 2006). Although KKLLC sought to
        adjudicate the Viansa vs. KKLLC Complaint and the KKLLC vs. Viansa and Global
        Counterclaim, the trial was held with respect to the Viansa vs. KKLLC Complaint
        only.  Global was not a party to the pleadings at issue during the
        trial.  The sole issue at the trial was whether Viansa was entitled to a
        turnover of its wine in KKLLC's possession, which required adjudication of
        the
        amounts owed by Viansa to KKLLC and application of payments made by
        Viansa.
 
 At
        the
        conclusion of the trial, the Bankruptcy Court issued a Judgment finding that
        Viansa's payments to KKLLC were made on account of our obligations to KKLLC
        pursuant to the Operating Agreement and that such payments should not be
        applied
        to Viansa's debt to KKLLC. Based on the foregoing, the Bankruptcy Court entered
        judgment in favor of KKLLC and against Viansa.  Viansa has appealed the
        Judgment.  The appeal is pending before the Bankruptcy Appellate Panel for
        the Ninth Circuit Court of Appeals. Trial on the Counterclaim was scheduled
        for
        June 2007.  However, in light of Viansa's and our bankruptcy filings on
        March 7, 2007, the foregoing litigation was stayed.


**Subsidiaries**




The
      following table highlights the subsidiaries currently held within the
      consolidated results described in this Annual Report n Form 10-KSB.






Name
                of Subsidiary
            
            Percent
                Owned360
                Viansa, LLC
            
            
            100
            %Dominion
                Wines International Ltd.
            
            
            56
            %Knightsbridge
                Torrique
            
            
            100
            %Knightsbridge
                Fine Wines, Inc.
            
            
            100
            %





2





**Reverse
      Stock Split**




During
      October, 2005, our Board of Directors approved a 1-for-150 reverse stock split
      of our common stock, subject to the approval of the holders of a majority of
      our
      common stock, which split became effective on February 28, 2006. The reverse
      split provided for the conversion of each 150 shares of common stock into one
      share of common stock, rounded up to the nearest whole share. Further, for
      those
      stockholders who, solely as a result of the reverse split, would own less than
      100 shares of common stock, the holdings of such stockholders were rounded
      up to a round lot of 100 shares. **** Share
      and per share amounts have been retroactively restated to give effect to the
      reverse stock split.




In
      conjunction with the reverse split, our trading symbol was changed to TSIX.
      Prior to the reverse split our common stock traded under the symbol “TGWC”, on
      the OTC Bulletin Board.






**Authorization
      of Preferred Stock**




During
      October, 2005, our Board of Directors approved and authorized the creation
      of
      preferred shares with a par value of $0.001. In February 2006 we obtained the
      approval of the holders of a majority of our common stock to authorize the
      creation of the Preferred Stock.





**Business
      Segments**




We
      do not
      segment its business internally beyond the reporting of consolidated and
      subsidiary financial performance.




**Growth
      Strategy**




Our
      strategy is to grow through a combination of internal initiatives and
      acquisitions.




Internal
      Growth Initiatives




Our
      internal growth will be driven by leveraging our existing portfolio of leading
      brands, developing new products, new packaging and line extensions, and focusing
      on the faster growing sectors of the wine industry.




We
      intend
      to internally increase sales by providing a wider selection of brands and
      products for our sales force to introduce into the marketplace, thereby reducing
      average sales cost per product and increasing product variety to our client
      base. We believe that by increasing our ability to provide an ever-growing
      inventory of brands and products, we will be able to increase our ability to
      provide wholesalers with better promotional advantages than our smaller peers.
      This could lead to an increased competitive position and drive internal
      growth.




*Tuscan
      Club*




We
      currently maintain a private membership club of approximately 14,000 individuals
      with an interest in having access to exclusive wine and food products, receiving
      advance notice of new releases, receiving additional special member discounts,
      and enjoying reserve wine tastings and exclusive social events.




*Launch
      of Cucina Viansa Brand*




We
      are
      currently in planning stages for the launch of a new wine brand, Cucina Viansa.
      The brand will consist of a line of mid-priced wines, including: Cabernet
      Sauvignon, Chardonnay, Merlot, Pinot Grigio and Sangiovese.





Promotion
      for the new brand will be focused on food and wine pairings, complementing
      the
      existing Cucina Viansa food line. As part of our integrated growth strategy
      to
      increase Tuscan Club membership and revenue from our on-site winery tasting
      room, we plan to use the wine club business and visitor e-mail list to promote
      awareness of Cucina Viansa as a nationally-distributed brand.





*Gutsverwaltung
      Niederhausen Schlossbockenheim Sales and Marketing Agreement*




In
      February, 2004, we entered into a sales and marketing agreement with
      Gutsverwaltung Niederhausen Schlossbockenheim, a German winery
      (“Gutsverwaltung”). Gutsverwaltung produces and sells certain wines under the
      name Gutsverwaltung Niederhausen-Schlossboeckelheim. Pursuant to the agreement,
      we have the exclusive right to sell Gutsverwaltung’s wines in North America,
      Asia, and duty free shops. The agreement expired on December 31, 2004, but
      automatically renews for successive one-year terms.





External
      Growth Initiatives




In
      addition to our internal growth initiatives, we continually are looking for
      ways
      to enhance shareholder value. In the past, and potentially in the future, we
      may
      seek out merger and acquisition opportunities which conglomerate our overall
      portfolio of businesses, and, may from time to time, act as offsetting hedges
      for the seasonality or other industry-specific performance characteristics
      of
      our winemaking business. The external initiatives include targeting and
      subsequently acquiring small to mid-sized wineries and distressed brands, which
      we can assimilate into our business model. We believe that by assimilating
      the
      small to mid-sized wineries we can add brands to our portfolio, which we can
      introduce into our sales and marketing channels, which in turn, should provide
      wider public awareness and a greater level of sales. In light of our Chapter
      11
      bankruptcy filing we will be forced to reduce our acquisition plans and focus
      on
      marketing our existing product lines.




3


*First
      Montauk Financial Corporation*




In
      January, 2006, we announced that we had acquired beneficial ownership of certain
      shares of common stock of First Montauk Financial Corp. which would give
      the Company beneficial ownership of approximately 18.7% of First Montauk’s
      common stock.




On
      January 13, 2006, the Company entered into a stock purchase agreement with
      BMAC
      Corp. and the stockholders of BMAC to purchase all of the outstanding capital
      stock of BMAC. We retained 360 Global Financial LLC2 (360GF) (not a related
      party) to provide investment banking services in our acquisition of the shares
      of FMFC common stock. The agreement with 360GF provided for the payment of
      1,200,000 shares of our common stock payable in three separate payments of
      400,000 shares based upon the completion of certain milestones. We issued the
      first 400,000 shares of our common stock with a fair value of $2,735,005. BMAC,
      the entity that was selling the FMFC shares to us, was not able to deliver
      its
      shares as contemplated in the original agreement. Accordingly, the FMFC share
      acquisition transaction has been cancelled and we instructed our transfer agent
      that the shares issued to BMAC are to be cancelled and are currently awaiting
      the receipt of the stock certificate issued to 360GF for
      cancellation




*Viansa
      Winery & Marketplace*




In
      July,
      2005, the Company completed its purchase of Viansa Winery, a California limited
      partnership, and La Fontana di Viansa, LLC, a California limited liability
      company, and thereby acquired Viansa Winery and Italian Marketplace, located
      in
      the Sonoma Valley of California. Upon the transaction’s completion, effective at
      the close of business on July 7, 2005, the Company changed the name of the
      acquired entities to 360 Viansa, LLC. Viansa currently produces over 50,000
      cases annually, with a selection that includes 12 different Italian varietals
      and 11 California varietals. Currently, Viansa sells its wine directly to the
      consumer. Viansa is a major competitor in the Direct to Consumer lifestyle
      business, and engages in the catalog, e-commerce and wine club business,
      primarily building its database through customer purchases at its winery and
      via
      its website. The Company’s strategy is to continue to expand its wine producing
      capacity of estate-bottled products and to expand its domestic and international
      sales and growth prospects of those goods through potential strategic
      alliances.





*Acquisition
      of 136.58 acres of land in Burnet, Texas*




In
      June,
      2005 we purchased 136.58 acres of land in Burnet, Texas from Charles Trios,
      Trustee for Wynthrop Barrington, Inc. The property, located in the heart of
      Texas wine country near the LBJ resort communities of Horseshoe Bay and Marble
      Falls, currently includes approximately 130,000 square feet of office, warehouse
      and mixed-use space. This includes one granite and block office building, five
      warehouse-style buildings and several smaller mixed-use buildings. The property
      was recently appraised for approximately $6,000,000.




The
      acquisition also includes approximately $9,000,000 of finished and unfinished
      granite products. We are investigating improving the property by developing
      a
      commercial winery and vineyard in combination with a future residential
      development. A portion of this development will be funded from the proceeds
      of
      the sale of finished and unfinished granite product. The total purchase price
      for the property was $12,500,000; $2,500,000 of which was paid in cash at the
      closing and $10,000,000 of which was given in the form of a three-year Secured
      Convertible Term Note to Wynthrop Barrington, Inc. Interest on the Wynthrop
      Barrington Term Note is 7% annually; with $350,000 paid monthly in advance
      at
      the rate of $29,667 and the balance of the annual amount accruing at the stated
      rate. In March, 2006 $9,000,000 of the principal under the Wynthrop Barrington
      Term Note was converted into an aggregate of 2,571,429 shares of our common
      stock at a conversion price of $3.50 per share. In December 2006, the balance
      the remaining principal balance of the Note and interest was converted into
      380,000 shares of our common stock at a conversion price of $3.50 per share.




On
      July
      7, 2005, the Company entered into a Security and Purchase Agreement with Laurus
      Master Fund, Ltd. (“Laurus”), a Cayman Islands company. With the funds obtained
      through this Security and Purchase Agreement, the Company completed its purchase
      of Viansa Winery as well as 136 acres of property in Burnet, Texas. The
      acquisition consisted of Viansa Winery, a California Limited Partnership, La
      Fontana di Viansa, LLC, a California limited liability company, and Viansa
      Winery and Italian Marketplace, located in the Sonoma Valley of California.
      Upon
      the transaction’s completion, effective July 7, 2005, the Company changed the
      name of the acquired entities to 360 Viansa, LLC.




Pursuant
      to the Security and Purchase Agreement, the Company issued to Laurus: (i) a
      three-year Term Note in the principal amount of $34,500,000; and (ii) a
      three-year Revolving Note equal to up to $3,000,000, upon which the Company
      will
      be able to draw based on available accounts receivable. After the initial
      drawing, the Company is required to maintain a minimum outstanding balance
      of
      $500,000 under the Revolving Note, which will be evidenced by a Convertible
      Minimum Borrowing Note. If this Minimum Borrowing Note is converted into the
      Company’s common stock, a new Minimum Borrowing Note will be issued (all such
      notes, collectively, the “Laurus Notes”).




4


The
      Term
      Loan was issued on the Closing Date and monthly amortization payments of
      principal commence on November 1, 2005, subject to acceleration upon the
      occurrence of an Event of Default or termination of the Agreement. The Maturity
      Date of the Laurus Notes is July 7, 2008. The Monthly Amount to be paid to
      Laurus includes amortization payments of the aggregate principal amount of
      the
      Term Note, any accrued but unpaid interest on that portion of the principal
      plus
      any and all other unpaid amounts then owing under the Laurus Notes.




Interest
      on the Laurus Notes began accruing on July 7, 2005 and monthly payments are
      payable at the end of each month, as described below.




The
      Monthly Amount may be paid in cash or may be converted into shares of the
      Company’s common stock. If paid in cash, the Company shall pay an amount equal
      to 103% of the Monthly Amount due and owing on that date. If the following
      conditions are met, the Company must pay the Monthly Amount in shares of its
      common stock: (i) the average closing price the Company’s common stock for the
      five trading days immediately preceding the current Due Date is greater than
      or
      equal to 120% of the Fixed Conversion Price, which initially is $0.25 and is
      subject to adjustment for stock splits, reorganizations and other extraordinary
      events, and (ii) the amount of such conversion does not exceed 25% of the
      aggregate dollar trading volume of the Company’s common stock for the period of
      22 trading days immediately preceding such due date. The number of shares of
      the
      common stock to be so issued shall be the quotient of (i) the portion of the
      Monthly Amount converted into shares of common stock divided by (ii) the then
      applicable Fixed Conversion Price. The interest on the Laurus Notes accrues
      per
      annum at a Contract Rate equal to the “prime rate” published in The Wall Street
      Journal, plus two percent (2.0%). However, if the Company has registered the
      shares of the Common Stock underlying the conversion of the Laurus Notes,
      Warrants and Options, as described in the following paragraph, and the market
      price of the Company’s Common Stock for the five trading days immediately
      preceding a Determination Date exceeds the then-applicable Fixed Conversion
      Price by at least 25%, the Contract Rate for the succeeding calendar month
      shall
      automatically be reduced by two percent. However, the Contract Rate shall not
      at
      any time be less than zero. Interest shall be (i) calculated on the basis of
      a
      360-day year and (ii) payable monthly, in arrears, commencing on August 1,
      2005
      through and including the Maturity Date. Following the occurrence and during
      the
      continuance of an Event of Default, the Company is obligated to pay additional
      interest of 2% per month.




To
      secure
      repayment of the Laurus Notes, the Company granted to Laurus a continuing
      security interest in and lien upon the following collateral: all of the
      Company’s and the Company’s subsidiary’s property and assets, whether real or
      personal, tangible or intangible, other than the Company’s 50% membership
      interest in KKLLC and the “current assets” of KKLLC until such time as the
      Laurus Notes are repaid in full. The security provisions in the Laurus Notes
      are
      cross-collateralized by a Guaranty Agreement entered into by the Company’s
      subsidiaries and a Stock Pledge Agreement covering all capital stock of the
      Company’s subsidiaries, as well. The Company and Viansa also entered into a Lien
      Subordination Agreement with Laurus and Gryphon. To induce Gryphon to enter
      into
      the Subordination Agreement, Mr. Shapiro transferred 3,000,000 of his personally
      held Company shares of common stock to Gryphon. The conversion price of the
      Gryphon Note and the exercise price of its 1,527,728 share Warrant were also
      reduced to $0.31 and $0.25, respectively. Pursuant to the Subordination
      Agreement, Laurus has a first-priority senior security interest. Gryphon
      subordinated all of its other security interests in the Company to Laurus,
      but
      the Company has agreed, with Laurus’ consent, to grant Gryphon a “silent” second
      position security interest in all of the assets of Viansa and the Texas Property
      (see Other Information below), including a second-lien mortgage on all Viansa
      and Texas Property winery property, now owned or hereafter
      acquired.




*Divestiture
      of Bodegas Y*  *Viñedos*  *Anguinan
      S.A.*




In
      December, 2004, we entered into an agreement to divest ourselves of our
      ownership interest in Bodegas Y Viñedos Anguinan S.A, an Argentine wine company
      in which we acquired an interest in November 2003. Pursuant to the Termination,
      Settlement & Release of Claims Agreement signed by us, our wholly owned
      subsidiary, KFWBA Acquisition Corp., and Bodegas and its former principals,
      both
      parties agreed to return any equity in the other party and to terminate any
      further obligations between them, including, but not limited to the put options
      we granted as part of the acquisition and any employment agreements between
      us
      and the principals of Bodegas.




*Acquisition
      of Dominion Wines International*




In
      February, 2003, we acquired a majority ownership interest in Dominion Wines
      International, an international sales and distributor of Australian-sourced
      wines sold under several Company-owned brands. We purchased 56% of Dominion’s
      issued and outstanding shares in exchange for 46,032 shares (on an adjusted
      basis) of our common stock. In addition to the shares, we also received all
      rights and properties owned, possessed or controlled by Dominion, tangible
      or
      intangible, of every kind and description, including all assets used by Dominion
      in connection with its business and operations as a going concern. Dominion,
      while still the holder of several pieces of intellectual property, is
      predominantly inactive at the current time and the Company has no current plans
      to market product under this brand.




**Marketing
      and Distribution**




*Industry
      Background*




The
      wine
      industry is generally segregated into three categories: premium table wines
      that
      retail for more than $3 per 750ml bottle; “jug” wines that retail for less than
      $3 per 750 ml bottle; and other wine products, such as sparkling wines,
      fortified wines, wine coolers and flavored wines. We produce and sell only
      premium table wines.  The
      premium category is generally divided by the trade into four segments:
      popular-premium ($3-$7 per 750ml); super-premium ($7-$14 per 750 ml);
      ultra-premium ($14-$25 per 750 ml); and luxury (over $25 per 750 ml). We sell
      wines in each segment of the premium table wine market.





5


**Products**





As
      of the
      date of this filing, we currently market and distribute a variety of red and
      white wines produced by Viansa and KKLLC labels under the Viansa Winery
      label.


As
      a result of our acquisition of Viansa and the property in Texas, we plan to
      begin independently producing and distributing our own wines in the future.
      We
      anticipate that the initial series of 360 Global owned and/or produced wines.


.




**Intellectual
      Property**





We
      own
      the rights to the following:




360
      Global Wine Company [Jake, please confirm whether the company owns the right
      to
      this mark]


Albanero


Augusto


Athena


Cal-Ital


Frescolina


Imbianco


Jaimeson
      Canyon


Musecco


Ossidiana


Pacomio


Piccolo
      Toscano


Prindelo


Santerra


Soscal
      Ridge


Tavola
      Di
      Viansa


Thalia


Tuscan
      Club


Viansa




**Customers**




Our
      customers are predominantly retail consumers. We market to these customers
      through our retail locations (wineries and shops), through catalogues,
      e-commerce, wine clubs, and distributors.




**Distribution
      Agreements**





We
      sell
      our wines through direct sales, independent distributors, our own customer
      list,
      and directly from the winery in limited quantities.




Distributors
      generally remarket the wines through specialty wine shops and grocery stores,
      selected restaurants, hotels and private clubs across the country, and in
      certain overseas markets. We rely primarily on word-of-mouth recommendation,
      wine tastings, positive reviews in various publications, select wine
      competitions and company-sponsored promotional activities in order to increase
      public awareness of our wines.




Independent
      distributors market our wines throughout the United States, including the
      District of Columbia.




Through
      our wholly owned subsidiary’s purchase of Viansa Winery & Italian
      Marketplace, we are able to sell wines produced by or for Viansa through the
      Viansa sales channels.




**Geographic
      data**




We
      currently operates predominantly within the United States.




**Competition**




The
      premium segment of the wine industry is intensely competitive. Our competitors
      produce table, premium and other wines in the United States.  Our
      domestic competitors in the popular-premium and super-premium segments include
      Beringer Blass Wine Estates (Beringer, Meridian), Brown-Forman (Fetzer),
      Constellation Brands (Estancia, Talus, Vendange, Nathanson Creek), Diageo
      (Beaulieu Vineyards), Kendall-Jackson and the Wine Group (Glen Ellen).




6


Our
      higher-priced wines compete with several hundred smaller California wineries,
      generally from Napa or Sonoma County, and with numerous foreign vintners that
      produce premium wines. In recent years some very large producers of primarily
      generic wines have introduced varietal wines in the growing premium wine market.
      Our wines also compete with other alcoholic and non-alcoholic beverages for
      shelf space in retail stores and for marketing focus by our independent
      distributors, all of which also carry other wine or beverage brands. Many of
      our
      domestic and international competitors have significantly greater resources,
      and
      as a result, there can be no assurance that we will be able to successfully
      compete with these competitors or that we will not face greater competition
      from
      other wineries and beverage manufacturers.




At
      present, we do not have a single main competitor. Rather, we compete with
      different companies in different wine categories. In addition, we compete with
      various beverage companies for shelf space in retail stores that carry wine
      or
      other beverage brands. We have a relatively small competitor position within
      the
      industry, but we believe that as we execute upon our business strategy, our
      relative position within the industry should rise.




**Production**




In
      the
      United States, we operate a winery where wine is produced from many varieties
      of
      grapes grown principally in the Sonoma regions of California. Grapes are crushed
      at most of our wineries and stored as wine until packaged for sale under our
      brand names. In the United States, the Company’s inventories of wine are usually
      at their highest levels in September through November, during and after the
      crush of each year’s grape harvest, and are reduced prior to the subsequent
      year’s crush.




We
      producte and bottle our wine products at our facility located in Sonoma,
      California.





The
      principal components in the production of our branded beverage alcohol products
      are agricultural products, such as grapes, and packaging materials (primarily
      glass).




Historically,
      most of our annual grape requirements are satisfied by purchases from each
      year’s harvest which normally begins in August and runs through October in the
      United States. We currently believe that we do not have adequate sources of
      grape supplies to meet our sales expectations, and are actively seeking
      additional sources of high quality grape harvests. In the event that demand
      for
      certain wine products exceed expectations, we would seek to source the extra
      requirements from the bulk wine markets, but could experience
      shortages.




We
      receive grapes from approximately 20 independent growers in the United States.
      We enter into written purchase agreements with a majority of these growers
      and
      pricing generally varies year-to-year based on then-current market
      prices.




At
      December 31, 2006, the Company owned or leased approximately 167 acres of land
      and vineyards, either fully bearing or under development, in California.. Most
      of this acreage is used to supply a large portion of the grapes used for the
      production of our super-premium and fine wines.




We
      utilize glass and polyethylene terephthalate (“PET”) bottles and other materials
      such as caps, corks, capsules, labels, wine bags and cardboard cartons in the
      bottling and packaging of its products. Glass bottle costs are one of the
      largest components of our cost of product sold. In the United States, the glass
      bottle industry is highly concentrated with only a small number of producers.
      We
      have traditionally obtained, and continue to obtain, our glass requirements
      from
      a limited number of producers. Currently, substantially all of our glass
      container requirements for our United States operations are supplied by one
      producer. We have not experienced difficulty in satisfying our requirements
      with
      respect to any of the foregoing and consider our sources of supply to be
      adequate. However, the inability of any of our glass bottle suppliers to satisfy
      our requirements could adversely affect our operations.




**Government
      Regulation**




We
      are
      subject to a range of regulations in the countries in which we operate. Where
      we
      produce products, we are subject to environmental laws and regulations and
      may
      be required to obtain permits and licenses to operate our facilities. Where
      we
      market and sell products, we may be subject to laws and regulations on trademark
      and brand registration, packaging and labeling, distribution methods and
      relationships, pricing and price changes, sales promotions, advertising and
      public relations. The Company is also subject to rules and regulations relating
      to changes in officers or directors, ownership or control.




We
      believe that we are in compliance in all material respects with all applicable
      governmental laws and regulations in the countries in which we operate. We
      also
      believe that the cost of administration and compliance with, and liability
      under, such laws and regulations do not have, and are not expected to have,
      a
      material adverse impact on our financial condition, results of operations or
      cash flows.




**Seasonality**




The
      beverage alcohol industry is subject to seasonality. As a result, our wine
      sales
      are typically highest during the fourth quarter of our fiscal year, primarily
      due to seasonal holiday buying.




7


**Corporate
      History**




We
      were
      incorporated in the State of Nevada on October 8, 2002, with a vision and
      objective to establish and build a diversified international wine company.
      On
      August 1, 2003, the Company completed a reverse acquisition of Tech-Net
      Communications, Inc., a Nevada corporation that was incorporated on May 15,
      2000. Following the reverse acquisition, we changed the name of Tech-Net
      Communications, Inc., to “Knightsbridge Fine Wines, Inc.” Effective February 15,
      2005, we changed our name from Knightsbridge Fine Wines, Inc., to “360 Global
      Wine Company.” Although Tech-Net was the “legal acquirer,” the share exchange
      was treated as a recapitalization of the Company, such that we are the
      continuing entity for financial reporting purposes. The financial statements
      have been prepared as if we had always been the reporting company, and, on
      the
      share exchange dates, had changed our name and reorganized our capital
      stock.




**Employees**




At
      December 31, 2006, we had 4 full-time employees based throughout the United
      States. Our 100% wholly-owned subsidiary, Viansa Winery and Italian Marketplace
      employed an additional 115 full-time employees. We employ additional workers
      on
      a temporary or part-time basis as required by the business.




None
      of
      our employees is represented by a labor union and we consider our relationships
      with our employees to be good.





**ITEM
      2. PROPERTIES.**




For
      the
      fiscal year ended December 31, 2006, our U. S. corporate office was located
      in
      Napa, California. In addition, we own and operate wineries, including
      warehousing and distribution facilities, in Sonoma, California which comprises
      approximately 167 acres. We recently acquired 136 acre property for development
      in Burnet, Texas. The Company also operates a satellite office in Greenwich,
      CT.
      Our Connecticut office occupies approximately 300 feet for which we pay a
      monthly rent of $4,000.





The
      Company owns a partial interest in Dominion Wines International, Ltd., located
      in Melbourne, Australia.





**ITEM
      3. LEGAL PROCEEDINGS.**




The
      Company is involved in various lawsuits, claims, and proceedings which arose
      in
      the ordinary course of business. Litigation is inherently unpredictable.
      However, the Company believes that it has valid defenses with respect to legal
      matters pending against it. Nevertheless, it is possible that cash flows or
      results of operations could be materially affected in any particular period
      by
      the unfavorable resolution of one or more of these contingencies.





**Chapter
      11 Proceedings**





On
      March
      7, 2007, the filed a voluntary petition for reorganization under Chapter 11
      of the Bankruptcy Code in the Bankruptcy Court. We continue to operate our
      business as “debtors-in-possession” under the jurisdiction of the Bankruptcy
      Court and in accordance with the applicable provisions of the Bankruptcy Code
      and orders of the Bankruptcy Court. As of the date of the Chapter 11
      filing, virtually all pending litigation (including actions described below)
      is
      stayed, and absent further order of the Bankruptcy Court, no party, subject
      to
      certain exceptions, may take any action, also subject to certain exceptions,
      to
      recover on pre-petition claims against us. At this time it is not possible
      to
      predict the outcome of the Chapter 11 filings or their effect on our
      business.




**Andy
      Warhol Foundation Suit**





In
      September, 2003, the Company entered into a license agreement with the Andy
      Warhol Foundation for the Visual Arts (the “Foundation”) to market an
      international collection of wines. The Company planned to launch an “artist
      series” of wines during the second half of 2006 using some of the artwork and
      quotations created by Mr. Warhol on some of the Company’s wine products. Under
      the agreement, the Company was granted a non-exclusive license to use Andy
      Warhol’s artwork throughout North America, in connection with the Company’s wine
      products. Specifically, the Company was entitled to use artwork and quotations
      created by Andy Warhol on the Company’s wine labels. Pursuant to the terms of
      the agreement, the Company was obligated to pay four percent (4%) of all net
      sales of the wine, containing Andy Warhol’s artwork or quotes that the Company
      sold to the Andy Warhol Foundation. The Company was also required, under the
      agreement, to pay minimum royalty fees to the Andy Warhol Foundation as follows:
      $40,000 on December 31, 2003 (which was paid); $45,000 on December 15, 2004
      (which was paid); $135,000 on December 15, 2005; and $180,000 on December 15,
      2006. The Company terminated this agreement in October, 2005, prior to the
      launch of any Company product containing artwork or quotations created by Mr.
      Warhol.





8


On
      March
      7, 2006, the Foundation filed suit against the Company in U.S. District Court,
      Southern District of New York, for monies allegedly owed under the original
      contract. The suit is entitled “The Andy Warhol Foundation for the Visual Arts
      v. 360 Global Wine Co., f/k/a Knightsbridge Fine Wines, Inc.,” and has been
      assigned case number 06 CV 1796. The Company has answered the complaint denying
      all allegations by the plaintiff and filed counterclaims for breach of contract
      and breach of covenant of good faith and fair dealing. On August 9, 2006, the
      parties took part in a court-administered mediation conference, and subsequently
      agreed in principle to settle the case. In September 2006, the Company and
      the
      Foundation entered into a settlement agreement and release. Accordingly, the
      suit has been dismissed. Under the settlement, the Company shall pay to the
      Foundation $170,000 in four equal installments (September 6, 2006, December
      6,
      2006, March 6, 2006 and June 6, 2006) As of this date, the Company has made
      two
      payments as scheduled.





**Wall
      Street Communications Suit.**





Wall
      Street Communications Group Inc. alleges that, pursuant to a Finder’s Fee and
      Non-Circumvention Agreement with Wall Street Communications Group Inc., the
      Company had agreed to pay Wall Street Communications Group Inc. a finder’s fee
      consisting of cash and stock options in connection with their introduction
      of
      Laurus Master Fund, Ltd. to the Company in connection with the Company’s
      financing needs in 2005. Wall Street Communications Group Inc. further alleges
      that thereafter, the Company refused to pay, or publicly disclose in its press
      releases or SEC filings, the agreed upon finder’s fee. Wall Street
      Communications Group Inc. filed suit against the Company in state District
      Court
      in Boulder County, Colorado. The court issued a default judgment against the
      Company on December 16, 2005 ordering the Company to pay to Wall Street
      Communications Group Inc. a lump sum payment of $1.425 million, plus 4.0% of
      each and every past and future disbursement to the Company under its $3.0
      million Revolving Note with Laurus Master Fund, Ltd. The court also ordered
      the
      Company to issue to Wall Street Communications Group Inc., under the Finder’s
      Fee and Non-Circumvention Agreement, a five-year option to purchase 1,250,000
      shares of the Company’s common stock at $.31 per share, a second option to
      purchase 824,621 shares of the Company’s common stock at $.001 per share and
      209,666 shares of restricted common stock on the same terms offered Laurus
      Master Fund, Ltd.





On
      June
      9, 2006, the court granted the Company’s motion to set aside the default
      judgment on the grounds that the Company was not properly served and did not
      receive notice of Wall Street’s action against it. The Company has denied Wall
      Street Communications’ claims that it was involved with the Company’s financing
      of the Viands acquisition and intends to defend against these claims vigorously.




**Longview
      Fund Suit**





On
      October 12, 2005, the Company was served with a Summons and a Notice of Motion
      in Lieu of Complaint, titled Longview Fund, LP, Longview Equity Fund, LP and
      Longview International Equity Fund, LP, Plaintiffs vs. 360 Global Wine Company,
      Inc., f/k/a Knightsbridge Fine Wines, Inc., Defendant, Supreme Court of the
      State of New York, County of New York, index no. 05603607. The plaintiffs
      requested that the court grant their Order for Summary Judgment on behalf of
      Longview Funds, LP in the amount of $280,345, Longview Equity Fund, LP in the
      amount of $224,276, and Longview International Equity Fund, LP in the amount
      of
      $56,069, with interest at the rate of 18% per annum from October 10, 2005,
      plus
      attorneys’ fees, costs and distributions in the action, and such other, further
      and different relief as the court deems just and proper. The Order for Summary
      Judgment was granted by the court in December 2005. The Company reached a
      settlement agreement January 22, 2006 which is comprised of $125,000 in
      principal reductions and $25,000 in legal fees (this has been paid), (3) allowed
      for the inclusion of 10% simple interest, and (4) required a monthly payment
      of
      $100,000 until such time as the debt is satisfied.. Commencing in September,
      2006, Longview and the Company informally modified the settlement agreement
      to
      reduce the monthly payments to $50,000, which are payable either in cash or
      by
      the conversion of the underlying debt into shares of the Company’s common stock
      at market price. The Company’s most recent payment was on February 16,
      2007.





**Shane
      Suit**





On
      March
      18, 2005, Mr. Patrick Shane filed a lawsuit against the Company in U.S. District
      Court, Southern District of New York. The suit is titled Patrick Shane v. 360
      Global Wine Company, f/k/a Knightsbridge Fine Wines, Inc., Joel Shapiro, Michael
      L. Jeub, Philip E. Pearce and Larry Kirkland, and has been assigned case number
      05 CV 2953. Mr. Shane alleges that the defendants wrongfully cancelled
      restricted shares of Knightsbridge Fine Wines, Inc. allegedly belonging to
      Mr.
      Shane. The suit asserts claims for breach of contract, conversion, and breach
      of
      fiduciary duty and seeks monetary damages in the amount of $1,416,000,
      unspecified punitive damages, interest from July 16, 2004, and costs and
      attorneys’ fees. The case is currently in the discovery phase and management
      does not believe that the ultimate outcome of this suit will have a material
      adverse impact on the Company and intends to defend against these claims
      vigorously. The trial date scheduled for November 6, 2006 was adjourned
      indefinitely. On November 15, 2006, Mr. Shane moved for partial Summary Judgment
      with respect to his breach of contract claim.




**Kirkland
      Knightsbridge LLC Matter**





On
      February 10, 2005, Larry Kirkland, purportedly on behalf of Kirkland, Kirkland
      Ranch, LLC, a California Limited Liability Company (“KKLLC”), filed a corrective
      statement with the California Secretary of State alleging that the financing
      statement filed by Gryphon Master Fund in connection with its April 2004
      financing of 360 Global Wine Company was wrongfully filed and that no financing
      statement was agreed to by KKLLC.





9


The
      Company has taken the position that the financing statement was properly
      authorized by KKLLC, and believes further that Mr. Kirkland had no authority
      pursuant to the operating agreement of KKLLC to file the corrective statement.
      Accordingly, the Company is cooperating with Gryphon in a lawsuit filed in
      the
      U.S. District Court for the Northern District of Texas, Dallas Division, by
      Gryphon seeking a declaration that a valid and enforceable security agreement
      exists between Gryphon and KKLLC and that KKLLC had no authority to file the
      corrective statement with the California Secretary of State.





On
      September 19, 2006, in the Superior Court of California, County of Napa, a
      complaint, styled, Larry, Plaintiffs, v. 360 Global Wines, Inc., a Nevada
      Corporation formerly known as Knightsbridge Fine Wines, Inc., a Nevada
      Corporation, and Does 1 through 50, Defendants, Case No. 26-35015. Plaintiff
      alleged causes of action against us for Breach of Contract; Specific
      Performance; Breach of Covenant, Good Faith, and Fair Dealing; and Intentional
      Misrepresentation, and against Mr. Shapiro for Breach of Covenant, Good Faith,
      and Fair Dealing; and Intentional Misrepresentation.





In
      connection with its bankruptcy filing in the Northern district of California,
      KKLLC filed a complaint, styled, Kirkland Knightsbridge, LLC, a California
      limited liability company, Plaintiff, v. 360 Global Wine Company, fka
      Knightsbridge Fine Wines, Inc., a Nevada corporation, Case No. 06-10628, in
      which plaintiff alleged claims for relief for a compulsory turnover of certain
      property to the bankruptcy estate and for declaratory relief related to
      defendant’s ownership of membership interests in KKLLC. We have responded to
      such claims and intend to defend the litigation vigorously. KKLLC also filed
      a
      counterclaim in this matter against us and against our wholly-owned subsidiary,
      360 Viansa, LLC, a California limited liability company, alleging claims for
      relief for breach of contract; common counts; and judicial foreclosure of
      alleged lien on personal property.




**Costin
      Suit**





On
      August
      16, 2006, Consuelo Costin filed a lawsuit against the company, styled “Consuelo
      Costin, Plaintiff vs. Knightsbridge Fine Wines, Inc., a Nevada corporation
      number C13452-2000; Knightsbridge Fine Wines, Inc., a Nevada corporation number
      C24980-2002; 360 Global Wine Company, Inc.; 360 Global Wine Company, Inc.,
      a
      Nevada corporation; Joel Shapiro, an individual, and Does 1-50, inclusive,
      Defendants,” Superior Court of the State of California for the County of Los
      Angeles, Case No. BC357113. Plaintiff alleges causes of action against the
      corporate defendants for breach of contract, misappropriation of name and
      identity, and violation of California Civil Code Section 3344, and against
      Mr.
      Shapiro for intentional interference with contractual relations. The defendants
      have filed an answer in this matter (in which they denied the allegations in
      the
      complaint) and have filed a counter-claim against plaintiff for breach of
      contract, fraud, negligent misrepresentation, unfair business practices, and
      rescission. The plaintiff’s allegations relate to an alleged contract between
      plaintiff and certain corporate defendants in which plaintiff allegedly granted
      a license to a trademark that defendants thereafter understood could not have
      been so granted by plaintiff. Defendants believe that plaintiff’s case is wholly
      without


merit
      and
      intend to defend against her claims vigorously.





**Gryphon
      Master Fund, Ltd. Suit**





Gryphon
      has filed a lawsuit in violation of covenants in its agreement whereby it waived
      its rights with respect to the Laurus Master Fund, Ltd. This action is being
      vigorously defended by the Company and Laurus.





**GE
      Capital**





General
      Electric Capital Corporation (“GE Capital”) has filed a lawsuit against Viansa
      in connection with Viansa’s failure to make payments on certain equipment
      leases. Viansa was delinquent on the lease payments and GE Capital declared
      the
      Company to be in default thereby making the entire outstanding amounts due
      and
      payable. Samuel J. Sebastani, as trustee under the Samuel and Victoria K.
      Sebastiani Revocable Trust was also named as a co-defendant. The litigation
      is
      at a very early stage.





Except
      as
      otherwise disclosed herein, the Company is not aware of any other material
      legal
      proceedings against the Company .




**ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.**




There
      were no matters submitted to a vote of security holders during the fourth
      quarter of the fiscal year covered by this report.





10




**PART
      II.**





**ITEM
      5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
      MATTERS.**


**HIGH**
              
              **LOW****FISCAL
                  YEAR 2005**First
                  Quarter
              
              $
              91.50
              
              $
              37.50Second
                  Quarter
              
              $
              91.50
              
              $
              30.00Third
                  Quarter
              
              $
              51.00
              
              $
              30.00Fourth
                  Quarter
              
              $
              9.00
              
              $
              3.75**FISCAL
                  YEAR 2006**First
                  Quarter
              
              $
              7.50
              
              $
              0.053Second
                  Quarter
              
              $
              7.50
              
              $
              3.00Third
                  Quarter
              
              $
              4.50
              
              $
              2.50Fourth
                  Quarter
              
              $
              4.10
              
              $
              3.45




Our
      common stock is currently quoted on the OTC Bulletin Board under the symbol
      “TSIX”. Prior to March 1, 2006 our common stock traded under the symbol “TGWC”.
      Prior to February 24, 2005, the common stock traded under the symbol
“KFWI”.




The
      following table sets forth the quarterly high and low bid prices, for our common
      stock, adjusted for the reverse split, which was effective as of February
      28, 2006, and since the share exchange and reverse acquisition between Tech-Net
      Communications, Inc. and us on August 1, 2003. The prices set forth below
      represent interdealer quotations, without retail markup, markdown, or
      commission, and may not be reflective of actual transactions.




On
      May
      17, 2007, the closing bid price for our common stock was $1.30 per share.
      At May 17, 2007, there were approximately 149 record holders of our common
      stock. This number excludes any estimate by us of the number of beneficial
      owners of shares held in street name, the accuracy of which cannot be
      guaranteed.





**Dividends**




We
      have
      never declared or paid cash dividends on our common stock and do not anticipate
      paying cash dividends in the foreseeable future. We currently expect to retain
      future earnings, if any, for use in the operation and expansion of our business
      and do not anticipate paying any cash dividends in the foreseeable
      future.




**Recent
      Sales of Unregistered Securities**




We
      sold
      the following equity securities during the fiscal year ended December 31, 2006
      that were not registered under the Securities Act of 1933, as amended (the
      “Securities Act”) and that were not previously disclosed in a filing with the
      SEC:


In
        the
        quarter ended December 31, 2006, the Company issued 171,629 shares of its
        common
        stock to nine entities or individuals for past consulting services with a
        value
        of $600,701 based upon the fair value of the stock at the date of
        issuance.
  In
        December, the Company issued 31,530 shares of it common stock as compensation
        to
        eighteen employees as compensation with a value of  $109,725 based on the
        fair value of the stock on the date of issuance.
  In
        December, the Company issued 44,447 shares of it common stock as compensation
        to one investor as repayment of a short term loan with a value of 
$155,562 based on the fair value of the stock on the date of
        issuance.
  During
        the quarter ended December 31, 2006, the Company issued 205,000 shares of
        its
        common stock to Gryphon in partial satisfaction of a convertible note payable
        at
        the contractually specified conversion price of $3.50 per share amounting
        to
        $717,500.
  During
        the quarter December 31, 2006, the Company issued 15,000 shares of its common
        stock to Laurus in partial satisfaction of a convertible note payable at
        the
        contractually specified conversion price of $3.50 per share amounting to
        $52,500.
  During
        the quarter December 31, 2006, the Company issued 27,419 shares of its common
        stock to Longview funds  in partial satisfaction of a convertible note
        payable at the contractually specified conversion price of $3.50 per share
        amounting to $95,966.
  During
        the quarter December 31, 2006, the Company issued 380,000 shares of its common
        stock to five investors as partial satisfaction of a convertible note
        payable at the contractually specified conversion price of $3.50 per share
        amounting to $1,330,000.


The
      foregoing was issued in reliance on an exemption from registration afforded
      by
      Section 4(2) and Rule 506 promulgated pursuant to Regulation D of the Securities
      Act of 1933, as amended.




**Securities
      Authorized for Issuance Under Equity Compensation Plans**





The
      following table shows information with respect to each equity compensation
      plan
      under which the Company’s common stock is authorized for issuance as of the
      fiscal year ended December 31, 2006.





11





**EQUITY
      COMPENSATION PLAN INFORMATION**





**Plan
                  category**
              
              **Number
                  of securities**
                **to
                  be issued upon**
                **exercise
                  of**
                **outstanding
                  options,**
                **warrants
                  and rights**
              
              **Weighted
                  average**
                **exercise
                  price of**
                **outstanding
                  options,**
                **warrants
                  and rights**
              
              **Number
                  of securities**
                **remaining
                  available for future issuance under equity compensation plans (excluding
                  securities reflected in column (a)****(a)**
              
              **(b)**
              
              **(c)****Equity
                  compensation plans approved by security holders**
              
              -0-
              
              -0-
              
              -0-**Equity
                  compensation plans not approved by security
                  holders**
              
              -0-
              
              -0-
              
              -0-**Total**
              
              -0-
              
              -0-
              
              -0-


**ITEM
      6. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
      OPERATION.**




*The
      following discussion should be read in conjunction with our financial statements
      and the notes thereto which appear elsewhere in this report. The results shown
      herein are not necessarily indicative of the results to be expected in any
      future periods. This discussion contains forward-looking statements based on
      current expectations, which involve uncertainties. Actual results and the timing
      of events could differ materially from the forward-looking statements as a
      result of a number of factors. Readers should also carefully review factors
      set
      forth in other reports or documents that we file from time to time with the
      Securities and Exchange Commission.*




**Overview**




On
      March
      7, 2007 (the “Petition Date”), we filed a voluntary petition for reorganization
      under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy
      Code”), in the United States Bankruptcy Court for the District of Nevada (the
“Bankruptcy Court”). The reorganization case is being administered under Case
      No. 07-50206-gwz.





**Our
      Business**





360
      Global Wine Company (the “Company”) is a Sonoma-based marketer of alcoholic
      beverage brands in the wine category. Management believes that there is an
      abundance of small and mid-sized wineries that lack effective sales, marketing,
      and branding strength, creating an opportunity to consolidate wineries and
      build
      an efficient operation. If successful, such an operation could maximize
      economies of scale, increase utilization of production assets, and provide
      a
      more streamlined and effective sales, marketing, and distribution group. We
      believe that by adopting and applying consumer beverage marketing principles
      within the wine industry, we can further enhance operating results, creating
      a
      competitive advantage over other small and mid-sized wineries.





For
      a
      brief period of time earlier this year, diversified into a mineral extraction
      operation for kaolin. However, our Board of Directors has decided to concentrate
      our efforts on our core wine business and we implemented plans to discontinue
      our extractive operations and disposed of our kaolin operation. In addition,
      in
      May 2006, our Board decided to discontinue our involvement with KKLLC, a Napa
      Valley, California-based wine operation in which we held a 50% interest. We
      were
      not able to integrate this operation into our other wine business and,
      therefore, did not realize our anticipated operating efficiencies. In September
      2005, KKLLC filed for protection under Chapter 11 of the Federal Bankruptcy
      Code. As of the date of this Form 10-QSB, these activities are recorded as
      discontinued operations.





We
      have
      grown predominantly through acquisitions. Through these acquisitions, we believe
      that we have become more competitive by: (1) diversifying our product offering;
      (2) developing strengthening market positions in the wine category; (3)
      strengthening our relationships with wholesalers and retailers; (4) expanding
      our distribution capabilities; (5) enhancing our production capabilities; and
      (6) acquiring additional management, operational, marketing, and research and
      development expertise. While not all of our acquisitions have been as successful
      as anticipated, we believe we have better defined the characteristics necessary
      in target companies.





12


The
      following table highlights the subsidiaries currently held within the
      consolidated results described in this Form 10-KSB:





Name
                of Subsidiary
            
            Percent
                Owned360
                Viansa, LLC
            
            
            100
            %Dominion
                Wines International Ltd.
            
            
            56
            %Knightsbridge
                Torrique
            
            
            100
            %Knightsbridge
                Fine Wines, Inc.
            
            
            100
            %





At
      September 30, 2006, we do not segment our business internally beyond the
      reporting of consolidated results and certain required aspects of subsidiary
      financial performance.





**Mergers,
      Acquisitions and Divestitures**





*Springer
      Mining Company*





On
      March
      31, 2006, we attempted to expand our operations into another business segment
      -
      extractive minerals and processing. We acquired all of the stock of Springer
      Mining Company (“Springer”) for $3,000,000. The purchase price consisted of
      $600,000 in cash and a note issued by us for $2,400,000 to the prior owner
      of
      Springer (General Electric Company). We did not make the required note payment
      and General Electric Company foreclosed on the Springer shares held in escrow.
      As a result, we have recorded a loss on our investment in Springer of $900,000
      in 2006. This loss includes approximately $300,000 of direct costs and fees
      related to this transaction. We believe that our $2,400,000 note payable issued
      in this transaction and the related accrued interest have been satisfied by
      the
      General Electric Company foreclosure of the Springer stock from the
      escrow.





Related
      to the Springer transaction and at the same time in March 2006, we entered
      into
      an agreement to purchase the processing rights to the mineral Kaolin. The
      acquisition agreement with the holder of the mineral processing rights required
      us to issue them 6,800,000 shares of our common stock. The seller was unable
      to
      deliver the mineral processing rights; so, we terminated the agreement. We
      did
      not physically deliver the 6,800,000 shares to the seller of the mineral
      processing rights and have entered into an agreement whereby both parties have
      relinquished all potential claims against the other.





*First
      Montauk Financial*





In
      the
      first quarter of 2005, we agreed to acquire 18.7% of the outstanding shares
      of
      First Montauk Financial Corp. (FMFC) from a group of individuals and an entity
      (BMAC). We retained 360 Global Financial LLC2 (360GF) (not a related party)
      to
      provide investment banking services in our acquisition of the shares of FMFC
      common stock. The agreement with 360GF provided for the payment of 1,200,000
      shares of our common stock payable in three separate payments of 400,000 shares
      based upon the completion of certain milestones. We issued the first 400,000
      shares of our common stock with a fair value of $2,735,005. BMAC, the entity
      that was selling the FMFC shares to us, was not able to deliver its shares
      as
      contemplated in the original agreement. Accordingly, the FMFC share acquisition
      transaction has been cancelled and we are currently negotiating to recover
      the
      shares of our common stock issued to 360GF.




*Kirkland
      Knightsbridge LLC*





In
      April
      2004 we acquired a 50% interest in Kirkland Knightsbridge LLC (KKLLC), a wine
      producer located in Napa Valley, California. As a result of unsatisfactory
      relations with our joint venture partner, our inability to realize anticipated
      costs savings and efficiencies, and the lack of market acceptance due to less
      than expected wine quality, we decided in May 2006 to discontinue our interest
      in KKLLC. In September 2006, KKLLC filed for protection under Chapter 11 of
      the
      Federal Bankruptcy Code. We, therefore, report KKLLC as a discontinued operation
      in our financial statements included in this Form 10-QSB. We have guaranteed
      a
      $22 million loan in favor of KKLLC which is currently in default. All of the
      assets of KKLLC have been used to secure the note payable. We believe that
      the
      value of the assets of KKLLC will be sufficient to satisfy this debt and we
      will
      not incur any loss related to this guarantee. Our initial agreement with our
      joint venture partner included our guarantee of the value of shares of our
      common stock issued for the benefit of an individual related to our joint
      venture partner in the amount of $10 million. KKLLC declared a forfeiture of
      our
      membership interests, which eliminated our $10 million guarantee. Therefore,
      we
      transferred this obligation to additional paid in capital at September 30,
      2006.




**Correction
      of Errors in Previously Issued Financial Statements**





We
      discovered errors in our financial statements issued in prior years. The
      correction of these errors was reported by our March 31, 2006 10-QSB, as
      follows:





Accumulated
            
            Additional
                Paid-Deficit
            
            In CapitalAccretion
                of original issue discount on debt
            
            $
            12,134,347Interest
                expense resulting from initial recognition of derivative
                instruments
            
            
            19,193,919Derivative
                instrument mark-to-market adjustments
            
            
            (67,514,760
            )Loss
                on divestiture of subsidiary
            
            
            1,500,000
            
            
            (1,500,000
            )Shares
                issued for services
            
            
            2,288,535Related
                party shares issued for Company benefit
            
            
            1,819,250
            
            
            (1,819,250
            )Additional
                interest expense
            
            
            229,036Warrants
                issued for services
            
            
            1,616,504
            
            
            (1,616,504
            )Minimum
                share price guarantee
            
            
            
            
            
            9,995,745Share
                issuances
            
            
            
            
            
            (2,347,220
            )Derivative
                instruments
            
            
            
            
            
            4,855,824Other
            
            
            124,722
            
            
            (5,600
            )Total
                decrease in accumulated deficit and additional paid-in capital at
                January
                1, 2006
            
            $
            (28,608,447
            )
            $
            7,562,995





13


**Inventory
      Revaluation**





In
      addition to the errors described above, we discovered that we had not correctly
      allocated the purchase price to the assets of Viansa which we acquired in July
      2005. The reallocation resulted in an increase to the inventory of bottled
      and
      bulk wine of $5,247,745. Of this amount, $1,249,770 was charged to cost of
      sales
      during the three-month period ended September 30, 2005, $483,956 was charged
      to
      cost of sales during the three-month period ended September 30, 2006, and $
      1,412,221 was charged to cost of sales during the nine-month period ended
      September 30, 2006.




**Results
      of Operations**




**Comparison
        of the twelve month period ended December 31, 2006 to the twelve month period
        ended December 31, 2005** .
 
 *Revenues*
 
 Revenues
        for the year ended December 31, 2006, were $17,268,132 as compared to
        $12,649,000 for the fiscal year ended December 31, 2005. This increase of
        $5,000,132 is due to the increased sales of our Viansa products.
 
 *Cost
        of Goods Sold*
 
 Cost
        of
        goods sold for the year ended December 31, 2006, was 9,695,739 compared to
        $6,883,028 for the year ended December 30, 2005.
 
 *Sales
        and Marketing Expense*
 
 Sales
        and
        marketing expenses for the year ended December 31, 2006 was approximately
        equal
        to the same period in 2005. We believe our sales and marketing program is
        established and should remain consistent in future periods. This excludes
        non
        cash expenses associated the company’s branding strategies.
 
 *General
        and Administrative Expense*
 
 General
        and administrative expenses for the fiscal year ended December 31, 2006 were
        $24,843,226. For the same year in 2005, the general and administrative
        expenditures was $5,343,089.
 
 Both
        the
        Sales and Marketing and the General and Administrative expenses, in general,
        were greater in the twelve-month period ended December 31, 2006 than the
        comparable twelve-month period in 2005 because the 2006 activity included
        operating expenses of Viansa, which was acquired in the third quarter of
        2005
        and, therefore, had limited impact on the operating results for the twelve
        months in 2005.
 
 *Legal
        Fees*
 
 Legal
        fees for the twelve months ended December 31, 2006 were $1,065,094 compared
        to
        $424,353 for the twelve month period ended December 31, 2005. The major portion
        of the increase is the result of one-time legal costs associated with the
        Company's correction of errors reported by our March 31, 2006 10-QSB (as
        discussed above) and legal matters concerning acquisitions and
        divestitures.
 
 *Provision
        for Income Taxes*
 
 The
        Company currently makes no provision for income taxes due to its ongoing
        net
        loss status.
 
 *Stock
        Compensation Expense*
 
 During
        the twelve-month period ended December 31, 2006, our Board of Directors
        authorized the issuance of unregistered shares of our common stock to various
        consultants and employees in lieu of cash payments and in conjunction with
        various debt financing and refinancing undertaken during 2006. Based upon
        the
        common stock trading price at the times of issuances and FASB rules, we were
        required to incur non-cash expenses of approximately $23,638,516 for the
        issuance of these shares during the twelve-month period ended December 31,
        2006
        and $3,737,000 for the issuance of these shares during the same period in
        2005.
   14
 
 *Operating
        Loss with detail of Non-Cash items*
 
 During
        the first twelve months of 2006, the Company recorded a loss from continuing
        operations of $89,125,751. Of that amount, approximately $76.2 million resulted
        from non-cash items. These non-cash items were stock-based compensation of
        employees and members of the board of directors of $23.6 million, losses
        on
        financial instrument derivatives of $23.8 million, non cash interest costs
        of
        $24.3 million, and marketing sponsorships of $4.5 million.
 
 *Interest
        and Other Expense*
 
 Total
        interest expense increased to $9,140,346 during the twelve-month period in
        2006
        from the same period in 2005. We incurred about $4.0 million of default interest
        on the Laurus loan during 2006 and our debt increase due to the financing
        in
        July 2005 related to our acquisition of Viansa. The interest expense for
        the
        year ended December 31, 2005 was approximately $6,871,216.
 
 Accretion
        of original issue discount increased as a result of a full nine months accretion
        in 2006 compared to only three months in 2005. The excess of the fair value
        of
        financial instrument derivatives over the net proceeds received decreased
        in
        2006 compared to 2005 as we had fewer new loans in 2006.
 
 In
        connection with an increase in the Laurus line of credit, we reduced the
        conversion price of the Laurus and Gryphon loans to $3.50 per share and also
        decreased the exercise price of the warrants issued in connection with these
        loans to $3.50 per share. This resulted in additional derivative costs of
        $6,245,007. The value of the financial instrument derivatives increased by
        $75,604,425 in the first quarter of 2006. This was partially offset by a
        decrease in the value of these derivatives of $32,279,546 in the second quarter
        of 2006 and $19,4936,835 in the third quarter of 2006. These dramatic changes
        in
        the value of these derivatives are due to changes in the quoted price of
        our
        common stock at the end of each quarter. There are no cash costs to these
        changes, and the balances of the derivative liability will be included in
        shareholders' equity when the notes are repaid, the warrants are exercised
        or
        expire, or the registration statement required by the agreements becomes
        effective.
 
 *Loss
        From Discontinued Operations and Disposal of Discontinued
        Operations*
 
 For
        the
        twelve-month period ended December 31, 2006, the loss on discontinued operations
        was $3,391,689. The total amount pertains to the losses incurred from the
        KKLLC
        discontinued operation. The loss on the disposal of a discontinued operation
        was
        $900,000 and is the result of the loss recorded on the Springer
        transaction.
 
 **Liquidity
        and Capital Resources**
 
 As
        of
        December 31, 2006, the Company's working capital has been primarily financed
        by
        the issuance of various forms of debt, convertible debt and its common stock.
        The Company has suffered significant operating losses since its inception
        in its
        efforts to establish and execute its business strategy. The Company anticipates
        that it will continue to require additional working capital to fund its ongoing
        operations, repay certain debts in default, and execute its business strategy.
        In the event that the Company is unable to raise the required funds to sustain
        its ongoing operations and repay those debt instruments that are in default
        or
        are coming due in the near future it would raise substantial doubt about
        the
        Company's ability to continue as a going concern.
 
 Since
        inception, we have financed our operations through the sale of common stock
        and
        the issuance of promissory notes and convertible, exchangeable debentures,
        many
        of these with detachable warrants.
 
 *Operating
        Activities*
 
 Cash
        used
        in operating activities for the twelve-month period ended December 31, 2006
        was
        $7,579,865. The use of cash during the period was primarily a result of an
        increase in accrued expenses and a decrease of accounts payable
        trade.
 
 *Financing
        Activities*
 
 Cash
        provided from financing activities for the twelve-month period ended December
        31, 2006 was $6,665,159. The cash provided from financing activities was
        primarily a result of the proceeds from notes issued during the
        period.
   15
 
 *Investing
        Activities*
 
 Cash
        used
        in investing activities during the twelve-month period in 2006 was $190,601,
        the
        majority of which is due to the purchase of equipment.
 
 *Impact
        of Derivatives* on *Liquidity*
 
 We
        financed the acquisition of Viansa through a convertible debt instrument
        with
        Laurus Fund. This note is convertible into shares of our common stock. We
        also
        issued warrants to purchase shares of our common stock to Laurus in connection
        with this loan.
 
 As
        the
        warrants and the embedded conversion feature of this convertible debt meet
        the
        accounting definition of “financial instrument derivatives”, accounting rules
        require that we must adjust the carrying value of these derivatives to their
        fair value at the end of each reporting period (March, June, September and
        December). These adjustments to the carrying value of the derivatives are
        recognized as either non-cash income or non-cash expense. An increase in
        the
        fair value of the warrants and embedded conversion feature result in an expense.
        A decrease in fair value results in income. These changes have no effect
        on our
        current or future cash requirements.
 
 In
        March
        2006, we lowered the conversion price of the Laurus and other convertible
        debt
        and lowered the exercise price of certain warrants issued in connection with
        convertible debt to $3.50 per share. This reduction of the exercise price
        of the
        warrants and the conversion price of the debt instruments resulted in an
        increase of $75,604,425 in the value of these derivatives for the quarter
        ended
        March 31, 2006. As explained above, this increase in value of the warrants
        and
        conversion features must be recognized as a non-cash expense. In the second
        and
        third quarters of 2006, we experienced gains of $32,279,546 and $19,493,835,
        respectively, that partially offset the expense recorded in the first quarter;
        resulting in a net expense of $23,831,044.
 
 The
        actual value of these derivatives will vary significantly, depending upon
        market
        conditions and the price of our stock.
 
 **Contractual
        Obligations and Commitments**
 
 The
        Company incurs certain contractual obligations and commitments from time
        to time
        in the normal course of business. Included in these obligations are typically:
        (1) leasing or mortgage obligations, (2) employment agreements, (3) sales,
        marketing, distribution and licensing agreements, and (4) anticipated costs
        of
        litigation, all of which are discussed in more detail in the Company's filing
        of
        its Annual Report on Form 10-KSB in the Notes to Consolidated Financial
        Statements.
 
 There
        were no material amounts accrued into the Company's financial statements
        for
        employment agreements and sales, marketing, distribution and licensing
        agreements.
 
 **Capital
        Expenditures**
 
 Capital
        expenditures in the twelve-month period ended December 31, 2006 were $39,167,
        compared to capital expenditures of $6,326,000 in the twelve-month period
        ended
        December 31, 2005.
   16




**Liquidity
      and Capital Resources**




**Management’s
      Strategy and Plan for the Future**





Our
      strategy is to grow through a combination of internal growth initiatives and
      acquisitions. Our internal growth will be driven by leveraging our existing
      portfolio of leading brands, developing new products, new packaging and line
      extensions, and focusing on the faster growing sectors of the wine
      industry.





The
      internal growth initiatives include increases to sales by providing a wider
      selection of brands and products for our sales force to introduce into the
      marketplace, thereby reducing average sales cost per product and increasing
      product variety to our client base. We believe that, by increasing our ability
      to provide an ever-growing inventory of brands and products, we will be able
      to
      increase our ability to provide wholesalers with better promotional advantages
      than our smaller peers. This could lead to an increased competitive position
      and
      drive internal growth. Two key aspects of our internal growth initiatives
      include our *Tuscan
      Club* private
      membership club of approximately 15,000 individuals with an interest in having
      access to exclusive wine and food products and our upcoming launch of *Cucina
      Viansa,* a line
      of mid-priced wines, including Chardonnay, Merlot, Pinot Grigio and Sangiovese,
      that will be distributed primarily through third party channels.





The
      external initiatives include targeting and subsequently acquiring small to
      mid-sized wineries and distressed brands, which we can assimilate into our
      business model. We believe that by assimilating the small to mid-sized wineries
      we can add brands to our portfolio that can be introduced into our sales and
      marketing channels, which, in turn, should provide wider public awareness and
      increased sales. In light of our Chapter 11 bankruptcy filing we will be forced
      to reduce our acquisition plans and focus on internal growth
      initiatives.





17


**Contractual
      Obligations and Commitment**





**Off-Balance
      Sheet Arrangements**




We
      do not
      have any off-balance sheet arrangements.




**Cautionary
      Information Regarding Forward-Looking Statements**




Under
      the
      Private Securities Litigation Reform Act of 1995, companies are provided with
      a
“safe harbor” for making forward-looking statements about the potential risks
      and rewards of their strategies . Some of the statements contained in this
      Annual Report on Form 10-KSB are forward-looking statements about 360 Global
      Wine Company, including but not limited to those specifically identified as
      such, that involve risks and uncertainties. The statements contained in this
      Annual Report on Form 10-KSB that are not purely historical are forward looking
      statements within the meaning of Section 27A of the Securities Act and Section
      21E of the Exchange Act, including, without limitation, statements regarding
      our
      expectations, beliefs, intentions or strategies regarding the future. In some
      cases, you can identify forward-looking statements by terminology such as “may,”
“will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,”
“predicts,” “potential” or “continue” or the negative of these terms or other
      comparable terminology.




Our
      ability to achieve our goals depends on many known and unknown risks and
      uncertainties, including risks and uncertainties specific to our Company, our
      industry, and changes in general economic and business conditions. These factors
      could cause our actual performance and results to differ materially from those
      described or implied in forward-looking statements. Although we believe that
      the
      expectations reflected in the forward-looking statements are reasonable, we
      cannot guarantee future results, levels of activity, performance or
      achievements. Moreover, neither we nor any other person can assume
      responsibility for the accuracy and completeness of such
      statements.




All
      forward-looking statements included in this Annual Report on Form 10-KSB are
      based on information available to us on the date hereof, and we assume no
      obligation to update any such forward-looking statements, beyond those
      obligations required by law.




**Risk
      Factors**




Investing
      in our common stock involves a high degree of risk. Our auditors have expressed
      substantial doubt about our ability to continue as a going concern. This is
      due
      in large part to the Company’s history of significant operating losses and its
      previous securing of operating capital through the sale of its securities.
      Currently, the growth and success of our business depends largely upon obtaining
      future financings, without which we may not have the necessary capital to
      continue our business.




The
      risks
      and uncertainties described below are not the only ones we may face. Additional
      risks and uncertainties not currently known to us or that we currently deem
      immaterial may also adversely affect our business, financial condition, and/or
      operating results. If any of the following risks, or any other risks not
      described below, actually occur, it is likely that our business, financial
      condition, and operating results could be seriously harmed. As a result, the
      trading price of our common stock could decline and you could lose part or
      all
      of your investment.




**RISKS
      RELATING TO OUR BUSINESS**





**We
      filed for reorganization under Chapter 11 of the Bankruptcy Code on March
      7, 2007 and are subject to the risks and uncertainties associated with
      Chapter 11 proceedings.**





For
      the duration of our Chapter 11 proceedings, our operations, including our
      ability to execute our business plan, are subject to the risks and uncertainties
      associated with bankruptcy. Risks and uncertainties associated with our
      Chapter 11 proceedings include the following:





·
            the
                actions and decisions of our creditors and other third parties who
                have
                interests in our Chapter 11 proceedings that may be inconsistent with
                our plans;·
            our
                ability to obtain court approval with respect to motions in the
                Chapter 11 proceedings prosecuted from time to time;·
            our
                ability to develop, prosecute, confirm and consummate a plan of
                reorganization with respect to the Chapter 11 proceedings;·
            our
                ability to obtain and maintain normal terms with vendors, service
                providers, including the grape growers;·
            our
                ability to maintain contracts that are critical to our operations;
                and·
            risks
                associated with third parties seeking and obtaining court approval
                to
                terminate or shorten the exclusivity period for us to propose and
                confirm
                a plan of reorganization, to appoint a Chapter 11 trustee or to
                convert the cases to Chapter 7 cases.





18


These
      risks and uncertainties could affect our business and operations in various
      ways. For example, negative events or publicity associated with our
      Chapter 11 proceedings could adversely affect our sales and the
      relationship with our customers, as well as with vendors and employees, which
      in
      turn could adversely affect our operations and financial condition, particularly
      if the Chapter 11 proceedings are protracted. Also, transactions outside
      the ordinary course of business are subject to the prior approval of the
      Bankruptcy Court, which may limit our ability to respond timely to certain
      events or take advantage of certain opportunities.





Because
      of the risks and uncertainties associated with our Chapter 11 proceedings,
      the ultimate impact that events that occur during these proceedings will have
      on
      our business, financial condition and results of operations cannot be accurately
      predicted or quantified, and there is substantial doubt about our ability to
      continue as a going concern.





**We
      have incurred substantial indebtedness and have significant losses in recent
      years.**




The
      premium wine industry is a capital-intensive business, which requires
      substantial capital expenditures to develop and acquire vineyards and to improve
      or expand wine production. We have incurred substantial indebtedness to finance
      our acquisitions and have issued secured note to two of our key investors,
      Gryphon Master Fund and Laurus Master Fund in an amount of up to $34.5 million.
      Further, these notes are secured by all of our assets. Historically, our cash
      flow from operations has been insufficient to meet all of our debt service
      and
      capital requirements. There can be no assurance in the future that our cash
      flow
      from operations will be sufficient to meet all of our debt service requirements
      or to fund our capital expenditure requirements. Our ability to satisfy our
      debt
      obligations outstanding is dependent upon our future operating performance,
      which is subject to prevailing economic conditions, levels of interest rates
      and
      financial, business and other factors, many of which are beyond our
      control.




**We
      have substantial debt service obligations and covenants which may significantly
      impact our business.**




Our
      current and future debt service obligations and covenants could have important
      consequences. These consequences include, or may include, the
      following:





·
            our
                ability to obtain financing for future working capital needs or
                acquisitions or other purposes may be limited;·
            a
                significant portion of our cash flow from operations will be dedicated
                to
                the payment of principal and interest on our indebtedness, thereby
                reducing funds available for operations, expansion;·
            our
                ability to conduct its business could be limited by restrictive covenants;
                and·
            we
                may be more vulnerable to adverse economic conditions than less leveraged
                competitors and, thus, may be limited in our ability to withstand
                competitive pressures.








**We
      are facing significant litigation and if any such significant litigation is
      concluded in a manner adverse to us, our financial condition and operating
      results could be materially adversely affected.**





We
      are
      involved in several legal proceedings concerning our business. As a result
      of
      our Chapter 11 filing, most attempts to collect, secure or enforce remedies
      with respect to pre-petition claims against us are subject to the automatic stay
      provisions of Section 362(a) of the Bankruptcy Code and certain liabilities
      could be discharged in the Chapter 11 proceedings. While we cannot
      reasonably estimate the potential loss for certain of our legal proceedings
      because, for example, the litigation is in its early stages or the plaintiff
      does not specify damages being sought, if the outcome of any significant
      litigation is adverse to us and such proceedings are not discharged in our
      Chapter 11 proceedings, our financial condition and operating results could
      be materially adversely impacted.




**The
      Loss Of our Current Management Team Could Have a Material Adverse Effect on
      Our
      Business. If we Are Not Able To Retain Additional Key Personnel, Our Business
      Could Suffer.**




We
      are
      dependent on certain key personnel, including our Chief Executive Office and
      Chief Restructuring Officer, A. John A. Brayn Jr. We believe that the services
      of Mr. Bryant are critical to the successful transformation and ongoing
      operation of our business.  In addition, as our business plan is
      implemented, we will need to recruit and retain additional management and key
      employees in virtually all phases of our operations. Key employees will require
      a strong background in the wine industry and we cannot assure that we will
      be
      able to successfully attract and retain such key personnel. If, for any reason
      our current key employees leave our employment and we are unable to retain
      comparable replacements, we will lack a strong management team and that could
      lead to a temporary or permanent breakdown of operations.




19


**We
      operate in a very competitive industry.**




The
      premium table wine industry is intensely competitive and highly fragmented.
      Our
      wines may compete in the premium wine market segments with many other premium
      domestic and foreign wines. Our wines may also compete with popular-priced
      generic wines and with other alcoholic and, to a lesser degree, non-alcoholic
      beverages, for shelf space in retail stores and for marketing focus by our
      independent distributors, many of which carry extensive brand portfolios. Being
      a fairly new and smaller company than many of our competitors who have greater
      financial, technical, marketing and public relations resources than we presently
      do, may put us at a disadvantage. Our sales may be harmed to the extent we
      are
      not able to compete successfully against such wine or alternative beverage
      producers.





**We
      are dependent on the performance of wholesale distributors, major Retailers,
      and
      chains for the sale of our products.**




In
      the
      United States, we sell our products principally to wholesalers for resale to
      retail outlets including grocery stores, package liquor stores, club and
      discount stores and restaurants. The replacement or poor performance of our
      major wholesalers, retailers or chains, or our inability to collect accounts
      receivable from our major wholesalers, retailers or chains could materially
      and
      adversely affect our results of operations and financial condition. Distribution
      channels for beverage alcohol products have been consolidating in recent years.
      In addition, wholesalers and retailers of our products offer products which
      compete directly with our products for retail shelf space and consumer
      purchases. Accordingly, there is a risk that wholesalers or retailers may give
      higher priority to products of our competitors. In the future, our wholesalers
      and retailers may not continue to purchase our products or provide our products
      with adequate levels of promotional support.




**We
      are dependent on third parties for supply of our products and if we are not
      able
      to maintain good working relationships with these parties or enter into new
      third party agreements, we may not be able to meet our distribution and sale
      goals.**




We
      currently own one vineyard with the facilities for wine production. However,
      we
      primarily market and distribute wines produced by third parties under our own
      label, or the label of such third party producers. Except for any contractual
      rights and remedies that we may have with such producers, we have no control
      over the availability of products, their quality or cost. If for any reason
      we
      are unable to maintain or acquire new relationships with third party producers
      on commercially acceptable terms, we may not be able to distribute our products
      as planned. If we encounter delays or difficulties with contract producers
      in
      producing or packaging our products, the distribution, marketing and subsequent
      sales of these products would be adversely affected, and we may have to seek
      alternative sources of supply or abandon or sell product lines on unsatisfactory
      terms. We may not be able to enter into alternative supply arrangements on
      commercially acceptable terms, if at all. There can be no assurance that the
      producers that we have engaged will be able to provide sufficient quantities
      of
      these products or that the products supplied will meet with our specifications.
      We are currently, actively seeking additional sources of supply to meet our
      anticipated sales opportunities in the coming year.




**Our
      industry is subject to seasonal as well as quarterly fluctuations in revenues
      and operating results.**





Sales
      volume tends to increase during summer months and the holiday season and
      decrease after the holiday season. As a result, our sales and earnings are
      likely to be highest during the fourth calendar quarter and lowest in the first
      calendar quarter. This and other factors may cause fluctuations in the market
      price of our common stock.




**We
      face several agricultural risks which may affect the quality and quantity of
      grapes available, decreasing the supply of our products and negatively impacting
      profitability.**




Various
      diseases, pests, fungi, viruses, drought, frosts and certain other weather
      conditions can affect the quality and quantity of grapes available, decreasing
      the supply of our products and negatively impacting profitability. Many
      California vineyards have been infested in recent years with phylloxera.
      Although we intend to work towards limiting the risk from phylloxera, there
      can
      be no assurance that the vineyards owned or utilized by the producers with
      whom
      we have contracted, or future vineyards that we may acquire, will not become
      susceptible to current or new strains of phylloxera. Pierce’s Disease is a vine
      bacterial disease that has been in California for more than 100 years. It kills
      grapevines and there is no known cure. Small insects called sharpshooters spread
      this disease. A new strain of the sharpshooter, the glassy winged, was
      discovered in Southern California and is believed to be migrating north. The
      agricultural industry is actively trying to control this pest and is making
      every reasonable effort to prevent an infestation in vineyards. We cannot,
      however, guarantee that our current producers will succeed in preventing
      contamination in existing vineyard or that we will succeed in preventing
      contamination in future vineyards we may acquire. Future government restrictions
      regarding the use of certain materials used in grape growing may increase
      vineyard costs and/or reduce production. Grape growing also requires adequate
      water supplies. A substantial reduction in water supplies could result in
      material losses of grape crops and vines, which could lead to a shortage of
      our
      product supply.




20




**Our
      success is dependent on our ability to acquire high-quality
      grapes**




The
      adequacy of ** our
      grape
      supply is influenced by consumer demand for wine in relation to industry-wide
      production levels. While we believe that we can secure sufficient regular
      supplies of grapes from a combination of acquisitions and from grape supply
      contracts with independent growers. Our bankruptcy status may negatively affect
      our purchasing ability. We cannot be certain that grape supply shortages will
      not occur. A shortage in the supply of wine grapes could result in an increase
      in the price of some or all grape varieties and a corresponding increase in
      our
      wine production costs. An increase in production cost could lead to an increase
      in our wine prices, which may ultimately have a negative effect on our sales.
      Depending upon our independent growers and acquisitions, a shortage in grape
      supply could have a stronger effect on us than our competitors. Since wine
      is
      our only product at this time, a shortage like the one described above would
      harm our business.




**An
      excess of supply over demand and a resulting decrease in wine prices will
      significantly affect our profitability**




Current
      trends in the domestic and foreign wine industry point to rapid plantings of
      new
      vineyards and replanting of old vineyards to greater densities, with the
      expected result of significantly increasing the worldwide supply of premium
      wine
      grapes and the amount of wine which will be produced in the future. This
      increase in grape production has resulted in an excess of supply over demand
      and
      has forced wineries to reduce, or maintain prices without the ability to
      increase them. A reduction in our wine prices could have a material adverse
      effect on our sales and overall business. Specifically, reduced grape prices
      could result in a greater number of wine companies and increased competition
      for
      our product.




**Class
      action or other litigation relating to alcohol abuse or the misuse of alcohol
      could adversely affect our business**




There
      has
      been increased public attention directed at the beverage alcohol industry,
      which
      we believe are due to concern over problems related to alcohol abuse, including
      drinking and driving, underage drinking and health consequences from the misuse
      of alcohol. Several beverage alcohol producers have been sued in several courts
      regarding alleged advertising practices relating to underage consumers. If
      there
      are adverse developments in these or similar lawsuits or there is a significant
      decline in the social acceptability of beverage alcohol products that results
      from these lawsuits, our business could be materially adversely
      affected.




**If
      we fail to adequately protect or enforce our intellectual property rights,
      competitors may produce and market products similar to
      ours.**





Our
      wines
      are branded consumer products. Our ability to distinguish our brand name from
      those of our competitors depends, in part, on the strength and vigilant
      enforcement of our brand name. Competitors may use trademarks, trade-names
      or
      brand names that are similar to those we use, thereby weakening our intellectual
      property rights. If our competitors infringe on our rights, we may have to
      litigate in order to protect such rights. Litigation may result in significant
      expense and divert our attention from business operations. In addition, we
      cannot assure you that we would be successful in protecting our
      rights.




**Our
      business is subject to certain hazards and liabilities related to food products,
      such as contamination**




Because
      our products are designed for human consumption, our business is subject to
      certain hazards and liabilities related to food products, such as contamination.
      A discovery of contamination in any of our wines, through tampering or
      otherwise, could result in a recall of our products. Any such recall would
      significantly damage our reputation for product quality, which we believe is
      one
      of our principal competitive assets, and could seriously harm our business
      and
      sales. Although we maintain insurance to protect against such risks, we may
      not
      be able to maintain such insurance on acceptable terms and such insurance may
      not be adequate to cover any resulting liability. Therefore, if our products
      are
      recalled and we do not have adequate insurance coverage, our business will
      suffer a significant loss of sales and profit, as well as capital to cover
      the
      difference in the liability cost.




**RISKS
      RELATING TO OUR INDUSTRY OR AREA OF OPERATION**




**We
      are subject to imposition of excise and other taxes on beverage alcohol products
      which may affect our financial condition or results of
      operations**





In
      the
      United States, and other countries in which we may operate, we are subject
      to
      imposition of excise and other taxes on beverage alcohol products in varying
      amounts which have been subject to change. Significant increases in excise
      or
      other taxes on beverage alcohol products could materially and adversely affect
      our financial condition or results of operations. Recently, many states have
      considered proposals to increase, and some of these states have increased,
      state
      alcohol excise taxes. New or increased licensing fees, requirements or taxes
      could also have a material adverse effect on the Company’s financial condition
      or results of operations.




**Compliance
      with governmental regulations may impose additional costs, which may adversely
      affect our financial condition and results of operations.**




The
      beverage alcohol products industry is subject to extensive regulation by
      federal, state, local and foreign governmental agencies concerning such matters
      as licensing, trade and pricing practices, permitted and required labeling,
      advertising and relations with wholesalers and retailers. Certain federal and
      state regulations also require warning labels and signage. Any acquisition
      of
      new vineyards or wineries may be limited by present and future zoning
      ordinances, environmental restrictions and other legal requirements. In
      addition, new regulations or requirements could reduce our profits. Future
      legal
      challenges to the industry, either individually or in the aggregate, could
      harm
      our business if they mandate documents to continue our business and we are
      unable to obtain such documents.




21


**A
      decline in consumption or public opinion regarding alcohol may significantly
      impact our business**




Although
      since 1995 there have been modest increases in consumption of beverage alcohol,
      there have been periods in the past in which there were substantial declines
      in
      the overall per capita consumption of beverage alcohol products in the United
      States and other markets in which the Company participates. A limited or general
      decline in consumption in one or more of the Company’s product categories could
      occur in the future due to a variety of factors, including:




·
            a
                general decline in economic conditions;·
            increased
                concern about the health consequences of consuming beverage alcohol
                products and about drinking and driving;·
            a
                trend toward a healthier diet including lighter, lower calorie beverages
                such as diet soft drinks, juices and water products;·
            the
                increased activity of anti-alcohol consumer groups; and·
            increased
                federal, state or foreign excise or other taxes on beverage alcohol
                products.





**Currency
      and interest rate fluctuations and geopolitical uncertainty could impact our
      business**




We
      conduct some of our business in foreign currencies.  We previously owned
      and operated a winery in Argentina and currently own a majority interest in
      a
      sales and marketing business in Australia, which formerly exported Australian
      sourced wines.  As part of our plans to acquire other businesses we may
      expand our operations to other countries, operate those businesses in
      foreign currencies, and export goods from the United States of
      America.   While our current foreign exchange exposure is immaterial,
      we expect the volume of international transactions to increase, which may
      increase our exposure to future exchange rate fluctuations. There is a risk
      that
      a shift in certain foreign exchange rates or the imposition of unforeseen and
      adverse political instability and/or trade regulations could adversely impact
      our costs of in the future.




**RISKS
      RELATED TO OUR COMMON STOCK**




**Our
      common stock is subject to the “penny stock” rules of the sec and the trading
      market in our securities is limited, which makes transactions in our common
      stock cumbersome and may reduce the value of an investment in our stock.**




The
      Securities and Exchange Commission has adopted Rule 3a51-1 which establishes
      the
      definition of a “penny stock,” for the purposes relevant to us, as any equity
      security that has a market price of less than $5.00 per share or with an
      exercise price of less than $5.00 per share, subject to certain exceptions.
      For
      any transaction involving a penny stock, unless exempt, Rule 15g-9 requires:




-
      that a
      broker or dealer approve a person’s account for transactions in penny stocks;
      and




-
      the
      broker or dealer receive from the investor a written agreement to the
      transaction, setting forth the identity and quantity of the penny stock to
      be
      purchased.




In
      order
      to approve a person’s account for transactions in penny stocks, the broker or
      dealer must:




-
      obtain
      financial information and investment experience objectives of the person; and




-
      make a
      reasonable determination that the transactions in penny stocks are suitable
      for
      that person and the person has sufficient knowledge and experience in financial
      matters to be capable of evaluating the risks of transactions in penny stocks.




The
      broker or dealer must also deliver, prior to any transaction in a penny stock,
      a
      disclosure schedule prescribed by the SEC relating to the penny stock market,
      which, in highlight form:




-
      sets
      forth the basis on which the broker or dealer made the suitability
      determination; and




-
      that
      the broker or dealer received a signed, written agreement from the investor
      prior to the transaction.




Generally,
      brokers may be less willing to execute transactions in securities subject to
      the
“penny stock” rules. This may make it more difficult for investors to dispose of
      our common stock and cause a decline in the market value of our stock.




22


Disclosure
      also has to be made about the risks of investing in penny stocks in both public
      offerings and in secondary trading and about the commissions payable to both
      the
      broker-dealer and the registered representative, current quotations for the
      securities and the rights and remedies available to an investor in cases of
      fraud in penny stock transactions. Finally, monthly statements have to be sent
      disclosing recent price information for the penny stock held in the account
      and
      information on the limited market in penny stocks.





**ITEM
      7. FINANCIAL STATEMENTS**





All
      financial information required by this Item is attached hereto at the end of
      this report.




**ITEM
      8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE.**




Not
      applicable.





**ITEM
      8A. CONTROLS AND PROCEDURES**




(a)
      EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. New
      senior management hired since March 7, 2007 has identified material weakness
      in
      our disclosure controls and procedures and internal control over financial
      reporting. We plan to investigate further and to apply compensating procedures
      and processes as necessary to ensure the reliability of our financial reporting
      and are evaluating and intend to adopt measures designed to remediate any
      weaknesses. 
 New
        management is also conducting an evaluation of our corporate governance and
        internal controls in an effort to improve the quality and transparency of
        our
        corporate governance, internal controls, and financial reporting. Such
        evaluation may take many months to conclude and our ability to implement
        any
        improvements in these areas will be limited by our human and financial
        resources.
 
 The
        Company controls and procedures are inadequate to ensure that information
        required to be disclosed in reports filed under the Securities Exchange Act
        of
        1934, as amended, is recorded, processed, summarized and reported within
        the
        specified time periods. Disclosure controls are designed to reasonably assure
        that such information is accumulated and communicated to our management,
        including the Chief Executive Officer, as appropriate to allow timely decisions
        regarding required disclosure. As of April 2007, new management began an
        assessment of the effectiveness of the design and operation of the Company’s
        disclosure controls. Based on an initial assessment that has not been completed
        yet, management has determined that the Company’s disclosure controls as of
        December 31, 2003, December 31, 2004, December 31, 2005, and December 31,
        2006,
        were ineffective because of, but not limited to, the material weaknesses
        discussed below.
 
 A
        material weakness is a significant deficiency (within the meaning of Public
        Company Accounting Oversight Board Auditing Standard No. 2), or combination
        of
        significant deficiencies, that results in there being a more than remote
        likelihood that a material misstatement of the annual or interim financial
        statements will not be prevented or detected.
 
 Material
        weakness has been identified during the audit of our December 31, 2006 financial
        statements relating to the December 31, 2003, December 31, 2004, December
        31,
        2005, and December 31, 2006 financial statements. Since 2003 there has been
        a
        lack of personnel with sufficient knowledge of US generally accepted accounting
        principles and SEC reporting requirements to ensure proper and timely evaluation
        of the Company’s activities and transactions. There has also been inadequate
        knowledge of the application of certain technical interpretations of certain
        generally accepted accounting principles. The Company has not retained outside
        experts to review its disclosure controls and procedures or its internal
        controls and consequently, no reports or recommendations regarding these
        controls were requested or prepared.
 
 To
        mitigate this weakness, the Company engaged a consultant to assist with the
        preparation of the financial restatements of prior years and other accounting
        issues. This consultant was not paid on a timely basis and subsequent to
        the
        bankruptcy filing has refused to cooperate with new management or deliver
        working papers and accounting work completed during 2006. Since March of
        2007,
        management terminated several of our accounting staff and hired 2 new
        individuals to assist with the preparation of the financial statements, SEC
        reports, US Trustee reports, and other accounting issues.
  In
          conducting our assessment of internal control over financial reporting,
          we have
          also identified a lack of segregation of duties to be a potential material
          weakness in internal controls. Lack of segregation of duties is inherent
          to our
          company due to the small number of employees.
 In
        connection with the preparation of our Annual Report on Form 10-KSB for fiscal
        2006, management has identified material weakness in the operations of the
        Company’s internal control. The material weakness relate to, among other things,
        the completeness of the review and inadequate consideration in the application
        of many technical interpretations of generally accepted accounting principles
        as
        evidenced by adjustments in several areas.
 
 As
        a
        result of this material weakness, new management has concluded that our
        disclosure controls and procedures were not effective as of December 30,
        2006.
 
 Our
        management will continue our efforts to remediate this material weakness
        through
        ongoing process improvements and the implementation of enhanced policies,
        engaging third-party financial and financial system consultants, and improving
        standards. Accordingly, the material weaknesses may not have all been identified
        and are not yet remediated. No material weaknesses will be considered remediated
        until the remedial procedures have operated for an appropriate period, have
        been
        tested, and management has concluded that they are operating effectively.
        We
        cannot be certain that any measures we take will ensure that we implement
        and
        maintain adequate controls over our financial reporting processes and that
        we
        will remediate the material weakness. Any failure to implement required new
        or
        improved controls or to remediate the material weakness, or difficulties
        encountered in their implementation, could prevent us from accurately reporting
        our financial results, result in material misstatements in our financial
        statements or cause us to fail to meet our reporting obligations. In addition,
        we cannot assure you that we will not in the future identify further material
        weaknesses in our internal control over financial reporting that we have
        not
        discovered to date, which may impact the reliability of our financial reporting
        and financial statements. Our ability to implement any improvements in these
        areas will be limited by our human and financial resources.




(b)
      CHANGES IN INTERNAL CONTROLS. There were no changes in internal controls over
      financial reporting that occurred during the period covered by this report
      that
      has materially affected, or is likely to materially effect, the Company’s
      internal control over financial reporting.





**ITEM
      8B. OTHER INFORMATION**




Not
      applicable.





**PART
      III.**





**ITEM
      9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
      WITH
      SECTION 16(a) OF THE EXCHANGE ACT.**




The
      following table sets forth the names and ages of our executive officers,
      directors, promoters, and control persons as of April 13, 2007. There are no
      family relationships among our executive officers and directors. Also provided
      herein are brief descriptions of the business experience of each executive
      officer and director during the last five years and an indication of
      directorships held by each individual in other companies subject to the
      reporting requirements under the federal securities laws.




**Name**
            
            **Age**
            
            **Position**A.
                John A. Bryan, Jr.
            
            50
            
            Chief
                Executive Office and Chief Restructuring OfficerJoel
                A. Shapiro
            
            35
            
            President
                and DirectorAnthony
                J. A. Bryan
            
            82
            
            Non-Executive
                Chairman, DirectorMichael
                L. Jeub
            
            62
            
            Director





***A.
      JOHN A. BRYAN, JR.*** , ***Chief Executive Officer***  ***and
      Chief Restructuring Officer*** .
      A. John
      A. Bryan Jr. was appointed as our Chief Executive Officer and Chief
      Restructuring Officer on March 7, 2007. A.
      John
      A. Bryan, Jr. is also the CEO or The Watley Group, LLC, a California based
      consulting firm specializing in Capter 11 reorganizations, mergers and
      acquisitions, and management consulting. Mr. Bryan was formerly the CEO of
      Cetalon Corporation, a health and nutrition company operating as a licensee
      of
      Sears Roebuck that filed for Chapter 11 in January of 2003. From 1987 to the
      present, Mr. Bryan has also served as the Chief Executive Officer and Senior
      Managing Director of Investment Banking of Watley and its predecessor, Watley
      Investments Limited. In that capacity, from 2000 to the present, Mr. Bryan
      worked directly on the restructuring of Claydan Enterprises, the predecessor
      company of Cetalon Corporation and he was involved in plan of reorganization
      of
      Seracare, Inc. He earned a Bachelor of Arts degree in Economics from the
      University of Texas and an MBA from the University of Pittsburgh.




23


***JOEL***  ***A.***  ***SHAPIRO***  ***,
      President*** . Joel
      Shapiro is our Chief Executive Officer, a position he has held since August
      1,
      2003, and our President, a position he has held since September 1, 2005. Mr.
      Shapiro has also been a member of the Board of Directors since August 1, 2002.
      Mr. Shapiro has been with the Company since October 2002. Prior to joining
      us,
      Mr. Shapiro was President of JS Capital LLC from 2000-2002, a finance boutique
      that specialized in mergers and acquisitions and public corporate finance,
      and
      which is no longer an active company. From 1992 to 2000, Mr. Shapiro worked
      as a
      trader at the investment banking firm of M.H. Meyerson & Company. Mr.
      Shapiro received his Bachelors of Science degree from Rutgers University and
      his
      Masters Degree in Business Administration from Rutgers University Graduate
      School of Business.




***ANTHONY
      J. A. BRYAN, Non-Executive Chairman of the Board*** . Mr.
      Bryan currently serves as our non-executive Chairman of the Board, a position
      that he has held since November 4, 2004. Mr. Bryan also serves as a member
      of
      our compensation committee and our audit committee. Mr. Bryan first joined
      the
      Company in November 2003 as a Director. He also serves as non-executive
      Vice-Chairman of the Board for Astrata Group Incorporated, a publicly traded
      company in the telematics and geomatics sectors of the GPS industry, which
      position he has held since June 2005, having initially served as its Chairman
      of
      the Board since January 2005. Mr. Bryan is the former Chairman and CEO of
      Copperweld Corporation, a bimetallic wire and steel tubing company, and the
      former CEO of Cameron Iron Works, a company in the oil service business. He
      has
      also served on the Boards of Directors of Federal Express Corporation, between
      1987 and 1996; Chrysler Corporation (now, DaimlerChrysler Corporation), between
      1975 and 1991); The PNC Financial Services Group, Inc., between 1978 and 1989;
      ITT Corporation; Koppers Inc.; Hamilton Oil Company Ltd.; First City National
      Bank of Houston; Imetal; and as Chairman of the Executive Committee of Hospital
      Corporation International (formerly the international division of Hospital
      Corporation of America), between 1991 and 1992. Mr. Bryan received his Master
      Degree in Business Administration from the Harvard Business School.




***MICHAEL
      L. JEUB, Director, and Chairman of the Audit Committee*** .
      Michael L. Jeub is one of our directors and has served in this capacity since
      July, 2004. Mr. Jueb also serves as a member of our compensation committee
      and
      our audit committee. Mr. Jeub is currently a Partner with the San Diego office
      of Tatum Partners, a national firm of chief financial officers and chief
      information officers. Mr. Jeub has been on assignment as Chief Financial Officer
      for Road Runner Sports from January 2005 to the present. From June 2002 to
      October 2003, Mr. Jeub served as Chief Financial Officer and Vice President
      of
      Finance for The Immune Response Corporation, a biotech company co-founded by
      Jonas Salk. Prior to joining Tatum Partners, Mr. Jeub was Senior Vice-President
      and CFO of Jenny Craig International, a $350 million NYSE company for five
      years. Previously, Mr. Jeub was Senior Vice-President and Chief Financial
      Officer of National Health Laboratories, a NYSE company, at which he was the
      financial liaison with the controlling investor. Mr. Jeub also served first
      as
      Chief Financial Officer and then as President of Medical Imaging Centers of
      America, a publicly held chain of freestanding imaging centers and hospital
      leased imaging centers. Mr. Jeub spent 18 years with International Clinical
      Laboratories, a publicly held national chain of medical testing facilities.
      Mr.
      Jeub began his career at ICL as regional controller, was promoted to Chief
      Financial Officer during the bulk of his tenure and was President-ICL East
      for
      the last two years. Mr. Jeub was responsible for SEC filings and analyst
      presentations at ICL. Mr. Jeub holds a Bachelor of Science in Accounting from
      California State Polytechnic University-Pomona. Upon graduation, Mr. Jeub joined
      Ernst & Young LLP where he earned his CPA Certificate (currently
      inactive).





Compensation
      Committee





Our
      Compensation Committee is composed of Michael Jeub and Anthony J.A. Bryan. The
      Compensation Committee reviews and approves our salary and benefits policies,
      including compensation of executive officers.




**Audit
      Committee and Financial Expert**




Our
      Audit
      Committee is composed of Michael Jeub and Anthony J.A. Bryan. The Audit
      Committee assists our Board of Directors in fulfilling their oversight
      responsibilities with respect to:




·
            Quarterly
                and annual consolidated financial statements and financial information
                filed with the Securities and Exchange Commission,·
            System
                of internal controls,·
            Financial
                accounting principles and policies,·
            Internal
                and external audit processes, and·
            Regulatory
                compliance programs.




The
      committee meets periodically with management to consider the adequacy of our
      internal controls and financial reporting process. It also discusses these
      matters with our independent auditors and with appropriate financial personnel
      employed by us. The committee reviews our financial statements and discusses
      them with management and our independent auditors before those financial
      statements are filed with the Securities and Exchange Commission.




The
      committee has the sole authority to retain and dismiss our independent auditors
      and periodically reviews their performance and independence from management.
      The
      independent auditors have unrestricted access and report directly to the
      committee.




24




**Audit
      Committee Financial Expert**




The
      Board
      of Directors has determined and Mr. Jeub has agreed to serve as the Audit
      Committee's financial expert. We believe that Mr. Jeub is independent, as that
      term is used in Item 7(d)(3)(iv) of Schedule 14A under the Securities and
      Exchange Act. Because we are not a listed issuer, the members of the Audit
      Committee are not subject to the independence requirements of any national
      securities exchange or association. Notwithstanding, we believe that all of
      our
      Audit Committee members satisfy the independence requirements of the Nasdaq
      Stock Market and the American Stock Exchange.




**Compliance
      with Section 16(a) of the Exchange Act**




Section
      16(a) of the Exchange Act requires our officers, directors and persons who
      own
      more than 10% of any class of our securities registered under Section 12(g)
      of
      the Exchange Act to file reports of ownership and changes in ownership with
      the
      SEC. Officers, directors and greater than 10% stockholders are required by
      SEC
      regulation to furnish us with copies of all Section 16(a) forms they
      file.




Based
      solely on our review of copies of such reports, we believe that there was
      compliance with all filing requirements of Section 16(a) applicable to our
      officers, directors and 10% stockholders during fiscal 2006 .




**Code
      of Ethics**




On
      May 2,
      2004, we adopted a code of ethics that applies to its Chief Executive Officer,
      Principal Financial and Accounting Officer and Controller. A copy of the
      Company’s code of ethics is filed as Exhibit 14.1 to the Company’s Annual Report
      on Form 10-KSB filed on May 11, 2004. Upon request, we will provide to any
      person without charge a copy of our Code of Ethics. Any such request should
      be
      made to Attn: A. John A. Bryan Jr. at the Company’s address.





**ITEM
      10. EXECUTIVE COMPENSATION.**





**Executive
      Officers**




The
      following table sets forth certain summary information for the fiscal years
      ended December 31, 2006 and 2005 regarding compensation awarded to, earned
      by,
      or paid to our Chief Executive Officer and other Executive Officers. While
      the
      Company has not adopted, nor have the shareholders of the Company approved,
      an
      employee stock option program; the Company does provide for equity-based
      compensation in the forms of warrants and grants of restricted stock. We have
      included this information in the following tables.




Name
                and Principal Position
            
            Year
            
            Salary
                ($) (1)
            
            Bonus
                ($)
            
            Stock
                Awards ($)
            
            Option
                Awards ($)
            
            Non-Equity
                Incentive Plan Compensation ($)
            
            Change
                in Pension Value and Non-Qualified Deferred Compensation Earnings
                ($)
            
            All
                Other Compensation ($)
            
            Total
                ($)Joel
                A. Shapiro(1)
            
            
            2006
            
            
            275,000
            
            
            0
            
            
            9,689,625
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0President
                and Director
            
            
            2005
            
            
            130,000
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0Lynn
                K. Fetterman (2)
            
            
            2006Chief
                Operating Officer
            
            
            2005
            
            $
            44,315
            
            
            —
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            20,246and
                Chief Financial Officer







(1)
            On
                September 1, 2005, Joel Shapiro was appointed President, replacing
                Jon
                Sebastiani, who had held the position on an interim basis since June
                of
                2005. On March 16, 2006, we issued 1,291,950 shares to Mr. Shapiro,
                valued
                at $9,689,625. Mr. Shapiro resigned as CEO of the Company on March
                7,
                2007.  (2)
            On
                November 4, 2005, Lynn Fetterman was appointed as Chief Financial
                Officer
                and Chief Operating Officer. The $20,246 paid by the Company in 2005
                was
                fringe benefits associated with Mr. Fetterman’s relocation. Mr. Fetterman
                resigned as the Company’s Chief Financial Officer on August 25, 2006.


25




**Outstanding
      Equity Awards at Fiscal Year-End Table.**




The
      following table provides information related to options granted to our named
      executive officers during the fiscal year ended December 31, 2006.




Option
                Awards
            
            Stock
                AwardsName
            
            Number
                of Securities Underlying Unexercised Options (#) Exercisable
            
            Number
                of Securities Underlying Unexercised Options (#) Unexercisable
            
            Equity
                Incentive Plan Awards: Number of Securities Underlying Unexercised
                Unearned Options (#)
            
            Option
                Exercise Price ($)
            
            Option
                Expiration Date
            
            Number
                of Shares or Units of Stock That Have Not Vested (#)
            
            Market
                Value of Shares or Units of Stock That Have Not Vested ($)
            
            Equity
                Incentive Plan Awards: Number of Unearned Shares, Units or Other
                Rights
                That Have Not Vested (#)
            
            Equity
                Incentive Plan Awards: Market or Payout Value of Unearned Shares,
                Units or
                Other Rights That Have Not Vested ($)Joel
                A. Shapiro
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Lynn
                K. Fetterman
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -




**Director
      Compensation**




The
      following table sets forth with respect to the named director, compensation
      information inclusive of equity awards and payments made in the year end
      December 31, 2006.






Name
            
            Fees
                Earned or Paid in Cash ($)
            
            Stock
                Awards ($)
            
            Option
                Awards ($)
            
            Non-Equity
                Incentive Plan Compensation ($)
            
            Change
                in Pension Value and Nonqualified Deferred Compensation Earnings
            
            All
                Other Compensation ($)
            
            Total
                ($)Joel
                A. Shapiro
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Anthony
                J.A. Bryan
            
            
            -
            
            $
            2,672,632
            (1)
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            2,672,632Michael
                L. Jeub
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -





(1)
      In
      December 2006 we issued 352,350 shares of common stock at a price of $7.50
      per
      share to Mr. Bryan for as compensation.




Our
      directors who are employees do not receive any compensation from us for services
      rendered as directors.




26





Each
      of
      our non-employee directors receives $25,000 a year for serving on the Board
      of
      Directors and an additional $1,000 per board or committee meeting. Additionally,
      Mr. Jeub receives $10,000 a year for his service as Chairman of the Audit
      Committee. There are currently two standing Board committees, an audit committee
      and a compensation committee. Cash fees to be paid to directors have not been
      paid as of December 20, 2005 and are currently accruing. In addition, each
      non-employee director is entitled to reimbursement of travel
      expenses.




Non-employee
      directors may in the future be granted incentive-based stock
      compensation.




**Employment
      Agreements and Change of Control Arrangements**





The
      Company does not have an employment agreement in place with any
      of
      its other executive officers.




**Stock
      Option Plans**




The
      Company currently offers no stock option or incentive plans.





**ITEM
      11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS.**




As
      used
      in this section, the term beneficial ownership with respect to a security is
      defined by Rule 13d-3 under the Securities Act of 1934, as amended, as
      consisting of sole or shared voting power (including the power to vote or direct
      the vote) and/or sole or shared investment power (including the power to dispose
      of or direct the disposition of) with respect to the security through any
      contract, arrangement, understanding, relationship, or otherwise, subject to
      community property laws where applicable. Except as otherwise indicated, the
      address of each beneficial owner is c/o our business address 25200 Arnold Drive,
      Sonoma, CA 95476.




The
      following table sets forth, as of April 13, 2007, the beneficial ownership
      of
      our common stock by each executive officer and director, by each person known
      by
      us to beneficially own more than 5% of our common stock and by the executive
      officers and directors as a group. Except as otherwise indicated, all shares
      are
      owned directly and the percentage shown is based on 8,619,389 shares of common
      stock issued and outstanding as of the date of this SEC filing on Form
      10-KSB.





**SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT**


**Number
      of Shares (adjusted for 2/28/06 reverse stock split)**





**Number
                of**
            
            **Number
                of**
            
            **Total**
            
            **Percent
                of****Shares**
            
            **Shares**
            
            **Shares**
            
            **Shares****Beneficially**
            
            **Underlying**
            
            **Beneficially**
            
            **Beneficially****Name
                and Address of Beneficial Owner(1)**
            
            **Owned**
            
            **Options**
            
            **Owned**
            
            **Owned(2)****5%
                Shareholders:**The
                Watley Group LLC
            
            
            469,800
            
            
            
            
            
            469,800
            
            
            5.45
            %1801
                Century Park East, suite 1830Los
                Angeles, CA 90067Laurus
                Master Fund, Ltd.
            
            
            360,188
            
            
            —
            
            
            360,188
            
            
            4.99
            %825
                Third Avenue, 14th FloorNew
                York, NY 10022Wynthrop
                Barrington Inc.
            
            
            531,667
            
            
            —
            
            
            531,667
            
            
            6.17
            %1800
                E Sahara, Suite 107Santa
                Barbara, CA 93015**Directors
                and Named Executive Officers:**A.
                John A. Bryan
            
            
            469,800
            (3)
            
            —
            
            
            469,800
            
            
            5.45
            %Joel
                A. Shapiro
            
            
            1,336,121
            
            
            —
            
            
            1,336,121
            
            
            15.50
            %Anthony
                J. A. Bryan
            
            
            356,351
            
            
            —
            
            
            356,351
            
            
            4.13
            %Michael
                L. Jueb
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            %All
                directors and executive officers as a group
                (4 persons)
            
            
            2,162,272
            
            
            —
            
            
            2,162,272
            
            
            25.09
            %




(1)
            Based
                on Schedule 13G/A filed with the SEC on February 14, 2007 by Laurus
                Master
                Fund, Ltd. As of December 31, 2006, Laurus Master Fund, Ltd. (the
                "Fund")
                held (i) a Secured Convertible Term Note, in the aggregate initial
                principal amount of $34,500,000, which is convertible into Shares
                at a
                conversion rate of $3.50 per Share, subject to certain adjustments
                (the
                "Term Note"), (ii) warrants to acquire 166,675 Shares at an exercise
                price
                of $46.50 per Share, subject to certain adjustments (the "2005 Warrants"),
                (iii) warrants to acquire 650,000 Shares at an exercise price of
                $3.50 per
                Share, subject to certain adjustments (the "March Warrants"), (iv)
                warrants to acquire 350,000 Shares at an exercise price of $3.50
                per
                Share, subject to certain adjustments (the "September Warrants",
                and
                together with the 2005 Warrants and the March Warrants, the "Warrants"),
                and (v) 349,680 Shares. The Term Note and each of the Warrants contain
                an
                issuance limitation prohibiting the Fund from converting or exercising
                those securities to the extent that such conversion or exercise would
                result in beneficial ownership by the Fund of more than 4.99% of
                the
                Shares then issued and outstanding (the "4.99% Issuance Limitation").
                The
                4.99% Issuance Limitation may be waived by the Fund upon at least
                75 days
                prior notice to the Company and shall automatically become null and
                void
                following notice to the Issuer of the occurrence and/or continuance
                of an
                event of default (as defined in and pursuant to the terms of the
                applicable instrument). The Fund is managed by Laurus Capital Management,
                LLC. Eugene Grin and David Grin, through other entities, are the
                controlling principals of Laurus Capital Management, LLC and share
                sole
                voting and investment power over the securities owned by the Fund.


27





(2)
            Based
                on Schedule 13G/A filed with the SEC on January 30, 2007 by Gryphon
                Master
                Fund LP. Includes warrants to purchase 47,037 shares of the Issuer’s
                Common Stock, and (ii) 689,700 shares of the Issuer’s Common Stock
                underlying the Issuer’s 7.5% Senior Secured Convertible Note Due 2006
                (which shares, pursuant to Rule 13d-3(d)(1)(i)(D) promulgated under
                the
                Securities Exchange Act of 1934, as amended, are deemed to be outstanding
                for the purpose of computing the percentage of outstanding shares
                of the
                Issuer’s Common Stock owned by the Reporting Person), and (iii) 58,670
                shares of the Issuer’s Common Stock. The shares of the Issuer’s Common
                Stock reported are owned directly by Gryphon Master Fund. The General
                Partner of Master Fund is Gryphon Partners, which may be deemed to
                be the
                beneficial owner of all such shares of Common Stock owned by Gryphon
                Master Fund. The General Partner of Gryphon Partners is GMP, which
                may be
                deemed to be the beneficial owner of all such shares of Common Stock
                owned
                by Master Fund. The General Partner of GMP is Gryphon Advisors, which
                may
                be deemed to be the beneficial owner of all such shares of Common
                Stock
                owned by Master Fund. Lyon controls Gryphon Advisors and may be deemed
                to
                be the beneficial owner of all such shares of Common Stock owned
                by Master
                Fund. Each of Gryphon Partners, GMP, Gryphon Advisors and Lyon disclaims
                any beneficial ownership of any such shares of Common Stock owned
                by
                Gryphon Master Fund.





(3)
            Represents
                shares issued to the Watley Group LLC, of which Mr. Bryan is the
                President
                and Chief Executive Officer.





**Changes
      in Control**




We
      are
      not aware of any arrangements which may result in a change in control of the
      Company.




**ITEM
      12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.**




On
      September 24, 2004, Gryphon Master Fund, L.P., Warren W. Garden, P.C., and
      Joel
      Shapiro, our former Chief Executive Officer entered into a Stock Pledge
      Agreement, pursuant to which Mr. Shapiro pledged 3,000,000 of his personally
      owned shares of our common stock. The agreement secures the payment of all
      of
      our obligations existing under the Debt Restructuring Agreement and the
      Promissory Note dated September 24, 2004, issued by us to Gryphon. These shares
      were transferred to Gryphon and are being registered herein. On September 24,
      2005, the closing sales price of our common stock as reported by OTC Bulletin
      Board was $0.88 per share. Based on that price, the shares were valued at
      $2,640,000.




Pursuant
      to a Pledge Agreement dated September 30, 2004 between Joel Shapiro, our former
      Chief Executive Officer and Longview Fund, LP, Longview Equity Fund, LP and
      Longview International Equity Fund, LP, Mr. Shapiro pledged 250,000 of his
      personally owned shares of our common stock as security for the performance
      of
      our obligations under the Note Purchase Agreement, the notes granted pursuant
      thereto, and the Amended Agreement with Longview. Upon foreclosure under the
      Pledge Agreement, the pledged shares shall be deemed registrable securities,
      and
      such pledged shares shall be registered with the Securities and Exchange
      Commission in accordance with the terms, conditions and provisions of the Note
      Purchase Agreement. On September 30, 2004, the closing sales price of our common
      stock as reported by OTC Bulletin Board was $0.90 per share. Based on that
      price, the shares were valued at $225,000.





In
      the
      three and nine months-ended September 30, 2005, Joel Shapiro, our President
      and
      Director transferred 43,667 and 47,667, respectively, of his personal shares
      to
      entities and individuals as an incentive to lend money to the Company and
      compensation. The value of the shares of common stock transferred by Mr. Shapiro
      was $1,518,000 and $1,778,000 for the three and nine months-ended September
      30,
      2005, respectively. The value was based upon the fair value of the shares at
      the
      time of their transfer.




28





**ITEM
      13. EXHIBITS**




**Exhibits**




Exhibit
                Number
            
            Description2.1
            
            Share
                Exchange Agreement between Tech-Net Communications, Inc. and the
                stockholders of Knightsbridge Fine Wines, Inc., dated as of July
                31, 2003
                (Incorporated by reference to Exhibit 1.1 to the Company’s Current Report
                on Form 8-K filed on August 1, 2003).2.2
            
            Form
                of Termination, Settlement and Release Agreement between Raúl Enrique
                Granillo Ocampo, Nelida Barros Reyes de Granillo Ocampo, Bodegas
                y Viñedos
                Anguinan S.A. and the Company, KFWBA Acquisition Corp., Raul Marozof,
                dated as of November 30, 2004 (Incorporated by reference to Exhibit
                2.1 to
                the Company’s Current Report on Form 8-K filed on December 20,
                2004).3.1
            
            Articles
                of Incorporation of Tech-Net Communications, Inc. (Incorporated by
                reference to Exhibit 3.1 to the Company’s Registration Statement on Form
                SB-2 (File No. 333-90456)).3.2
            
            Certificate
                of Amendment to the Articles of Incorporation of the Company.
                (Incorporated by reference to Exhibit 3.2 to the Company’s Annual Report
                on Form 10-K filed on May 11, 2004).3.3
            
            Certificate
                of Amendment to the Articles of Incorporation of the Company.
                (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report
                on Form 8-K filed on February 22, 2005).3.4
            
            Amended
                Bylaws of the Company (Incorporated by reference to Exhibit 3.2 to
                the
                Company’s Registration Statement on Form SB-2 (File No.
                333-90456)).10.1
            
            Form
                of Purchase Agreement by and between the Company and Gryphon Master
                Fund,
                L.P., dated as of October 16, 2003 (Incorporated by reference to
                Exhibit
                10.1 to the Company’s Current Report on Form 8-K filed on October 17,
                2003).10.2
            
            Form
                of Convertible Note issued by the Company to Gryphon Master Fund,
                L.P.,
                dated as of October 16, 2003 (Incorporated by reference to Exhibit
                10.2 to
                the Company’s Current Report on Form 8-K filed on October 17,
                2003).10.3
            
            Form
                of Registration Rights Agreement by and between the Company and Gryphon
                Master Fund, L.P., dated as of October 16, 2003 (Incorporated by
                reference
                to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on
                October 17, 2003).10.4
            
            Form
                of Common Stock Purchase Warrant issued by the Company to Gryphon
                Master
                Fund, L.P., dated as of October 16, 2003 (Incorporated by reference
                to
                Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on October
                17, 2003).10.5
            
            Stock
                Purchase Agreement among Raul Granillo Ocampo, Nelida Barros Reyes
                and
                KFWBA Acquisition Corp., dated as of November 5, 2003 (Incorporated
                by
                reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed
                on November 10, 2003).10.6
            
            Form
                of Purchase Agreement by and between the Company and Gryphon Master
                Fund,
                L.P., dated as of December 22, 2003 (Incorporated by reference to
                Exhibit
                10.1 to the Company’s Current Report on Form 8-K filed on December 22,
                2003).10.7
            
            Form
                of Convertible Note issued by the Company to Gryphon Master Fund,
                L.P.,
                dated as of December 22, 2003 (Incorporated by reference to Exhibit
                10.2
                to the Company’s Current Report on Form 8-K filed on December 22,
                2003).10.8
            
            Form
                of Common Stock Purchase Warrant issued by the Company to Gryphon
                Master
                Fund, L.P., dated as of December 22, 2003 (Incorporated by reference
                to
                Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on December
                22, 2003).10.9
            
            Form
                of Registration Rights Agreement by and between the Company and Gryphon
                Master Fund, L.P., dated as of December 22, 2003 (Incorporated by
                reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K
                filed on December 22, 2003).10.10
            
            Form
                of Security Agreement by and between the Company and Gryphon Master
                Fund,
                L.P., dated as of December 22, 2003 (Incorporated by reference to
                Exhibit
                10.5 to the Company’s Current Report on Form 8-K filed on December 22,
                2003).10.11
            
            Form
                of Capital Stock Contribution Agreement by and among Kirkland Ranch,
                LLC,
                Kirkland Knightsbridge, LLC, Knightsbridge Fine Wines, Inc and Mr.
                Larry
                Kirkland, dated as of April 21, 2004 (Incorporated by reference to
                Exhibit
                10.1 to the Company’s Current Report on Form 8-K filed on May 3,
                2004).10.12
            
            Form
                of Guaranty issued by the Company in favor of The Travelers Insurance
                Company, dated as of April 21, 2004 (Incorporated by reference to
                Exhibit
                10.2 to the Company’s Current Report on Form 8-K filed on May 3,
                2004).10.13
            
            Form
                of Promissory Note issued by Larry Kirkland, Kirkland Knightsbridge,
                LLC
                and Kirkland Cattle Co. to The Travelers Insurance Company, dated
                April
                21, 2004 (Incorporated by reference to Exhibit 10.3 to the Company’s
                Current Report on Form 8-K filed on May 3, 2004).10.14
            
            Form
                of Trust Deed, Security Agreement, Assignment of Rents and Fixture
                Filing
                by and among Larry Kirkland, Kirkland Knightsbridge, LLC, Kirkland
                Cattle
                Co., First American Title Insurance Company and The Travelers Insurance
                Company, dated April 21, 2004 (Incorporated by reference to Exhibit
                10.4
                to the Company’s Current Report on Form 8-K filed on May 3,
                2004).10.15
            
            Form
                of Securities Exchange Agreement by and between the Company and Gryphon
                Master Fund, L.P., dated as of April 21, 2004 (Incorporated by reference
                to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on May
                3, 2004).10.16
            
            Form
                of Convertible Note issued by the Company to Gryphon Master Fund,
                L.P.,
                dated April 21, 2004 (Incorporated by reference to Exhibit 10.6 to
                the
                Company’s Current Report on Form 8-K filed on May 3,
                2004).


29





10.17
            
            Form
                of Common Stock Purchase Warrant issued by the Company to Gryphon
                Master
                Fund, L.P., dated April 21, 2004 (Incorporated by reference to Exhibit
                10.7 to the Company’s Current Report on Form 8-K filed on May 3,
                2004).10.18
            
            Form
                of Common Stock Purchase Warrant (Green Shoe Warrant) issued by the
                Company to Gryphon Master Fund, L.P., dated April 21, 2004 (Incorporated
                by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K
                filed on May 3, 2004).10.19
            
            Form
                of Registration Rights Agreement by and between the Company and Gryphon
                Master Fund, L.P., dated as of April 21, 2004 (Incorporated by reference
                to Exhibit 10.9 to the Company’s Current Report on Form 8-K filed on May
                3, 2004).10.20
            
            Form
                of Amended and Restated Security Agreement by and between the Company
                and
                Gryphon Master Fund, L.P., dated as of April 21, 2004 (Incorporated
                by
                reference to Exhibit 10.10 to the Company’s Current Report on Form 8-K
                filed on May 3, 2004).10.21
            
            Form
                of Amendment Agreement by and between the Company, Longview Fund,
                LP,
                Longview Equity Fund, LP and Longview International Equity Fund,
                LP, dated
                September 30, 2004. (Incorporated by reference to Exhibit 10.1 to
                the
                Company’s Current Report on Form 8-K filed on October 7,
                2004).10.22
            
            Form
                of Pledge Agreement by and between Joel Shapiro, Longview Fund, LP,
                Longview Equity Fund, LP and Longview International Equity Fund,
                LP, dated
                September 30, 2004. (Incorporated by reference to Exhibit 10.1 to
                the
                Company’s Current Report on Form 8-K filed on October 7,
                2004).10.23
            
            Form
                of Debt Restructuring Agreement dated September 24, 2004 by and between
                the Company and Gryphon Master Fund, LP (Incorporated by reference
                to
                Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on
                September 30, 2004).10.24
            
            Form
                of Escrow Agreement dated September 24, 2004 by and between Joel
                Shapiro,
                Gryphon Master Fund, L.P., and Warren W. Garden, P.C. (Incorporated
                by
                reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
                filed on September 30, 2004).10.25
            
            Form
                of Irrevocable Escrow Agent Instructions to Gottbetter & Partners, LLP
                dated September 24, 2004 (Incorporated by reference to Exhibit 10.1
                to the
                Company’s Current Report on Form 8-K filed on September 30,
                2004).10.26
            
            Form
                of Notice of Conversion Price Adjustment to Gryphon Master Fund,
                L.P.
                dated September 24, 2004 (Incorporated by reference to Exhibit 10.1
                to the
                Company’s Current Report on Form 8-K filed on September 30,
                2004).10.27
            
            Form
                of Promissory Note dated September 24, 2004 by and between the Company
                and
                Gryphon Master Fund, LP (Incorporated by reference to Exhibit 10.1
                to the
                Company’s Current Report on Form 8-K filed on September 30,
                2004).10.28
            
            Form
                of Stock Pledge Agreement dated September 24, 2004 between Joel Shapiro,
                Gryphon Master Fund, L.P., and Warren W. Garden, P.C. (Incorporated
                by
                reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
                filed on September 30, 2004).10.29
            
            Sales
                and Marketing Agreement by and between the Company and Kirkland Ranch
                Winery, dated as of June 1, 2003 (Incorporated by reference to Exhibit
                10.2 to the Company’s Registration Statement on Form SB-2/A filed on
                November 2, 2004).10.30
            
            Employment
                Agreement by and between the Company and Jay Essa dated February
                20,
                2003.10.31
            
            Employment
                Agreement by and between the Company and Charles Marin dated February
                20,
                2003.10.32
            
            License
                Agreement by and between the Company, Guy Buffet and The Guy Buffet
                Collection, dated as of July 9, 2003 (Incorporated by reference to
                Exhibit
                10.24 to the Company’s Registration Statement on Form SB-2/A filed on
                November 2, 2004).10.33
            
            License
                Agreement by and between the Company and The Andy Warhol Foundation
                For
                the Visual Arts, Inc., dated as of September 22, 2003 (Incorporated
                by
                reference to Exhibit 10.25 to the Company’s Registration Statement on Form
                SB-2/A filed on November 2, 2004).10.34
            
            Sales
                and Marketing Agreement by and between the Company and Gutsverwaltung
                Niederhausen Schlossbockenheim, dated as of February 1, 2004 (Incorporated
                by reference to Exhibit 10.26 to the Company’s Registration Statement on
                Form SB-2/A filed on November 2, 2004).10.35
            
            Settlement
                Agreement and Release between the Company and Marks Paneth & Shron,
                LLP dated April 30, 2005 (Incorporated by reference to Exhibit 10.1
                to the
                Company’s Current Report on Form 8-K filed on May 20,
                2005).10.36
            
            Promissory
                Note to Marks Paneth & Shron, LLP dated April 30, 2005 (Incorporated
                by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K
                filed on May 20, 2005).10.37
            
            Security
                Agreement between the Company and Marks Paneth & Shron, LLP dated
                April 30, 2005 (Incorporated by reference to Exhibit 10.3 to the
                Company’s
                Current Report on Form 8-K filed on May 20, 2005).10.38
            
            Security
                and Purchase Agreement dated July 7, 2005 by and among Laurus Master
                Fund,
                Ltd., the Company, and 360 Viansa, LLC (Incorporated by reference
                to
                Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 8,
                2005) .10.39
            
            Form
                of Secured Convertible Term Note in connection with the July 2005
                private
                placement with Laurus (Incorporated by reference to Exhibit 10.2
                to the
                Company’s Current Report on Form 8-K filed on July 8,
                2005).10.40
            
            Form
                of Secured Revolving Note in connection with the July 2005 private
                placement with Laurus (Incorporated by reference to Exhibit 10.3
                to the
                Company’s Current Report on Form 8-K filed on July 8,
                2005).10.41
            
            Form
                of Secured Convertible Minimum Borrowing Note in connection with
                the July
                2005 private placement with Laurus (Incorporated by reference to
                Exhibit
                10.4 to the Company’s Current Report on Form 8-K filed on July 8,
                2005).10.42
            
            Funds
                Escrow Agreement by and among the Company, Laurus Master Fund, Ltd.
                and
                Loeb & Loeb LLP dated July 7, 2005 (Incorporated by reference to
                Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on July 8,
                2005).




30




10.43
            
            Form
                of Option in connection with the July 2005 private placement with
                Laurus
                (Incorporated by reference to Exhibit 10.6 to the Company’s Current Report
                on Form 8-K filed on July 8, 2005).10.44
            
            Registration
                Rights Agreement dated July 7, 2005, by and between the Company and
                Laurus
                Master Fund, Ltd (Incorporated by reference to Exhibit 10.7 to the
                Company’s Current Report on Form 8-K filed on July 8,
                2005).10.45
            
            Form
                of Common Stock Purchase Warrant dated July 7, 2005 (Incorporated
                by
                reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K
                filed on July 8, 2005).10.46
            
            Subsidiary
                Guarantee dated July 7, 2005 (Incorporated by reference to Exhibit
                10.9 to
                the Company’s Current Report on Form 8-K filed on July 8,
                2005).10.47
            
            Stock
                Pledge Agreement dated July 7, 2005, among Laurus Master Fund, Ltd.,
                the
                Company, 360 Viansa LLC, KFWBA Acquisition Corporation, Dominion
                Wines,
                Ltd., Knightsbridge Torrique, and Laurus Master Fund, Ltd. (Incorporated
                by reference to Exhibit 10.10 to the Company’s Current Report on Form 8-K
                filed on July 8, 2005).10.48
            
            Lien
                Subordination Agreement between Gryphon Master Fund, L.P., Laurus
                Master
                Fund, Ltd., the Company and 360 Viansa LLC (Incorporated by reference
                to
                Exhibit 10.11 to the Company’s Current Report on Form 8-K filed on July 8,
                2005).10.49
            
            Master
                Security Agreement to Laurus Master Fund, Ltd. (Incorporated by reference
                to Exhibit 10.12 to the Company’s Current Report on Form 8-K filed on July
                8, 2005).10.50
            
            Real
                Estate Sales Contract between Charles Trios, Trustee and the Company
                (Incorporated by reference to Exhibit 10.13 to the Company’s Current
                Report on Form 8-K filed on July 8, 2005).10.51
            
            Secured
                Convertible Term Note for Wynthrop Barrington, Inc (Incorporated
                by
                reference to Exhibit 10.14 to the Company’s Current Report on Form 8-K
                filed on July 8, 2005).10.52
            
            Asset
                Purchase Agreement by and among Viansa Winery, La Fontana di Viansa,
                LLC
                and 360 Viansa LLC, a Nevada limited liability company, dated June
                21,
                2005 (Incorporated by reference to Exhibit 10.15 to the Company’s Current
                Report on Form 8-K filed on July 8, 2005).10.53
            
            Stock
                Purchase Agreement by and among the Company, BMAC Corp., and the
                stockholders of BMAC dated January 13, 2006 (Incorporated by reference
                to
                Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January
                19, 2006).10.54
            
            Form
                of Stock Purchase Agreement by and between the Company and each of
                certain
                stockholders of First Montauk Financial Corp. dated January 13, 2006
                (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report
                on Form 8-K filed on January 19, 2006).10.55
            
            Financial
                Consulting Agreement by and between the Company and 360 Global Financial
                LLC 2 dated November 17, 2005 (Incorporated by reference to Exhibit
                10.2
                to the Company’s Current Report on Form 8-K/A filed on February 10,
                2006).14.1
            
            Code
                of Ethics of the Company (Incorporated by reference to Exhibit 14.1
                to the
                Company’s Annual Report on Form 10-KSB filed on May 11,
                2004).16.1
            
            Letter
                Regarding Change in Certifying Accountant from Lopez, Blevins, Bork
&
                Associates, L.L.P dated May 31, 2005 (Incorporated by reference to
                Exhibit
                16.1 to the Company’s Current Report on Form 8-K filed on May 31,
                2005).21.1
            
            List
                of Subsidiaries (Incorporated by reference to Exhibit 21.1 to the
                Company’s Annual Report on Form 10-KSB filed on May 11,
                2004).31.1+
            
            Certification
                of Chief Executive Officer and Principal Financial and Accounting
                Officer
                Pursuant to Section 302 of the Sarbanes-Oxley Act of
                2002.32.1+
            
            Certification
                of Chief Executive Officer and Principal Financial and Accounting
                Officer
                Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002.




+
      Filed
      herewith.




31




**ITEM
      14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.**




The
      following sets forth fees billed to us by our auditors during the fiscal years
      ended December 31, 2006 and 2005 for: (i) services rendered for the audit of
      our
      annual financial statements and the review of our quarterly financial
      statements, (ii) services by our auditor that are reasonably related to the
      performance of the audit or review of our financial statements and that are
      not
      reported as Audit Fees, (iii) services rendered in connection with tax
      compliance, tax advice and tax planning, and (iv) all other fees for services
      rendered.





**Audit
      Fees**




The
      aggregate fees billed for professional services rendered by our principal
      accountants for the audit of our financial statements, for the reviews of the
      financial statements included in our annual report on Form 10-KSB, and for
      other
      services normally provided in connection with statutory filings are $240,000
      for
      the 10KSB and three 10Q's.


**Tax
        Fees**




NONE




**All
      Other Fees**




NONE




**Audit
      Committee Policies and Procedures**




The
      policy of our Audit Committee is to pre-approve all audit and permissible
      non-audit services to be performed by the Company’s independent auditors during
      the fiscal year.




No
      services related to *Audit-Related
      Fees* , *Tax
      Fees* or *All
      Other Fees* described above, were approved by the Audit Committee.





32




**SIGNATURES**





In
      accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
      this report to be signed on its behalf by the undersigned, thereunto duly
      authorized.




360
                Global Wine CompanyBy:
            */s/ A.
              John A. Bryan, Jr.*A.
                John A. Bryan, Jr.Chief
                Executive Officer, Chief Structuring Officer and Principal Financial
                and Accounting Officer





Date:
                May 18, 2007




In
      accordance with the Exchange Act, this report has been signed below by the
      following persons on behalf of the registrant and in the capacities and on
      the
      dates indicated.




Date:
                    May 18, 2007By:
              */s/
                  Joel A. Shapiro*Joel
                    A. ShapiroPresident
                    and Director
 Date:
                        May 18, 2007By:
                  */s/
                      Anthony J.A. Bryan*Anthony
                          J.A. Bryan,Non-Executive
                          Chairman and Director
 Date:
                            May 18, 2007By:
                      */s/
                            Michael Jeub*Michael
                                JeubDirector
 Date:
                                May 18, 2007
  
  **REPORT
                      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
 
 
 To
                      the
                      Board of Directors and Stockholders of
 360
                      Global Wine Company (Formerly Knightsbridge Fine Wines, Inc.)
 Sonoma,
                      California
 
 We
                      have
                      audited the accompanying consolidated balance sheet of 360
                      Global Wine Company
                      (Formerly Knightsbridge Fine Wines, Inc.) as of December 31,
                      2006 and the
                      related consolidated statements of operations, comprehensive
                      income,
                      stockholders’ equity and cash flows for the year then ended. These financial
                      statements are the responsibility of the Company’s management. Our
                      responsibility is to express an opinion on these financial
                      statements based on
                      our audit. Our responsibility is to express an opinion on these
                      financial
                      statements based on our audit.
 
 We
                      conducted our audit in accordance with the standards of the
                      Public Company
                      Accounting Oversight Board (United States). Those standards
                      require that we plan
                      and perform the audit to obtain reasonable assurance about
                      whether the financial
                      statements are free of material misstatement. An audit includes
                      examining, on a
                      test basis, evidence supporting the amounts and disclosures
                      in the consolidated
                      financial statements. An audit also includes assessing the
                      accounting principles
                      used and significant estimates made by management, as well
                      as evaluating the
                      overall financial statement presentation. We believe that our
                      audit provides a
                      reasonable basis for our opinion.
 
 In
                      our
                      opinion, the consolidated financial statements referred to
                      above present fairly,
                      in all material respects, the consolidated financial position
                      of 360 Global Wine
                      Company (Formerly Knightsbridge Fine Wines, Inc.) as of December
                      31, 2006, and
                      the results of its operations and its cash flows for the year
                      then ended in
                      conformity with accounting principles generally accepted in
                      the United States of
                      America.
 
 The
                      accompanying financial statements have been prepared assuming
                      that the Company
                      will continue as a going concern. As discussed in Note 15 to
                      the financial
                      statements, the Company has suffered significant losses and
                      will require
                      additional capital to develop its business until the Company
                      either (1) achieves
                      a level of revenues adequate to generate sufficient cash flows
                      from operations;
                      or (2) obtains additional financing necessary to support its
                      working capital
                      requirements. In addition, the Company has filed for Chapter
                      11 bankruptcy
                      protection in order to reorganize and work out its debt arrangements.
                      These
                      conditions raise substantial doubt about the Company’s ability to continue as a
                      going concern. Management’s plans in regard to these matters are also described
                      in Note 15. The financial statements do not include any adjustments
                      that might
                      result from the outcome of this uncertainty.
 
 
 The
                      Hall
                      Group, CPAs
 Dallas,
                      Texas
 
 May
                      20,
                      2007
 F-1
 **360
                                GLOBAL WINE COMPANY AND SUBSIDIARIES**Consolidated
                                Balance SheetsAs
                                of December 31, 2006 and 2005____________________________________________________________________
  ASSETS2006
                            
                            2005Current
                                assetsCash
                                and cash equivalents
                            
                            $
                            148,810
                            
                            $
                            129,005Accounts
                                receivable - trade, net
                            
                            
                            970,895
                            
                            
                            688,452Inventories,
                                net
                            
                            
                            15,743,982
                            
                            
                            14,611,672Net
                                assets of discontinued operation
                            
                            
                            -
                            
                            
                            35,196,817Prepaid
                                expenses and other
                            
                            
                            476,909
                            
                            
                            363,439Total
                                current assets
                            
                            
                            17,340,595
                            
                            
                            50,989,385Property,
                                vineyard, plant and equipment, net
                            
                            
                            12,573,084
                            
                            
                            25,679,051Assets
                                held-for-sale
                            
                            
                            11,312,514
                            
                            
                            -Other
                                assets, net
                            
                            
                            -
                            
                            
                            676,242Intangible
                                assets
                            
                            
                            290,348
                            
                            
                            21,270**Total
                                assets**
                            
                            $
                            41,516,541
                            
                            $
                            77,365,948
  The
                        accompanying notes are an integral part of these financial
                        statements.
  F-2
  **360
                                GLOBAL WINE COMPANY AND SUBSIDIARIES**Consolidated
                                Balance SheetsAs
                                of December 31, 2006 and 2005____________________________________________________________________
  LIABILITIES
                                AND STOCKHOLDERS' EQUITY (DEFICIT)2006
                            
                            
                            2005Current
                                LiabilitiesNotes
                                payable in default
                            
                            
                            4,492,500
                            
                            
                            4,687,456Bank
                                overdraft
                            
                            
                            467
                            
                            
                            -Accounts
                                payable - trade
                            
                            
                            6,617,889
                            
                            
                            5,328,536Accrued
                                expenses and other liabilities
                            
                            
                            2,449,382
                            
                            
                            579,356Accrued
                                interest
                            
                            
                            4,965,430
                            
                            
                            2,608,507Short-term
                                notes payable
                            
                            
                            1,633,464
                            
                            
                            1,045,000Current
                                portion of long-term debt
                            
                            
                            -
                            
                            
                            39,639Financial
                                instrument derivatives
                            
                            
                            35,634,682
                            
                            
                            3,516,090Stock
                                value guarantee
                            
                            
                            -
                            
                            
                            10,000,000Current
                                liabilities of discontinued operations
                            
                            
                            -
                            
                            
                            24,091,656Total
                                current liabilities
                            
                            
                            55,793,815
                            
                            
                            51,896,240Long-term
                                debt, less current maturities
                            
                            
                            22,496,344
                            
                            
                            9,617,275**Total
                                liabilities**
                            
                            
                            78,290,159
                            
                            
                            61,513,515**Minority
                                interest in discontinued operations**
                            
                            
                            -
                            
                            
                            8,798,974Shareholders'
                                equity (deficit):Common
                                stock, $.001 par value, 100,000,000 sharesauthorized,
                                8,484,103 and 438,074 shares issuedand
                                outstanding as of December 31, 2006 and 2005,respectively
                            
                            
                            8,484
                            
                            
                            438Additional
                                paid-in capital
                            
                            
                            60,949,323
                            
                            
                            15,658,694Accumulated
                                deficit
                            
                            
                            (97,731,424
                            )
                            
                            (8,605,673
                            )**Total
                                shareholders's equity (deficit)**
                            
                            
                            (36,773,617
                            )
                            
                            7,053,459**Total
                                liabilities and shareholders' equity (deficit)**
                            
                            $
                            41,516,542
                            
                            $
                            77,365,948
  The
                        accompanying notes are an integral part of these financial
                        statements.
 F-3
  **360
                              GLOBAL WINE COMPANY AND SUBSIDIARIES**Consolidated
                              Statements of OperationsFor
                              the Period Ended December 31, 2006 and 2005___________________________________________________________________________________
  2006
                          
                          2005Revenues
                              - continuing operations
                          
                          $
                          17,268,132
                          
                          $
                          10,098,654Cost
                              of goods sold - continuing operations
                          
                          
                          (9,695,739
                          )
                          
                          (6,883,028
                          )Gross
                              profit - continuing operations
                          
                          
                          7,572,393
                          
                          
                          3,215,626Operating
                              expenses - continuing operations:Sales
                              and marketing
                          
                          
                          9,881,330
                          
                          
                          3,857,849General
                              and administrative
                          
                          $
                          24,843,226
                          
                          
                          5,343,089Total
                              operating expenses - continuing operations
                          
                          
                          34,724,556
                          
                          
                          9,200,938Loss
                              from continuing operations before otherincome
                              (expense) items
                          
                          
                          (27,152,163
                          )
                          
                          (5,985,312
                          )Other
                              income (expenses) from continuing operations:Interest
                              expense:Interest
                              expense
                          
                          
                          (9,140,346
                          )
                          
                          (6,871,216
                          )Interest
                              expenses - original issue discount accretion
                          
                          
                          (19,189,846
                          )
                          
                          (9,727,774
                          )Interest
                              expense - financial instrument derivatives
                          
                          
                          (6,245,007
                          )
                          
                          (12,317,289
                          )Total
                              interest expense
                          
                          
                          (34,575,199
                          )
                          
                          (28,916,279
                          )Decrease
                              in the fair market value of financialinstrument
                              derivative liabilities
                          
                          
                          (23,831,044
                          )
                          
                          53,779,797Other
                              income (expense)
                          
                          
                          (175,656
                          )
                          
                          (428,524
                          )Total
                              other income (expense) from continuing operations
                          
                          
                          (58,581,899
                          )
                          
                          24,434,994Income
                              (loss) from continiuing operations
                          
                          
                          (85,734,062
                          )
                          
                          18,449,682Discontinued
                              operations:(Loss)
                              from discontinued operations
                          
                          
                          (3,391,689
                          )
                          
                          (2,722,383
                          )Total
                              loss from discontinued operations
                          
                          
                          (3,391,689
                          )
                          
                          (2,722,383
                          )Income
                              before taxes
                          
                          
                          (89,125,751
                          )
                          
                          15,727,299Provision
                              for taxes
                          
                          
                          -
                          
                          
                          -Net
                              income (loss)
                          
                          
                          (89,125,751
                          )
                          
                          15,727,299
  The
                      accompanying notes are an integral part of these financial
                      statements.
  F-4
  **360
                              GLOBAL WINE COMPANY AND SUBSIDIARIES**Consolidated
                              Statements of OperationsFor
                              the Period Ended December 31, 2006 and 2005___________________________________________________________________________________
  2006
                          
                          2005Income
                              (loss) per share of common stock:Basic:Income
                              (loss) from:Continuing
                              operations
                          
                          $
                          (11.56
                          )
                          $
                          52.34Discontinued
                              operations
                          
                          
                          (0.46
                          )
                          
                          (7.72
                          )**Net
                              income (loss) per common share - basic**
                          
                          **$**
                          (12.02
                          )
                          **$**
                          **44.62**Diluted:Income
                              (loss) from:Continuing
                              operations
                          
                          $
                          (4.33
                          )
                          $
                          9.33Discontinued
                              operations
                          
                          
                          (0.17
                          )
                          
                          (1.38
                          )**Net
                              income (loss) per common share - diluted**
                          
                          **$**
                          (4.50
                          )
                          **$**
                          **7.95****Weighted
                              average number of common shares - basic**
                          
                          
                          **7,418,959**
                          
                          
                          **352,503****Weighted
                              average number of common assuming dilution**
                          
                          
                          **19,804,833**
                          
                          
                          **1,978,358**
 The
                  accompanying notes are an integral part of these financial
                  statements.
  F-5
  
 **Consolidated
                          Statements of Shareholders' Equity (Deficit)**Consolidated
                          Statements of Shareholders' Equity (Deficit)For
                          the Periods Ended December 31, 2006 and 2005________________________________________________________________________________________________________________
  AdditionalCommon
                          Stock
                      
                      Paid-In
                      
                      AccumulatedShares
                      
                      Stock
                      
                      Capital
                      
                      Deficit
                      
                      Total**Balance,
                          December 31, 2004**
                      
                      
                      291,166
                      
                      $
                      291
                      
                      $
                      9,033,593
                      
                      $
                      (24,332,972
                      )
                      $
                      (15,299,088
                      )Shares
                          issued to employees as compensation
                      
                      
                      51,652
                      
                      
                      51
                      
                      
                      1,943,443
                      
                      
                      
                      
                      
                      1,943,494Shares
                          issued to consultants as compensation
                      
                      
                      2,667
                      
                      
                      3
                      
                      
                      152,497
                      
                      
                      
                      
                      
                      152,500Shares
                          issued for cash
                      
                      
                      42,863
                      
                      
                      43
                      
                      
                      149,957
                      
                      
                      
                      
                      
                      150,000Shared
                          issued in connection with debt instruments
                      
                      
                      49,726
                      
                      
                      50
                      
                      
                      2,151,593
                      
                      
                      
                      
                      
                      2,151,643Warrants
                          issued for services
                      
                      
                      
                      
                      
                      
                      
                      
                      253,125
                      
                      
                      
                      
                      
                      253,125Personal
                          shares transferred by a related party for the benefit of
                          the
                          Company
                      
                      
                      
                      
                      
                      
                      
                      
                      1,778,000
                      
                      
                      
                      
                      
                      1,778,000Warrants
                          issued to short term note holder
                      
                      
                      
                      
                      
                      
                      
                      
                      196,486
                      
                      
                      
                      
                      
                      196,486Net
                          income (loss)
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      15,727,299
                      
                      
                      15,727,299**Balance,
                          December 31, 2005**
                      
                      
                      438,074
                      
                      $
                      438
                      
                      $
                      15,658,694
                      
                      $
                      (8,605,673
                      )
                      $
                      7,053,459Shares
                          issued to employees as compensation
                      
                      
                      1,675,650
                      
                      
                      1,676
                      
                      
                      12,440,299
                      
                      
                      
                      
                      
                      12,441,975Shares
                          issued to consultants as compensation
                      
                      
                      1,822,067
                      
                      
                      1,822
                      
                      
                      11,761,695
                      
                      
                      
                      
                      
                      11,763,517Shares
                          issued for cash
                      
                      
                      71,429
                      
                      
                      71
                      
                      
                      249,929
                      
                      
                      
                      
                      
                      250,000Shares
                          issued in connection with debt instruments
                      
                      
                      3,935,614
                      
                      
                      3,935
                      
                      
                      17,568,159
                      
                      
                      
                      
                      
                      17,572,094Shares
                          issued in exchange for interest payments
                      
                      
                      359,545
                      
                      
                      360
                      
                      
                      383,047
                      
                      
                      
                      
                      
                      383,407Shares
                          issued in exchange for warrants
                      
                      
                      181,724
                      
                      
                      182
                      
                      
                      -
                      
                      
                      
                      
                      
                      182Warrants
                          issued for debt incentives
                      
                      
                      
                      
                      
                      
                      
                      
                      2,275,000
                      
                      
                      
                      
                      
                      2,275,000Warrants
                          issued to short term note holder
                      
                      
                      
                      
                      
                      
                      
                      
                      350,000
                      
                      
                      
                      
                      
                      350,000Warrants
                          issued to employees for future services
                      
                      
                      
                      
                      
                      
                      
                      
                      262,500
                      
                      
                      
                      
                      
                      262,500Net
                          income (loss)
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      (89,125,751
                      )
                      
                      (89,125,751
                      )**Balance,
                          December 31, 2006**
                      
                      
                      8,484,103
                      
                      
                      8,484
                      
                      
                      60,949,323
                      
                      
                      (97,731,424
                      )
                      
                      (36,773,617
                      )
  The
                accompanying notes are an integral part of these financial
                statements.
  F-6
 **360
                          GLOBAL WINE COMPANY AND SUBSIDIARIES**Consolidated
                          Statements of Cash FlowsFor
                          the Periods Ended December 31, 2006 and 2005___________________________________________________________________________________
  2006
                      
                      2005Cash
                          flows from operating activities:Net
                          income (loss)
                      
                      $
                      (89,125,751
                      )
                      $
                      15,727,299Add
                          back: Net loss from discontinued operations
                      
                      
                      3,391,689
                      
                      
                      2,722,383Net
                          income (loss) from continuing operations
                      
                      
                      (85,734,062
                      )
                      
                      18,449,682Adjustments
                          to reconcile net income (loss) to cash provided by (used
                          in) operating
                          activities:Depreciation
                          and amortiztion
                      
                      
                      391,097
                      
                      
                      249,845Decrease
                          in allowance for doubtful accounts
                      
                      
                      -
                      
                      
                      (4,033
                      )Interest
                          expense, non-cash
                      
                      
                      9,301,821
                      
                      
                      15,273,743Interest
                          expense, accretion of original issue discount
                      
                      
                      19,189,845
                      
                      
                      9,727,774Decrease
                          in other assets, net
                      
                      
                      407,164
                      
                      
                      -Loss
                          on forfeiture of KKLLC
                      
                      
                      2,306,187
                      
                      
                      -Loss
                          on write down of assets held for sale
                      
                      
                      1,211,755
                      
                      
                      -Company
                          common shares issued for services
                      
                      
                      24,399,387
                      
                      
                      2,349,119Loss
                          (gain) on fair market value of financial instrument derivative
                          liabilities
                      
                      
                      32,118,592
                      
                      
                      (53,779,797
                      )Adjustments
                          to net income (loss) from continuing operation
                      
                      
                      89,325,848
                      
                      
                      (26,183,349
                      )Decrease
                          (increase) in assets:Accounts
                          receivable-trade
                      
                      
                      (282,443
                      )
                      
                      417,916Inventories
                      
                      
                      (1,132,310
                      )
                      
                      625,184Prepaid
                          expenses and other
                      
                      
                      (113,470
                      )
                      
                      (197,383
                      )Increase
                          (decrease) in liabilities:Accounts
                          payable-trade
                      
                      
                      1,289,353
                      
                      
                      1,855,256Accrued
                          expenses
                      
                      
                      1,870,026
                      
                      
                      442,128Accrued
                          interest
                      
                      
                      2,356,923
                      
                      
                      2,503,607**Net
                          cash provided (used) in operating activities of continuing
                          operations**
                      
                      
                      **7,579,865**
                      
                      
                      **(2,086,959**
                      **)**Cash
                          flows from operating activities:Purchase
                          of property and equipment
                      
                      
                      (66,577
                      )
                      
                      (30,862,810
                      )Disposal
                          of equipment
                      
                      
                      257,178
                      
                      
                      -**Cash
                          provided (used) in investing activities**
                      
                      
                      **190,601**
                      
                      
                      **(30,862,810**
                      **)**Cash
                          flows from financing activities:Sale
                          of common stock
                      
                      
                      250,000
                      
                      
                      150,000Disposition
                          of stock value guarantee
                      
                      
                      (10,000,000
                      )
                      
                      -Proceeds
                          from notes payable
                      
                      
                      918,970
                      
                      
                      -Payments
                          on note payable
                      
                      
                      (39,639
                      )
                      
                      -Proceeds
                          from notes payable
                      
                      
                      2,400,000
                      
                      
                      35,027,000Bank
                          overdraft
                      
                      
                      466
                      
                      
                      -Payments
                          on note payable
                      
                      
                      (194,956
                      )
                      
                      (1,777,000
                      )**Cash
                          provided (used) by financing activities**
                      
                      
                      **(6,665,159**
                      **)**
                      
                      **33,400,000****Cash
                          (used) by discontinued operations**
                      
                      
                      (1,085,502
                      )
                      
                      (343,388
                      )**Net
                          increase (decrease) in cash**
                      
                      
                      **19,805**
                      
                      
                      **106,843****Cash
                          at the beginning of period**
                      
                      
                      **129,005**
                      
                      
                      **22,162****Cash
                          at end of period.**
                      
                      **$**
                      **148,810**
                      
                      **$**
                      **129,005****Supplemental
                          Disclosure of Cash Flow Information**Cash
                          paid during the fiscal years for:Interest
                      
                      
                      1,251,222
                      
                      
                      1,487,652Income
                          taxes
                      
                      
                      906
                      
                      
                      -**Non-Cash
                          Financing Activity Transactions**Debt
                          conversion:Conversion
                          of notes payable
                      
                      
                      20,649,470
                      
                      
                      225,077Issuance
                          of common stock
                      
                      
                      (20,649,470
                      )
                      
                      -Reduction
                          of accrued interest
                      
                      
                      -
                      
                      
                      (225,077
                      )Share
                          payments of accrued interest:Share
                          based payments
                      
                      
                      2,001,339
                      
                      
                      -Reduction
                          of accrued interest
                      
                      
                      (2,001,339
                      )
                      
                      -Additions
                          to notes payable:Notes
                          payable in defaultAccrued
                          interest rolled into notes payableProceeds
                          of note payable:Issuance
                          of note payable
                      
                      
                      -
                      
                      
                      (10,000,000
                      )Acquision
                          of fixed assets-PP&E
                      
                      
                      -
                      
                      
                      3,500,000Acquision
                          of fixed assets-granite remnants
                      
                      
                      -
                      
                      
                      6,500,000Identification
                          of assets held-for-sale:Increase
                          of assets held-for-sale
                      
                      
                      11,312,514
                      
                      
                      -Decrease
                          in fixed assets
                      
                      
                      (5,925,000
                      )
                      
                      -Decrease
                          in natural resource
                      
                      
                      (5,387,514
                      )
                      
                      -Creation
                          of financial instrument derivatives:Origniation
                          of financial instrument derivatives
                      
                      
                      (8,287,548
                      )
                      
                      (42,021,577
                      )Decrease
                          in the debt instruments resulting from the related
                          financialinstrument
                          derivatives
                      
                      
                      8,287,548
                      
                      
                      42,021,577Investment
                          in discontinued operation:Issuance
                          of note payable
                      
                      
                      (2,400,000
                      )
                      
                      -Non-cash
                          portion of discontinued operation acquisition
                      
                      
                      2,400,000
                      
                      
                      -**Other**Reconciliation
                          of cash used by discontinued operations:Net
                          loss from discontinued operations
                      
                      
                      (3,391,689
                      )
                      
                      (2,722,383
                      )Non-cash
                          amount in loss from discontinued operations
                      
                      
                      -
                      
                      
                      2,378,995Loss
                          on forfeiture of KKLLC
                      
                      
                      2,306,187
                      
                      
                      -Cash
                          used in discontinued operations
                      
                      
                      (1,085,502
                      )
                      
                      (343,388
                      )
 The
              accompanying notes are an integral part of these financial
              statements.
  F-7
  **360
              Global Wine Company and Subsidiaries**
 **Notes
              to the Consolidated Financial Statements**
 **For
              the years ending December 31, 2006 and 2005**
  **1.** **** **Business
              and the Basis of Presentation, Organization and Nature of
              Operation**
  ***Description
              of Business***
  360
              Global Wine Company (the Company) was incorporated in October 2002
              in the state
              of Nevada. In August 2003, the Company completed a recapitalization
              transaction
              with Tech-net Communications, Inc. a Nevada corporation that was incorporated
              in
              May 2000 (reverse merger). Following the reverse merger the name Tech-net
              Communications, Inc. was changed to Knightsbridge Fine Wines, Inc.
              In February
              2005, that name was changed from Knightsbridge Fine Wines, Inc. to
              360 Global
              Wine Company, Inc. 360 Global Wine Company is now the parent company
              to its
              operating subsidiary and is referred to herein as the Company. Although
              the
              Company is the legal parent company, the share exchange was treated
              as a
              recapitalization of 360 Global Wine Company. 360 Global Wine Company
              is the
              continuing entity for financial reporting purposes. The financial statements
              have been prepared as if 360 Global Wine Company has always been the
              reporting
              company and on the share exchange date, had changed its name and reorganized
              its
              capital stock. The recapitalization transaction results in severe limitations
              being in place on the use of the Company’s net operating loss
              carryovers.
 
 The
              Company operates a winery and is a marketer of premium wine brands.
              The
              Company’s growth has been predominantly through acquisitions. Through these
              acquisitions and other anticipated in the future, the Company believes
              that it
              can become more competitive by: (1) diversifying its product offering;
              (2)
              developing strong market positions in the alcoholic wine category;
              (3)
              strengthening its relationships with wine wholesalers and retailers;
              (4)
              expanding its distribution; (5) enhancing its production capabilities;
              and (6)
              acquiring additional viticultural management, marketing and operational
              and
              research and development expertise.
 
 On
              March
              8, 2007, the Company and its subsidiaries filed petitions for relief
              under
              Chapter 11 of the federal bankruptcy laws in the United States Bankruptcy
              Court
              for the Central District of Nevada, in Reno, Case No. 07-50205-GWZ
              and
              07-50206-GWZ. Under Chapter 11, certain claims against the Debtor in
              existence
              prior to the filing of the petitions for relief under the federal bankruptcy
              laws are stayed while the Debtor continues business operations as a
              Debtor-in-possession. Claims secured against the Debtor’s assets (“secured
              claims”) also are stayed, although the holders of such claims have the right
              to
              move the court for relief from the stay. The Company intends to emerge
              from
              bankruptcy and continue its business. The Company will require the
              raising of
              capital through the issuance of DIP notes and common stock, which will
              significantly dilute the ownership percentages of existing shareholders
              as of
              December 31, 2007.
 
 ***Basis
              of Presentation***
 
 The
              consolidated financial statements included herein have been prepared
              by 360
              Global Wine Company and its subsidiaries.
 
 F-8
  **360
              Global Wine Company and Subsidiaries**
 **Notes
              to the Consolidated Financial Statements**
 **For
              the years ending December 31, 2006 and 2005**
 
 **2.**  **Correction
              of Errors**
 
 The
              Company is restating its previously issued 2005 consolidated financial
              statements for the following reasons: unrecorded derivative financial
              instruments; errors in the valuation of share issuances; unrecorded
              original
              issue discount (“OID”) and errors in the calculation of its valuation and
              accretion; unrecorded expense related to related party transfer of
              shares for
              benefit of the Company; errors in not identifying and reporting discontinued
              operations; and errors in recording business combinations. The accompanying
              financial statement information for 2005 has been restated to reflect
              the
              corrections and errors noted above.
 
 The
              following is a summary of the restatements for the year ended December
              31,
              2005:
 Errors
                          in the identification andcalculation
                          of additional OIDaccretion
                      
                      $
                      7,755,482Financial
                          instrument derivativeinterest
                          expense in excess offace
                          value
                      
                      
                      12,317,289Financial
                          instrument derivativesmarked-to-market
                          gain
                      
                      
                      (53,779,797
                      )Correction
                          of valuation of shareIssuances
                      
                      
                      (1,388,310
                      )Related
                          party shares transferredfor
                          Company benefit
                      
                      
                      1,778,000Correction
                          of underreported(over
                          reported) interest expenseon
                          notes payable
                      
                      
                      1,198,544Correction
                          of Viansa bad debt andinventory
                          valuation reserves
                      
                      
                      253,520Other
                      
                      
                      (44,027
                      )Subtotal
                      
                      
                      (31,909,299
                      )Income
                          tax effect of restatement
                      
                      
                      -Total
                          (increase) in netearnings
                      
                      $
                      (31,909,299
                      )
  F-9
  **360
                Global Wine Company and Subsidiaries**
 **Notes
                to the Consolidated Financial Statements**
 **For
                the years ending December 31, 2006 and 2005**
 
 **2.**  **Correction
              of Errors (continued)**
 
 The
              effect on the Company’s previously issued 2005 financial statements is
              summarized as follows:
 
 Balance
              sheet as of December 31, 2005:
 Previously
                      
                      IncreaseReported
                      
                      (Decrease)
                      
                      RestatedTotal
                          current assets
                      
                      $
                      21,937,000
                      
                      $
                      29,052,385
                      
                      $
                      50,989,385Other
                          assets
                      
                      
                      60,995,000
                      
                      
                      (35,242,329
                      )
                      
                      25,679,051**Total
                          assets**
                      
                      
                      **82,932,000**
                      
                      
                      **(5,566,052**
                      **)**
                      
                      **77,365,948**Total
                          current liabilities
                      
                      
                      13,864,000
                      
                      
                      38,032,240
                      
                      
                      51,896,240Long
                          term debt less currentmaturities
                      
                      
                      67,818,000
                      
                      
                      (58,200,725
                      )
                      
                      9,617,275**Total
                          liabilities**
                      
                      
                      **81,682,000**
                      
                      
                      **(20,168,485**
                      **)**
                      
                      **61,513,515**Minority
                          interest
                      
                      
                      13,896,000
                      
                      
                      (5,097,026
                      )
                      
                      8,798,974Stockholders
                          equity (deficit):Common
                          stock
                      
                      
                      59,000
                      
                      
                      (58,562
                      )
                      
                      438Subscription
                          receivable
                      
                      
                      (19,000
                      )
                      
                      19,000
                      
                      
                      -Additional
                          paid-in capital
                      
                      
                      21,783,000
                      
                      
                      (6,124,306
                      )
                      
                      15,658,694Accumulated
                          othercomprehensive
                          income(loss)
                      
                      
                      (6,000
                      )
                      
                      6,000
                      
                      
                      -Accumulated
                          deficit atJanuary
                          1, 2005
                      
                      
                      (18,281,000
                      )
                      
                      (6,051,972
                      )
                      
                      (24,332,972
                      )Net
                          income (loss) for 2005
                      
                      
                      (16,182,000
                      )
                      
                      31,909,299
                      
                      
                      15,727,299Accumulated
                          deficit atDecember
                          31, 2005
                      
                      
                      (34,463,000
                      )
                      
                      25,857,327
                      
                      
                      (8,605,673
                      )**Total
                          stockholders' equity****(deficit)**
                      
                      
                      **(12,646,000**
                      **)**
                      
                      **19,699,459**
                      
                      
                      **7,053,459****Total
                          liabilities and****stockholders'
                          equity (deficit)**
                      
                      **$**
                      **82,932,000**
                      
                      **$**
                      **(5,566,052**
                      **)**
                      **$**
                      **77,365,948**
  F-10
  **360
              Global Wine Company and Subsidiaries**
 **Notes
              to the Consolidated Financial Statements**
 **For
              the years ending December 31, 2006 and 2005**
 
 **2.**  **Correction
              of Errors (continued)**
 
 Statement
              of operations for the year ended December 31, 2005:
 Previously
                        Reported
                      
                      Increase
                        (Decrease)
                      
                      RestatedNet
                          sales
                      
                      $
                      12,649,000
                      
                      $
                      (2,550,346
                      )
                      $
                      10,098,654Cost
                          of sales
                      
                      
                      9,017,000
                      
                      
                      (2,133,972
                      )
                      
                      6,883,028Gross
                          profit
                      
                      
                      3,632,000
                      
                      
                      (416,374
                      )
                      
                      3,215,626Selling
                          and administrative expense
                      
                      
                      9,490,000
                      
                      
                      (289,062
                      )
                      
                      9,200,938Stock
                          compensation expense
                      
                      
                      3,737,000
                      
                      
                      (3,737,000
                      )
                      
                      -Income
                          (loss) from operations
                      
                      
                      (9,595,000
                      )
                      
                      3,609,688
                      
                      
                      (5,985,312
                      )Other
                          income (expense)
                      
                      
                      (9,310,000
                      )
                      
                      33,744,994
                      
                      
                      24,434,994Loss
                          from discontinued operations
                      
                      
                      -
                      
                      
                      2,722,383
                      
                      
                      2,722,383Income
                          (loss) before minority interest
                      
                      
                      (18,905,000
                      )
                      
                      34,632,299
                      
                      
                      15,727,299Minority
                          interest
                      
                      
                      2,723,000
                      
                      
                      (2,723,000
                      )
                      
                      -**Net
                          income (loss)**
                      
                      **$**
                      **(16,182,000**
                      **)**
                      **$**
                      **31,909,299**
                      
                      **$**
                      **15,727,299**Income
                          (loss) per share of common stock:Basic:Income
                          (loss) from:Continuing
                          operations
                      
                      **$**
                      **(56.53**
                      **)**
                      **$**
                      **108.87**
                      
                      **$**
                      **52.34**Discontinued
                          operations
                      
                      
                      -
                      
                      
                      (7.72
                      )
                      
                      (7.72
                      )**Net
                          income (loss) per common share****-
                          basic**
                      
                      $
                      (56.53
                      )
                      $
                      101.15
                      
                      $
                      44.62Diluted:Income
                          (loss) from:Continuing
                          operations
                      
                      $
                      (56.53
                      )
                      $
                      65.86
                      
                      $
                      9.33Discontinued
                          operations
                      
                      
                      -
                      
                      
                      (1.38
                      )
                      
                      (1.38
                      )**Net
                          income (loss) per common share****-
                          diluted**
                      
                      $
                      (56.53
                      )
                      $
                      64.48
                      
                      $
                      7.95**Weighted
                          average number of****common
                          shares - basic**
                      
                      
                      **286,261**
                      
                      
                      **66,242**
                      
                      
                      **352,503****Weighted
                          average number of****common
                          shares assuming dilution**
                      
                      
                      **286,261**
                      
                      
                      **1,692,097**
                      
                      
                      **1,978,358**Supplemental
                          information:Stock
                          based charges for the yearended
                          December 31, 2005
                      
                      $
                      3,737,000
                      
                      $
                      (1,387,880
                      )
                      $
                      2,349,120
  F-11
  **360
                Global Wine Company and Subsidiaries**
 **Notes
                to the Consolidated Financial Statements**
 **For
                the years ending December 31, 2006 and 2005**
  **2.**  **Correction
              of Errors (continued)**
 
 Statement
              of stockholders' equity (deficit) for the year ended December 31,
              2005:
 
 (previously
              reported data rounded to thousands, except share data)
 AccumulatedOtherPrepaid
                      
                      Additional
                      
                      
                      
                      ComprehensiveCommon
                          Stock
                      
                      Stock
                      
                      Paid-In
                      
                      Accumulated
                      
                      IncomeShares
                      
                      Amount
                      
                      Compensation
                      
                      Capital
                      
                      Deficit
                      
                      (Loss)
                      
                      TotalBalance
                          at January 1, 2005, as previously reported
                      
                      
                      273,822
                      
                      $
                      274
                      
                      $
                      -
                      
                      $
                      20,256,726
                      
                      $
                      (18,281,000
                      )
                      $
                      (6,000
                      )
                      $
                      1,970,000Prior
                          period adjustment
                      
                      
                      17,344
                      
                      
                      17
                      
                      
                      -
                      
                      
                      (11,223,133
                      )
                      
                      (6,051,972
                      )
                      
                      6,000
                      
                      
                      (17,269,088
                      )Balance
                          at January 1, 2005, as restated
                      
                      
                      291,166
                      
                      
                      291
                      
                      
                      -
                      
                      
                      9,033,593
                      
                      
                      (24,332,972
                      )
                      
                      -
                      
                      
                      (15,299,088
                      )Stock,
                          warrant and other activity
                      
                      
                      146,908
                      
                      
                      147
                      
                      
                      -
                      
                      
                      6,625,101
                      
                      
                      -
                      
                      
                      -
                      
                      
                      6,625,248Net
                          loss for 2005, as restated
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      15,727,299
                      
                      
                      -
                      
                      
                      15,727,299Comprehensive
                          income
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -Balance
                          at December 31, 2005, as restated
                      
                      
                      438,074
                      
                      $
                      438
                      
                      $
                      -
                      
                      $
                      15,658,694
                      
                      $
                      (8,605,673
                      )
                      $
                      -
                      
                      $
                      7,053,459
  F-12
  **360
                Global Wine Company and Subsidiaries**
 **Notes
                to the Consolidated Financial Statements**
 **For
                the years ending December 31, 2006 and 2005**
 
 **3.
              Summary of Significant Accounting Policies**
 
 *Principles
              of Consolidation*
  The
              accompanying condensed consolidated financial statements include the
              accounts of
              consolidated entities since their respective dates of acquisition.
              All
              significant inter-company amounts have been eliminated. These condensed
              consolidated financial statements do not include the financial statements
              of
              Kirkland Knightsbridge, LLC (a California limited liability corporation)
              (“KKLLC”) and Springer Mining Company as the Company in May 2006 and then in
              June 2006 elected to treat the joint venture and then the subsidiary
              as a
              discontinued operation (Note 4).
  *Use
              of Estimates and Assumptions*
  Preparing
              the Company's financial statements in conformity with accounting principles
              generally accepted in the United States of America ("GAAP") requires
              management
              to make estimates and assumptions that affect reported amounts of assets
              and
              liabilities and disclosure of contingent assets and liabilities as
              of the date
              of the financial statements and the reported amounts of revenues and
              expenses
              during the periods reported. Actual results could differ from those
              estimates.
  The
              financial statements include some amounts that are based on management's
              best
              estimates and judgments. The most significant estimates are the valuation
              of
              financial instrument derivatives and the related original issue discount
              (OID)
              and beneficial conversion features identified in the issuance of convertible
              debt instruments, the valuation of the net assets of discontinued operations,
              the valuation of Company issued securities used as employee compensation
              and for
              services, the valuation of securities used in business acquisitions,
              the
              allocation of the purchase price in business combinations, the determination
              of
              the allowance for uncollectible accounts receivable, the valuation
              reserve for
              inventories, and the valuation reserve for the deferred income tax
              asset. The
              Company's estimation process requires assumptions to be made about
              future events
              and conditions, and as such, is inherently subjective and uncertain.
              Actual
              results could differ materially from the Company’s estimates.
  *Concentration
              of Cash*
 
 As
              of
              December 31, 2005, the Company had one bank account with a balance
              that exceeded
              the amount insured by the Federal Deposit Insurance Corporation by
              $16,439. As
              of December 31, 2006, no balances exceeded the limits.
 
 *Accounts
              Receivable and Allowance for Doubtful Accounts*
 
 The
              Company extends credit to the customer based on evaluation of the individual
              customer’s financial condition and collateral is not required .
              Accounts receivable - trade are due within 30 to 45 days and are stated
              at the
              anticipated amounts due from customers net of any allowance for doubtful
              accounts. Accounts receivable - trade, net was as follows:
 2006
                      
                      2005Accounts
                          receivable - trade
                      
                      $
                      975,328
                      
                      $
                      692,885Allowance
                          for doubtful accounts
                      
                      
                      (4,433
                      )
                      
                      (4,433
                      )Accounts
                          receivable - trade, net
                      
                      $
                      970,895
                      
                      $
                      688,452
 
 Accounts
              outstanding beyond the contractual payment terms are considered past
              due. The
              Company determines its allowance for doubtful accounts by considering
              a number
              of factors, including the length of time accounts receivable - trade
              are beyond
              the contractual payment terms, the Company’s previous loss history, the
              customer’s current ability to pay its obligation to the Company and the
              condition of the premium wine and the industry as a whole. The Company
              writes-off accounts receivable when they are identified as uncollectible.
              Subsequent cash receipts on such written-off receivables are credited
              to the
              allowance for doubtful accounts.
  F-13
  **360
              Global Wine Company and Subsidiaries**
 **Notes
              to the Consolidated Financial Statements**
 **For
              the years ending December 31, 2006 and 2005**
 
 **3.
              Summary of Significant Accounting Policies (continued)**
 
 *Inventories*
 
 All
              direct and indirect costs related to the making of the bulk and bottled
              wine
              inventories are stated at the lower of average cost, which approximates
              the
              first-in, first-out (“FIFO”) method, or market value. Costs associated with the
              current year’s unharvested grape crop are deferred and recognized in the
              subsequent year when the grapes are harvested. Capitalized unharvested
              grape
              crop costs amounted to $29,034 and $102,160 for the years ended December
              31,
              2006 and 2005 respectively.
 
 Production
              overhead includes all production costs that are common to viticulture
              farming
              and wine making processes and their related support centers. These
              costs are
              accumulated and allocated based upon the use of resources. Cost is
              determined on
              a standard cost basis that approximates the first-in, first-out (“FIFO”)
              inventory valuation method.
 
 Market
              is
              determined based on net realizable value. Determining net realizable
              value
              requires estimating selling prices and related costs of disposal in
              the ordinary
              course of business. Disposal costs include handling, packing, transportation
              costs identified with sale of the bulk and bottled wine, and selling
              expenses
              such as commissions and other types of direct sales expense. Appropriate
              consideration is given to obsolescence, excessive levels, deterioration,
              and
              other factors in evaluating net realizable value.
 
 *Property,
              Plant, and Equipment*
 
 Depreciation
              expense is computed using the straight-line method over the estimated
              lives of
              the related assets, as follows:
 Asset
                          Type
                      
                      YearsLand
                          Improvements
                      
                      
                      25Vineyards
                      
                      
                      25Buildings
                      
                      
                      40Cooperage
                      
                      
                      3Equipment
                      
                      
                      3-7
 
 The
              Company determines the productive lives of grape vines at the time
              of
              acquisition. Routine maintenance and repairs are charged as period
              operating
              costs as incurred. The costs of significant improvements are capitalized.
              Gains
              or losses on the disposition of assets are included in operations in
              the period
              of asset disposition.
 
 The
              assets held-for-sale are removed from property, plant, and equipment
              classification and shown separately on the balance sheet at their fair
              value
              (anticipated sales price less the cost to sell). The fair values that
              are less
              than the recorded net book value of the assets at the time they are
              identified
              are charged to operations and no further depreciation is
              recognized.
 
 Long-lived
              assets, including property, plant, and equipment, are reviewed for
              impairment
              whenever events or changes in business circumstances indicate that
              the carrying
              amount of the assets may not be fully recoverable. The estimated undiscounted
              cash flows associated with the assets are compared to the carrying
              amounts to
              determine if a write-down to fair value is required. If impairment
              is indicated,
              the carrying value of the asset is reduced to its fair value.
 
 F-14
  **360
              Global Wine Company and Subsidiaries**
 **Notes
              to the Consolidated Financial Statements**
 **For
              the years ending December 31, 2006 and 2005**
 
 **3.
              Summary of Significant Accounting Policies (continued)**
 
 *Mineral
              Remnants - Granite*
 
 Mineral
              -
              granite remnants is classified as a non-current asset and was acquired
              as part
              of the Texas property acquisition in June 2005. Mineral - granite remnants
              are
              granite slabs, pieces and blocks other aggregate stone indigenous to
              the Texas
              area as well as other granite slabs and assorted other stone that are
              from other
              areas both inside and outside of the United States. The Company after the Texas
              property acquisition but before it could start an extractive mineral
              business
              segment concluded that the financial resources necessary to pursue
              the second
              business segment would adversely effect its wine business segment.
              The Company
              in April 2006 concluded that the Texas property and the mineral - granite
              remnants should be sold. The Texas property in 2006 was reclassified
              as a
              non-facility as assets held-for-sale and the mineral - granite remnants
              was
              reclassified as a non-facility as assets held-for-sale and the mineral
              - granite
              remnants was reclassified as a non-current asset.
 
 *Impairment
              of Fixed Assets and Intangible Assets with Finite Lives*
 
 Unlike
              goodwill and indefinite-lived intangible assets, the accounting rules
              do not
              provide for an annual impairment test in determining whether fixed
              assets (e.g.,
              property, plant, and equipment) and finite-lived intangible assets
              (e.g.,
              customer lists) are impaired. Instead, they require that a triggering
              event
              occur before testing an asset for impairment. Examples of such triggering
              events
              include a significant disposal of a portion of such assets, an adverse
              change in
              the market involving the business employing the related asset, a significant
              decrease in the benefits realized from an acquired business or assets,
              difficulties or delays in integrating the business or assets, and a
              significant
              change in the operations of an acquired business.
 
 Once
              a
              triggering event has occurred, the impairment test employed is based
              on whether
              the intent is to hold the asset for continued use or to hold the asset
              for sale.
              If the intent is to hold the asset for continued use, the impairment
              test
              involves a comparison of undiscounted cash flows against the carrying
              value of
              the asset as an initial test. If the carrying value of such asset exceeds
              the
              undiscounted cash flow, the asset would be deemed to be impaired. Impairment
              would then be measured as the difference between the fair value of
              the fixed or
              amortizing intangible asset and the carrying value to determine the
              amount of
              the impairment. The Company determines fair value generally by using
              the
              discounted cash flow method. If the intent is to hold the asset for
              sale and
              certain other criteria are met (i.e., the asset can be disposed of
              currently,
              appropriate levels of authority have approved sale, and there is an
              actively
              pursuing buyer), the impairment test is a comparison of the asset’s carrying
              value to its fair value less costs to sell. To the extent that the
              carrying
              value is greater than the asset’s fair value less costs to sell, an impairment
              loss is recognized for the difference. Assets held for sale are separately
              presented on the balance sheet and are no longer depreciated.
 
 *Income
              Taxes*
 
 Deferred
              tax assets and liabilities are recognized for the future tax consequences
              attributable to differences between the financial statement carrying
              amounts of
              existing assets and liabilities and their respective tax bases. Deferred
              tax
              assets including tax loss and credit carryforwards, and liabilities
              are measured
              using enacted tax rates expected to apply to taxable income in the
              years in
              which those temporary differences are expected to be recovered or settled.
              The
              effect on deferred tax assets and liabilities of a change in tax rates
              is
              recognized in income in the period that includes the enactment date.
              Deferred
              income tax expense represents the change during the period in the deferred
              tax
              assets and deferred tax liabilities. The components of the deferred
              tax assets
              and liabilities are individually classified as current and non-current
              based on
              their characteristics. Deferred tax assets are reduced by a valuation
              allowance
              when, in the opinion of management, it is more likely than not that
              some portion
              or all of the deferred tax assets will not be realized.
 
 F-15
  **360
              Global Wine Company and Subsidiaries**
 **Notes
              to the Consolidated Financial Statements**
 **For
              the years ending December 31, 2006 and 2005**
 
 **3.
              Summary of Significant Accounting Policies (continued)**
 
 *Stock
              Split*
 
 In
              January 2006, the Company’s Board of Directors (“BOD”) and stockholders
              authorized a reverse stock split of its outstanding common shares of
              1-for-150
              for stockholders of record as of January 31, 2006 and effective as
              of February
              28, 2006. Those stockholders who, as a result of the reverse split,
              would own
              less than 100 shares of common stock, had their share holdings rounded
              up to a
              lot of 100 shares (Note 11). In addition, all references in these consolidated
              financial statements to weighted average number of shares, income (loss)
              per
              share amounts, and market prices of the Company’s common stock have been
              restated to give retroactive recognition to the reverse stock split
              for all
              periods presented.
 
 *Accounting
              for Share-Based Payments*
 
 In
              December 2004, the Financial Accounting Standards Board (FASB) issued
              SFAS No.
              123(R), *Share-Based
              Payment* .
              This
              pronouncement amends SFAS No. 123, “Accounting for Stock-Based Compensation,”
and supersedes Accounting Principles Board (APB) Opinion No. 25, *Accounting
              for Stock Issued to Employees* .
              SFAS
              No. 123(R) requires that companies account for awards of equity instruments
              issued to employees under the fair value method of accounting and recognize
              such
              amounts in their statements of operations. The Company adopted SFAS
              No. 123(R)
              on January 1, 2006, using the modified prospective method and, accordingly,
              has
              not restated the consolidated statements of operations for periods
              prior to
              January 1, 2006. Under SFAS No. 123(R), the Company is required to
              measure
              compensation cost for all stock-based awards at fair value on the date
              of grant
              and recognize compensation expense in its consolidated statements of
              operations
              over the service period that the awards are expected to vest. As permitted
              under
              SFAS No. 123(R), the Company elected to recognize compensation cost
              for all
              options with graded vesting on a straight-line basis over the vesting
              period of
              the entire option.
  Prior
              to
              January 1, 2006, we accounted for stock-based compensation, as permitted
              by FASB
              Statement No. 123; *Accounting
              for Stock-Based Compensation,* under
              the intrinsic value method described in (APB) Opinion No. 25, *Accounting
              for Stock Issued to Employees* ,
              and
              related Interpretations. Under the intrinsic value method, no stock-based
              employee compensation cost is recorded when the exercise price is equal
              to, or
              higher than, the market value of the underlying common stock on the
              date of
              grant. We recognized stock-based compensation expense for all grants
              to
              consultants and for those grants to employees where the exercise prices
              were
              below the market price of the underlying stock at the measurement date
              of the
              grant.
  *Fair
              Value of Financial Instruments*
 
 The
              carrying amounts of cash and cash equivalents, accounts receivable
              - trade,
              advances, accounts payable - trade, other current and accrued liabilities
              and
              the put liability, as reported on the balance sheet, are considered
              to
              approximate their fair value given the short-term maturity and/or the
              liquidity
              of these financial instruments. Notes payable and convertible notes
              payable have
              been recorded at their fair value based upon the Company’s recognition of the
              debt net of related OID and beneficial conversion features. The accretion
              of OID
              is recognized as an expense over the initial life of the promissory
              note as an
              adjustment of the effective interest rate. Financial instrument derivatives
              related to debt transactions are initially recorded at their fair value.
 
 *Financial
              Instrument Derivatives*
 
 SFAS
              No.
              133, *Accounting
              for Derivative Instruments and Hedging Activities* requires
              the Company to initially measure all financial instrument derivative
              liabilities
              at their fair value, regardless of the purpose or intent of holding
              them. Gains
              or losses resulting from changes in the fair value of derivatives reported
              by
              the Company are recorded each period in current operating results as
              they are
              not designated as hedging instruments.
 
 F-16
  **360
              Global Wine Company and Subsidiaries**
 **Notes
              to the Consolidated Financial Statements**
 **For
              the years ending December 31, 2006 and 2005**
 
 **3.
              Summary of Significant Accounting Policies (continued)**
 
 *Certain
              Financial Instruments with Characteristics of Both Liabilities and
              Equity*
 
 SFAS
              No.
              150, *Accounting
              for Certain Financial Instruments with Characteristics of Both Liabilities
              and
              Equity* deals
              with certain financial instruments that must be classified as liabilities
              in the
              balance sheet. These financial instruments include: (1) mandatory redeemable
              financial instruments (2) obligations to repurchase the issuer’s equity shares
              by transferring assets, and (3) obligations to issue a variable number
              of
              shares. The Company had an obligation to repurchase its common shares
              with cash
              when it issued a put option and an obligation to issue a variable number
              of its
              shares when it entered into a value guarantee of its shares.
 
 *Revenue
              Recognition*
  The
              Company’s primary streams of wine revenue include:
  Commission
              sales
 Retail
              sales
 Catalog
              sales
 E-commerce
              sales, and
 Wine
              club
              sales
 
 Revenue
              is recognized for these income streams when product is shipped FOB
              winery. The
              cost of price promotions, rebates and coupon programs are treated as
              reductions
              in revenues. Revenue from items sold through the Company’s retail locations is
              recognized at the time of sale, including commission sales. The costs
              of
              commissions are treated as reductions of revenues. No Company products
              are sold
              on consignment.
  *Cost
              of Goods Sold*
  The
              types
              of costs the Company included in cost of goods sold of its primary
              products, the
              sale of alcoholic wines, are raw materials, packaging materials, vinting
              costs,
              plant administrative support and overheads subject to inclusion in
              inventory,
              and freight and warehouse costs (including distribution network costs)
              for the
              winery operations. Distribution network costs include inbound freight
              charges
              and outbound shipping and handling costs, purchasing and receiving
              costs,
              inspection costs, warehousing, and internal transfer costs.
  *Selling,
              General and Administrative Costs*
  Costs
              included in selling and general and administrative expenses consist
              predominately of advertising, promotion, and non-manufacturing administrative
              overhead costs.
  *Advertising
              Costs*
  The
              Company expenses advertising costs as incurred, shown or distributed.
              Prepaid
              advertising costs at December 31, 2006 were immaterial. Advertising
              costs for
              the period ended December 31, 2006 were $40,973. The Company incurred
              no
              advertising costs in 2005.
 
 *Legal
              Costs Expected to be Incurred in Connection with a Loss
              Contingency*
 
 The
              Company does not provide for the inclusion of estimated legal fees
              and other
              directly related costs as part of its loss contingency
 
 F-17
  **360
              Global Wine Company and Subsidiaries**
 **Notes
              to the Consolidated Financial Statements**
 **For
              the years ending December 31, 2006 and 2005**
 
 **3.
              Summary of Significant Accounting Policies (continued)**
 
 *Basic
              and Diluted Income (Loss) per Share*
 
 Basic
              income (loss) per common share is computed by dividing net income (loss)
              applicable to common stockholders by the weighted-average number of
              common
              shares outstanding during the period. Diluted net income (loss) per
              common share
              is determined using the weighted-average number of common shares outstanding
              during the period, adjusted for the dilutive effect of common stock
              equivalents,
              consisting of shares that might be issued upon exercise of common stock
              options.
              In periods where losses are reported, the weighted-average number of
              common
              shares outstanding excludes common stock equivalents, because their
              inclusion
              would be anti-dilutive. Potentially dilutive common stock equivalents
              would
              include the common stock to be issued based upon conversion features
              provided in
              debt security instruments and the exercise of warrants.
 
 *Reclassifications*
 
 Certain
              reclassifications have been made to the prior year financials statements
              presented in this report to conform to the current year presentation.
              These
              reclassifications had no effect on the prior year reported results
              of operations
              or retained earning or accumulated deficit.
 
 *Recent
              Accounting Pronouncements*
 
 SFAS
              No. 154, *Accounting
              changes and Error Corrections*
 
 SFAS
              No.
              154 replaces APB Opinion No. 20 and SFAS No. 3, and changes the requirements
              for
              the accounting for and reporting of a change in accounting principle.
              This
              statement redefines restatement as the revising of previously issued
              financial
              statements to reflect the correction of an error. This statement was
              effective
              for the Company on January 1, 2006.
 
 The
              Company has identified a significant number of errors that are corrected
              in this
              financial statement. The current accounting requirement is to only
              correct
              errors in the years that are presented in the financial statements.
              As all of
              the error corrections apply to the years presented in these financial
              statements
              there is no correction to beginning retained earnings presented in
              these
              financial statements there is no correction to beginning retained earnings
              (Note
              2). The Company does not expect the adoption of SFAS No. 154 to have
              a
              significant impact on its financial statements.
 
 SFAS
              No. 155, *Accounting
              for Certain Hybrid Financial Instruments*
 
 SFAS
              No.
              155, *Accounting
              for Certain Hybrid Financial Instruments* permits
              fair value remeasurement of any hybrid financial instrument that contains
              an
              embedded derivative and clarifies the fact that concentrations of credit
              risk in
              the form of subordination are not embedded derivatives. This statement
              is
              effective f or
              the
              Company beginning January 1, 2007. The Company does not expect the
              adoption of
              SFAS No. 155 to have a significant impact on its financial
              statements.
 
 SFAS
              No. 157, *Fair
              Value Measurements*
 
 SFAS
              No.
              157, *Fair
              Value Measurements* defines
              fair value, establishes a framework for measuring fair value in GAAP
              and expands
              disclosure about fair value measurement. This statement is effective
              for the
              Company beginning January 1, 2008. The Company does not expect the
              adoption of
              SFAS No. 157 to have a significant impact on its financial
              statements.
 
 F-18
  **360
              Global Wine Company and Subsidiaries**
 **Notes
              to the Consolidated Financial Statements**
 **For
              the years ending December 31, 2006 and 2005**
 
 **3.
              Summary of Significant Accounting Policies (continued)**
 
 EITF
              Issue No. 05-01, *Accounting
              for the Conversion of an Instrument That Became Convertible upon the
              Issuer’s
              Exercise of a Call Option*
 
 A
              substantive conversion feature is one that is at least reasonably possible
              of
              becoming exercisable absent the issuer’s exercise of its call option and the
              issuance date is the instrument’s commitment date. It was also concluded that
              the assessment of whether the conversion feature is substantive may
              be performed
              after the issuance date but should be based only on assumptions, considerations,
              and/or marketplace information available as of the issuance date. This
              statement
              was effective for the Company on April 1, 2006. The Company does not
              expect the
              adoption of EITF Issue No. 05-01 to have a significant impact on its
              financial
              statements.
 
 *Cash
              and Cash Equivalents*
  Cash
              and
              cash equivalents include cash and all highly liquid financial instruments
              with
              purchased maturities of three months or less. As of December 31, 2006,
              the
              Company did not have a bank account with balances that exceeded the
              amount
              insured by the Federal Deposit Insurance Corporation.
 
 *Recent
              Accounting Pronouncement Continued*
 
 EITF
              Issue No. 05-07 *,
              Accounting for Modifications to Conversion Options Embedded in Debt
              Instruments*
 
 An
              entity
              should include, upon the modification of a convertible debt instrument,
              the
              change in fair value of the related embedded conversion option in the
              analysis
              to determine whether a debt instrument has been extinguished and should
              affect
              subsequent recognition of interest expense for the associated debt
              instrument
              for changes in the fair value of the embedded conversion option. The
              recognition
              of the beneficial conversion feature or reassessment of an existing
              beneficial
              conversion feature should not result in a modification of a convertible
              debt
              instrument. This statement was effective for the Company on January1,
              2006. The
              Company does not expect the adoption of EITF Issue No. 05-07 to have
              a
              significant impact on its financial statements.
 
 EITF
              Issue No. 05-08 *,
              Income Tax Consequences of Issuing Convertible Debt with a Beneficial
              Conversion
              Feature*
 
 The
              issuance of convertible debt with a beneficial conversion feature results
              in a
              basis difference for purposes of applying accounting for income taxes,
              in that
              the recognition of a beneficial conversion feature effectively creates
              two
              separate instruments and consequently, the reported amount in the financial
              statements (book basis) of the debt instrument is different from the
              tax basis
              of the debt instrument and is a temporary difference. The recognition
              of
              deferred taxes for the temporary difference of the convertible debt
              with a
              beneficial conversion feature should be recorded as an adjustment to
              the related
              components of the stockholders’ equity. This statement was effective for the
              Company on January 1, 2006.  The
              Company does not expect the adoption of EIFT Issue No. 05-08 to have
              a
              significant impact on its financial statements.
 
 EITF
              Issue No. 06-07 *,
              Accounting for a Previously Bifurcated Conversion Option in a Convertible
              Debt
              Instrument*
 
 An
              embedded conversion option that initially requires separate accounting
              as a
              derivative under SFAS 133 may no longer meet the conditions for separate
              accounting as a derivative subsequent to its issuance. This statement
              is
              effective for the Company on January 1, 2007. The Company does expect
              the
              adoption of EITF Issue No. 06-07 to have a significant impact on its
              financial
              statements.
 
 F-19
 **360
                Global Wine Company and Subsidiaries**
 **Notes
                to the Consolidated Financial Statements**
 **For
                the years ending December 31, 2006 and 2005**
  **4.** **** **Discontinued
              Operations**
  *Kirkland
              Knightsbridge, LLC*
  In
              May
              2006, the Company adopted a formal plan to discontinue its support
              of the KKLLC
              joint venture. Initial Company assumptions related to cost savings
              and
              efficiencies were never realized and the wines marketed under the KKLLC
              labels
              did not achieve anticipated market acceptance. In addition, the relationship
              between the Company and its joint venture partner had become so strained
              as to
              make the Company's continued participation in the operation impracticable.
              Based
              on these facts, the Company concluded that it had lost the ability
              to control
              the joint venture and, accordingly, determined not to continue to fund
              its
              operations and long-term debt and elected to report the joint venture
              and its
              operations as a discontinued operation.
 
 The
              Company’s plan to discontinue operations for the KKLLC joint venture operation
              has resulted in material reduction of the joint venture’s day-to-day operations
              due to the Company's decision to discontinue its support of the operation.
              Currently, it is the Company's belief that the only liability related
              to its
              plan as of December 31, 2006 is the contingent liability resulting
              from the
              Company's corporate guarantee of the Metropolitan Life Insurance Company
              ("MetLife") note (Notes 7 and 9). During the quarter ending September
              30, 2006,
              the Company determined that they were no longer liable for the market
              value
              guarantee of the Company’s common stock of $10,000,000 which was recorded in
              2004 (Note 9).
  The
              Company has accounted for the KKLLC discontinued operation in accordance
              with
              SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived
              Assets".
  The
              results of operations of KKLLC have been excluded from the Company's
              continuing
              operations from acquisition date through the June 30, 2006 and have
              been
              reported as a discontinued operation. The losses reported from the
              discontinued
              operation are $3,391,689 and $2,722,383 for the years ended December
              31, 2006
              and 2005 respectively. The carrying value of the Company’s investment in KKLLC
              joint venture at December 31, 2006 has been reduced to zero.
 
 The
              assets and liabilities that create the net asset of the KKLLC joint
              venture
              discontinued operation as presented under the caption “Net assets of
              discontinued operations” in the Company's accompanying balance sheet at December
              31, 2006 and 2005 are as follows:
  2006
                    
                    2005Assets
                        of the discontinued operation:Cash
                    
                    
                    -
                    
                    $
                    2,327Accounts
                        receivable
                    
                    
                    -
                    
                    
                    125,828Inventories
                    
                    
                    -
                    
                    
                    4,219,016Property
                        and equipment, net
                    
                    
                    -
                    
                    
                    29,862,395Other
                        assets
                    
                    
                    -
                    
                    
                    987,251Total
                        assets
                    
                    
                    -
                    
                    $
                    35,196,817
 Liabilities
                        of the discontinued operation:Accounts
                        payable and accrued liabilities
                    
                    
                    -
                    
                    $
                    1,869,203Note
                        payable plus related accrued interest payable
                    
                    
                    -
                    
                    
                    22,222,453Minority
                        interest
                    
                    
                    -
                    
                    
                    8,798,974Total
                        liabilities
                    
                    
                    -
                    
                    $
                    32,890,630**Net
                        asset of the discontinued operation - KKLLC**
                    
                    
                    **-**
                    
                    **$**
                    **2,306,187**
 
 F-20
 
 **360
                  Global Wine Company and Subsidiaries**
 **Notes
                  to the Consolidated Financial Statements**
 **For
                  the years ending December 31, 2006 and 2005**
 **4.
              Discontinued Operations (continued)**
 
 Selected
              results of operating information for the KKLLC discontinued operation
              are as
              follows:
 
 2006
                    
                    2005Net
                        Sales
                    
                    $
                    -
                    
                    $
                    -Net
                        loss from the discontinued operation
                    
                    $
                    3,391,689
                    
                    $
                    2,722,383Net
                        loss on disposal of the discontinued operation
                    
                    $
                    -
                    
                    $
                    -
 
 There
              has
              been no continuing involvement of either the Company or KKLLC in the
              other
              business activity after the disposal transaction; nor has there been
              any
              pre-disposal intercompany amounts related to the Company’s activities that
              result in a continuation of revenues and expenses that were previously
              eliminated intercompany transactions for purposes of the pre-disposal
              consolidated financial statements.
 
 *Madison
              Capital (formerly Metropolitan Life Insurance Company)*
  The
              Company has owned its 50% interest in the membership units of KKLLC
              and since
              May 2006 has its interest as a discontinued operation (Note 4). In
              addition,
              pursuant to an order of the court in the fourth quarter of 2006, the
              Company’s
              membership interest in KKLLC was terminated. KKLLC, the Kirkland Cattle
              Company
              (a California partnership) (KKLLC's sole other member) ("Kirkland Cattle")
              and
              Larry Kirkland (an individual)("Kirkland") (as a group referred to
              as "the
              obligors"), owe Madison Capital (successor in interest to Metropolitan
              Life
              Insurance Company ("MetLife")) approximately $22,000,000 of which approximately
              $20,000,000 is principal and the balance consists of accrued contract
              and
              default interest and related fees and costs.
  The
              original interest rate of the promissory note was 6.5% per annum. The
              note
              required KKLLC to make monthly principal and interest payments of $149,115,
              beginning December 1, 2005 with a balloon payment due on March 1, 2009.
              Since
              December 2005, the note has been in default and accruing default interest
              at a
              rate of 18 percent per annum. On April 4, 2006, MetLife notified the
              obligors
              and the Company as a guarantor that it had accelerated the amount due
              under a
              provision of the promissory note.
  Security
              for this note was substantially all of the assets of KKLLC, which have
              a book
              value of approximately $42,000,000 as of December 31, 2006, the assets
              of
              Kirkland Cattle and Kirkland. The Company is not an obligor on the
              Madison note,
              but is a guarantor as the Madison note payable is reported in the KKLLC
              financial statements and has been accounted for as part of the discontinued
              operation by the Company.
 
 *Springer
              Mining Company*
  In
              June
              2006, the Company adopted a formal plan to discontinue its initial
              efforts to
              develop a business segment involved in mineral processing. In March
              2006, the
              Company acquired all of the common stock of Springer Mining Company
              (Springer)
              in Nevada. The Springer mineral processing facility, prior to the Company's
              acquisition of its outstanding stock, had been inactive. Prior to the
              Company's
              acquisition of Springer, it entered negotiations with an agreement
              with an
              entity that was to provide mineral processing rights.
  In
              conjunction with the issuance of the note payable to General Electric
              and the
              Springer Mining Company stock purchase agreement, the Company entered
              into a
              security agreement in which all of the issued and outstanding shares
              of Springer
              stock were pledged as collateral for the note payable and held in escrow.
              The
              promissory note as extended was due on September 30, 2006. The Company
              was
              unable to make the required payments and General Electric Company foreclosed
              upon the Springer shares held in escrow in July 2006.
  F-21
  **360
              Global Wine Company and Subsidiaries**
 **Notes
              to the Consolidated Financial Statements**
 **For
              the years ending December 31, 2006 and 2005**
 
 **5.** **** **Inventories**
 
 At
              December 31, 2006 and 2005, inventories consisted of the following
              at:
 2006
                      
                      2005Finished
                          Goods - bottled wines
                      
                      $
                      5,146,378
                      
                      $
                      4,416,547Bulk
                          Wines
                      
                      
                      10,190,341
                      
                      
                      9,520,945Deferred
                          viticultural costs
                      
                      
                      29,034
                      
                      
                      102,160Bottling
                          supplies
                      
                      
                      97,311
                      
                      
                      183,166Retail
                          products
                      
                      
                      280,918
                      
                      
                      524,142Total
                          Inventories
                      
                      
                      15,743,982
                      
                      
                      14,746,960Less:
                          valuation reserve for wine inventories
                      
                      
                      -
                      
                      
                      (135,288
                      )**Total
                          inventories, net**
                      
                      **$**
                      **15,743,982**
                      
                      **$**
                      **14,611,672**
 
 Wine
              inventories are classified as current assets in accordance with recognized
              industry practice although some products will not be sold within one
              year. Each
              specific grape crop harvested is pressed into a single production unit
              (“vintage”). However, each vintage is not sold entirely in a single year.
              Inventories of each year’s vintage are normally carried over and sell for
              several years after their initial pressing.
 
 The
              valuation reserve for wine inventories as of December 31, 2005 resulted
              from
              bulk wines that were identified as slow moving or did not fit the Company’s
              marketing plan. A reserve for these bulk wines has reduced their value
              to their
              net realizable value anticipated through sales in the local discount
              bulk wine
              market and through Company alternative uses. The valuation reserve
              for the wine
              inventories as of December 31, 2004 resulted from bottled wines involved
              in the
              Company’s “Artist Series” of premium wines. The bottled wines were reduced to
              their net realizable value and liquidated in 2004 and 2005. The expense
              related
              to the valuation reserve for wine inventories for the years ended December
              31,
              2006 and 2005 are $0 and $135,288, respectively.
 
 The
              Company’s inventories as of December 31, 2006 were pledged as collateral for
              lending purposes for the Laurus revolving note (line of credit) that
              was unused
              at that time (Note 9-Unused Available Line of Credit). In addition,
              the
              inventories were pledged as security in the general security liens
              for two other
              Company debt agreements as of December 31, 2006 totaled $38,604,158
              (Note 7 -
              Collateral for Lending Purposes).
 
 F-22
  **360
              Global Wine Company and Subsidiaries**
 **Notes
              to the Consolidated Financial Statements**
 **For
              the years ending December 31, 2006 and 2005**
 
 **6.** **** **Property,
              Plant, Equipment and Mineral Remnants - Granite**
 
 Property,
              plant, equipment and mineral remnants at December 31, 2006 and 2005
              consisted of
              the following:
 2006
                      
                      2005Land
                      
                      $
                      3,174,999
                      
                      $
                      5,728,909Cultivated
                          land
                      
                      
                      775,092
                      
                      
                      873,605Building,
                          improvements and equipment
                      
                      $
                      9,249,540
                      
                      $
                      12,797,692Total
                          property, plant and equipment
                      
                      
                      13,199,631
                      
                      
                      19,400,206Less:
                          accumulated depreciation
                      
                      
                      (626,547
                      )
                      
                      (320,424
                      )Net
                          property, plant and equipment
                      
                      
                      12,573,084
                      
                      
                      19,079,782Mineral
                          remnants - Granite granite
                      
                      
                      -
                      
                      
                      6,599,269**Property,
                          plant, equipment and mineral remnants - granite,
                          net**
                      
                      $
                      12,573,084
                      
                      $
                      25,679,051
  Depreciation
              expense for the years ended December 31, 2006 and 2005 was $391,097
              and
              $249,845, respectively. The amount of depreciation that was reported
              in
              inventory as part of the capitalized overhead was $46,816 for the year
              ended
              December 31, 2005. There was no capitalized overhead for the years
              ended
              December 31, 2006.
 
 **Assets
              Held-For-Sale**
  In
              April
              2006, in connection with its strategy planning to redirect Company
              efforts and
              assets towards premium wine production and sales, the Company decided
              to sell
              land, buildings and mineral deposits described as the Texas property.
              As a
              result, the Company transferred the fixed assets and mineral deposits
              to assets
              held-for-sale. An initial review by the Company indicates that these
              assets are
              recorded at amounts below the current best estimate of the amount anticipated
              to
              be realized on their disposition. The assets included as assets held-for-sale
              at
              December 31, 2006 amount to $11,312,514. This estimate is based on
              negotiations
              with potential buyers and independent parties familiar with valuations
              of this
              nature. The amount that the Company will ultimately realize could differ
              materially from the amount recorded in the financial statements. Accordingly,
              as
              of April 1, 2006 the Texas property has been classified as held-for-sale
              and is
              not being depreciated.
  In
              June
              2005, the Company acquired the property, facilities and mineral deposits
              consisting of granite blocks and other stone remnants (the “Texas property”) for
              $12,500,000. The Texas property purchase price was allocated to the
              real
              property and facilities based on fair value as determined by appraisal
              and the
              remainder to the granite block and other stone remnants. The Texas
              property is
              located in Burnet County, Texas, near the city of Granite Shoals, is
              identified
              as the Cold Springs Granite Quarry, and has been dormant for more than
              two
              years. The Texas property is comprised of approximately 136 acres,
              130,000
              square feet of office, warehouse and mixed use space, along with mineral
              deposits consisting of granite block and other stone remnant. In July
              2005, the
              Company pledged the Texas property as security in the Laurus loan
              transaction.
 
 F-23
  **360
              Global Wine Company and Subsidiaries**
 **Notes
              to the Consolidated Financial Statements**
 **For
              the years ending December 31, 2006 and 2005**
 
 **7.**  **Notes
              Payable**
 
 **Notes
              Payable in Default**
  Notes
              payable in default consists of the following at December 31, 2006 and
              2005:
 At
                          December 31, 2006Principal
                      
                      OID
                      
                      NetConvertible
                          note payable, secured, convertible into shares of common
                          stock at any time
                          prior to maturity, with a fixed interest rate of 7.5% per
                          annum,
                          converting to 10% at default and due in April 2006 and
                          has not been paid
                          as of May 18, 2007
                      
                      $
                      4,492,500
                      
                      $
                      
                      
                      $
                      4,492,500**Notes
                          payable - in default**
                      
                      **$**
                      **4,492,500**
                      
                      **$**
                      **-**
                      
                      **$**
                      **4,492,500**
  Notes
              payable in default OID accretion for the year ending December 31, 2006,
              was
              $846,154.
 
 *Short-Term
              Notes Payable*
 
 Short-term
              notes payable consists of the following at December 31, 2006:
 At
                          December 31, 2006Principal
                      
                      OID
                      
                      NetPromissory
                          notes payable to 1 individual and 1 entityUnsecured,
                          with interest rates ranging from 6% to 10% per annum(10%-19%
                          default)
                      
                      $
                      545,000
                      
                      
                      -
                      
                      $
                      545,000Short-term
                          notes payable to 13 individuals from aMarch
                          2006 private placement, with an interest rate of 9%per
                          annum and an effective interest rate of 21% atDecember
                          31, 2006
                      
                      $
                      654,500
                      
                      $
                      (4,711
                      )
                      $
                      649,789Note
                          payable - Other
                      
                      $
                      438,675
                      
                      $
                      -
                      
                      
                      438,675Short-term
                          notes payable
                      
                      $
                      1,638,175
                      
                      $
                      (4,711
                      )
                      $
                      1,633,464
  Short-term
                notes payable original issue discount accretion for the year ended
                December 31,
                2006 and 2005 was $190,758 and $196,486, respectively.
  F-24
 **360
                  Global Wine Company and Subsidiaries**
 **Notes
                  to the Consolidated Financial Statements**
 **For
                  the years ending December 31, 2006 and 2005**
 
 **7.
              Notes Payable (continued)**
 
 Convertible
              Notes Payable issued with Stock Purchase Warrants
 
 In
              March
              2006, in a private placement to qualified buyers and accredited investors,
              the
              Company sold two Note Units. Each Note Unit consisted of (a) a promissory
              note
              in the initial principal amount of $25,000, convertible into shares
              of common
              stock at a conversion price of $3.50 per share and (b) 7,143 detachable
              warrants
              for the purchase of an equivalent number of shares of the Company’s common
              stock, par value $0.001 per share, at an exercise price of $3.50 per
              share,
              exercisable immediately. Interest on the notes is payable in full at
              the
              maturity date of the notes in March 2009. Total funds received of $50,000
              were
              allocated $34,306 to the warrants and $15,694 to the notes. The fair
              value of
              the warrants of $34,306 at the time of issuance was determined using
              the
              Black-Scholes option-pricing model, and was recorded as additional
              paid-in
              capital and a reduction in the carrying value of the notes. The discount
              on the
              notes is being accreted to interest expense over the term of the notes.
              On
              December 31, 2006, the unamortized discount on the notes was
              $4,711.
 
 *Long-Term
              Debt*
 
 Long-term
              debt consists of the following at December 31, 2006:
 At
                          December 31, 2006Principal
                      
                      OID
                      
                      Net*Unsecured
                          note payable*Subordinated
                          note payable, unsecured, convertible intoshares
                          of common stock at any time prior to maturity,with
                          a fixed interest rate of 7% per annum, due in June 2008
                      
                      $
                      1,000,000
                      
                      $
                      (488,339
                      )
                      $
                      511,661Long-term
                          note payable, unsecured
                      
                      $
                      1,000,000
                      
                      $
                      (488,339
                      )
                      $
                      511,661*Secured
                          note payable*Subordinated
                          note payable, secured, convertible into sharesof
                          common stock at nay time prior to maturity, with an
                          interestrate
                          of prime plus 2% per annum with a minimum interest rateof
                          8% per annum, due in July 2008
                      
                      $
                      34,290,000
                      
                      $
                      (17,404,560
                      )
                      $
                      16,885,440Revolving
                          line of credit up to $4,500,000, secured, including$500,000
                          convertible minimum borrowing note that is convertibleinto
                          shares of common stock at any time prior to maturity, with
                          aninterest
                          rate of prime plus 2% per annum with a minimum interestrate
                          of 8% per annum, due in July 2008, with an effective
                          interestrate
                          of 8% for the year ended December 31, 2006
                      
                      $
                      4,314,158
                      
                      $
                      (1,019,511
                      )
                      $
                      3,294,647Notes
                          payable with four expiration dates ranging between2006
                          and 2011 with interest rates ranging between 4.8%and
                          10.5% per annum. All notes are secured by operatingequipment
                      
                      $
                      1,804,596
                      
                      $
                      -
                      
                      $
                      1,804,596Long-term
                          note payable, secured
                      
                      $
                      41,408,754
                      
                      $
                      (18,912,410
                      )
                      $
                      22,496,344
 Long-term
              debt OID accretion for the years ended December 31, 2006 and 2005 was
              $16,131,392 and $6,678,288, respectively.
 
 F-25
  **360
              Global Wine Company and Subsidiaries**
 **Notes
              to the Consolidated Financial Statements**
 **For
              the years ending December 31, 2006 and 2005**
 
 **7.
              Notes Payable (continued)**
 
 Future
              maturities of long-term debt are as follows as of December 31,
              2006:
 
 2007
                    
                    $
                    28,2572008
                    
                    
                    1,028,2572009
                    
                    
                    28,2572010
                    
                    
                    40,307,6442011
                        and thereafter
                    
                    
                    16,339**$**
                    **41,408,754**
 
 Gryphon
              Master Fund
  In
              2003,
              the Company entered into two convertible note agreements with Gryphon
              Master
              Fund (“Gryphon”). At their inception, these notes had a combined principal
              balance of $3,500,000. In April 2004, these two notes were combined
              and the
              principal balance was increased to a total of $5,500,000. This note
              bears
              interest at 7.5% and was due in April 2006. In September 2004, the
              Company
              issued a $700,000 short-term note to pay interest due and to prepay
              future
              interest on the Gryphon convertible note. This note was paid in July
              2005. In
              addition, an officer and major shareholder was required to pledge his
              stock as
              an additional guarantee in September 2004. In July 2006, Gryphon formally
              filed
              a notice of default on the note. The Company is currently in discussions
              with
              Gryphon regarding the conversion of this debt into equity of the Company
              to the
              extent permitted by the terms of the note. Originally, the Company
              had pledged
              certain of its assets as collateral for this note. The collateral position
              held
              by Gryphon was subordinated to Laurus in July 2005.
 
 During
              2003, the Company issued Gryphon and a placement agent the following
              warrants to
              purchase shares of its common stock in connection with the $3,500,000
              convertible notes payable:
  Number
                        of WarrantsGryphon
                    
                    Placement
                      Agent
                    
                    PriceInitial
                        note balance:$1,500,000
                    
                    
                    2,778
                    
                    
                    167
                    
                    $
                    360.00$2,000,000
                    
                    
                    7,407
                    
                    
                    400
                    
                    $
                    105.00**Total
                        issued in 2003**
                    
                    
                    **10,185**
                    
                    
                    **567**
  Gryphon
              Master Fund, Continued
 
 During
              2004, in connection with the additional loan of $2,000,000 from Gryphon,
              the
              Company reduced the exercise price of the warrants previously issued
              to Gryphon
              in 2003 to $105 per share, and issued Gryphon and a placement agent
              the
              following additional warrants to purchase shares of its common
              stock:
  Number
                        of WarrantsPlacementGryphon
                    
                    Agent
                    
                    PriceIncrease
                        to note balance due to rewrite:$2,000,000
                    
                    
                    10,185
                    
                    
                    933
                    
                    $
                    105.0033,333
                    
                    
                    -
                    
                    $
                    1.50**Total
                        issued in 2004**
                    
                    
                    **43,518**
                    
                    
                    **933****Total
                        issued**
                    
                    
                    **53,703**
                    
                    
                    **1,500**
 
 F-26
 
 **360
                  Global Wine Company and Subsidiaries**
 **Notes
                  to the Consolidated Financial Statements**
 **For
                  the years ending December 31, 2006 and 2005**
 **7.
              Notes Payable (continued)**
 
 The
              $1,500,000 and $2,000,000 notes that originated during 2003 were convertible
              into shares of the Company’s common stock at $270.00 per share. In April 2004,
              in connection with the increase in the note balance to $5,500,000,
              the
              conversion price was reduced to $105 per share. In March 2006, the
              Company
              reduced the conversion price of the Gryphon note and the exercise price
              of the
              $105.00 warrants issued to Gryphon to $3.50 per share. Upon conversion,
              the
              conversion right could result in the issuance of 1,428,571 shares of
              the
              Company’s common stock based on the $5,000,000 balance at the time of the
              reduction in the conversion price. The exercise price of the warrants
              issued to
              the placement agent was not reduced.
 
 The
              holders of the notes and warrants have registration rights that require
              the
              Company to file a registration statement with the SEC to register for
              resale the
              common stock issuable upon conversion of the note or the exercise of
              the
              warrants. Because the ability to register the shares to be issued upon
              exercise
              and conversion is deemed to be outside the control of the Company,
              the initial
              fair value of the warrants and the initial fair value of the embedded
              conversion
              feature of the note were recorded as a financial instrument derivative
              liability
              and are marked-to-market at the end of each reporting period. As of
              May 18,
              2007, that registration statement was not effective.
 
 The
              Company estimated the fair value of the conversion feature and the
              warrants
              issued using the Black-Scholes valuation model with the following
              assumptions:
  ConversionAssumption
                    
                    Feature
                    
                    WarrantsTerm
                    
                    
                    2
                        or 3 years
                    
                    
                    5
                        yearsRisk
                        free interest rate
                    
                    
                    7.5%
                    1
                    
                    3.42%-4.71
                    %Volatility
                    
                    
                    86.6%-189.6
                    %
                    
                    134.2%-164.5
                    %Dividend
                        yield
                    
                    
                    0
                    
                    
                    0
  1Interest rate is the stated rate of the
                        note
 
 F-27
  **360
              Global Wine Company and Subsidiaries**
 **Notes
              to the Consolidated Financial Statements**
 **For
              the years ending December 31, 2006 and 2005**
 
 **7.
              Notes Payable (continued)**
 
 Gryphon
              Master Fund, Continued
 
 The
              initial estimated fair values of the conversion features and the warrants
              were:
  Financial
                        instrument derivative
                    
                    ValueConversion
                        feature:$1,500,000
                        note (October 2003)
                    
                    $
                    2,574,500$2,000,000
                        note (December 2003)
                    
                    
                    2,000,222$5,500,000
                        note (April 2004)
                    
                    
                    3,656,583Warrants:Issued
                        with $1,500,000 note (October 2003)
                    
                    
                    1,437,317Issued
                        with $2,000,000 note (December 2003)
                    
                    
                    2,317,980Issued
                        with $5,500,000 note (April 2004)
                    
                    
                    13,756,349
 
 The
              financial instrument derivative liability related to both the conversion
              feature
              and the warrants are adjusted to their fair value at the end of each
              period. The
              balance at each period-end and the related gain (loss) during the period
              are as
              follows:
  FinancialInstrument
                    
                    PeriodYear
                        Ended:
                    
                    Liability
                    
                    Balance
                    
                    Gain
                        (Loss)December
                        31, 2003
                    
                    
                    Conversion
                        Feature
                    
                    $
                    3,466,499
                    
                    $
                    1,108,223December
                        31, 2003
                    
                    
                    Warrants
                    
                    
                    3,165,194
                    
                    
                    590,103Balance,
                        December 31, 2003
                    
                    
                    
                    
                    $
                    6,631,693
                    
                    $
                    1,698,326December
                        31, 2004
                    
                    
                    Conversion
                        Feature
                    
                    $
                    1,590,000
                    
                    $
                    5,533,083December
                        31, 2004
                    
                    
                    Warrants
                    
                    
                    2,611,842
                    
                    
                    14,309,702Balance,
                        December 31, 2004
                    
                    
                    
                    
                    $
                    4,201,842
                    
                    $
                    19,842,785December
                        31, 2005
                    
                    
                    Conversion
                        Feature
                    
                    $
                    4,000
                    
                    $
                    1,586,000December
                        31, 2005
                    
                    
                    Warrants
                    
                    
                    163,280
                    
                    
                    2,448,559Balance,
                        December 31, 2005
                    
                    
                    
                    
                    $
                    167,280
                    
                    $
                    4,034,559December
                        31, 2006
                    
                    
                    Conversion
                        Feature
                    
                    $
                    0
                    
                    $
                    2,142,857December
                        31, 2006
                    
                    
                    Warrants
                    
                    
                    149,622
                    
                    
                    69,209Balance,
                        December 31, 2006
                    
                    
                    
                    
                    $
                    149,622
                    
                    $
                    2,212,066
 
 F-28
  **360
              Global Wine Company and Subsidiaries**
 **Notes
              to the Consolidated Financial Statements**
 **For
              the years ending December 31, 2006 and 2005**
  **7.
              Notes Payable (Continued)**
 
 Gryphon
              Master Fund, Continued
  The
              fair
              values of the conversion feature and of the warrants resulted in the
              recording
              of a discount on the convertible debt and the creation of financial
              instrument
              derivatives. The original issue discounts (OID) on the notes are accreted
              to
              interest expense, using the effective interest method, over the initial
              term of
              the notes. In certain instances, the excess of the fair values of the
              conversion
              feature and of the warrants over the proceeds from the issuance of
              the notes was
              recorded as interest expense upon origination during the two years
              as follows:
  Note
                        Expense
                    
                    OID
                        atIssuance
                    
                    Interest$1,500,000
                        (2003)
                    
                    
                    1,500,000
                    
                    
                    2,511,817$2,000,000
                        (2003)
                    
                    
                    2,000,000
                    
                    
                    2,318,202$5,500,000
                        (2004)
                    
                    
                    5,500,000
                    
                    
                    11,912,932
  The
              original issue discount offsets the face value of the note and is accreted
              evenly over the life of the note. The OID balance at each period-end
              and the
              related expense during the period are as follows:
 OID
                          Accreted InterestPrincipalBalance
                      
                      OIDPeriod
                          End
                      
                      of
                          Note
                      
                      Balance
                      
                      ExpenseDecember
                          31, 2003
                      
                      $
                      3,500,000
                      
                      $
                      3,379,121
                      
                      $
                      120,879December
                          31, 2004
                      
                      
                      5,500,000
                      
                      
                      3,596,154
                      
                      
                      5,282,967
                      3December
                          31, 2005
                      
                      
                      5,500,000
                      4
                      
                      8,461,554
                      
                      
                      2,750,000December
                          31, 2006
                      
                      
                      4,492,500
                      
                      
                      0
                      
                      
                      0
 3
                Includes full accretion of the prior notes of $1.5 and $2.0 million
                upon the
                issuance of the $5.5 million note
  4
                The
                Company made a principal payment of $500,000
 In
              connection with the Laurus notes entered into in July 2005, Gryphon
              subordinated
              its collateral position to Laurus and the Company reduced the conversion
              price
              of the Gryphon debt and the exercise price of the warrants. Also in
              connection
              with the Laurus notes, the Company made a $500,000 principal payment
              on the
              Gryphon note.
  As
              part
              of the subordination to Laurus, the Company’s Chief Executive Officer
              transferred 20,000 of his personally-held shares of the Company’s common stock
              to Gryphon. The fair value of these shares was $720,000 and was recorded
              as
              interest expense and additional paid in capital (Note 7 - Laurus Master
              Fund,
              Ltd.).
  The
              entire amount is shown in notes payable in default on the balance sheet
              as of
              December 31, 2006.
  F-29
  **360
              Global Wine Company and Subsidiaries**
 **Notes
              to the Consolidated Financial Statements**
 **For
              the years ending December 31, 2006 and 2005**
  **7.
              Notes Payable (continued)**
 
 ***Long-Term
              Debt***
 
 Laurus
              Master Fund, Ltd.
  In
              July
              2005, the Company entered into a $34,500,000 convertible note agreement
              and a
              $3,000,000 revolving note agreement with Laurus Master Fund, Ltd (“Laurus”).
              Both notes bear interest at the higher of 8% or prime plus 2%, have
              a three year
              term and were originally convertible into shares of the Company’s common stock
              at $37.50 per share. The Company did not draw on the revolving note
              until
              February 2006. In March 2006, in connection with the drastic decrease
              in the
              Company’s stock price, the conversion price of the convertible note was reduced
              to $3.50 per share which upon conversion could result in the issuance
              of
              9,857,143 shares of the Company’s common stock. The conversion price of the
              revolving note was also reduced to 3.50 per share. Upon conversion
              the maximum
              loan balance would result in the issuance of 857,143 shares. Also in
              March 2006,
              the amount available for borrowing on the revolving note was increased
              to
              $4,500,000, induced by the issuance of 650,000 warrants to purchase
              common stock
              at $3.50 per share. Laurus converted $210,000 of the principal of the
              note
              during the quarter ended September 30, 2006, into 60,000 shares at
              a conversion
              price of $3.50.
  The
              note
              provides for monthly payments based on daily interest rates and a structured
              schedule of principal repayment. The average monthly payment for the
              year ended
              December 31, 2005 on the $34,500,000 note was $314,316. The securities
              underlying the notes are subject to a registration rights agreement
              that
              requires the Company to file a registration statement and have it declared
              effective. As of May 18, 2007, that registration statement was not
              effective.
              The registration rights agreement provides for liquidated damages to
              Laurus for
              the failure of the registration statement to become effective. The
              effect of
              non-compliance with the terms of the registration rights agreement
              results in a
              charge of liquidated damages of 2% of the outstanding balance of the
              notes per
              month.
  The
              effective interest rate of the note at December 31, 2006 and December
              31, 2005
              was 31.3% and 60.5%. The line of credit portion of the Laurus loan
              agreement was
              first utilized in February 2006.
  The
              Company has accrued $1,334,381 of additional interest expense due to
              the lack of
              registration rights as of December 31, 2005. As of December 31, 2005,
              the
              Company has made interest payments totaling $1,025,633. The Company
              has pledged
              substantially all of its assets as collateral on these notes.
  As
              part
              of the original note agreements, the Company issued to Laurus 27,956
              shares of
              the Company’s common stock and warrants to purchase 166,667 shares of the
              Company’s common stock with an exercise price of $46.50 per share and warrants
              to purchase 109,950 shares of the Company’s common stock exercisable at $0.015
              per share. The fair value of the Company’s common shares issued in the
              transaction was $1,048,332, which was based on the fair value of the
              shares,
              $37.50 per share, on the date of issuance.
  Number
                        of
                    
                    ExerciseNote
                    
                    
                    Warrants
                    
                    
                    Price$34,500,000
                    
                    
                    166,667
                    
                    $
                    46.50109,950
                    
                    $
                    0.02$1,500,000
                        increase
                    
                    
                    650,000
                    
                    $
                    3.50Total
                        warrants issued
                    
                    
                    926,617
  F-30
  **360
              Global Wine Company and Subsidiaries**
 **Notes
              to the Consolidated Financial Statements**
 **For
              the years ending December 31, 2006 and 2005**
 
 **7.
              Notes Payable (continued)**
 
 ***Long-Term
              Debt***
 
 Laurus
              Master Fund, Ltd.
 
 The
              exercise price of the 166,667 warrants was reduced to $3.50 in March
              2006 in
              connection with the note conversion price reduction.
  The
              holder of the note and warrants has registration rights that require
              the Company
              to file a registration statement with the SEC to register for resale
              the common
              stock issuable upon conversion of the note or the exercise of the warrants.
              Because the ability to register the shares to be issued upon exercise
              and
              conversion is deemed to be outside the control of the Company, the
              initial fair
              value of the warrants and the initial fair value of the embedded conversion
              feature of the note were recorded as a financial instrument derivative
              liability
              and are marked-to-market at the end of each reporting period.
 
 The
              Company estimated the fair value of the conversion feature and the
              warrants
              issued using the Black-Scholes valuation model with the following
              assumptions:
 ConversionAssumption
                      
                      Feature
                      
                      WarrantsTerm
                      
                      
                      3
                          years
                      
                      
                      5
                          yearsRisk
                          Free Interest Rate
                      
                      
                      8.25%
                          - 9.75
                      %1
                      
                      4.13%
                          - 4.78
                      %Volatility
                      
                      
                      160.3%
                          - 181.7
                      %
                      
                      161.1%
                          - 168.4
                      %Dividend
                          yield
                      
                      
                      0
                      
                      
                      0
 1 Interest
                rate is the stated rate of the note
 The
              initial estimated fair values of the conversion feature, warrants and
              the common
              shares issued as an inducement were:
  Financial
                        instrument
                    
                    Fair
                        ValueConversion
                        feature:$34,500,000
                        note (July 2005)
                    
                    
                    34,237,800$3,000,000
                        line of credit (upon borrowing Feb 2006)
                    
                    
                    318,563$1500,000
                        line of credit increase (upon borrowing March 2006)
                    
                    
                    2,172,748
                    2$300,437
                        borrowing on the line of credit (April 2006)
                    
                    
                    562,037$42,210
                        borrowing on the line of credit (May 2006)
                    
                    
                    56,047$207,799
                        borrowing on the line of credit (June 2006)
                    
                    
                    306,502Warrants:Issued
                        with $34,500,000 note (July 2005)
                    
                    
                    11,531,157Issued
                        with $1,500,000 line of credit increase (March 2006)
                    
                    
                    4,871,652Common
                        shares issued as inducement:Issued
                        with $34,500,000 note (July 2005)
                    
                    
                    1,048,332
  2 The
                Company initially borrowed an additional $1,173,532
 F-31
 **360
                  Global Wine Company and Subsidiaries**
 **Notes
                  to the Consolidated Financial Statements**
 **For
                  the years ending December 31, 2006 and 2005**
 
 **7.
              Notes Payable (continued)**
 
 ***Long-Term
              Debt***
 
 Laurus
              Master Fund, Ltd.
 
 The
              financial instrument derivative liability related to both the conversion
              feature
              and the warrants are adjusted to their fair value at the end of each
              period. The
              balance at each period-end and the related gain (loss) during each
              period are as
              follows:
 
 Instrument
                    
                    PeriodYear
                        Ended:
                    
                    Liability
                    
                    Balance
                    
                    Gain
                        (Loss)December
                        31, 2005
                    
                    
                    Conversion
                        Feature
                    
                    
                    1,973,400
                    
                    
                    32,264,400Warrants
                    
                    
                    967,796
                    
                    
                    10,563,361Balance,
                        December 31, 2005
                    
                    
                    
                    
                    
                    2,941,196
                    
                    
                    42,827,761December
                        31, 2006
                    
                    
                    Conversion
                        Feature
                    
                    
                    31,478,599
                    
                    
                    15,707,678December
                        31, 2006
                    
                    
                    Warrants
                    
                    
                    3,186,336
                    
                    
                    1,162,061Balance,
                        December 31, 2006
                    
                    
                    
                    
                    
                    34,664,935
                    
                    
                    16,869,739
  The
              fair
              value of the warrants and of the conversion feature resulted in the
              recording of
              a discount on the convertible debt. The OID on the notes are accreted
              to
              interest expense, using the effective interest method, over the initial
              term of
              the notes. The excess of the fair values of the warrants, common shares
              issued
              and the conversion feature over the proceeds from the issuance of the
              notes was
              recorded as interest expense upon origination as follows:
  OID
                        at
                    
                    AdditionalNote
                        Expense
                    
                    Issuance
                    
                    Interest$34,500,000
                        convertible note
                    
                    
                    34,500,000
                    
                    
                    11,310,930$3,000,000
                        LOC
                    
                    
                    318,563
                    
                    
                    -$1,500,000
                        LOC increase
                    
                    
                    1,173,532
                    
                    
                    999,216Increased
                        borrowing on LOC
                    
                    
                    300,437
                    
                    
                    261,600Increased
                        borrowing on LOC
                    
                    
                    42,210
                    
                    
                    13,837Increased
                        borrowing on LOC
                    
                    
                    207,799
                    
                    
                    98,702
  F-32
  **360
              Global Wine Company and Subsidiaries**
 **Notes
              to the Consolidated Financial Statements**
 **For
              the years ending December 31, 2006 and 2005**
 
 **7.
              Notes Payable, Continued**
 
 ***Long-Term
              Debt***
 
 Laurus
              Master Fund, Ltd.
 
 The
              original issue discount offsets the face value of the note and is accreted
              evenly over the life of the note. The OID balance at each year-end
              and the
              related expense during the period are as follows:
  OID
                        Accreted InterestPrincipalBalance
                        of
                    
                    OIDPeriod
                        End
                    
                    Note
                    
                    Balance
                    
                    ExpenseBalance,
                        December 31, 2005
                    
                    $
                    34,500,000
                    
                    $
                    28,939,560
                    
                    $
                    5,560,440Balance,
                        December 31, 2006
                    
                    $
                    38,604,158
                    
                    $
                    18,424,071
                    
                    $
                    10,515,489
 
 Wynthrop
              Barrington
 
 In
              June
              2005, the Company entered into a convertible note agreement with Wynthrop
              Barrington, Inc. (“Wynthrop”). This note had a principal balance of $10,000,000,
              bears interest at 7% and is due in June 2008. This note is unsecured.
              The note
              was originally convertible into shares of the Company’s common stock at $49.50
              per share. In March 2006, the Company reduced the conversion price
              of the
              Wynthrop note to $3.50 per share which upon conversion at that time
              could have
              resulted in the issuance of up to 2,857,143 shares of the Company’s common
              stock. Later in March 2006, Wynthrop converted $9,000,000 of its note
              resulting
              in the issuance of 2,571,429 shares of common stock. The monthly interest
              only
              payment on the note in the amount of $29,667 is due at the beginning
              of each
              month.
 
 The
              holder of the note has registration rights that require the Company
              to file a
              registration statement with the SEC to register for resale the common
              stock
              issuable upon conversion of the note. Because the ability to register
              the shares
              to be issued upon conversion is deemed to be outside the control of
              the Company,
              the initial fair value of the embedded conversion feature of the note
              was
              recorded as a financial instrument derivative liability and is marked-to-market
              at the end of each reporting period.
 
 The
              Company estimated the fair value of the conversion feature using the
              Black-Scholes valuation model with the following assumptions:
 Conversion
                          FeatureAssumptionTerm
                      
                      
                      3
                          yearsRisk
                          free interest rate
                      
                      
                      7.0
                      %Volatility
                      
                      
                      160.3%-168.4
                      %Dividend
                          yield
                      
                      
                      0
 Interest
              rate is the stated rate of the note
 
 The
              initial estimated fair value of the conversion feature was:
 
 Financial
                          Instrument Derivative
                      
                      ValueConversion
                          feature:$10
                          million note (2005)
                      
                      $
                      7,325,091
  F-33
 **360
                Global Wine Company and Subsidiaries**
 **Notes
                to the Consolidated Financial Statements**
 **For
                the years ending December 31, 2006 and 2005**
  **7.
              Notes Payable, Continued**
 
 The
              financial instrument derivative liability related to the conversion
              feature is
              adjusted to its fair value at the end of each reporting period. The
              balance at
              each period-end and the related gain or loss during each period are
              as
              follows:
 FinancialInstrument
                      
                      PeriodYear
                          Ended
                      
                      Liability
                      
                      Balance
                      
                      Gain
                          (Loss)December
                          31, 2005
                      
                      
                      Conversion
                          feature
                      
                      $
                      407,614
                      
                      $
                      6,917,477December
                          31, 2006
                      
                      
                      Conversion
                          feature
                      
                      $
                      810,641
                      
                      
                      (403,027
                      )
 
 The
              fair
              value of the conversion feature resulted in the recording of a discount
              on the
              convertible debt. The OID on the note is accreted to interest expense,
              using the
              effective interest method, over the initial term of the note. The amount
              of OID
              at origination is as follows:
 Note
                      
                      OID
                          at Issuance$10,000,000
                          convertible note
                      
                      $
                      7,325,091
  The
              OID
              is offset against the face value of the note payable and is accreted
              ratably
              over the life of the note. The OID balance at each period-end and the
              related
              expense during the period are as follows:
  OID
                          Accreted InterestYear
                          Ended
                      
                      Principal
                          Balance
                            of
                            Note
                      
                      OID
                          Balance
                      
                      ExpenseDecember
                          31, 2005
                      
                      $
                      10,000,000
                      
                      $
                      6,104,242
                      
                      $
                      1,220,848December
                          31, 2006
                      
                      $
                      1,000,000
                      
                      $
                      511,661
                      
                      $
                      81,390
  F-34
  **360
              Global Wine Company and Subsidiaries**
 **Notes
              to the Consolidated Financial Statements**
 **For
              the years ending December 31, 2006 and 2005**
 
 **8.
              Financial Instrument Derivatives Liability**
 
 The
              following is a summary of the financial instrument derivative liabilities
              as of
              December 31, 2006 and 2005:
  December
                          312006
                      
                      2005Gryphon
                          note payableWarrant
                          liability
                      
                      $
                      149,622
                      
                      $
                      163,280Conversion
                          feature
                      
                      
                      0
                      
                      
                      4,000Laurus
                          note payableWarrant
                          liability
                      
                      
                      3,186,336
                      
                      
                      967,796Conversion
                          feature
                      
                      
                      31,488,083
                      
                      
                      1,973,400Wynthrop
                          note payableWarrant
                          liability
                      
                      
                      0
                      
                      
                      0Conversion
                          feature
                      
                      
                      810,641
                      
                      
                      407,614Total
                      
                      $
                      35,634,682
                      
                      $
                      3,516,090
 F-35
  **360
              Global Wine Company and Subsidiaries**
 **Notes
              to the Consolidated Financial Statements**
 **For
              the years ending December 31, 2006 and 2005**
 
 **9.** **** **Commitments
              and Contingencies**
  *Lease
              Commitments*
  Future
              minimum lease payments (excluding the effect of future increases in
              payments
              based on indices which cannot be estimated at the present time) required
              under
              non-cancelable operating leases with terms in excess of one year are
              as
              follows:
  2007
                    
                    $
                    872,7002008
                    
                    
                    332,5762009
                    
                    
                    171,2932010
                        and thereafter
                    
                    
                    79,816**$**
                    **1,456,385**
  *Litigation
              and Disputes*
  The
              Company is involved in various lawsuits, claims, and proceedings which
              arose in
              the ordinary course of business. In accordance with SFAS No. 5, Accounting
              for
              Contingencies, the Company makes a provision for a liability when it
              is both
              probable that a liability has been incurred and the amount of the loss
              can be
              reasonably estimated. The Company believes it has adequate provisions
              for all
              such matters that have come to the attention of the Company. The Company
              reviews
              these provisions at least quarterly and adjusts these provisions to
              reflect the
              impacts of negotiations, settlements, rulings, advice of legal counsel,
              and
              other information and events pertaining to a particular case. Litigation
              is
              inherently unpredictable. However, the Company believes that it has
              valid
              defenses with respect to legal matters pending against it. Nevertheless,
              it is
              possible that cash flows or results of operations could be materially
              affected
              in any particular period by the unfavorable resolution of one or more
              of these
              contingencies. As of the date of the filing of this report, to the
              best of
              management’s knowledge and belief, the Company faces legal action, either actual
              or potential, as follows:
  Andy
              Warhol Foundation Suit
  In
              September, 2003, the Company entered into a license agreement with
              the Andy
              Warhol Foundation for the Visual Arts (the “Foundation”) to market an
              international collection of wines. The Company planned to launch an
“artist
              series” of wines during the second half of 2006 using some of the artwork and
              quotations created by Mr. Warhol on some of the Company’s wine products. Under
              the agreement, the Company was granted a non-exclusive license to use
              Andy
              Warhol's artwork throughout North America, in connection with the Company’s wine
              products. Specifically, the Company was entitled to use artwork and
              quotations
              created by Andy Warhol on the Company’s wine labels. Pursuant to the terms of
              the agreement, the Company was obligated to pay four percent (4%) of
              all net
              sales of the wine, containing Andy Warhol's artwork or quotes that
              the Company
              sold to the Andy Warhol Foundation. The Company was also required,
              under the
              agreement, to pay minimum royalty fees to the Andy Warhol Foundation
              as follows:
              $40,000 on December 31, 2003 (which was paid); $45,000 on December
              15, 2004
              (which was paid); $135,000 on December 15, 2005; and $180,000 on December
              15,
              2006. The Company terminated this agreement in October, 2005, prior
              to the
              launch of any Company product containing artwork or quotations created
              by Mr.
              Warhol.
  F-36
  **360
              Global Wine Company and Subsidiaries**
 **Notes
              to the Consolidated Financial Statements**
 **For
              the years ending December 31, 2006 and 2005**
 
 **9.** **** **Commitments
              and Contingencies (continued)**
 
 On
              March
              7, 2006, the Foundation filed suit against the Company in U.S. District
              Court,
              Southern District of New York, for monies allegedly owed under the
              original
              contract. The suit is entitled “The Andy Warhol Foundation for the Visual Arts
              v. 360 Global Wine Co., f/k/a Knightsbridge Fine Wines, Inc.,” and has been
              assigned case number 06 CV 1796. The Company has answered the complaint
              denying
              all allegations by the plaintiff and filed counterclaims for breach
              of contract
              and breach of covenant of good faith and fair dealing. On August 9,
              2006, the
              parties took part in a court-administered mediation conference, and
              subsequently
              agreed in principle to settle the case. In September 2006, the Company
              and the
              Foundation entered into a settlement agreement and release. Accordingly,
              the
              suit has dismissed. Under the settlement, the Company shall pay to
              the
              Foundation $170,000 in four equal installments (September 6, 2006,
              December 6,
              2006, March 6, 2006 and June 6, 2006) As of this date, the Company
              has made
              payment(s) as scheduled
 
 Wall
              Street Communications Suit
  Wall
              Street Communications Group Inc. alleges that, pursuant to a Finder's
              Fee and
              Non-Circumvention Agreement with Wall Street Communications Group Inc.,
              the
              Company had agreed to pay Wall Street Communications Group Inc. a finder's
              fee
              consisting of cash and stock options in connection with their introduction
              of
              Laurus Master Fund, Ltd. to the Company in connection with the Company’s
              financing needs in 2005. Wall Street Communications Group Inc. further
              alleges
              that thereafter, the Company refused to pay, or publicly disclose in
              its press
              releases or SEC filings, the agreed upon finder's fee. Wall Street
              Communications Group Inc. filed suit against the Company in state District
              Court
              in Boulder County, Colorado. The court issued a default judgment against
              the
              Company on December 16, 2005 ordering the Company to pay to Wall Street
              Communications Group Inc. a lump sum payment of $1.425 million, plus
              4.0% of
              each and every past and future disbursement to the Company under its
              $3.0
              million Revolving Note with Laurus Master Fund, Ltd. The court also
              ordered the
              Company to issue to Wall Street Communications Group Inc., under the
              Finder's
              Fee and Non-Circumvention Agreement, a five-year option to purchase
              1,250,000
              shares of the Company's common stock at $.31 per share, a second option
              to
              purchase 824,621 shares of the Company's common stock at $.001 per
              share and
              209,666 shares of restricted common stock on the same terms offered
              Laurus
              Master Fund, Ltd.
  On
              June
              9, 2006, the court granted the Company's motion to set aside the default
              judgment on the grounds that the Company was not properly served and
              did not
              receive notice of Wall Street's action against it. The Company has
              denied Wall
              Street Communications' claims that it was involved with the Company's
              financing
              of the Viands acquisition and intends to defend against these claims
              vigorously.
              Discovery in the case has just begun, and no trial date has been
              set.
  F-37
  **360
              Global Wine Company and Subsidiaries**
 **Notes
              to the Consolidated Financial Statements**
 **For
              the years ending December 31, 2006 and 2005**
 
 **9.** **** **Commitments
              and Contingencies**  **(continued)**
 
 *Litigation
              and Disputes*
 
 Longview
              Fund Suit
  On
              October 12, 2005, the Company was served with a Summons and a Notice
              of Motion
              in Lieu of Complaint, titled Longview Fund, LP, Longview Equity Fund,
              LP and
              Longview International Equity Fund, LP, Plaintiffs vs. 360 Global Wine
              Company,
              Inc., f/k/a Knightsbridge Fine Wines, Inc., Defendant, Supreme Court
              of the
              State of New York, County of New York, index no. 05603607. The plaintiffs
              requested that the court grant their Order for Summary Judgment on
              behalf of
              Longview Funds, LP in the amount of $280,345, Longview Equity Fund,
              LP in the
              amount of $224,276, and Longview International Equity Fund, LP in the
              amount of
              $56,069, with interest at the rate of 18% per annum from October 10,
              2005, plus
              attorneys’ fees, costs and distributions in the action, and such other, further
              and different relief as the court deems just and proper. The Order
              for Summary
              Judgment was granted by the court in December 2005. The Company reached
              a
              settlement agreement with the plaintiffs, which: (1) recognized the
              principal
              amounts due to the plaintiffs, (2) required an initial payment of $150,000
              on
              January 22, 2006 which is comprised of $125,000 in principal reductions
              and
              $25,000 in legal fees (this has been paid), (3) allowed for the inclusion
              of 10%
              simple interest, and (4) required a monthly payment of $100,000 until
              such time
              as the debt is satisfied. Commencing in September, 2006, Longview and
              the
              Company informally modified the settlement agreement to reduce the
              monthly
              payments to $50,000, which are payable either in cash or by the conversion
              of
              the underlying debt into shares of the Company’s common stock at market price.
              As of the filing of this Quarterly Report on Form 10-QSB, the Company
              is one
              month behind in such monthly payments.
 
 Costin
              Suit
  On
              August
              16, 2006, Consuelo Costin filed a lawsuit against the company, styled
“Consuelo
              Costin, Plaintiff vs. Knightsbridge Fine Wines, Inc., a Nevada corporation
              number C13452-2000; Knightsbridge Fine Wines, Inc., a Nevada corporation
              number
              C24980-2002; 360 Global Wine Company, Inc.; 360 Global Wine Company,
              Inc., a
              Nevada corporation; Joel Shapiro, an individual, and Does 1-50, inclusive,
              Defendants,” Superior Court of the State of California for the County of Los
              Angeles, Case No. BC357113. Plaintiff alleges causes of action against
              the
              corporate defendants for breach of contract, misappropriation of name
              and
              identity, and violation of California Civil Code Section 3344, and
              against Mr.
              Shapiro for intentional interference with contractual relations. The
              defendants
              have filed an answer in this matter (in which they denied the allegations
              in the
              complaint) and have filed a counter-claim against plaintiff for breach
              of
              contract, fraud, negligent misrepresentation, unfair business practices,
              and
              rescission. The plaintiff’s allegations relate to an alleged contract between
              plaintiff and certain corporate defendants in which plaintiff allegedly
              granted
              a license to a trademark that defendants thereafter understood could
              not have
              been so granted by plaintiff. Defendants believe that plaintiff’s case is wholly
              without merit and intend to defend against her claims vigorously.
  In
              2004,
              Kirkland Ranch, LLC (“KR”) and 260 Global Wine Company, Inc. (“Global”), entered
              into an operating agreement (the “Operating Agreement”), thereby creating
              Kirkland Knightsbridge, LLC (“KKLLC”). The Operating Agreement contains numerous
              provisions with respect to the parties’ respective rights and
              obligations.
 
 In
              or
              about July 2005, Global acquired 360 Viansa, LLC (“Viansa”). Viansa is a winery
              with physical operations in Sonoma, California. However, Viansa sells
              its wines
              worldwide through its wine clubs and on line sales, which account for
              the bulk
              of Viansa’s revenues.
 
 Towards
              the end of 2005, however, Viansa and KKLLC entered into a bottling
              agreement and
              a custom crush agreement (collectively, the “Wine Processing Agreements”) with
              respect to Viansa’s wine. Neither the bottling agreement nor the custom crush
              agreement reference the Operating Agreement and neither document incorporates
              any terms related thereto, or involves Global.
  F-38
  **360
              Global Wine Company and Subsidiaries**
 **Notes
              to the Consolidated Financial Statements**
 **For
              the years ending December 31, 2006 and 2005**
  **9.** **** **Commitments
              and Contingencies**  **(continued)**
 
 Viansa
              and KKLLC operated pursuant to the Wine Processing Agreements for a
              little over
              one (1) year, at which time a dispute arose between KKLLC and Viansa
              with
              respect to amounts owed by Viansa to KKLLC pursuant to the Wine Processing
              Agreements. KKLLC asserted that the Wine Processing Agreements provide
              KKLLC
              with a lien on Viansa’s assets in KKLLC’s possession in the event of nonpayment
              by Viansa, which KKLLC has asserted. In fact, KKLLC provided Viansa
              with notice
              of its intent to foreclose on its collateral (i.e., Viansa’s wine) and sell such
              collateral through a foreclosure sale. Viansa disputed the foregoing
              and
              contended that it has made payments to KKLLC and was not obligated
              to
              KKLLC.
 
 Based
              on
              KKLLC’s refusal to turn over Viansa’s wine, on October 5, 2006, Viansa initiated
              an adversary proceeding by filing a Complaint for Turnover of Property
              (“Complaint”) against KKLLC, pursuant to which Viansa sought a turnover of its
              wine and related assets. In response to the Complaint, KKLLC filed
              an answer and
              a counterclaim (the “Counterclaim”) against Viansa and Global, asserting that
              Viansa and Global are alter egos and that Global is liable to KKLLC
              for damages
              stemming from the Operating Agreement.
 
 Trial
              was
              scheduled on an expedited basis for December 12, 2006 (trial lasted
              through
              December 13, 2006) (the “Trial”). Although KKLLC sought to adjudicate the Viansa
              vs. KKLLC Complaint and the KKLLC vs. Viansa and Global Counterclaim,
              Trial was
              held with respect to the Viansa vs. KKLLC Complaint only. Global was
              not a party
              to the pleadings at issue during the Trial. The sole issue for Trial
              was whether
              Viansa was entitled to a turnover of its wine in KKLLC’s possession, which
              required adjudication of the amounts owed by Viansa to KKLLC and application
              of
              payments made by Viansa.
 
 At
              the
              conclusion of Trial, the bankruptcy Court issued a Judgment finding
              that
              Viansa’s payments to KKLLC were made on account of Global’s obligations to KKLLC
              pursuant to the Operating Agreement and that such payments should not
              be applied
              to Viansa’s debt to KKLLC. Based on the foregoing, the Bankruptcy Court entered
              judgment in favor of KKLLC and against Viansa. Viansa has appealed
              the Judgment.
              The appeal is pending before the Bankruptcy Appellate Panel for the
              ninth
              Circuit Court of Appeals.
 
 Trial
              on
              the Counterclaim was scheduled for June 2007. However, in light of
              Viansa’s and
              Global’s bankruptcy filings on March 7, 2007, the foregoing litigation was
              stayed.
 
 Except
              as
              otherwise disclosed herein, the Company is not aware of any other material
              legal
              proceedings against the Company.
  F-39
 **360
                Global Wine Company and Subsidiaries**
 **Notes
                to the Consolidated Financial Statements**
 **For
                the years ending December 31, 2006 and 2005**
 
 **10.** **** **Related
              Party Transactions** ****
 
 *Issuance
              of Shares by an Officer and Major Stockholder*
 
 An
              officer and major stockholder of the Company transferred his personal
              shares of
              Company common stock to entities and individuals for the following
              purposes:
 
 Inducement
              to loan money to the Company - In the
              years ended December 31, 2005 and 2004, the officer and major stockholder
              transferred 39,000 and 833 shares of the Company’s common stock amounting to
              $1,700,000 and $41,250, respectively, based upon the fair value of
              the shares at
              the time of their transfer. The transactions were for the purpose of
              inducing
              Gryphon to loan money to the Company and were treated by the Company
              as capital
              contributions by the officer and major stockholder and recorded as
              interest
              expense with a corresponding increase to additional paid-in
              capital.
 
 Employment
              incentives to Company employees - In the
              year ended December 31, 2005, the officer and major stockholder transferred
              8,667 shares of the Company’s common shares amounting to $78,000 based upon the
              fair value of the shares at the time of their transfer. The transactions
              were
              for the purpose of providing employment incentives to Company employees
              and were
              treated by the Company as capital contributions by the officer and
              major
              stockholder and as employee compensation expense with a corresponding
              increase
              to additional paid-in capital.
 
 **11.** **** **Equity
              Transactions** ****
 
 *Common
              Stock Activity*
 
 Shares
              Issued for Cash
 
 In
              November 2005, the Company issued 42,863 shares of its common stock
              to an
              individual for $150,000 in cash.
 
 During
              the quarter ended March 31, 2006, the Company issued 71,429 shares
              of its common
              stock to an individual for cash of $250,000.
 
 Shares
              Issued to Employees and Board of Directors Members as
              Compensation
 
 In
              February 2005, the Company issued 783 shares of its common stock to
              eight
              individuals for past services. The Company's common shares issued to
              the
              individuals had a value of $38,775 based upon its fair value at the
              date of
              issuance.
  In
              March
              2006, the Company issued 75,000 shares of its common stock as compensation
              to
              two employees with a value of $562,500 based on the fair value of the
              stock on
              the date of issuance.
 
 In
              March
              2006, the Company issued 1,569,120 shares of its common stock to two
              Board of
              Director members for past services with a total value of $12,332,250
              based on
              the fair value of the stock at the date of issuance.
 
 In
              December 2006, the Company issued 31,530 shares of its common stock
              as
              compensation to eighteen employees with a value of $109,725 based on
              the fair
              value of the stock on the date of issuance.
 
 Shares
              Issued to Consultants for Services
 
 In
              June
              2005, the Company issued 50,000 shares of its common stock to a former
              executive
              for past services in accordance with an employment agreement. The Company's
              common shares issued to the individual had a value of $1,875,000 based
              upon its
              fair value at the date of issuance.
  F-40
  **360
              Global Wine Company and Subsidiaries**
 **Notes
              to the Consolidated Financial Statements**
 **For
              the years ending December 31, 2006 and 2005**
 
 **11.** **** **Equity
              Transactions (continued)**
 
 In
              July
              2005, the Company issued 636 shares of its common stock to an employee
              for past
              services. The Company's common shares issued to the individual had
              a value of
              $27,620 based upon its fair value of at the date of issuance.
 
 In
              August
              2005, the Company issued 233 shares to two employees for past services.
              The
              Company's common shares issued to the individuals had a value of $2,100
              based
              upon its fair value at the date of issuance.
 
 In
              March
              2005, the Company issued 1,000 shares of its common stock to an entity
              for past
              consulting services. The Company's common shares issued for the consulting
              services to the entity had a value of $75,000 based upon its fair value
              on the
              date of issuance.
 
 In
              April
              2005, the Company issued 1,667 shares of its common stock to an entity
              for past
              consulting services. The Company's common shares issued for the consulting
              services to the entity had a value of $77,500 based upon its fair value
              on the
              date of issuance.
 
 In
              March
              2006, the Company issued 696,133 shares of its common stock to thirteen
              entities
              or individuals for past and future consulting services with a value
              of
              $4,306,010 based upon the fair value of the stock at the date of
              issuance.
 
 In
              March
              2006, the Company issued 603,438 shares of its common stock to five
              entities or
              individuals for future advertising services with a value of $4,525,785
              based
              upon the fair value of the stock at the date of issuance.
 
 In
              the
              quarter ended September 30, 2006, the Company issued 376,843 shares
              of its
              common stock to eight entities or individuals for past consulting services
              with
              a value of $1,244,776 based upon the fair value of the stock at the
              date of
              issuance.
 
 In
              the
              quarter ended June 30, 2006, the Company issued 7,500 shares of its
              common stock
              to one individual and one entity for past consulting services with
              a value of
              $40,250 based upon the fair value of the stock at the date of
              issuance.
 
 In
              the
              quarter ended December 31, 2006, the Company issued 171,629 shares
              of its common
              stock to nine entities or individual for past consulting services with
              a value
              of $600,701 based upon the fair value of the stock at the date of
              issuance.
 
 Shares
              Issued in Conjunction with Debt Instruments
 
 In
              April
              2005, the Company issued an additional 2,000 shares of its common stock
              to the
              same institutional investor that was issued shares in May and October
              2004, as
              an inducement to forestall default on a short-term convertible note
              payable,
              which is in default as of October 10, 2006. The Company's common shares
              issued
              to the institutional investor as a financing incentive had a value
              of $144,000
              based upon fair value on the date of issuance. The value of the common
              shares
              issued was immediately recorded as interest expense.
 
 In
              May
              2005, the Company issued an additional 13,333 shares of its common
              stock to the
              same institutional investor that was issued shares in May and October
              2004 and
              April 2005, as an inducement to forestall default on a short-term convertible
              note payable, which is in default as of October 10, 2006. The Company's
              common
              shares issued to the institutional investor as a financing incentive
              had a value
              of $660,000 based upon its fair value on the date of issuance. The
              value of the
              common shares issued was immediately recognized as interest
              expense.
 
 In
              July
              2005, the Company issued 27,956 share of its common stock to an institutional
              investor as an inducement for the issuance of a convertible note payable.
              The
              financing transaction was completed in July 2005. The Company's common
              shares
              issued to the institutional investor had a value of $1,048,350 based
              upon fair
              value at the date of issuance (Note 7 - Laurus Master Fund). The value
              of the
              common shares issued was immediately recorded as interest expense.
  F-41
  **360
              Global Wine Company and Subsidiaries**
 **Notes
              to the Consolidated Financial Statements**
 **For
              the years ending December 31, 2006 and 2005**
 
 **11.** **** **Equity
              Transactions (continued)**
 
 In
              July
              2005, the Company issued 6,437 shares of its common stock to an institutional
              investor as partial consideration for the subordination of their collateral
              position securing the institutional investor's convertible note payable
              to
              facilitate another Company financing transaction. The Company's common
              shares
              issued to the institutional investor had a value of $299,293 based
              upon fair
              value at the date of issuance (Note 7 - Gryphon Master Fund). The value
              of the
              common shares issued was immediately recorded as interest expense.
 
 In
              March
              2006, the Company issued 2,571,429 shares of its common stock in partial
              satisfaction of a convertible note payable at the contractually specified
              conversion price of $3.50 per share amounting to $9,000,000.
 
 In
              March
              2006, the Company issued 121,811 shares of its common stock in satisfaction
              of
              accrued interest and principal on multiple notes payable to an individual
              at the
              price of $3.50 per share amounting to $426,339.
 
 In
              March
              2006, the Company issued 250,000 shares of its common stock in satisfaction
              of
              penalty charges on a convertible note payable with a value of $1,875,000
              based
              on the fair value of the stock on the date of issuance.
 
 In
              July
              2006, the Company issued 7,500 shares of its common stock as payment
              of interest
              to a note payable holder. The shares had a value of $26,250 based upon
              the fair
              value of the stock at the date of issuance.
 
 In
              August
              2006, the Company issued 44,447 shares of its common stock as repayment
              of a
              note payable to an individual with a value of $125,000 and accrued
              interest with
              a value of $30,250 based upon the based upon the fair value of the
              stock at the
              date of issuance.
 
 During
              the quarter ended September 30, 2006, the Company issued 60,000 shares
              of its
              common stock to Laurus in partial satisfaction of a convertible note
              payable at
              the contractually specified conversion price of $3.50 per share amounting
              to
              $210,000.
 
 During
              the quarter ended September 30, 2006, the Company issued 359,545 shares
              of its
              common stock to Laurus in partial settlement of accrued interest amounting
              to
              $383,047.
 
 During
              the quarter ended September 30, 2006, the Company issued 145,000 shares
              of its
              common stock to Gryphon in partial satisfaction of a convertible note
              payable at
              the contractually specified conversion price of $3.50 per share amounting
              to
              $507,500.
 
 During
              the quarter ended September 30, 2006, the Company issued 13,333 shares
              of its
              common stock to Longview in partial satisfaction of a convertible note
              payable
              at the contractually specified conversion price of $3.50 per share
              amounting to
              $46,666.
 
 In
              December 2006, the Company issued 44,447 shares of its common stock
              as
              compensation to one investor as repayment of a short term loan with
              a value of
              $155,562 based on the fair value of the stock on the date of
              issuance.
 
 During
              the quarter ended December 31, 2006, the Company issued 205,000 shares
              of its
              common stock to Gryphon in partial satisfaction of a convertible note
              payable at
              the contractually specified conversion price of $3.50 per share amounting
              to
              $717,500.
 
 During
              the quarter ended December 31, 2006, the Company issued 15,000 shares
              of its
              common stock to Laurus in partial satisfaction of a convertible note
              payable at
              the contractually specified conversion price of $3.50 per share amounting
              to
              $52,500.
 
 During
              the quarter ended December 31, 2006, the Company issued 27,419 shares
              of its
              common stock to Longview funds in partial satisfaction of a convertible
              note
              payable at the contractually specified conversion price of $3.50 per
              share
              amounting to $95,966.
 
 During
              the quarter ended December 31, 2006, the Company issued 380,000 shares
              of its
              common stock to five investors in partial satisfaction of a convertible
              note
              payable at the contractually specified conversion price of $3.50 per
              share
              amounting to $1,330,000.
  F-42
  **360
                Global Wine Company and Subsidiaries**
 **Notes
                to the Consolidated Financial Statements**
 **For
                the years ending December 31, 2006 and 2005**
 **11.** **** **Equity
              Transactions (continued)**
 
 Shares
              Issued In Conjunction with a Minimum Share Guarantee
 
 In
              March
              2006, the Company issued 49,767 shares of its common stock to meet
              the minimum
              shares guarantee resulting from the Company’s reverse common stock split that
              occurred in February 2006 (Note 3). These shares are valued at $50
              or $0.001
              (par value).
 
 In
              the
              quarter ended June 30, 2006, the Company issued 461 shares of its common
              stock
              to meet the minimum shares guarantee resulting from the Company’s reverse common
              stock split that occurred in February 2006 (Note 3). These shares are
              valued at
              $0.001 (par value).
 
 Shares
              Issued in Conjunction with the Exercise of Warrants
 
 During
              the quarter ended September 30, 2006, the Company issued 181,724 to
              an entity
              and an individual for the exercise of warrants outstanding. Both of
              the
              transactions were cashless exercises and the shares were recorded at
              $.001(par
              value).
 
 *Warrant
              Activity*
 
 During
              the three-month period ended March 31, 2005, the BOD approved the issuance
              of
              warrants to purchase an aggregate of 3,000 shares of the Company’s common stock.
              Such warrants are exercisable at a price of $82.50 per share, vested
              immediately, and expire at various times through January 2011. The
              warrants were
              issued to two individuals in association with the issuance of short-term
              notes
              payable. The total value of the warrants is $88,879.
 
 During
              the three-month period ended June 30, 2005, the BOD approved the issuance
              of
              warrants to purchase an aggregate of 2,000 shares of the Company’s common stock.
              These warrants are exercisable at a price of $82.50 per share, vest
              immediately,
              and expire at various times through January 2010. The warrants to purchase
              2,000
              shares of the Company’s common stock were issued to an individual in association
              with the issuance of short-term note payable. The total value of the
              warrants is
              $107,607.
 
 During
              the three-month period ended September 30, 2005, the BOD approved the
              issuance
              of warrants to purchase an aggregate of 301,616 shares of the Company’s common
              stock. Such warrants are exercisable at prices ranging from $0.02 to
              $46.50 per
              share, vested immediately, and expire at various times through September
              2010.
              Included in the issuance of warrants to purchase 301,616 aggregate
              shares of the
              Company’s common stock was a warrant to purchase 25,000 shares of common stock
              that was issued to one employee as compensation for past services.
              This issuance
              was valued using the Black-Scholes option pricing model, which resulted
              in the
              recording of $253,125 in compensation cost. The Company also issued
              warrants to
              purchase 276,616 shares of the Company’s common stock to an entity in
              association with a convertible note payable. The total value of the
              warrants
              $11,531,157 was recorded as a liability (Note 7 - Laurus Master Fund).
              In
              association with an equity transaction of the Company, a warrant holder
              canceled
              6,437 of their warrants, which reduced the number of outstanding warrants
              (Note
              7 - Gryphon Master Fund).
 
 During
              the nine-month period ended September 30, 2006, the BOD approved the
              issuance of
              warrants to purchase 900,002 shares of the Company’s common stock. These
              warrants are exercisable at $3.50 per share, at any time until they
              expire which
              will be at periods ranging from March 2009 through March 2021.
 
 During
              the nine-month period ended September 30, 2006, two warrant holders
              exercised
              their warrants, resulting in the issuance of 181,724 shares of the
              Company’s
              common stock. The warrants were exercised in cashless exercises, and
              the share
              issuances were valued at par value.
 
 During
              the nine-month period ended September 30, 2006, 667 warrants to purchase
              the
              Company’s common stock expired.
  F-43
  **360
              Global Wine Company and Subsidiaries**
 **Notes
              to the Consolidated Financial Statements**
 **For
              the years ending December 31, 2006 and 2005**
 **11.** **** **Equity
              Transactions (continued)**
 
 *Summary
              of Outstanding Warrants*
 
 A
              summary
              of warrant activity for the period ended December 31, 2006 is as
              follows:
 Weighted-
                      
                      
                      
                      Weighted-Average
                      
                      
                      
                      AverageNumber
                          of
                      
                      Exercise
                      
                      Warrants
                      
                      ExerciseWarrants
                      
                      Price
                      
                      Exercisable
                      
                      Price**Outstanding,****Outstanding,****December
                          31, 2005**
                      
                      
                      **367,168**
                      
                      **$**
                      **30.60**
                      
                      
                      **367,168**
                      
                      **$**
                      **30.60**Granted
                      
                      
                      900,002
                      
                      $
                      3.50
                      
                      
                      900,002
                      
                      $
                      3.50Exercised
                      
                      
                      (181,724
                      )
                      $
                      3.50
                      
                      
                      (181,274
                      )
                      $
                      3.50(667
                      )
                      
                      311.09
                      
                      
                      (667
                      )
                      
                      3311.09**Outstanding,****December
                          31, 2006**
                      
                      
                      **1,084,779**
                      
                      **$**
                      **5.18**
                      
                      
                      **1,084,779**
                      
                      **$**
                      **5.18**
  At
              December 31, 2006, the range of warrant prices for shares under warrants
              and the
              weighted-average remaining contractual life is as follows:
 Warrants
                          Outstanding
                      
                      
                      
                      Warrants
                          ExercisableWeighted-Range
                          of
                      
                      
                      
                      Weighted-
                      
                      Average
                      
                      
                      
                      Weighted-Warrant
                      
                      
                      
                      Average
                      
                      Remaining
                      
                      Number
                      
                      AverageExercise
                      
                      Number
                          of
                      
                      Exercise
                      
                      Contractual
                      
                      of
                      
                      ExercisePrice
                      
                      Warrants
                      
                      Price
                      
                      Life
                      
                      Warrants
                      
                      Price$46.50-$600.00
                      
                      
                      225,052
                      
                      $
                      297.22
                      
                      
                      3.12
                      
                      
                      225,052
                      
                      $
                      297.20$3.50
                      
                      
                      798,168
                      
                      $
                      3.50
                      
                      
                      11.08
                      
                      
                      798,168
                      
                      $
                      3.50$1.50
                      
                      
                      33,333
                      
                      $
                      1.50
                      
                      
                      2.56
                      
                      
                      33,333
                      
                      $
                      1.50$0.02
                      
                      
                      28,226
                      
                      $
                      0.02
                      
                      
                      3.77
                      
                      
                      28,226
                      
                      $
                      0.021,084,779
                      
                      
                      
                      
                      
                      
                      
                      
                      1,084,779
 The
              assumptions used in the Black-Scholes option pricing model for the
              warrants
              granted during the year ended December 31, 2006 are as follows:
 Risk-free
                          interest rate ranging from:
                      
                      
                      4.30%
                          to 4.52
                      %Expected
                          volatility of common stock:
                      
                      
                      164.8%
                          to 165.2
                      %Dividend
                          yield:
                      
                      
                      0
                      %Term
                          of the warrants granted:
                      
                      
                      4
                          years to 15 yearsWeighted
                          average fair market value of warrantsgranted
                          during the year
                      
                      $
                      7.30
 F-44
  **360
              Global Wine Company and Subsidiaries**
 **Notes
              to the Consolidated Financial Statements**
 **For
              the years ending December 31, 2006 and 2005**
 **12.** **** **Income
              Taxes** ****
 
 The
              Company accounts for income taxes in accordance with Statement of Financial
              Accounting Standards (“SFAS”) No. 109, “Accounting for Income Taxes.” Under
              SFAS No.109, deferred tax assets and liabilities are computed based
              on the
              difference between the financial statement and income tax bases of
              assets and
              liabilities using the enacted marginal tax rate. SFAS No. 109 requires that
              the net deferred tax asset be reduced by a valuation allowance if,
              based on the
              weight of available evidence, it is more likely than not that some
              portion or
              all of the net deferred tax asset will not be realized. The Company
              continues to
              reduce its net deferred tax assets by a 100% valuation allowance.
 
 **13.** **** **Acquisitions** ****
 
 *The
              Viansa Winery Transaction*
 
 Business
              Combination
  In
              July
              2005, the Company acquired all of the general and limited partnership
              units of
              Viansa Winery, a California Limited Partnership and all of the membership
              interests of La Fontana di Viansa, LLC, a California Limited Liability
              Company
              (collectively Viansa) for $26,410,013 in cash and professional and
              other direct
              fees totaling $1,657,663. Included in the other direct fees was a lender
              management fee of $1,085,175. The operating results of Viansa are included
              in
              the Company’s income statement from the date of acquisition. The acquisition of
              Viansa was part of the Company’s strategy to build upon its domestic wine
              operations. The Company recorded the assets and liabilities of Viansa
              based on
              fair values at the date of acquisition. The allocation of certain Viansa
              assets
              was based on an April 2005 appraisal of land, buildings, fixtures and
              inventories. Management believes that there was no material change
              in the values
              of these assets from April 2005 to July 2005.
 
 The
              allocation of the Viansa acquisition cost is shown below:
 July
                          8, 2005Assets
                          acquired:Accounts
                          receivable
                      
                      $
                      1,532,445Inventories,
                          including growing crop costs of $146,135
                      
                      
                      15,266,000Property
                          and equipment
                      
                      
                      12,398,759Other
                          assets
                      
                      
                      607,548Assets
                          acquired
                      
                      $
                      29,804,752
  July
                          8, 2005Liabilities
                          assumed:Cash
                          overdraft
                      
                      $
                      91,494Accounts
                          payable
                      
                      
                      971,919Deferred
                          revenue
                      
                      
                      455,572Notes
                          payable, short and long term
                      
                      
                      218,091Liabilities
                          assumed
                      
                      
                      1,737,076**Allocation
                          of purchase price of net assets of Viansa at****Acquisition**
                      
                      **$**
                      **28,067,676**
  F-45
 **360
                Global Wine Company and Subsidiaries**
 **Notes
                to the Consolidated Financial Statements**
 **For
                the years ending December 31, 2006 and 2005**
 **13.** **** **Acquisitions
              (continued)**
 
 *The
              Texas Property Transaction*
 
 The
              Acquisition
 
 In
              June
              2005, the Company acquired the property, facilities and mineral remnants
              -
              granite (the “Texas property”) for $12,599,269. The purchase price is comprised
              of $2,500,000 in cash, an unsecured convertible note to the seller
              for
              $10,000,000 (Note 7) and fees related to the transactions of $99,269.
              A
              provision of the transaction’s Security and Purchase agreement requires a
              minimum of 50% of gross proceeds resulting from Company granite sales to be
              applied against the outstanding balance of the convertible note. In
              March 2006,
              Wynthrop Barrington, Inc., the seller of the Texas property and the
              holder of
              the convertible note converted $9,000,000 of the principal balance
              into
              2,571,429 shares of the Company’s common stock at $3.50 per share (Note 7). The
              Texas property purchase price has been allocated to the real property
              and
              facilities based on their fair value as determined by appraisal and
              the
              remainder to the mineral remnants - granite. The Texas property is
              located in
              Burnet County, Texas, near the city of Granite Shoals, is identified
              as the Cold
              Springs Granite Quarry, and has been dormant for more than two years.
              The Texas
              property is comprised of approximately 136 acres, 130,000 square feet
              of office,
              warehouse and mixed use space, along with mineral remnants consisting
              of granite
              block and other stone remnants.
 
 In
              July
              2005, the Company pledged the Texas property with carrying value of
              $12,599,269
              as security in the Laurus loan transaction with a balance of $34,500,000
              as of
              December 31, 2005 (Note 7).
 
 Valuation
              of the Real Property and Facilities
 
 The
              real
              property and facilities have been allocated $6,000,000 of the purchase
              price
              based on appraised market value defined in the July 2005 appraisal’s premise of
              value as “the most probable price which a property should bring in a competitive
              and open market under all conditions requisite to a fair sale, the
              buyer and
              seller each acting prudently and knowledgeably, and assuming the price
              is not
              affected by undue stimulus”.
 
 Valuation
              of the Mineral Remnants - Granite Block and Other Stone Remnants
 
 The
              Company utilized an estimate of quantities and gross sale values from
              an
              individual that did not include estimates of the cost of gathering,
              processing,
              or selling costs of the granite block and other stone remnants. The
              estimated
              gross revenue of the granite blocks and other stone remnants was $9,750,000.
              The
              Company allocated $6,500,000 (the difference between the Texas property’s
              acquisition price and the value allocated to the real property and
              facilities)
              to the granite block and other stone remnants.
 
 The
              Plan
              of Disposal
 
 In
              2006,
              as a result of a change in the Company’s strategic planning, it has decided to
              sell the Texas property and has initiated a plan of disposal (Note
              5 - *Assets
              Held-For-Sale* ).
  F-46
 **360
                Global Wine Company and Subsidiaries**
 **Notes
                to the Consolidated Financial Statements**
 **For
                the years ending December 31, 2006 and 2005**
 
 **13.
              Acquisitions (continued)**
 
 *The
              Kirkland Knightsbridge, LLC Transaction*
 
 Business
              Combination
 
 In
              April
              2004, the Company acquired a 50% membership interest in Kirkland Knightsbridge,
              LLC, a California Limited Liability Company ("KKLLC"). The Company
              acquired its
              membership interest with the issuance of 28,369 shares of its common
              stock with
              a fair value based on the market price at the date of the acquisition
              of
              $10,000,000. In addition, the Company provided loans to KKLLC amounting
              to
              $2,450,000 and guaranteed a pre-existing obligation of the other member
              for a
              promissory note originally issued in the amount of $20,000,000, to
              Metropolitan
              Life Insurance Company ("Met Life"). The Company’s membership acquisition
              commitment included the requirement to make all principal and interest
              payments
              due under the Met Life promissory note if not paid by KKLLC (Notes
              4- *MetLife
              Foreclosure Action-now Madison* )
              and
              fund all additional working capital contributions required for the
              ongoing
              operations of KKLLC. The Company’s failure to make the required cash advances
              has resulted in the possibility of forfeiture of its membership interest
              (Note
              9). Ownership of KKLLC is evenly split between the Company and the
              only other
              member. Pursuant to the KKLLC Operating Agreement, the Company has
              disproportionate control over certain budgetary and expenditure matters
              and has
              the ability to appoint key
 employees.
              In the past, the Company has treated KKLLC as an entity that required
              consolidation.
 
 The
              Company recorded the assets and liabilities of KKLLC including a "minority
              interest" equal to the other member’s capital account based on fair values at
              the date of acquisition. The allocation of KKLLC assets was based on
              a November
              2003 appraisal of land, buildings and fixtures.
 
 The
              allocation of the KKLLC acquisition cost is shown below:
 April
                          24, 2004Assets
                          acquired:Cash
                      
                      $
                      316,503Accounts
                          receivable assumed
                      
                      
                      130,483Inventories
                      
                      
                      4,424,373Property
                          and equipment
                      
                      
                      39,402,080Other
                          assets
                      
                      
                      693,119Total
                          assets
                      
                      $
                      44,966,558Liabilities
                          assumed in the acquisition
                      
                      $
                      23,169,684Minority
                          interest
                      
                      
                      11,796,874Total
                          liabilities and minority interest recorded
                      
                      $
                      34,966,558Allocation
                          of net assets of KKLLC at acquisition
                      
                      $
                      10,000,000
 F-47
 **360
                Global Wine Company and Subsidiaries**
 **Notes
                to the Consolidated Financial Statements**
 **For
                the years ending December 31, 2006 and 2005**
 
 **14.** **** **Subsequent
              Events**
 
 On
              March
              8, 2007, the Company and its subsidiaries filed petitions for relief
              under
              Chapter 11 of the federal bankruptcy laws in the United States Bankruptcy
              Court
              for the Central District of Nevada, in Reno, Case No. 07-50205-GWZ
              and
              07-50206-GWZ. Under Chapter 11, certain claims against the Debtor in
              existence
              prior to the filing of the petitions for relief under the federal bankruptcy
              laws are stayed while the Debtor continues business operations as a
              Debtor-in-possession. Claims secured against the Debtor’s assets (“secured
              claims”) also are stayed, although the holders of such claims have the right
              to
              move the court for relief from the stay. The Company intends to emerge
              from
              bankruptcy and continue its business. The Company will require the
              raising of
              capital through the issuance of DIP notes and common stock, which will
              significantly dilute the ownership percentages of existing shareholders
              as of
              December 31, 2007.
 
 In
              March,
              2007, KKLLC filed a motion to change venue of 360 Global’s and Viansa’s
              bankruptcy cases from the District of Nevada (Reno Division) to the
              Northern
              District of California (Santa Rosa Division). The Debtors, as well
              as its
              primary lenders (Laurus and Gryphon) and other creditors opposed the
              motion to
              transfer venue. At a hearing held on April 22, 2007, the Debtors prevailed
              and
              the motion to change venue was denied. The reorganizations will continue
              in the
              District of Nevada (Reno Division).
 
 Viansa
              winery was a party to a written lease with Carneros Warehousing (“CW”) with
              respect to Viansa’s bottling facility in Sonoma. Pursuant to the lease, Viansa
              was required to exercise its option by December, 2006 to extend the
              lease for
              three years after February 28, 2007. Viansa did not exercise its option
              in
              accordance with the express terms of the agreement and, on March 7,
              2007, CW
              served Viansa with notice to vacate the premises. In light of Viansa’s
              bankruptcy filing on March 7, 2007, the notice was stayed. CW thereafter
              filed a
              motion for relief from the automatic stay in order to seek eviction
              in the state
              court. Viansa opposed the motion. Subsequently, at a hearing scheduled
              for April
              22, 2007, Viansa and CW reached an agreement pursuant to which Viansa
              will have
              the ability to occupy the premises to carry out its bottling operations
              through
              December 31, 2007. During this period, Viansa will locate an alternate
              facility
              and improve it for the transition at year end.
 
 **15.** **** **Going
              Concern**
 
 The
              Company has an accumulated deficit through December 31, 2006 totaling
              $97,731,424 and had working capital of $17,340,595. Because of this
              accumulated
              deficit, the Company will require additional working capital to develop
              its
              business operations. The Company intends to raise additional working
              capital
              either through private placements, public offerings and/or bank financing.
              There
              are no assurances that the Company will be able to either (1) achieve
              a level of
              revenues adequate to generate sufficient cash flow from operations;
              or (2)
              obtain additional financing through either private placement, public
              offerings
              and/or bank financing necessary to support the Company’s working capital
              requirements.  To the extent that funds generated from any private
              placements, public offerings and/or bank financing are insufficient,
              the Company
              will have to raise additional working capital.  No assurance can be given
              that additional financing will be available, or if available, will
              be on terms
              acceptable to the Company.  If adequate working capital is not available,
              the Company may not be able to continue its operations.
 
 The
              Company faces many factors in its ability to continue as a going concern,
              including but not limited to, competition from larger and better capitalized
              companies, and its ability to market its products.
 
 **16.** **** **Income
              (Loss) per Common Share**
 
 In
              January 2006, the Company authorized a reverse stock split of its outstanding
              shares for stockholders of record as of January 31, 2006 and that was
              effective
              as of February 28, 2006. The reverse stock split resulted in the issuance
 of
              one
              share for each hundred and fifty shares that were previously outstanding.
              Previously reported share and income (loss) per share amounts have
              been
              restated.
  F-48