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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-KSB



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(Mark One)

|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------



For the fiscal year ended December 31, 2004



OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------



For the transition period from  to



000-23712

(Commission File No.)



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ASCONI CORPORATION

(formerly Grand Slam Treasures, Inc.)

(Name of Small Business Issuer in Its Charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Nevada                                                         |  | 91-1395124                          
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification No.)



|                                                           |  |           
|---------------------------------------------------------- |  | ----------
|2200 Winter Springs Blvd., Suite 206, #330 Oviedo, Florida |  | 32765     
|(Address of Principal Executive Offices)                   |  | (Zip Code)



Issuers
Telephone Number, Including Area Code: (407) 679-9463



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Securities registered under Section 12(b) of the Securities Exchange Act of 1934:



None



Securities registered under Section 12(g) of the Securities Exchange Act of 1934:



Common Stock, par value $.001 per share



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Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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  x    No ̈



Check if
disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained herein, 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. ̈



Issuers revenues for the fiscal year ended December 31, 2004: $19,318,600.



The aggregate market value of the voting and non-voting common equity held by
non-affiliates, computed by reference to the closing price per share of the registrants common stock as reported on the American Stock Exchange as of March 31, 2005, was $2,226,656.



As of March 31, 2005, there were 12,168,678 shares of issuers common stock outstanding.



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



Documents incorporated by reference



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##### Table of Contents

TABLE OF CONTENTS



|         |  |                                                                                                                 |  |   
|-------- |  | --------------------------------------------------------------------------------------------------------------- |  | --
|         |  | PART I                                                                                                          |  |   
|         |  |                                                                                                                
|ITEM 1.  |  | DESCRIPTION OF BUSINESS                                                                                         |  | 4 
|ITEM 2.  |  | DESCRIPTION OF PROPERTY                                                                                         |  | 16
|ITEM 3.  |  | LEGAL PROCEEDINGS                                                                                               |  | 17
|ITEM 4.  |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                             |  | 18
|         |  |                                                                                                                
|         |  | PART II                                                                                                         |  |   
|         |  |                                                                                                                
|ITEM 5.  |  | MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES  |  | 19
|ITEM 6.  |  | MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION                                                       |  | 21
|ITEM 7.  |  | FINANCIAL STATEMENTS                                                                                            |  | 31
|ITEM 8.  |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                            |  | 31
|ITEM 8A. |  | CONTROLS AND PROCEDURES                                                                                         |  | 31
|         |  |                                                                                                                
|         |  | PART III                                                                                                        |  |   
|         |  |                                                                                                                
|ITEM 9.  |  | DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT |  | 33
|ITEM 10. |  | EXECUTIVE COMPENSATION                                                                                          |  | 35
|ITEM 11. |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS                  |  | 36
|ITEM 12. |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                                  |  | 37
|         |  |                                                                                                                
|         |  | PART IV                                                                                                         |  |   
|         |  |                                                                                                                
|ITEM 13. |  | EXHIBITS                                                                                                        |  | 38
|ITEM 14. |  | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                                          |  | 40



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Cautionary Note Regarding Forward-Looking Statements



This annual report contains both historical and forward-looking statements. All statements
other than statements of historical fact are, or may be deemed to be, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The
forward-looking statements in this annual report are not based on historical facts, but rather reflect the current expectations of our management concerning future results and events.



The forward-looking statements generally can be identified by the use of terms such as believe, expect,
anticipate, intend,  plan, foresee, likely or other similar words or phrases. Similarly, statements that describe our objectives, plans or goals are or may be forward-looking statements.



Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause our actual results, performance or achievements to be different from any future results, performance and achievements expressed or implied by these statements. You should review carefully all information, including the
financial statements and the notes to the financial statements included in this report. The following important factors could affect future results, causing the results to differ materially from those expressed in the forward-looking statements in
this annual report.



| |  |  | the timing, impact and other uncertainties related to pending and future acquisitions by us;
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | the impact of new technologies;
| | - |  | -------------------------------



| |  |  | changes in laws or rules or regulations of governmental agencies; and
| | - |  | ---------------------------------------------------------------------



| |  |  | currency exchange rate fluctuations.
| | - |  | ------------------------------------



These factors are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in the forward-looking statements
in this annual report. Other unknown or unpredictable factors also could have material adverse effects on our future results. The forward-looking statements in this annual report are made only as of the date of this annual report, and we do not have
any obligation to publicly update any forward-looking statements to reflect subsequent events or circumstances. We cannot assure you that projected results will be achieved.



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PART I



Introductory Note



The consolidated financial statements, including the information in the
notes thereto, as of and for the year ended December 31, 2003 included in this Annual Report on Form 10-KSB are unaudited.



The Companys consolidated financial statements as of and for the year ended December 31, 2003, as included in the Companys Annual Report on Form 10-KSB/A for
the year ended December 31, 2003, were audited by Michaelson & Co., P.A., which firm in its report dated April 2, 2004 expresses an unqualified opinion on those financial statements.



Michaelson & Co., P.A. has advised the Company that it will not grant the Company permission to reuse its report on the fiscal 2003
consolidated financial statements in this Annual Report on Form 10-KSB. However, Michaelson & Co., P.A. has not, as of the date of the filing of this Annual Report on Form 10-KSB for the year ended December 31, 2004, withdrawn its opinion on the
Companys consolidated financial statements as of and for the year ended December 31, 2003, as included in the Companys Annual Report on Form 10-KSB/A for the year ended December 31, 2003.



Accordingly the fiscal 2003 consolidated financial statements, as included herein, are deemed
unaudited. Except for certain reclassifications to conform to fiscal 2004 presentations, the fiscal 2003 consolidated financial statements, as included herein, have been derived from, without adjustment, those included in the Companys Annual
Report on Form 10-KSB/A for the year ended December 31, 2003.



The omission of
a report on the audit of the fiscal 2003 consolidated financial statements from this Annual report on Form 10-KSB means that this Annual Report on Form 10-KSB fails to comply, in that respect, with the rules and regulations of the SEC. The Company
is presently exploring the feasibility of having the Companys 2003 consolidated financial statements reaudited for the purpose of curing the aforementioned 2004 Form 10-KSB filing deficiency.



ITEM 1. DESCRIPTION OF BUSINESS



Throughout this
annual report on Form 10-KSB, the terms we, us, our, Asconi and our Company refer to Asconi Corporation, a Nevada corporation, and, unless the context indicates otherwise, includes our
subsidiaries.



Overview



We were formerly known as Grand Slam Treasures, Inc. and were incorporated under the laws of
the State of Nevada in March 2000. On April 12, 2001, we effectuated a share exchange (Merger) whereby our wholly-owned subsidiary, Asconi Holding Company Limited, a British Virgin Island company, acquired all of the outstanding interest in Asconi
S.R.L., and Asconi S.R.L. became a direct wholly-owned subsidiary of Asconi Holding Company Limited and our indirect wholly-owned subsidiary. Asconi S.R.L. was formed in October 1994 as a Republic of Moldova limited liability company, which is
materially similar to a limited liability company in the United States, which we refer to as the U.S. The sole owners of Asconi S.R.L. from the time of its formation until April 12, 2001 were Constantin Jitaru and Anatolie Sirbu. Asconi S.R.L. has
been producing and distributing wine throughout Eastern Europe since 1999.



Prior to April 12, 2001, we engaged in various business ventures, including the purchase and marketing of sports memorabilia and recovered sunken treasure. In connection with the Merger, we sold all of our current assets and liabilities to
Hannibal Corporation, a wholly-owned company of our former officers and directors prior to April 12, 2001.



We own 100% of the equity interest in Asconi Holding Company Limited, which owns 100% of the equity interest in Asconi S.R.L. and Coppet Finance Limited, a British Virgin Island limited liability company. Asconi
S.R.L. owns 70% of the equity interest in S.A. Fabrica de Vinuri din Puhoi, 74% of the equity interest in S.A. Orhei-vin and 61% of the equity interest in S.A. Vitis Hincesti. All three entities in which Asconi S.R.L. owns an equity interest are
Moldovan entities.



Asconi S.R.L., S.A. Fabrica de Vinuri din Puhoi, S.A.
Orhei-vin and S.A. Vitis Hincesti all are engaged in the production and distribution of wine. Coppett Finance Limited serves as the selling subsidiary for certain of our sales to customers outside of Moldova, in particular to certain customers in
the Russian Federation, and also contracts for certain services used by the wine making subsidiaries. We use Coppett Finance Limited for these purposes to avail ourselves of certain tax savings that are available because Coppett Finance Limited is
incorporated in the British Virgin Islands. In general Coppett Finance Limited hold minimal assets, and the net cash received by Coppett Finance Limited is transferred to the Moldova subsidiaries through inter-company loans.



Although Asconi Corporation does engage in the importation and wholesale of our products in
the U.S., the vast majority of our operations are conducted through our subsidiaries, and the following discussion of our business includes the business of Asconi S.R.L. and our other subsidiaries.



All of our wine making operations are conducted in the Republic of Moldova, which is located
between Romania and Ukraine in Eastern Europe. Having our production facilities and vineyards in the Republic of Moldova generates certain challenges for us, such as:



| |  |  | Obtaining government approval and licensing relating to the operation of a business can still be time-consuming, costly and bureaucratic.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The countrys legal, regulatory and accounting systems are in the process of transitioning to a market based system versus a state-influenced system and these new systems are
not yet entirely consistent with international laws. The infrastructure in the country is relatively poor by not only U.S. standards, but Western European standards also.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The majority of the parliament and the president of the country are current members of the Communist party, which is one of several political parties in the country. The Communist
party won the majority vote in the new Moldovan parliament during the March 2005 elections.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Corruption in the federal government of Moldova as well as local governments is extensive and the current laws, regulations and penalties against corruption are not strictly
enforced which can lead to uncertainty when working with government personnel and agencies.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



All measurements referring to size or capacity are those used in the U.S. (i.e., foot, acre, and gallon) and any financial information is reflected in U.S. dollars, unless otherwise noted.



Our fiscal year ends on December 31, and references to fiscal 2004 refer to the
year ended December 31, 2004, references to fiscal 2003 refer to the year ended December 31, 2003, references to fiscal 2002 refer to the year ended December 31, 2002, references to fiscal 2001 refer to the year ended
December 31, 2001 and references to fiscal 2000 refer to the year ended December 31, 2000.



Our website is atwww.acsoni.com. That website is not a part of this Annual Report on Form 10-KSB.



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Industry Background



Moldovas winemaking tradition is hundreds of years old. At one point in the early 1980s, Moldova produced over 20% of the wine consumed in the former Soviet
Union. However, the Moldovan wine industry underwent a change between 1985 and 1991 during the Soviet Unions anti-alcohol campaigns that destroyed nearly 40% of Moldovas vineyards. In the mid to late 1980s, thousands of acres of
vineyards were destroyed in an attempt to limit alcohol consumption under the so-called dry law enacted by the Soviet authorities.



After Moldova proclaimed independence and became a sovereign state in 1991, the Moldovan wine industry began coordinating efforts to attract foreign investments, boost
exports and modernize winemaking equipment. The Moldovan government has also taken steps to stimulate growth and boost exports for companies based in Moldova. For example, in 1995, the Moldovan government eliminated its 20% value added tax on all
exports. In 2001, the Moldovan government eliminated excise taxes of approximately 8 to 11 cents per liter, depending on the alcohol content, on all bottled wine exports. In addition, over the last several years, the Moldovan government has
substantially reduced the corporate income tax rate from 32% in 2001 to 20% in 2004. The enacted corporate income tax rate for 2005 is 18%.



Current production capacity of the approximately 150 wineries in Moldova is eight to ten million gallons of wine a year from approximately 425,000 acres of vineyards. For
the years ended December 31, 2004 and 2003, the total exports of Moldovas wineries were approximately $278 and $260 million, respectively, to 34 countries, with exports to the Russian Federation accounting for approximately 80% ($225 and $208
million, respectively) of those amounts. For the years ended December 31, 2002 and 2001, the Moldovan wineries collectively exported approximately $200 million and $175 million, respectively, of wine and brandies to 34 and 28 countries, with 80% and
77% of all wine exports going to the Russian Federation. Exchange rate stability, favorable customs tariffs for Moldovan products as well as improved market conditions in the Russian Federation set the environment, which enable importers to continue
to increase demand in this vital market for Moldova. There are, however, certain political risks, which may pose threat to the preferential treatment of Moldovan products by the Russian legislation. For example, the increasing pro-EU direction of
Moldova has caused negative reaction within the Russian Parliament with a number of Russian politicians voicing intentions to introduce economic sanctions against Moldova including the removal of tax duty break on wines imported from Moldova.



While approximately 90% of Moldovan wineries are private, some large wineries
remain state owned. In its privatization program for 2003-2005 the government has reiterated its intention to sell its controlling interest in various wineries and brandy distillers to foreign investors. During 2004 and 2003, the Moldovan government
sold a number of enterprises, including the Calarasi Divin distillery and the Vismos and Nis Strugurras sparkling wines plants, to private investors from the Russian Federation. In April 2004 the Parliament of Moldova passed the new Law on
Investments, which establishes equivalent regulations for foreign and domestic investors, promotes removal of the government bureaucratic barriers and envisions further reduction of taxes.



Products



Our wines are categorized as either white or red/rose, and either ordinary or aged, and are further categorized as either dry, semi-dry,
semi-sweet, sweet, dessert and fortified wines. Among our bottled wines, our sweet and semi-sweet wines currently account for approximately 75% of our sales, dessert wines account for approximately 12% of our sales, dry and semi-dry wines account
for approximately 8% of our sales and fortified wines account for approximately 5% of our sales. We also sell wine in bulk to other wineries in Moldova for bottling under their brand name, which accounts for less than 3% of our sales.



In total, we generate revenues from over 350 separate products derived from 32 varieties of
grapes. Our products are combined into series such as: Souvenir, Antique, Gothic, Vivat, Grand Reserve, Dekabrist, Love Story, European Collection,
Classic and French. Each series has a particular design and market. The Gothic series includes the Muscat Rubiniu and Muscat Asconi firm-developed brands. We continually develop and
introduce new products initiated by both our viticulturists and distributors. However, less than 10% of our sales each year are generated from new products developed that year.



We package our wine in a variety of bottle sizes including 0.187, 0.5, 0.7, 0.75, 1.5 liter and 2.0 liters as well as bag in the box
packages of 3 liters. All bottles are corked with genuine Portuguese cork and capped with shrink capsules made of Italian materials supplied by Euro Cork and First Line companies of Moldova. We purchase bottles from a small number of manufacturers,
primarily the Moldovan Glass Container Company and Cristal Flor, which together provide us with approximately 95% of our bottles, as well as Bolgarian Drujba. Wine bottles are packed and shipped in carton containers or boxes supplied by Moldcarton
and Horn of Moldova. We purchase bags for our bag in the box packaging from Rapak Gmbh of Germany and Salterio of Israel. We purchase boxes for our bag in the box packaging from Moldovan Olero S.R.L. and Horn.



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Our products and packaging meet all appropriate national and international standards. Each label contains the
winerys brand name, alcohol content, wine type and class designation, brief wine legend, a bar code (back label), year of production of vintage wines, as well as other required notices such as the government warning and the sulfite
declaration. Labels are supplied by Vox Design of Italy, New Wind Company of Poland and Financial Papers of Moldova as well as Dars of Bulgaria.



We also produce and sell several types of vodka and brandy, including seven varieties of brandy, one of which is our own Asconi brand, as well as six varieties of vodka.
Sales of these products account for less than 1% of our revenues.



Sales and
Marketing



In both fiscal 2004 and 2003, we derived approximately 99% of
our total revenue from sales of our products outside Moldova, with approximately 83% and 89%, respectively, of our total revenue coming from sales in the Russian Federation. In October 2003, we signed agreements with Grand Vin, Ltd. and Bonus
Bord Ltd., to export an additional ten million bottles of varietal and blended wines to the Russian Federation in the 12 months after the agreement. In addition, we signed an agreement in April 2003 with Israel Colonial Food, Ltd. to export up to
360,000 bottles of varietal and blended wines to Israel by the end of fiscal 2004. Besides the Russian Federation, we primarily export products to the U.S., Czech Republic, Poland, Romania, Bulgaria, Belarus, Ukraine, Switzerland and Israel.



Currently, wines produced by our S.A. Vitis Hincesti subsidiary as well as
vodka products are sold in Moldova. Our sales within Moldova are limited as the conditions in the domestic wine market in Moldova do not provide for substantial sales volumes and attractive profit margins. As a result, the Moldova market is
presently not a focus of our sales and marketing efforts, although we are considering plans to sell more wine in Moldova in the future.



While the Russian market will remain our principal channel of distribution for the foreseeable future, over the last three years we have worked to lessen our dependence
on this market and increase our sales to other geographic areas. These efforts have enabled us to increase our overall sales while decreasing the percentage of our total sales accounted for by exports to the Russian Federation from approximately 95%
in fiscal 2000 to approximately 83% in fiscal 2004. Our plan is to attempt to reduce our sales in the Russian Federation to about 70% of our total revenues over the next five years by increasing our sales to our other current markets and
entering new markets, including the U.S., Central and Western Europe and Israel. During fiscal 2003, we entered the Israeli wine market and increased the volume exported to Poland by approximately 50% from the amount exported to Poland in fiscal
2002. In early fiscal 2004, we started selling wine to distributors in Switzerland. Similarly, the volume of exports to Belarus and Ukraine increased approximately 74% and 29%, respectively from fiscal 2003 to fiscal 2004. We are currently
pursuing distribution agreements in new markets such as Canada, Sweden, United Kingdom and Cyprus, as well as seeking to expand the number of our distributors in current markets such as Switzerland and Germany. We have also increased our visibility
in the European market by participating in international wine fairs such as Prowein in Germany, Vin Expo in France as well as several trade fairs in the U.S.



Our products are designed for broad markets, mainly focusing on middle and high income consumers. Russian consumers traditionally give preference to spirits, in
particular, to vodka. Demand for our wine is characterized by seasonal fluctuations: in winter, consumers prefer red wines, and stronger wines such as dessert and fortified wines. In summer and fall, consumers prefer light dry and semi-sweet wines,
which mainly are white wines. However, recently, customers have gradually shifted towards a preference for red wines.



We price our products based on a variety of factors, including prevailing pricing in the target market, shipment size, type of wine and type and volume of bottle. We sell
a 0.75 liter bottle to our distributors for anywhere from $.60 to $5.00.



We
have made a concerted effort to increase the quality of our products, as we believe that offering a superior product will increase our ability to both enter new markets and increase our market share in our current markets. To increase the quality of
our products we have recently invested in land that we started planting as vineyards which will provide us with more control over the quality of the grapes we use. During 2004 we acquired and installed new wine production equipment for our Puhoi
winery, which allows us to increase our production capacity at that winery and the efficiency with which we produce our wine. This new equipment incorporates some of the most recent technology in grape processing and wine making. Additionally, in an
effort to differentiate the quality of our wines, we have obtained the organic wine certification from Societe Generale de Surveillance and the ISO-9001 certification.



We sell our products to importers and distributors for further resale to wholesalers or retail outlets including grocery stores, package
liquor stores, club and discount stores and restaurants. Sales to our largest buyer, who is an importer and distributor in the Russian Federation, GB Holding Vin, represented approximately 24% of our revenues in fiscal 2004, while sales to our
largest distributor during fiscal 2003 and fiscal 2002, Iantarnaia Grozdi, represented approximately 24% of our revenues in each of fiscal 2003 and 2002. Sales to our five largest buyers combined, GB Holding Vin, Expovin, Iantarnaia Grozdi, Sever
and Davis, all of whom are in the Russian Federation, represented approximately 74% of our revenues for fiscal 2004, 82% of our revenues for fiscal 2003 and 79% of our revenues for fiscal 2002. Our sales to these distributors are expected to
continue to represent a substantial amount of our revenues in the near future. We do not have long term agreements with any of our distributors. Our agreements with our distributors are one year agreements that are renewed annually. Each year there
is a risk that a distributor, including one of our five largest, could decide not to renew its distribution agreement with us.



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Competition



Our competition in the Russian Federation market is mostly from other Moldovan wines, and not European, Australian or American wines. The European, Australian and
American wines are priced higher, they generally target the upper class consumer and represent approximately 7% of the total wine consumed in the Russian Federation. In contrast, wines produced in Moldova represent about 70% of all wine consumed in
the Russian Federation, with approximately 26% of all consumption occurring in Moscow and the other approximately 74% of all consumption occurring in the other regions of the Russian Federation.



Our competitive advantage in the Russian Federation market is our large product line and
strong brand image, which is maintained through marketing efforts, including advertising and sales campaigns, of our distributors in the Russian Federation. According to an independent marketing study done in 2000, which was commissioned by Dionis
Club, which is one of our competitors in the Russian Federation market, Asconi is the most familiar Moldovan brand of wine sold in the Russian Federation. During fiscal 2001, fiscal 2002, fiscal 2003 and fiscal 2004, we exported more bottled wine to
the Russian Federation than any other Moldovan winery (on a consolidated basis). Our primary Moldovan competitors for the Russian Federation market are Basvinex, Garling, Dionis Club and Lion-Gri.



Intellectual Property



We have been issued 75 trademark registrations in 18 countries covering our brands and products, with approximately 121 trademark
applications pending as of the date of this report. We generally register trademarks in the countries, which represent target markets for the specific products associated with the corresponding trademarks. These registrations included Asconi, Orhei
Vin, Vitis Hincesti, Muscat Asconi, Muscat Rubiniu, Old Orhei, Castle Orhei and Regal Asconi marks, as well as Asconi logo, Asconi crest, and a number of bottle and label designs. The duration of these trademark registrations ranges from ten to
twenty five years depending on the jurisdiction in which the registration is made. Asconi is one of the most familiar brands of Moldovan wine sold in the Russian Federation. Since the Russian Federation has less intellectual property protection than
the U.S. or the European Economic Union, we have a greater risk in the Russian Federation of infringement of our material trademarks. Competitors infringing on our trademarks by using trademarks, trade names or trade dress that resemble ours will
dilute our intellectual property rights, which could materially harm our ability to maintain or expand our sales and our future financial results.



Winemaking Practices



Our philosophy is that winemaking is a natural process best managed with minimum intervention, but requiring the attention and dedication of a seasoned winemaker and strict adherence to the technological features of
production. While we use a relatively high level of manual labor during the winemaking processes, we also make extensive use of modern laboratory equipment and techniques to monitor the progress of each wine through all stages of the winemaking
process. All of our wineries are operated under the overall supervision of our Chief Executive Officer. However, each winery has its own general manager who is always an experienced winemaker.



The principal raw materials used by us are grapes or bulk wine, oak barrels, glass, labels
and cork.



We purchase approximately 80% of our grape requirements from
independent growers in Moldova. The remaining approximately 20% is purchased in the form of bulk wine from VinExport, a Romanian company, in which two of our officers and directors, Constantin Jitaru and Anatolie Sirbu, collectively own 60%. During
fiscal 2004 and 2003, we purchased approximately 23,900 and 20,200 tons of grapes, respectively, from independent growers and approximately 2,300 and 6,500 tons of grapes, respectively, were processed for us by VinExport and purchased by us as wine
in bulk.



We own approximately 3,100 acres of farmland suitable for growing
vineyards. In Fiscal 2004 we planted approximately 925 acres of vineyards. Those vineyards are expected to produce their first harvest in the fall of 2007, and reach their full production capacity in the fall of 2009. We believe that having our own
vineyards will provide us with more control over our access to and the quality of the grapes we use. Our present plans call for the planting of approximately 865 additional acres of vineyards in fiscal 2005.



The cork we use is produced and manufactured in Portugal, the primary cork-producing country
in the world. We purchase approximately 90% of our bottles from two Moldovan companies. We purchase the rest of our bottles from a group of companies with offices in Italy, Germany, the Czech Republic and Romania. We pack and ship our finished
product in carton containers or boxes supplied by a Moldovan company.



Due to
the nature of wine production, we have not found it necessary to enter into long term purchase agreements with the independent growers in Moldova. Grapes must be crushed within two hours of picking, which limits the wineries to which the independent
growers can sell their harvest, especially given the absence of a highly developed highway system in Moldova. Since our production facilities are located in close proximity to the vineyards from which we purchase grapes, and since there are no
significant competitors located within two hours of these vineyards, to date we have not encountered difficulties in obtaining at reasonable prices the volume of grapes we have needed to meet our production goals, and we do not believe that we will
encounter any such difficulties in the foreseeable future. However, because we only purchase grapes from growers located in close proximity to our production facilities, if these growers experience a poor harvest, we will either be required to
purchase additional wine in bulk from other wineries or reduce our production and sales. At present, we could only purchase an additional approximately 10,000 tons in bulk wine from VinExport. As a result, a poor harvest in the area of our
facilities could require us to reduce our production and sales levels, and increase our costs.



Employees



As of December 31, 2004 and
2003, we employed a total of 1,057 and 860 employees, respectively, all of whom are full-time. We do not typically hire part-time workers, and do not anticipate doing so in the foreseeable future. We do not have a collective bargaining agreement
with our employees, nor are any of our employees members of any labor union.



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Wine Production



The following table sets forth our wine production for the 2004, 2003, 2002, 2001 and 2000 vintages. The wines vintage is the year during which the grapes are
harvested. The following information is presented in terms of equivalent number of cases. The precise number of cases is not known at this time because many of these vintages are still being aged in barrels and tanks.



|                  |  |           |   |      |                          |      |           |      |  |                          |  |           |   |  |                          |  |           |   |  |                          |  |           |   |  |                           
|----------------- |  | --------- | - | ---- | ------------------------ | ---- | --------- | ---- |  | ------------------------ |  | --------- | - |  | ------------------------ |  | --------- | - |  | ------------------------ |  | --------- | - |  | --------------------------
|                  |  | 2004      |   | 2003 |                          | 2002 |           | 2001 |  | 2000                    
|                  |  | % ofTotal |   |      | EquivalentNumber ofCases |      | % ofTotal |      |  | EquivalentNumber ofCases |  | % ofTotal |   |  | EquivalentNumber ofCases |  | % ofTotal |   |  | EquivalentNumber ofCases |  | % ofTotal |   |  | Equivalent Number of Cases
|Aligote           |  | 15        | % |      | 295,103                  |      | 3         | %    |  | 43,270                   |  | 3         | % |  | 43,000                   |  | 3         | % |  | 25,000                   |  | 4         | % |  | 2,500                     
|Traminer          |  | 1         | % |      | 12,416                   |      | 0         | %    |  | 2,735                    |  | 0         | % |  | 20,000                   |  | 2         | % |  | 15,000                   |  | 2         | % |  | 1,000                     
|Reisling          |  | 2         | % |      | 41,292                   |      | 2         | %    |  | 26,210                   |  | 3         | % |  | 45,000                   |  | 4         | % |  | 23,000                   |  | 3         | % |  | 3,500                     
|Sauvignon Blanc   |  | 10        | % |      | 194,887                  |      | 4         | %    |  | 72,310                   |  | 4         | % |  | 39,000                   |  | 3         | % |  | 19,000                   |  | 3         | % |  | 2,000                     
|Chardonnay        |  | 3         | % |      | 57,757                   |      | 7         | %    |  | 113,420                  |  | 6         | % |  | 38,000                   |  | 3         | % |  | 22,000                   |  | 3         | % |  | 3,000                     
|Feteasca          |  | 1         | % |      | 23,150                   |      | 1         | %    |  | 20,455                   |  | 3         | % |  | 45,000                   |  | 4         | % |  | 25,000                   |  | 4         | % |  | 3,500                     
|Rcatiteli         |  | 8         | % |      | 159,365                  |      | 1         | %    |  | 14,960                   |  | 2         | % |  | 40,000                   |  | 3         | % |  | 20,000                   |  | 3         | % |  | 1,500                     
|Pinot Blanc       |  | 0         | % |      | 1,154                    |      | 0         | %    |  | 4,760                    |  | 1         | % |  | 45,000                   |  | 4         | % |  | 15,000                   |  | 2         | % |  | 2,000                     
|Muscat Blanc      |  | 5         | % |      | 101,489                  |      | 8         | %    |  | 137,410                  |  | 6         | % |  | 50,000                   |  | 4         | % |  | 28,000                   |  | 4         | % |  | 2,500                     
|Other white wines |  | 2         | % |      | 45,467                   |      | 7         | %    |  | 117,100                  |  | 9         | % |  | 200,000                  |  | 16        | % |  | 106,000                  |  | 16        | % |  | 10,000                    
|                  |  |           |   |      |                          |      |           |      |  |                          |  |           |   |  |                          |  |           |   |  |                          |  |           |   |  |                           
|Total White Wines |  | 47        | % |      | 932,080                  |      | 33        | %    |  | 552,630                  |  | 37        | % |  | 565,000                  |  | 45        | % |  | 298,000                  |  | 44        | % |  | 31,500                    
|                  |  |           |   |      |                          |      |           |      |  |                          |  |           |   |  |                          |  |           |   |  |                          |  |           |   |  |                           
|Pinot Noir        |  | 3         | % |      | 58,385                   |      | 4         | %    |  | 73,185                   |  | 6         | % |  | 45,000                   |  | 4         | % |  | 24,000                   |  | 3         | % |  | 3,000                     
|Cabernet          |  | 5         | % |      | 102,081                  |      | 11        | %    |  | 190,500                  |  | 11        | % |  | 40,000                   |  | 3         | % |  | 22,000                   |  | 3         | % |  | 3,000                     
|Cagor             |  | 4         | % |      | 78,549                   |      | 3         | %    |  | 52,885                   |  | 3         | % |  |                         |  |          |   |  |                         |  |          |   |  |                          
|Merlot            |  | 5         | % |      | 89,235                   |      | 9         | %    |  | 160,540                  |  | 10        | % |  | 38,000                   |  | 3         | % |  | 21,000                   |  | 3         | % |  | 3,000                     
|Mugurel           |  | 0         | % |      |                         |      | 0         | %    |  | 150                      |  | 0         | % |  | 30,000                   |  | 2         | % |  | 22,000                   |  | 3         | % |  | 1,500                     
|Joc               |  | 0         | % |      |                         |      | 0         | %    |  |                         |  | 0         | % |  | 15,000                   |  | 1         | % |  | 10,000                   |  | 1         | % |  | 1,500                     
|Codreanca         |  | 0         | % |      |                         |      | 1         | %    |  | 10,340                   |  | 1         | % |  | 50,000                   |  | 4         | % |  | 30,000                   |  | 4         | % |  | 3,000                     
|Izabella          |  | 7         | % |      | 133,035                  |      | 9         | %    |  | 143,950                  |  | 5         | % |  | 50,000                   |  | 4         | % |  | 31,000                   |  | 5         | % |  | 3,500                     
|Zemfira           |  | 0         | % |      |                         |      | 1         | %    |  | 14,320                   |  | 3         | % |  | 50,000                   |  | 4         | % |  | 23,000                   |  | 3         | % |  | 4,000                     
|Lidia             |  | 4         | % |      | 80,165                   |      | 6         | %    |  | 101,440                  |  | 4         | % |  | 50,000                   |  | 4         | % |  | 32,000                   |  | 5         | % |  | 4,000                     
|Muscat Asconi     |  | 3         | % |      | 67,627                   |      | 2         | %    |  | 35,570                   |  | 2         | % |  | 50,000                   |  | 4         | % |  | 31,000                   |  | 5         | % |  | 5,000                     
|Muscat Rubiniu    |  | 3         | % |      | 57,022                   |      | 2         | %    |  | 40,505                   |  | 2         | % |  | 50,000                   |  | 4         | % |  | 31,000                   |  | 5         | % |  | 5,000                     
|Other red wines   |  | 16        | % |      | 311,600                  |      | 13        | %    |  | 223,190                  |  | 16        | % |  | 217,000                  |  | 17        | % |  | 106,000                  |  | 16        | % |  | 7,000                     
|                  |  |           |   |      |                          |      |           |      |  |                          |  |           |   |  |                          |  |           |   |  |                          |  |           |   |  |                           
|Total Red Wines   |  | 50        | % |      | 977,700                  |      | 62        | %    |  | 1,046,575                |  | 63        | % |  | 685,000                  |  | 55        | % |  | 383,000                  |  | 56        | % |  | 43,500                    
|                  |  |           |   |      |                          |      |           |      |  |                          |  |           |   |  |                          |  |           |   |  |                          |  |           |   |  |                           
|Sparking Wines    |  | 3         | % |      | 57,855                   |      | 4         | %    |  | 70,668                   |  |          |   |  |                         |  |          |   |  |                         |  |          |   |  |                          
|Spirits           |  | 0         | % |      |                         |      | 1         | %    |  | 20,677                   |  |          |   |  |                         |  |          |   |  |                         |  |          |   |  |                          
|                  |  |           |   |      |                          |      |           |      |  |                          |  |           |   |  |                          |  |           |   |  |                          |  |           |   |  |                           
|Total Production  |  | 100       | % |      | 1,967,635                |      | 100       | %    |  | 1,690,550                |  | 100       | % |  | 1,250,000                |  | 100       | % |  | 681,000                  |  | 100       | % |  | 75,000                    



We have a total of ten facilities. Of
these ten facilities, nine are equipped and used to process grapes and to store and age wine, and three are equipped and used to bottle wine. One facility, whose value is not significant, consists of a warehouse and a railroad terminal, neither of
which we currently use. Wine, which is processed and stored and aged at facilities that do not have bottling equipment are transported to the bottling facilities by tanker trucks. Our bottled wine is then transported from our three bottling
facilities by truck to either directly to our distributors or to rail terminals or seaports, depending on the products final destination. See Item 2  Description of Property.



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The majority of our wines are stored in stainless and enameled steel containers for up to a year, or until it is bottled
and sold. Our higher quality wines, which account for approximately 3% to 5% of our sales, are generally aged in new and used oak barrels before they are bottled. In general, white wines are aged for between six and nine months, and red wines are
aged for between nine and eighteen months, after harvest. The wine is then bottled and stored for further aging.



Risk Factors That May Affect Our Future Results and the Market Price of Our Stock



In addition to the other information set forth elsewhere in this annual report, you should carefully consider the following factors when
evaluating us. An investment in Asconi will be subject to risks inherent in our business. The trading price of our shares will be affected by the performance of our business relative to, among other things, our competitors, market conditions and
general economic and industry conditions. The value of an investment in Asconi may decrease, resulting in a loss. If any of the following risks actually occurs, our business, financial condition and results of future operations could suffer. In such
case, the trading price of our shares could decline, and you could lose all or part of your investment.



Our profits depend largely on third party vendors to distribute our wine in the Russian Federation.



We sell our products to importers and distributors for further resale to wholesalers or retail outlets including grocery stores, package liquor stores, club and discount
stores and restaurants. Sales to our largest buyer, who is an importer and a distributor in the Russian Federation, GB Holding Vin, represented approximately 24% of our revenues in fiscal 2004, while sales to our largest distributor during fiscal
2003 and fiscal 2002, Iantarnaia Grozdi, represented approximately 24% of our revenues in each of fiscal 2003 and 2002. Sales to our five largest buyers combined, GB Holding Vin, Expovin, Iantarnaia Grozdi, Sever and Davis, all of whom are in the
Russian Federation, represented approximately 74% of our revenues for fiscal 2004, 82% of our revenues for fiscal 2003 and 79% of our revenues for fiscal 2002. Sales to these distributors are expected to continue to represent a substantial amount of
our net revenues in the near future. Distribution channels for alcoholic beverage products have been characterized in recent years by rapid change, including consolidations of certain distributors. In addition, distributors and retailers of our
products offer products which compete directly with our products for retail shelf space and consumer purchases. Our agreements with our distributors are for a one year term, and are renewed on an annual basis. In the future, our distributors and
retailers may decide to not continue to purchase our products or provide our products with adequate levels of promotional support. Changes in the financial condition of these distributors, consumer preferences or consumer spending in the Russian
Federation could affect both the quantity and price level of the wines that we are able to sell to these distributors.



We depend on the services of our chief executive officer and our chief financial officer, and implementation of our business plan could be seriously harmed if we lost
the services of either one.



We depend heavily on the services of
Constantine Jitaru, our Chairman, Chief Executive Officer and President, and Anatolie Sirbu, our Chief Financial Officer. We do not have an employment agreement with either Mr. Jitaru or Mr. Sirbu, nor do we have a key person life
insurance policy on either Mr. Jitaru or Mr. Sirbu to cover our losses in the event of the death of either individual. There can be no assurance that these persons will remain in their management positions with us, and the loss of services of either
of these two people would disrupt our business operations which could reduce our revenues and profits.



Due to the seasonality of the wine business our revenues and operating expenses fluctuate from quarter to quarter, and are highest in the fall.



Our revenues and operating results may vary from quarter to quarter due to seasonal changes in consumer consumption habits. For example,
sales volumes tend to increase during the summer months and the holiday season and decrease after the holiday season. As a result, our sales and earnings are typically highest during the third and fourth calendar quarters and lowest in the first
calendar quarter. Seasonal factors also affect our level of borrowing. For example, our borrowing levels typically are highest during fall when we have to pay growers for grapes harvested and make payments related to the harvest. These and other
factors may cause fluctuations in the market price of our common stock.



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Our revenue could decline if we are unable to maintain or increase prices, there is a general decline in wine
consumption or our wholesale customers, retailers or consumers decide to purchase competitive products instead of our products.



Our wines compete in all of the wine market segments with many other Moldovan and foreign wines. Our wines 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. Wholesaler, retailer and consumer purchasing
decisions are influenced by, among other things, the perceived absolute or relative overall value of our products, including their quality or pricing, compared to competitive products. Unit volume and dollar sales could also be affected by pricing,
purchasing, financing, operational, advertising or promotional decisions made by wholesalers and retailers which could affect their purchases of, or consumer demand for, our products. We could also experience higher than expected selling, general
and administrative expenses if we find it necessary to increase advertising or promotional expenditures, or the number of our personnel to maintain our competitive position, or for other reasons.



We generally do not have long term supply contracts and are subject to price fluctuations
for grapes and grape-related raw materials.



Our business is heavily
dependent upon raw materials, such as grapes, grape juice in bulk, grains and packaging materials which we purchase from third-party suppliers. We could experience shortages of raw materials due to supply, production or shipment difficulties, which
could decrease our ability to supply goods to our customers. We are also directly affected by increases in the costs of such raw materials. In the past, we have experienced significant increases in the cost of grapes. Although we believe we have
adequate sources of grape supplies, in the event demand for certain wine products exceeds expectations, we could experience shortages. A shortage in the supply of wine grapes could result in an increase in the price of some or all of the grape
varieties we purchase and a corresponding increase in our wine production costs. If we cannot increase prices because of competitive pressure, increased grape supply costs could reduce our profits.



Integration of the business and product offerings of acquired companies could disrupt our
business operations.



We have made a number of acquisitions in the recent
years and anticipate that we may, from time to time, acquire additional businesses, assets or securities of companies that we believe would provide a strategic fit with our business. Any business we acquire will need to be integrated with our
existing operations. While we have not had difficulty in the past effectively assimilating the business or product offerings of companies we have acquired, there can be no assurance that we will not have difficulties doing so in the future. In
addition, we could incur unknown or contingent liabilities of acquired companies. Difficulties in integrating the operations and personnel of the acquired companies could disrupt our business operations, divert managements time and attention
and impair relationships with and risk the possible loss of key employees and customers of the acquired business. Our failure to adequately manage the integration of any acquisition could disrupt our business operations and lower our revenues and
profits.



We operate in ten countries other than Moldova, which subjects us
to a variety of economic and political conditions and developments.



We
derived approximately 99% of our total revenue in fiscal 2004 and 2003 from sales of our products outside Moldova, with approximately 83% and 89%, respectively of our total revenue coming from sales in the Russian Federation. Our business is
heavily influenced by the general economic conditions in the countries in which we do business, especially the Russian Federation. A significant deterioration in these conditions, including a reduction in consumer spending levels, could reduce our
sales. In addition, we are affected by political and economic developments in the countries where we have distribution networks, production facilities or marketing companies. Our operations are also subject to the imposition of import, investment or
currency restrictions, including tariffs and import quotas or any restrictions on the repatriation of earnings and capital. For example, the Government of Ukraine unilaterally doubled excise taxes on imported wines during fiscal 2003 in order to
protect Ukrainian wine producers. Although our sales to Ukraine have not decreased as a result of this increased excise tax, the growth of our sales in the Ukrainian market might otherwise have been higher. In addition, the increasing pro-EU
direction of Moldova has recently caused negative reaction within the Russian Parliament with a number of Russian politicians voicing intentions to introduce economic sanctions against Moldova including the removal of tax duty break on wines
imported from Moldova. These disruptions can affect our ability to import and export products and repatriate funds, which in turn can affect the level of consumer demand for our products, leading to a decrease in our levels of sales or
profitability.



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We may by unable to sustain further growth if we do not increase our working capital and/or attract financing for
capital expenditures.



The wine industry is a capital-intensive business
which requires substantial capital expenditures to improve or expand wine production and to develop or acquire vineyards. We estimate our need for capital expenditures at approximately $10 million over three years to be used for planting additional
acres of vineyards and renovating and upgrading our production facilities. Further, the acquisition of grapes and bulk wine require substantial amounts of working capital. In order to ensure continued growth in our operations, we estimate that we
will need to increase our working capital by 30% annually. These funds will be used to increase our purchases of grapes as well as other raw materials such as glass, cork and labels. These capital expenditures and working capital requirements will
have to be financed from cash flows from operations, additional borrowings or additional equity financing. If we do not attract capital for current operations and capital expenditures, we may not be able to increase our production and sales, and our
ability to compete with our more technologically advanced competitors who are able to invest in modern winemaking equipment will be adversely affected.



We depend on our trademarks and proprietary rights for a competitive advantage in the Eastern European market, and any failure to protect our intellectual property
rights may damage our competitive position.



Our success depends largely
upon our ability to protect our current and future brands and products, and to defend our intellectual property rights, especially in the Russian Federation. We have been issued 75 trademark registrations in 18 countries covering our brands and
products, with approximately 121 trademark applications pending as of the date of this report. We generally register trademarks in the countries, which represent target markets for the specific products associated with the corresponding trademarks.
These registrations included Asconi, Orhei Vin, Vitis Hincesti, Muscat Asconi, Muscat Rubiniu, Old Orhei, Castle Orhei and Regal Asconi marks, as well as Asconi logo, Asconi crest, and a number of bottle and label designs. The duration of these
trademark registrations ranges from ten to twenty five years depending on the jurisdiction in which the registration is made. Asconi is one of the most familiar brands of Moldovan wine sold in the Russian Federation. Since the Russian Federation has
less intellectual property protection than the U.S. or the European Economic Union, we have a greater risk in the Russian Federation of infringement of our material trademarks. Competitors infringing on our trademarks by using trademarks, trade
names or trade dress that resemble ours will dilute our intellectual property rights, which could materially harm our ability to maintain or expand our sales and our future financial results.



Demand for our products may decrease due to changes in consumer preferences and tastes.



A number of research studies suggest that various health benefits may
result from the moderate consumption of alcohol, but other studies suggest that alcohol consumption does not have any health benefits and may in fact increase the risk of stroke, cancer and other illnesses. If unfavorable reports on alcohol
consumption gain general support, it could harm the wine industry and our business. In addition, anti-alcohol groups have, in the past, successfully advocated more stringent labeling requirements and other regulations designed to discourage
consumption of alcoholic beverages, including wine. More restrictive regulations, negative publicity regarding alcohol consumption or changes in consumer perceptions of the relative healthfulness or safety of wine generally could adversely affect
the sale and consumption of wine and the demand for our products.



Prior to
December 31, 2004 our internal disclosure controls did not reduce to a relatively low level the risk that a material error in our financial statements may go undetected.



Our Certifying Officers are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) for the company. Accordingly, the Certifying Officers designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under their supervision, to ensure that material
information relating to the company is made known to the Certifying Officers by others within the company. We regularly evaluate the effectiveness of disclosure controls and procedures and report our conclusions about the effectiveness of the
disclosure controls quarterly on our Form 10-QSB and annually on our Form 10-KSB. In completing such reporting we disclose, as appropriate, any significant change in our internal control over financial reporting that occurred during our most recent
fiscal period that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. This disclosure, based on our most recent evaluation of our disclosure controls and procedures, is made to our
auditors and the audit committee of our board of directors. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect our ability to
record, process, summarize and report financial information are reported in our public filings.



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Through and including our public reports for the quarter ended September 30, 2004, the Certifying Officers have concluded
that the company had certain events of control deficiencies, constituting material weaknesses. We have undertaken specific measures to cure or mitigate the ineffective controls and procedures identified in our prior filings. Such measures include
(i) creating the position of chief accounting officer with adequate experience in the application of US GAAP and SEC reporting who will report both to the chief executive officer and the audit committee; (ii) requiring that all contracts, agreements
and other documents relating to debt or equity transactions, acquisition of assets or securities and investments in subsidiaries, be reviewed and approved by the chief accounting officer prior to their execution; (iii) requiring that all other
material contracts or agreements be (1) in writing, (2) executed only by the chief executive officer or chief financial officer, (3) if not in English, translated into English as soon as practicable after execution, and (4) immediately forwarded to
the chief accounting officer and our outside legal counsel; (iv) requiring that the chief accounting officer attend all of the meetings of our board of directors to be aware of actions taken by the board of directors that have accounting or
disclosure implications, and that the chief accounting officer act as the secretary for the board of director meetings and be responsible for the timely preparation of minutes of those meetings; (v) reconstituting our audit committee to, in
accordance with its charter, be made up of independent directors who are financially literate, and to contain at least one member who is a financial expert as that term is defined in the SECs rules; and (vii) requiring that our
audit committee to meet at least once every quarter, prior to the release of that periods financial statements, to discuss, with management and our independent auditors, prior to the release of each periods financial statements, the
financial statements themselves, significant accounting policies and estimates, our internal controls, and the scope and findings of the work performed by our independent auditor in its audit or review of the financial statements. For a more
detailed discussion of our progress on implementing these corrective steps please refer to Item 8A Controls and Procedures.



As a result of the steps we undertook in Fiscal 2004, at December 31, 2004 our Certifying Officers have concluded that our disclosure controls and procedures are
effective. However, while management is responsible for ensuring an effective control environment and has taken steps to ensure that the internal control environment remains free of significant deficiencies and/or material weaknesses, the inherent
nature of our business and rapidly changing environment may affect managements ability continually implement, on a timely basis, changes to our disclosure controls and procedures that may be necessary to keep them effective in light of any
changes in the nature of our business and any rapidly changing environment. Accordingly, there can be no assurance that the steps that the company has undertaken or will undertake in the future will prevent any future controls and procedures
deficiencies.



Constantine Jitaru and Anatolie Sirbu beneficially own,
collectively, approximately 90% of our outstanding shares of common stock and they exercise control over our affairs.



As of December 31, 2004, Mr. Jitaru and Mr. Sirbu beneficially owned, collectively, enough shares of our common stock to not only elect all of our directors, but also to:



| |  |  | amend or prevent amendment of our articles of incorporation or bylaws;
| | - |  | ----------------------------------------------------------------------



| |  |  | effect or prevent a merger, sale of assets or other corporate transaction; and
| | - |  | ------------------------------------------------------------------------------



| |  |  | control the outcome of any other matter submitted to the stockholders for vote.
| | - |  | -------------------------------------------------------------------------------



As a result of their ownership and positions, our directors and executive officers, collectively, are able to control all matters requiring
stockholder approval, including the election of directors and approval of significant corporate transactions. In addition, sales of significant amounts of shares held by Messrs. Jitaru and Sirbu, or the prospect of these sales, could lower the
market price of our common stock. Managements stock ownership may discourage a potential acquiror from making a tender offer or otherwise attempting to obtain control of us, which in turn could reduce our stock price or prevent our
stockholders from realizing a premium over our stock price.



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Our common stock may be de-listed from the American Stock Exchange which would substantially reduce liquidity in our
shares.



Our shares of common stock are traded on the American Stock
Exchange (AMEX) under the symbol ACD.



On April 20, 2005, the AMEX
staff notified us that as a result of our failure to file our Annual Report on Form 10-KSB for the fiscal year ended December 31, 2004 within the prescribed timeframe, we were not in compliance with the currency in public reporting continued listing
requirement pursuant to Sections 134 and 1101 of the AMEX Company Guide. The AMEX staff invited us to submit a plan of compliance addressing the continued listing deficiency by no later than May 4, 2005. The AMEX staff further noted that we must
regain compliance with all AMEX listing requirements no later than June 15, 2005.



On April 27, 2005, we requested an extension of time to regain compliance with Section 704 of the AMEX Company Guide. Under this Section, an AMEX-listed company is required to hold meetings of its stockholders annually to elect directors
and to take action on other corporate matters in accordance with its charter, by-laws and applicable state laws. We believe that a 90-day extension will give us a reasonable opportunity to prepare and hold an annual shareholder meeting as required
under the AMEX Company Guide. As of the today, the AMEX staff has not notified us whether it accepts or rejects our extension request.



On May 4, 2005, we submitted a plan of compliance with the currency in public reporting AMEX continued listing deficiency. We outlined the reasons for the filing delay.
Specifically, we stated that when filed, the Annual Report will not include the report by Michaelson & Co., P.A., our former auditors, regarding our consolidated financial statements (including the information in the notes thereto) as of and for
the year ended December 31, 2003. Our consolidated financial statements as of and for the year ended December 31, 2003, as included in our Annual Report on Form 10-KSB/A for the year ended December 31, 2003, were audited by Michaelson, which
firm in its report dated April 2, 2004 expressed an unqualified opinion on those financial statements. On April 29, 2005, Michaelson & Co., P.A advised us that it will not grant us permission to re-use its report on the fiscal 2003
consolidated financial statements in the Annual Report. However, Michaelson has not, as of the date of the filing of this Annual Report on Form 10-KSB for the year ended December 31, 2004, withdrawn its opinion on our consolidated financial
statements as of and for the year ended December 31, 2003, as included in the Companys Annual Report on Form 10-KSB/A for the year ended December 31, 2003. We further notified the AMEX staff that the subject Annual Report will be
filed as soon as possible following our discussions with the SEC staff concerning the omission of the report of Michaelson & Co., P.A from our 2004 Annual Report on Form 10-KSB. Presently, we are in dialogue with our present independent auditors
concerning the feasibility of the re-audit of the 2003 consolidated financial statements. As of the date of this filing, our Audit Committee and the auditors have not reached any conclusions respecting that matter. Further, as of the date of this
filing, the AMEX staff has not notified us whether it accepts or rejects the foregoing plan.



In the event the AMEX staff does not accept our plan of compliance, the AMEX staff will initiate delisting proceedings. There is no assurance that the AMEX staff will accept our plan of compliance or that, even if
such plan is accepted, we will be able to implement the plan within the prescribed timeframe. We may appeal a staff determination to initiate such proceedings and seek a hearing before an AMEX panel. The time and place of such a hearing will be
determined by the Panel. If the Panel does not grant the relief sought by us, our securities could be de-listed from the AMEX and may continue to be listed on the OTC Bulletin Board Market.



Furthermore, whether our shares are traded on AMEX, the Bulletin Board or the Pink Sheets,
there is still a limited public market for our common stock. Of the 12,168,768 shares of common stock outstanding on May 10, 2005, only 1,216,842 shares, or just over 10 % of the shares outstanding, are held by someone other than our
officers and directors. Due to the low number of outstanding shares held by the public, the market price of our common stock is volatile.



It may be difficult to effect service of U.S. process and enforce U.S. legal process against our directors and us.



We are organized under the laws of Nevada. Therefore, our stockholders are able to effect
service of process in the U.S. upon us. However, only one of our directors, Radu Bujoreanu, resides in the U.S. Our seven other directors and almost all of our operating assets are located outside the U.S. in the Republic of Moldova. As a result, it
may not be possible to effect service of process upon our directors in the Republic of Moldova, nor may it be possible to enforce judgments of U.S. courts against these directors or our assets. Any judgments of U.S. courts against our directors
residing in the Republic of Moldova will have to be domesticated in the Republic of Moldova in accordance with the Moldovan civil code, including the code of civil procedure and related laws and directives approved by the Moldovan Parliament and the
Plenum of the Supreme Court Justice of the Republic of Moldova. Original actions or actions for enforcement of judgments of U.S. courts predicated solely upon the laws of the U.S., including the U.S. federal securities laws, may not be enforceable
in the Republic of Moldova. In addition, awards of punitive damages in actions brought in the U.S. or elsewhere may not be enforceable in Moldova.



We do not plan to pay cash dividends.



Holders of our common stock are entitled to cash dividends when, as and if declared by the board of directors out of funds legally available for the payment of dividends.
We have never paid dividends and our management does not anticipate the declaration or payments of any dividends in the foreseeable future. We intend to retain earnings, if any, to finance the development and expansion of our business. Our future
dividend policy will be subject to the discretion of our board of directors and will be contingent upon future earnings, if any, our financial condition, capital requirements, general business conditions and other factors.



New regulations or increased regulatory costs in Moldova could restrict how we operate our
business.



The wine industry is subject to extensive regulation by the
Moldovan Ministry of Agriculture and various foreign agencies, and local authorities. These regulations and laws dictate such matters as licensing requirements, trade and pricing practices, permitted distribution channels, permitted and required
labeling, advertising and relations with wholesalers and retailers. Any expansion of our existing facilities or development of new vineyards or wineries may be limited by present and future zoning ordinances, environmental restrictions and other
legal requirements. For example, the Moldovan government is currently considering adoption of legislation that would result in additional taxes of 20% on imported rootstocks, which would increase the cost of planting vineyards. Vineyard development
is one of the major projects undertaken by us, which will continue in the future years. The taxes were not imposed on the rootstocks imported by us in 2004 and those we plan to import in 2005, however, there is no assurance that the taxes will not
be imposed starting as early as 2006. In addition, new regulations, requirements and/or increases in excise taxes, income taxes, property and sales taxes or international tariffs, could reduce our profits.



Deterioration of the market reforms undertaken by the Moldovan government may undermine
our ability to operate our business and predict financial performance.



The Republic of Moldova has undergone significant political and economic change since 1990 and any substantial change in current laws or regulations (or in the interpretations of existing laws or regulations), whether caused by changes in
the government of Moldova or otherwise, could have an impact on our results of operations. For example, currently there are no significant limitations on the repatriation of profits from Moldova, but there is no assurance that foreign exchange
control restrictions or similar limitations will not be imposed in the future with regard to repatriation of earnings and investments from the country. If such exchange control restrictions, or similar limitations are imposed, the ability of our
U.S. parent holding company to receive payments from its subsidiaries could be reduced, which would reduce our ability to invest in our operations in countries other than Moldova. If we are unable to invest in our non-Moldovan operations, our
operating results could suffer which could reduce the value of our shareholders investment in our common stock.



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There is no guarantee that the Republic of Moldova government will not exert greater control over agricultural
production.



The Republic of Moldova became the first former republic of
the USSR to elect a communist majority parliament and a communist president in 2001. The communist party also won the majority of votes during the March 2005 parliamentary elections thus extending its majority in the parliament until 2008. Current
political forces in the parliament are promoting significantly greater government controls over the economy and in particular over agricultural production. If the president and parliament decide to exert additional control over agricultural
production, our business, financial condition and results of future operations could suffer. We could be forced to sell some of our land or vineyards, restrict the acres of vineyards that we are allowed to harvest or limit the amount of wine we are
permitted to bottle and/or sell in the Republic of Moldova or export to other countries. We may also be required to pay additional taxes and/or fees in connection with our production of wine and we may not have as much control over the operations of
our day-to-day business operations in the Republic of Moldova.



We may be
subject to additional government oversight because we export wine out of the Republic of Moldova.



The Financial Action Task Force (FATF) is an inter-governmental body whose purpose is the development and promotion of policies, both at national and international levels, to combat money laundering and terrorist
financing. The FATF monitors members progress in implementing necessary measures, reviews money laundering and terrorist financing techniques and counter-measures, and promotes the adoption and implementation of appropriate measures globally.
In performing these activities, the FATF collaborates with other international bodies involved in combating money laundering and the financing of terrorism. The FATF 2001-2002 annual report cited Moldovan authorities as stating that organized crime
income accounts for over half the total income of the national economy of the Republic of Moldova. The Moldovan authorities believe that a large portion of this income is laundered through the official financial system and through the infiltration
of entire sectors of its economy. The Moldovan authorities could decide to implement additional controls on import and export operations limiting our ability to quickly respond to customer needs in other countries and/or bring in capital into the
Republic of Moldova for business operations.



An ongoing SEC investigation
could result in an enforcement action against us, our directors and/or our officers.



On December 29, 2003, we received a request from the Denver regional office of the SEC to voluntarily produce documents and information as part of an informal inquiry into certain accounting practices of Asconi. The
matters under investigation include, among others, our accounting treatment of the issuance of 5,000,000 shares to each of Constantin Jitaru and Anatolie Sirbu. The SEC requested voluntary production of documents relating to our accounting and
financial policies, practices and procedures in fiscal 2001, fiscal 2002 and fiscal 2003.



The SEC Denver staff followed up several times on its original questions and we provided, to the best of our ability, all information required to these follow up inquiries. The SEC staff also requested and received
testimony from our Chief Executive Officer Constantin Jitaru, our Chief Financial Officer Anatolie Sirbu, our Chief Operating Officer Serguei Melnik and our Interim Chief Accounting Officer Alex Brinister. Messrs. Jitru and Sirbu provided voluntary
testimony in August, 2004, and Messrs. Melnik and Brinister provided voluntary testimony in September, 2004.



In January, 2005 we were advised that the SEC had elevated the informal inquiry to a formal investigation, and that they wanted to take additional testimony from Alex Brinister. Mr. Brinister provided such additional
testimony via telephone on March 8, 2005. On March 29, 2005, we received a Wells Notice from the staff of the SEC relating to the Companys alleged failure to record expenses relating to the May 2003 issuances of 10,000,000 shares of its
securities to two of its executive officers and of 100,000 shares to Serguei Melnik. The Wells Notice stated that the SEC staff intends to recommend that a civil or administrative enforcement action be brought against us, alleging violations of
Sections 10(b), 13(a) and 13(b)(2) of the Securities Exchange Act of 1934, as amended (the Exchange Act) and Rules 10b-5, 12b-20, 13a-11 and 13a-13 thereunder. On the same date, Alex Brinister, also received a Wells Notice from the SEC
staff also relating to the May, 2003 these share issuances. This Wells Notice stated that the SEC staff intends to recommend that a civil or administrative enforcement action be brought against Mr. Brinister, alleging violations of Sections 10(b)
and 13(b)(5) of the Exchange Act and Rules 10b-5 and 13b2-1 thereunder and aiding and abetting the Companys alleged violations of the Exchange Act, as well as administrative proceedings against Mr. Brinister pursuant to Rule 102(e) of the
SECs Rules of Practice.



Under the SECs procedures, a Wells Notice
recipient has an opportunity to respond to the SEC staffs intended recommendation before the SEC initiates a civil action. We and Mr. Brinister have been cooperating in the SEC staffs investigation and intend to respond promptly to the
respective Wells Notices, in which responses, we and Mr. Brinister intend to vigorously defend their actions.



There can be no assurance that this matter will be resolved in a manner favorable to us or Mr. Brinister. We are unable to predict the outcome of this matter, including what action, if any, the SEC might take,
including the imposition of fines, penalties or other possible remedies. We will also likely continue to incur additional costs related to the SEC investigation and Wells responses including both additional accounting and legal fees. Also, a
significant amount of managements time and attention will be diverted until the investigation concludes. Any adverse development in connection with the investigation, including any expansion of the scope of the investigation, could negatively
impact the market value of our common stock. See Item 3 Legal Proceedings



Failure to resolve a pending derivative lawsuit may lead to continued costs and expenses and increased doubts from existing and potential customers and investors as to our prospects, which could cause our revenues and our stock price to
decline.



We are a defendant in a derivative lawsuit filed in the U.S.
District Court for the Middle District of Florida alleging that we made material misrepresentations and omissions of material facts concerning our business performance and financial condition and failed to disclose certain related party
transactions, thereby overstating our financial condition during a period from April 2001 to June 2004. Should this lawsuit linger for a long period of time, whether ultimately resolved in our favor or not, or further lawsuits be filed against us,
our financial results will be adversely affected by the need to pay the fees and costs incurred in defending this suit.



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Additionally, we may not be able to conclude or settle such litigation on terms that coincide with our ability to pay any
judgment or settlement. We do not have insurance that will cover any of claims alleged in the pending lawsuit, which will require us, rather than an insurance carrier, to pay all of the expenses and damages, if any, relating to these claims. The
size of these payments, individually or in the aggregate, could seriously impair our cash reserves and financial condition. In addition, the continued defense of this lawsuit also could result in continued diversion of our managements time and
attention away from business operations, which could cause our financial results to decline. A failure to resolve definitively current or future material litigation in which we are involved or in which we may become involved in the future,
regardless of the merits of the respective cases, could also cast doubt as to our prospects in the eyes of our customers, potential customers and investors, which could cause our revenues and stock price to further decline. See Item 3: Legal
Proceedings.



Changes in exchange rates could affect our financial results
and managements ability to make financial projections.



Our
operations are conducted primarily in the Republic of Moldova, and the functional currency of our subsidiaries in Moldova is the Moldova lei. This exposes us to risks associated with both foreign currency translation, and foreign currency
transactions.



While the functional currency of our operating subsidiaries is
the lei, we report in U.S. dollars. In preparing our financial statements, the revenues and expenses of such subsidiaries are translated into U.S. dollars at average exchange rates prevailing during the period. The assets and liabilities are
translated at the rates of exchange on the balance sheet date. The resulting translation gain and loss adjustments are recorded directly as a separate component of shareholders equity. The amount of such gain or loss will depend in changes in
the exchange rate between the lei and the U.S. dollar and the composition of our assets and liabilities in Moldova. If the U.S. dollar increases in value against the lei, the amount reported in U.S. dollars for assets, liabilities, revenues and
expenses originally recorded in the Moldovan lei will decrease. Conversely, if the U.S. dollar decreases in value against the lei, the amount reported in U.S. dollars for assets, liabilities, revenues and expenses originally recorded in the lei will
increase.



In addition to the effects of foreign currency translation, we are
also exposed to changes in exchange rates due to transactions, mainly sales, that are denominated in foreign currencies. Although our subsidiaries incur most of their expenses in the lei, many of their sales are to customers outside of Moldova and
are therefore denominated in currencies other than the lei (principally the U.S. dollar). At the time of such a sale, the subsidiary records the revenue in lei on the basis of the exchange rate in effect on the date of the sale. However, if the
exchange rate between the lei and the currency in which the sale is denominated changes between the date of the sale and the date the resulting receivable is collected, the amount received, when converted to lei, will be different that the
receivable originally recorded, resulting in a foreign currency transaction gain or loss which is recorded in the results of operations.



The following table sets forth, for the periods indicated, the average exchange rate (expressed in Moldovan lei) quoted by the National Bank of Moldova. Such rates are
set forth as Moldovan lei (MDL) per U.S. dollar. On March 25, 2005, the rate was MDL 12.61 = $1.00.



|                                       |  |             |  |       |  |       |  |       |  |      
|-------------------------------------- |  | ----------- |  | ----- |  | ----- |  | ----- |  | -----
|                                       |  | Fiscal Year
|                                       |  | 2000        |  | 2001  |  | 2002  |  | 2003  |  | 2004 
|Exchange rate at end of period         |  | 12.38       |  | 13.09 |  | 13.82 |  | 13.22 |  | 12.46
|Average exchange rate during period(1) |  | 12.43       |  | 12.87 |  | 13.57 |  | 13.94 |  | 12.33
|Highest exchange rate during period    |  | 12.72       |  | 13.12 |  | 13.98 |  | 14.78 |  | 13.22
|Lowest exchange rate during period     |  | 11.59       |  | 12.38 |  | 13.07 |  | 13.19 |  | 11.51

---

|(1) | The average of the exchange rates on the last day of each quarter during the applicable
period.
|--- | -----------------------------------------------------------------------------------------------



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ITEM 2. DESCRIPTION OF PROPERTY



Corporate
Offices



Through April, 2005, our corporate offices in the U.S. were
located at 1211 Semoran Blvd., Suite 141, in an office facility in Casselberry, Florida, where we leased approximately 1,500 square feet on a month to month basis for a monthly fee of $2,100. Effective April 4, 2005 we changed our mailing address to
2200 Winter Springs Blvd., Suite 106, #330, Oviedo, Florida 32765. We are presently seeking to lease office space for our corporate offices in the U.S. Our corporate offices for our wine production operations in the Republic of Moldova are located
in Chisinau City at 6 Zamfir Arbore Street, where we own approximately 6,500 square feet of office space. We believe that our existing facilities are adequate to support our existing operations and that, if needed, we will be able to obtain suitable
additional facilities on commercially reasonable terms.



Vineyards



As of December 31, 2004, we owned approximately 3,100 acres of farmland
suitable for growing vineyards located within approximately 40 miles of Chisinau, the capital of the Republic of Moldova. In the spring of 2004 we planted vineyards on approximately 925 acres of this farmland. We plan to plant an additional 865
acres of vineyards in 2005. The following table sets forth the name of each of our farmland lots and the respective acreage.



|              |  |            |  |                  
|------------- |  | ---------- |  | -----------------
|Property Name |  | Region     |  | Approximate Acres
|Dancu         |  | Hincesti   |  | 395              
|Geamana       |  | Anenii Noi |  | 2,300            
|Varatic       |  | Anenii Noi |  | 405              
|              |  |            |  |                  
|Total         |  |            |  | 3,100            
|              |  |            |  |                  



Wine-Making Facilities



As of December 31, 2004, we owned ten wine-making, distilling, processing
and storage facilities located within approximately 40 miles of Chisinau. The following table sets forth the approximate amount of grapes processed at each facility for fiscal 2004, fiscal 2003, fiscal 2002 and fiscal 2001, and the approximate
maximum production capacity of each of these facilities.



|           |                 |               |                |                           |                 |                              |                |       |          |        |  |           |  |       
|---------- | --------------- | ------------- | -------------- | ------------------------- | --------------- | ---------------------------- | -------------- | ----- | -------- | ------ |  | --------- |  | ------
|Facility   |                 | Grapes (Tons) |                | WineStorageCapacity(Gal.) |                 | Bottling Capacity (per hour)
|           | Crushed in 2004 |               | Crushedin 2003 |                           | Crushed in 2002 |                              | Crushedin 2001 |       | Capacity |        | 
|Puhoi      |                 | 6,277         |                | 5,393                     |                 | 6,021                        |                | 8,000 |          | 10,000 |  | 2,576,000 |  | 11,000
|Orhei      |                 | 7,516         |                | 3,279                     |                 | 4,000                        |                | 700   |          | 10,000 |  | 4,876,600 |  | 13,000
|Susleni    |                 |              |                |                          |                 |                             |                |      |          | 7,000  |  | 3,801,850 |  |      
|Soldanesti |                 |              |                |                          |                 |                             |                |      |          |       |  |          |  |      
|Hincesti   |                 | 5,347         |                | 2,186                     |                 | 7,043                        |                | 1,200 |          | 7,000  |  | 2,230,000 |  | 12,000
|Bozieni    |                 | 1,160         |                | 2,687                     |                 | 1,300                        |                | 86    |          | 13,000 |  | 1,400,000 |  |      
|Mereseni   |                 | 1,657         |                | 2,023                     |                 | 1,400                        |                | 217   |          | 14,000 |  | 1,321,000 |  |      
|Stolniceni |                 |              |                | 2,529                     |                 | 2,400                        |                |      |          | 10,000 |  | 2,013,600 |  |      
|Caracui    |                 | 1,575         |                | 2,119                     |                 | 1,837                        |                | 87    |          | 14,000 |  | 1,215,300 |  |      
|Codru      |                 |              |                |                          |                 |                             |                |      |          | 4,000  |  | 660,500   |  |      



Puhoi. This plant is located
about 15 miles east of Chisinau on approximately 14 acres. It has one 6,000 bottle per hour bottling line and one 5,000 bottle per hour bottling line. It also has a separate vintage and collection wine storage facility featuring oak barrels.



Orhei. This plant is located about 30 miles north of Chisinau on
approximately 17 acres of land. It has two 4,000 bottle per hour bottling lines and one 5,000 bottle per hour bottling line, line which is used to bottle vodka, brandy other liquors. The facility also contains an approximately 793,000 gallon Madeira
accretion facility, which is the largest such facility in the former Soviet Union, and an approximately 2,100 gallon per hour alcohol production facility, including grain storage, mill fermentation equipment and distillery.



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Susleni. This plant is located about 40 miles northeast of Chisinau on approximately nine acres and contains grape
processing and wine storage and aging facilities.



Soldanesti. This
facility is located about 40 miles north of Chisinau on approximately a 1/4 acre. The facility includes a warehouse and railroad terminal, with rail car loading equipment. We do not currently use this facility. This facility was acquired in one of
our fiscal 2000 transactions, and our investment in the facility is not material. We may consider the sale of this facility in the future.



Hincesti. This plant is located about 28 miles south of Chisinau on approximately 12 acres. It has one 6,000 bottle per hour bottling line, which can be used to
bottle still wines as well as sparkling wines such as champagne, one 3,000 bottle per hour bottling line which is used for standard bottles and one 3,000 bottle per hour bottling line which is used for smaller (187ml) bottles that are distributed to
hotels, airlines and cruise lines and are also used as complimentary additions with a purchase of a regular wine bottle.



Bozieni. This plant is located about 32 miles south of Chisinau on approximately seven acres and contains grape processing and wine storage and aging facilities.



Mereseni. This plant is located about 38 miles south of Chisinau on
approximately 21 acres and contains grape processing and wine storage and aging facilities.



Stolniceni. This plant is located about 30 miles south of Chisinau on approximately 13 acres and contains grape processing and wine storage and aging facilities.



Caracui. This plant is located about 43 miles south of Chisinau on approximately
twelve 12 acres and contains grape processing and wine storage and aging facilities.



Codru. This plant is located about 30 miles south of Chisinau on approximately four acres and contains grape processing and wine storage and aging facilities.



The combined grape crushing capacities of our production facilities exceed their actual current processing. As a result, we believe that our
existing processing capacity is adequate for our current and near term future needs. The costs of our excess capacities are expensed as incurred.



ITEM 3. LEGAL PROCEEDINGS



Other than as set forth
below, we are not a party to any pending legal proceedings or are aware of any pending legal proceedings against us that, individually or in the aggregate, would have a material adverse affect on our business, results of operations or financial
condition.



Shareholder Class Actions



On or about April 16, 2004, one of the Companys shareholders filed a class action
complaint, Maureen E. Alfred, et al. vs. Constantin Jitaru, Anatolie Sirbu and Asconi Corp, Case 04-CV-534 in the United States District Court, Middle District of Florida (the Alfred complaint) alleging that the Company, along with
Constantin Jitaru, its President, CEO and Chairman of the Board, and Anatolie Sirbu, its CFO, Treasurer and Secretary, violated certain federal securities laws. The complaint, which requested unspecified damages, alleged, among other things, that
the defendants made material misrepresentations and omissions of material facts concerning the Companys business performance and financial condition and failed to disclose certain related party transactions, thereby overstating the
Companys financial condition during a period from May 2003 to March 2004. The complaint specifically cited the Companys March 23, 2004 press release in which the Company disclosed that it would be restating its financial statements for
the fiscal quarters ended June 30, 2003 and September 30, 2003. The complaint alleged violations of Section 10(b) of the Exchange Act, and Rule 10b-5 promulgated thereunder against all of the defendants, as well as Section 20(a) violations against
Messrs. Jitaru and Sirbu.



Subsequent to the filing of the Alfred complaint,
seven additional class action complaints, which sought unspecified damages, were filed, in the Middle District of Florida. These complaints contained allegations that were substantially similar in nature to those in the Alfred complaint, except that
while the proposed Class Period in the Alfred complaint was from May 15, 2003 to March 23, 2004, the other complaints proposed Class Period was from June 11, 2001 to March 23, 2004.



All eight class action complaints have since been dismissed without prejudice, and none of the eight class action complaints are pending.



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Shareholder Derivative Suits



Five shareholders derivative actions, which sought unspecified damages, were filed in the United States District Court, Middle District of
Florida, commencing on or about June 30, 2004, naming seven of our directors and certain executive officers as defendants, and naming the Company as a nominal defendant. The five shareholders derivative suits alleged, among other things, breaches of
fiduciary duty and other alleged common law violations by such directors and officers. The shareholder derivative actions contained allegations substantially similar to the foregoing class actions, and claimed that the Company has been injured as a
result of the foregoing now-dismissed class actions and the conduct that was alleged in the foregoing class actions. Four of the shareholders derivative suits have since been voluntarily dismissed by the plaintiffs. The Company has filed a motion
seeking dismissal of the remaining shareholders derivative suit; the Court has not yet ruled on the Companys motion to dismiss.



The Company intends to defend itself in the remaining action vigorously. There is no assurance, however, that such matter will be resolved in the Companys favor. An
unfavorable outcome of this matter may have a material adverse impact on the Companys business, results of operations, financial position, or liquidity. Because the remaining litigation is in an early stage, the Company is unable to predict
the outcome or reasonably estimate any range of loss, if any, that may result and accordingly and has not recorded any liability of any judgment or settlement that may result from the resolution of these matters.



SEC Investigation



On December 29, 2003, we received a request from the Denver regional office of the SEC to voluntarily produce documents and information as
part of an informal inquiry into certain accounting practices of Asconi. The matters under investigation include, among others, our accounting treatment of the issuance of 5,000,000 shares to each of Constantin Jitaru and Anatolie Sirbu. The SEC
requested voluntary production of documents relating to our accounting and financial policies, practices and procedures in fiscal 2001, fiscal 2002 and fiscal 2003.



The SEC Denver staff followed up several times on its original questions and we provided, to the best of our ability, all information
required to these follow up inquiries. The SEC staff also requested and received testimony from our Chief Executive Officer Constantin Jitaru, our Chief Financial Officer Anatolie Sirbu, our Chief Operating Officer Serguei Melnik and our Interim
Chief Accounting Officer Alex Brinister. Messrs. Jitru and Sirbu provided voluntary testimony in August, 2004, and Messrs. Melnik and Brinister provided voluntary testimony in September, 2004.



In January, 2005 we were advised the SEC had elevated the informal inquiry to a formal
investigation, and that they wanted to take additional testimony from Alex Brinister. Mr. Brinister provided such additional testimony via telephone on March 8, 2005.



On March 29, 2005, we received a Wells Notice from the staff of the SEC relating to the Companys alleged failure to record expenses
relating to the May 2003 issuances of 10,000,000 shares of its securities to two of its executive officers and of 100,000 shares to Serguei Melnik. The Wells Notice stated that the SEC staff intends to recommend that a civil or administrative
enforcement action be brought against us, alleging violations of Sections 10(b), 13(a) and 13(b)(2) of the Securities Exchange Act of 1934, as amended (the Exchange Act) and Rules 10b-5, 12b-20, 13a-11 and 13a-13 thereunder. On the same
date, Alex Brinister, also received a Wells Notice from the SEC staff also relating to the May, 2003 these share issuances. This Wells Notice stated that the SEC staff intends to recommend that a civil or administrative enforcement action be brought
against Mr. Brinister, alleging violations of Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 10b-5 and 13b2-1 thereunder and aiding and abetting the Companys alleged violations of the Exchange Act, as well as administrative
proceedings against Mr. Brinister pursuant to Rule 102(e) of the SECs Rules of Practice.



Under the SECs procedures, a Wells Notice recipient has an opportunity to respond to the SEC staffs intended recommendation before the SEC initiates a civil action. We and Mr. Brinister have been
cooperating in the SEC staffs investigation and intend to respond promptly to the respective Wells Notices, in which responses, we and Mr. Brinister intend to vigorously defend their actions.



There can be no assurance that this matter will be resolved in a manner favorable to us or
Mr. Brinister. We are unable to predict the outcome of this matter, including what action, if any, the SEC might take, including the imposition of fines, penalties or other available remedies. We will also likely continue to incur additional costs
related to the SEC investigation and Wells responses, including both additional accounting and legal fees. Also, a significant amount of managements time and attention will be diverted until the investigation concludes. Any adverse development
in connection with the investigation, including any expansion of the scope of the investigation, could negatively impact the market value of our common stock.



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



None.



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PART II



ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUERS PURCHASES OF EQUITY SECURITIES



Market Information



Except for the period from March 24, 2004 to July 6, 2004 (the Trading Suspension), our common shares are traded on AMEX under the symbol ACD. The Trading Suspension came after our March 23,
2004 public announcement that our periodic public reports for the fiscal quarters ended June 30, 2003 and September 30, 2003 would be restated and our cautioning the marketplace not to rely upon our financial statements for the stated periods or any
earnings guidance we had previously released with respect to the 2003 fiscal year until we published the restated financial statements.



On July 2, 2004 the AMEX advised us that, as a result of our filing of our Annual Report on Form 10-KSB for the year ended December 31, 2003, our amended Quarterly
Reports on Form 10-QSB/A for the quarters ended March 31, June 30 and September 30, 2003 and our Quarterly report on Form 10-QSB for the quarter ended March 31, 2004, we had regained compliance with the filing and notification requirements as set
forth in the AMEX Company Guide, and that as a result trading in our common stock would resume on July 6, 2004 and the AMEX was terminating the delisting proceeding. The AMEX trading in our securities was resumed on July 6, 2004.



On April 20, 2005, the AMEX staff notified us that as a result of our failure to file our
Annual Report on Form 10-KSB for the fiscal year ended December 31, 2004 within the prescribed timeframe, we were not in compliance with the currency in public reporting continued listing requirement pursuant to Sections 134 and 1101 of the AMEX
Company Guide. The AMEX staff invited us to submit a plan of compliance addressing the continued listing deficiency by no later than May 4, 2005. The AMEX staff further noted that we must regain compliance with all AMEX listing requirements no later
than June 15, 2005.



On April 27, 2005, we requested an extension of time to
regain compliance with Section 704 of the AMEX Company Guide. Under this Section, an AMEX-listed company is required to hold meetings of its stockholders annually to elect directors and to take action on other corporate matters in accordance with
its charter, by-laws and applicable state laws. We believe that a 90-day extension will give us a reasonable opportunity to prepare and hold an annual shareholder meeting as required under the AMEX Company Guide. As of the today, the AMEX staff has
not notified us whether it accepts or rejects our extension request.



On May 4,
2005, we submitted a plan of compliance with the currency in public reporting AMEX continued listing deficiency. We outlined the reasons for the filing delay. Specifically, we stated that when filed, the Annual Report will not include the report by
Michaelson & Co., P.A., our former auditors, regarding our consolidated financial statements (including the information in the notes thereto) as of and for the year ended December 31, 2003. Our consolidated financial statements as of and for the
year ended December 31, 2003, as included in our Annual Report on Form 10-KSB/A for the year ended December 31, 2003, were audited by Michaelson, which firm in its report dated April 2, 2004 expressed an unqualified opinion on those financial
statements. On April 29, 2005, Michaelson & Co., P.A advised us that it will not grant us permission to re-use its report on the fiscal 2003 consolidated financial statements in the Annual Report. However, Michaelson has not, as of the date
of the filing of this Annual Report on Form 10-KSB for the year ended December 31, 2004, withdrawn its opinion on our consolidated financial statements as of and for the year ended December 31, 2003, as included in the Companys Annual
Report on Form 10-KSB/A for the year ended December 31, 2003. We further notified the AMEX staff that the subject Annual Report will be filed as soon as possible following our discussions with the SEC staff concerning the omission of the report
of Michaelson & Co., P.A from our 2004 Annual Report on Form 10-KSB. Presently, we are in dialogue with our present independent auditors concerning the feasibility of the re-audit of the 2003 consolidated financial statements. As of the date of
this filing, our Audit Committee and the auditors have not reached any conclusions respecting that matter. Further, as of the date of this filing, the AMEX staff has not notified us whether it accepts or rejects the foregoing plan.



In the event the AMEX staff does not accept our plan of compliance, the AMEX staff will
initiate delisting proceedings. There is no assurance that the AMEX staff will accept our plan of compliance or that, even if such plan is accepted, we will be able to implement the plan within the prescribed timeframe. We may appeal a staff
determination to initiate such proceedings and seek a hearing before an AMEX panel. The time and place of such a hearing will be determined by the Panel. If the Panel does not grant the relief sought by us, our securities could be de-listed from the
AMEX and may continue to be listed on the OTC Bulletin Board Market.



Furthermore, whether our shares are traded on AMEX, the Bulletin Board or the Pink Sheets, there is still a limited public market for our common stock. Of the 12,168,768 shares of common stock outstanding on May 10, 2005,
only 1,216,842 shares, or just over 10 % of the shares outstanding, are held by someone other than our officers and directors. Due to the low number of outstanding shares held by the public, the market price of our common stock is
volatile.



Prior to our listing on the AMEX in November, 2003, our shares of
common stock were traded over-the-counter on the OTC Bulletin Board under the symbol ASCS.



The following table sets forth, for the periods indicated, the high and low bid prices of our common stock, as reported in published financial sources. Quotations reflect inter-dealer prices, without retail mark-up,
mark-down, commission, and may not represent actual transactions. All amounts have been adjusted to reflect the one-for-ten reverse stock split affected in May 2003.



|                                    |  |       |   |  |      |  
|----------------------------------- |  | ----- | - |  | ---- | -
|                                    |  | High  |   |  | Low  |  
|Fiscal Year Ended December 31, 2004 |  |       |   |  |      |  
|Quarter Ended December 31, 2004     |  | 4.10  |   |  | 2.75 |  
|Quarter Ended September 30, 2004    |  | 4.95  |   |  | 2.70 |  
|Quarter Ended June 30, 2004         |  | (1    | ) |  | (1   | )
|Quarter Ended March 31, 2004        |  | 8.25  |   |  | 5.95 |  
|Fiscal Year Ended December 31, 2003 |  |       |   |  |      |  
|Quarter Ended December 31, 2003     |  | 10.24 |   |  | 3.80 |  
|Quarter Ended September 30, 2003    |  | 4.90  |   |  | 2.00 |  
|Quarter Ended June 30, 2003         |  | 5.00  |   |  | 0.05 |  
|Quarter Ended March 31, 2003        |  | 3.80  |   |  | 1.80 |  
|Fiscal Year Ended December 31, 2002 |  |       |   |  |      |  
|Quarter Ended December 31, 2002     |  | 4.20  |   |  | 1.80 |  
|Quarter Ended September 30, 2002    |  | 4.20  |   |  | 2.00 |  
|Quarter Ended June 30, 2002         |  | 5.00  |   |  | 2.00 |  
|Quarter Ended March 31, 2002        |  | 7.50  |   |  | 3.20 |  

---

|(1) | No trades due to Trading Suspension discussed above.
|--- | ----------------------------------------------------



Holders



As of December 31, 2004, there were 918 holders of record of our common stock.



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Dividends



We have never declared or paid any cash dividends on our common stock, and we do not anticipate paying cash dividends in the foreseeable future. Our current policy is to
retain any earnings to finance our future development and growth. We may reconsider this policy from time to time in light of conditions then existing, including our earnings performance, financial condition and capital requirements. Any future
determination to pay cash dividends will be at the discretion of our board of directors and will depend upon our financial condition, operating results, capital requirements, general business conditions and other factors that our board of directors
deems relevant.



Recent Sales of Unregistered Securities



Set forth below in chronological order is information regarding securities issued by us
during fiscal 2004 that were not registered under the Securities Act.



On
December 17, 2004, we entered into a Release of Claims and Covenant Not to Sue (the Release) with certain accredited investors (including both individuals and institutions) which had purchased the Companys securities in
the December 2003 private placement (2003 Investors). In consideration of the Shares Issuance and Warrant Repricing (as discussed below), the 2003 Investors agreed to release and discharge us against any and all claims and causes of
action, including those specifically related in any way to the 2003 Investors purchase of our securities in the 2003 private placement (the Claims). The 2003 Investors further agreed to not to sue or bring any action in law, or in
equity against us arising from or relating to the Claims.



Pursuant to the
terms of the Release, on December 17, 2004, we, in a privately negotiated transaction, agreed with the 2003 Investors to reduce the purchase price of our securities sold to the 2003 Investors (including both individuals and institutions) from $5.00
to $3.50 per share by (x) reducing the exercise price of the 259,600 warrants sold in the 2003 private placement to $5.00 (the Warrant Repricing) and (y) issuing 111,257 additional shares of our common stock (the Share
Issuance). The shares of our common stock issued in connection with the Share Issuance (the Shares) and the warrants to be issued in connection with the Warrant Repricing (the Repriced Warrants) have not been registered
under the Securities Act of 1933, as amended (the Act), and when issued, will be issued pursuant to Section 4(2), Section 4(6) and/or 3(b) of the Act and on Regulation D promulgated thereunder, and in reliance on similar exemptions under
applicable state laws. The issuances of the Share Issuance and Warrant Repricing were approved by our Board of Directors. The 2003 Investors represented to us that they were acquiring our securities for investment purposes only and not with a view
to or for sale in connection with any distribution thereof. When issued the certificates representing the securities issued will bear appropriated restrictive legends. No placement or underwriting fees were paid in connection with this transaction.



We also granted piggy-back registration rights to the 2003 Investors in
connection with the Share Issuance and Warrant Repricing, which rights expire on or before December 5, 2006.



Purchases of Equity Securities by the Registrant



None.



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##### Table of Contents

ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



General



In April 2001, pursuant to the Merger, we acquired 100% of the outstanding common stock of Asconi S.R.L. (a limited liability company formed in the Republic of Moldova in October 1994) in exchange for the issuance of
12,600,000 shares (before the affects of the April 2003 one-for-ten reverse stock split (see Note 11 of Notes to Consolidated Financial Statements)) of our common stock. We were formerly known as Grand Slam Treasures, Inc., (Grand Slam), and in
connection with the Merger we changed our name to Asconi Corporation.



Since
Grand Slam had no operations and limited assets at the time of the Merger, Asconi S.R.L. was treated as the continuing entity for accounting purposes, and the Merger was accounted for as: (1) the recapitalization of Asconi S.R.L., whereby its
previously outstanding common stock was converted into 12,600,000 shares of our common stock, par value $.001 per share; and (2) the issuance by Asconi S.R.L. of 386,689 shares of common stock (the number of shares of common stock of Grand Slam
outstanding prior to the Merger and before giving affect to the one-for-ten reverse stock split affected in April 2003) for the net assets of Grand Slam, which were recorded at their book value. The recapitalization of Asconi S.R.L. was accounted
for by restating all share and per share amounts. Since Asconi S.R.L. was treated as the continuing entity for accounting purposes, the consolidated financial statements include the results of operations and cash flows for Asconi S.R.L. for all
periods presented, and the results of operations and cash flows of Grand Slam from April 12, 2001.



Asconi S.R.L. was founded in 1994 and commenced significant operations in 1999. Asconi S.R.L. acquired a 70% interest in S.A. Fabrica de Vinuri din Puhoi and a 74% interest in S.A. Orhei-vin, both Moldovan entities,
in October and December 2000, respectively. The interests were originally acquired by the shareholders of Asconi S.R.L., who subsequently contributed them to Asconi S.R.L. The contribution was recorded based on the historical cost of the interests
to the shareholders. Those acquisitions were accounted for as purchases.



In
December 2001, we acquired approximately 25% of S.A. Vitis Hincesti. On March 7, 2002, we acquired an additional 21% of S.A. Vitis Hincesti. In June 2002, we acquired, through the acquisition of a beneficial interest in an irrevocable trust, an
additional 5% interest in S.A. Vitis Hincesti. Through June 2002, we accounted for our investment in S.A. Vitis Hincesti using the equity method. The acquisition of the additional interest in June 2002 gave us the controlling interest in S.A. Vitas
Hincesti, at which time we began to consolidate S.A. Vitis Hincesti. In February 2003, we subscribed to a subscription offering by S.A. Vitis Hincesti, increasing our ownership in S.A. Vitis Hincesti to 61%. See Note 1 of Notes to Consolidated
Financial Statements.



The consolidated financial statements, including the
information in the notes thereto, as of and for the year ended December 31, 2003 included in this Annual Report on Form 10-KSB are unaudited.



The Companys consolidated financial statements as of and for the year ended December 31, 2003, as included in the Companys Annual Report on Form 10-KSB/A for
the year ended December 31, 2003, were audited by Michaelson & Co., P.A., which firm in its report dated April 2, 2004 expresses an unqualified opinion on those financial statements.



Michaelson & Co., P.A. has advised the Company that it will not grant the Company permission to reuse its report on the fiscal 2003
consolidated financial statements in this Annual Report on Form 10-KSB. However, Michaelson & Co., P.A. has not, as of the date of the filing of this Annual Report on Form 10-KSB for the year ended December 31, 2004, withdrawn its opinion on the
Companys consolidated financial statements as of and for the year ended December 31, 2003, as included in the Companys Annual Report on Form 10-KSB/A for the year ended December 31, 2003.



Accordingly the fiscal 2003 consolidated financial statements, as included herein, are deemed
unaudited. Except for certain reclassifications to conform to fiscal 2004 presentations, the fiscal 2003 consolidated financial statements, as included herein, have been derived from, without adjustment, those included in the Companys Annual
Report on Form 10-KSB/A for the year ended December 31, 2003.



The omission of
a report on the audit of the fiscal 2003 consolidated financial statements from this Annual report on Form 10-KSB means that this Annual Report on Form 10-KSB fails to comply, in that respect, with the rules and regulations of the SEC. The Company
is presently exploring the feasibility of having the Companys 2003 consolidated financial statements reaudited for the purpose of curing the aforementioned 2004 Form 10-KSB filing deficiency.



Critical Accounting Policies and Estimates



Our significant accounting policies are more fully described in Note 2 of Notes to the
Consolidated Financial Statements. However, certain accounting policies and estimates are particularly important to the understanding of the our financial position and results of operations and require the application of significant judgment by our
management or can be materially affected by changes from period to period in economic factors or conditions that are outside the control of management. As a result they are subject to an inherent degree of uncertainty. In applying these policies,
our management uses their judgment to determine the appropriate assumptions to be used in the determination of certain estimates. Those estimates are based on our historical operations, our future business plans and projected financial results, the
terms of existing contracts, our observance of trends in the industry, information provided by our customers and information available from other outside sources, as appropriate. The following discusses our significant accounting policies and
estimates.



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Revenue recognition. We generally recognize product revenue at the time of shipment, at which time persuasive
evidence of an arrangement exists, delivery has occurred (generally triggered by the transfer of the merchandise to a third party shipper under FOB shipping terms), the price is fixed or determinable, and collectibility is probable. Cash payments
received in advance of shipment are recorded as deferred revenue. We generally are not contractually obligated to accept returns, except for defective product. However, we may permit our customers to return or exchange products and may provide
pricing allowances on products unsold by a customer. Revenue is recorded net of an allowance for estimated returns, price concessions, and other discounts. Those estimates are based on historical experience and future projections, and actual future
allowances may vary significantly from estimates. Returns, price concessions and other discounts have historically not been material, and a hypothetical 10% change in the estimate of the level of future returns, price concessions and other discounts
would not have had a material affect on the results of operations for fiscal 2004.



Allowance for doubtful accounts. We provide an allowance for doubtful accounts equal to the estimated uncollectible amounts. Our estimate is based on historical collection experience and a review of the current status of trade
accounts receivable. Historically our bad debt experience and allowances for doubtful accounts have not fluctuated significantly, and any reasonably likely change in the assumptions we currently use would not have a material affect on our results of
operations. However, we are not able to predict future changes in the financial condition of our customers and, if circumstances related to our customers deteriorate, our estimated of the recoverability of our trade receivables could be materially
affected, and we may be required to record additional allowances.



Inventory. We carry our inventory at the lower of cost, determined on a first-in, first-out basis, or market value. To date we have not had to record any allowance to reduce our inventories from cost to market value. In estimating
market value and determining the need for an allowance for the valuation of our inventories, we must estimate future demand and prices based on historic experience, current market conditions and assumptions about future market conditions and
expected demand. If actual market conditions and future demand are less favorable than projected, inventory write-downs, which are charged to costs of goods sold, may be required. A hypothetical 10% change in the sales prices used to estimate market
value would not have had a material affect on the need to record an inventory allowance in fiscal 2004.



Impairment of property, plant and equipment. Property, plant and equipment are carried at cost and are depreciated over their useful lives. In accordance with Statement of Financial Accounting Standards (SFAS)
No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, we review the carrying value of property, plant, and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not
be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where estimated undiscounted future cash flows are less than the carrying value, an impairment loss is recognized equal to an
amount by which the carrying value of the assets exceeds its fair value. The factors considered by management in performing this assessment include current operating results, trends, and prospects, as well as the effects of obsolescence, demand,
competition, and other economic factors. Estimates of future cash flows are subject to a significant degree of uncertainty, and may change over time. Significant changes in such estimates may cause a write-down for the impairment of property, plant
and equipment. A hypothetical 10% change in the estimated future cash flows used to determine if an impairment had occurred would not have had a material affect on need to record an impairment loss in fiscal 2004.



Income Taxes. As part of the process of preparing our financial statements, we are
required to estimate our income taxes. This process involves estimating our actual current tax exposure together with assessing temporary differences resulting from the difference in the financial reporting and tax treatments of specific items, such
as depreciation, the allowance for doubtful accounts, and other items. These differences result in deferred tax assets and liabilities. We also record a deferred tax asset for the net operating loss carryforwards we have in the U.S. We then assess
the likelihood that our deferred tax assets will be recovered from future taxable income, and to the extent we believe that recovery is not likely, we must establish a valuation allowance. Our future tax expense as reported in the financial
statements will be affected by the extent to which we establish a valuation allowance or increase or decrease the allowance in a period. To date, we have recorded a valuation allowance of $15,471,224, the entire amount of our deferred tax assets
(primarily net operating loss carryforwards) in the U.S. as we cannot currently determine that it is more likely than not that we will generate sufficient taxable income in the U.S. to use those net operating loss carryforwards. In the event that
actual results differ from these estimates or we adjust these estimates in future periods, we may need to adjust the valuation allowance, which could materially impact our financial position and results of operations.



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Foreign currency accounting. The financial position and results of operations of our foreign subsidiaries in the
Republic of Moldova are measured using the foreign subsidiaries local currency, the Moldovan lei, as the functional currency since that is the currency of the primary environment in which those companies generate their revenues and expenses.
Revenues and expenses of such subsidiaries are translated into U.S. dollars at average exchange rates prevailing during the period. Assets and liabilities are translated at the rates of exchange on the balance sheet date. The resulting translation
gain and loss adjustments are recorded directly as a separate component of shareholders equity. The amount of future translation gains or losses will be affected by any changes in the exchange rate between the lei and the U.S. dollar.



Although our Moldova subsidiaries incur most of their expenses in the lei,
many of their sales are to customers outside of Moldova and are therefore denominated in currencies other than the lei (principally the U.S. dollar). Additionally, our Moldova subsidiaries have certain bank loans that are denominated in U.S.
dollars, and make certain purchases that are denominated in U.S. dollars. As required by SFAS No. 52, Foreign Currency Translation, at the time of such a U.S dollar denominated transaction the subsidiary records the revenue and related
receivable, or the bank debt or other liability, in lei on the basis of the exchange rate in effect on the date of the transaction. However, if the exchange rate between the lei and the currency in which the transaction is denominated changes
between the date of the original transaction and the date the resulting receivable is collected or liability is paid, the amount received or paid, when converted to lei, will be different than the receivable or liability originally recorded,
resulting in a foreign currency transaction gain or loss which is recorded in the results of operations. Additionally, at the end of each reporting period the lei amounts for the receivables, bank debts and accounts payable of our Moldova
subsidiaries that are denominated in U.S. dollars are adjusted to reflect the amount in lei expected to be received or paid when the receivable is collected or the liability settled on the basis of the exchange rate at the end of the period. These
adjustments also produce foreign currency transaction gains or losses which are recorded in the results of operations.



As a result, in periods in which the value of the lei increases against the value of the U.S. dollar, we will recognize a net foreign currency transaction gain if our
Moldova subsidiaries have U.S. dollar denominated liabilities that exceed their U.S. dollar denominated receivables, or we will incur a net foreign currency transaction loss if our Moldova subsidiaries have U.S. dollar denominated receivables that
exceed their U.S. dollar denominated liabilities. Conversely, in periods in which the value of the lei declines against the value of the U.S. dollar, we will incur a net foreign currency transaction loss if our Moldova subsidiaries have U.S. dollar
denominated liabilities that exceed their U.S. dollar denominated receivables, or we will recognize a net foreign currency transaction gain if our Moldova subsidiaries have U.S. dollar denominated receivables that exceed their U.S. dollar
denominated liabilities. During fiscal 2004 and 2003 we incurred foreign currency transaction losses of $198,213 and $83,698, respectively.



The amount of these gains or losses will depend on the amount, if any, by which the U.S. dollar denominated receivables of our Moldova subsidiaries exceed their U.S.
dollar denominated liabilities, or vice versa, and the amount, if any, by which the value of the lei changes against the value of the U.S. dollar. The following table sets forth the average exchange rates (expressed in Moldova lei to U.S. $1.00) and
the exchange rates as of the beginning and end of fiscal 2004 and 2003 as quoted by the National Bank of Moldova:



|                                   |  |       |  |      
|---------------------------------- |  | ----- |  | -----
|                                   |  | 2004  |  | 2003 
|Exchange rate at beginning of year |  | 13.22 |  | 13.82
|Average exchange rate for year     |  | 12.33 |  | 13.94
|Exchange rate at end of year       |  | 12.46 |  | 13.22



We cannot predict the amount, if any,
by which the lei will increase or decrease in value against the U.S. dollar. Additionally, the amount of the U.S. dollar denominated receivables and liabilities of our Moldova subsidiaries will vary from period to period. At December 31, 2004 the
U.S. dollar denominated liabilities of our Moldova subsidiaries exceeded their U.S. dollar denominated receivables by approximately $10.1 million. Assuming no change in the amount by which the U.S. dollar denominated liabilities of our Moldova
subsidiaries exceeded their U.S. dollar denominated receivables, a hypothetical 1% increase in the value of the lei against the U.S. dollar would cause us to recognize a net foreign currency transaction gain of $100,911, which a hypothetical 1%
decrease in the value of the lei against the U.S. dollar would cause us to recognize a net foreign currency transaction loss of $100,911.



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Key Business Challenges and Risks



The nature of our operations, and the locations in which we operate and sell our products, create certain challenges and risks to us. These
challenges and risks are discussed in Item I of this Annual Report on Form 10-KSB.



We see certain of the factors discussed in Item 1 as especially important to understanding our results of operations, financial condition and cash flows, and the reasons why historical financial results may not be indicative of our future
operating performance. The following discusses those factors.



Regulatory
and economic conditions in Moldova. We produce all of our wines in Moldova, and as a result we may be affected by changes in the regulatory and economic conditions in Moldova.



The wine industry is subject to extensive regulation by the Moldovan Ministry of Agriculture and various foreign agencies, and local
authorities. These regulations and laws dictate such matters as licensing requirements, trade and pricing practices, permitted distribution channels, permitted and required labeling, advertising and relations with wholesalers and retailers. Any
expansion of our existing facilities or development of new vineyards or wineries may be limited by present and future zoning ordinances, environmental restrictions and other legal requirements. For example, the Moldovan government is currently
considering adoption of legislation that would result in additional taxes of 20% on imported rootstocks, which would increase the cost of planting vineyards. Vineyard development is one of the major projects undertaken by us, which will continue in
the future years. The taxes were not imposed on the rootstocks imported by us in 2004 and those we plan to import in 2005, however, there is no assurance that the taxes will not be imposed starting as early as 2006. In addition, new regulations,
requirements and/or increases in excise taxes, income taxes, property and sales taxes or international tariffs, could reduce our profits.



The Republic of Moldova has undergone significant political and economic change since 1990 and any substantial change in current laws or regulations (or in the
interpretations of existing laws or regulations), whether caused by changes in the government of Moldova or otherwise, could have an impact on our results of operations. The Republic of Moldova became the first former republic of the USSR to elect a
communist majority parliament and therefore a communist president in 2001. Current political forces in the parliament are promoting significantly greater government controls over the economy and in particular over agricultural production. If the
president and parliament decide to exert additional control over agricultural production, our business, financial condition and results of future operations could suffer. We could be forced to sell some of our land or vineyards, restrict the acres
of vineyards that we are allowed to harvest or limit the amount of wine we are permitted to bottle and/or sell in the Republic of Moldova or export to other countries. We may also be required to pay additional taxes and/or fees in connection with
our production of wine and we may not have as much control over the operations of our day-to-day business operations in the Republic of Moldova. Additionally, because we export most of our products, actions by the government implement additional
controls on import and export operations, whether prompted by concerns over money laundering or other concerns, could limit our ability to quickly respond to customer needs in other countries and/or bring in capital into the Republic of Moldova for
business operations.



Finally, although our Moldova subsidiaries incur most of
their expenses in the lei, many of their sales are to customers outside of Moldova and are therefore denominated in currencies other than the lei (principally the U.S. dollar). Additionally, our Moldova subsidiaries have certain bank loans that are
denominated in U.S. dollars, and make certain purchases that are denominated in U.S. dollars. As a result, our operating results can be affected by changes in the exchange rate between the lei and other currencies, principally the U.S. dollar. Such
exchange rates reflect, and may change, as a result of changes in economic and political conditions in Moldova. See Foreign Currency Exchange Rates below.



Economic conditions in our key markets. We derived approximately 99% of our total revenue in the fiscal 2004 from sales of our
products outside Moldova, with approximately 83% of our total revenue coming from sales in the Russian Federation. While the Russian market will remain our principal channel of distribution for the foreseeable future, over the last three years we
have worked to lessen our dependence on this market and increase our sales to other geographic areas. These efforts have enabled us to increase our overall sales while decreasing the percentage of our total sales accounted for by exports to the
Russian Federation from approximately 95% in fiscal 2000 to approximately 83% in fiscal 2004. Our plan is to attempt to reduce our sales in the Russian Federation to about 70% of our total revenues over the next five years by increasing our sales to
our other current markets and entering new markets, including the United States, Central and Western Europe and Israel. However, our business will remain heavily influenced by the general economic conditions in the countries in which we currently do
business, especially the Russian Federation. A significant deterioration in these conditions, including a reduction in consumer spending levels, could reduce our sales. In addition, we are affected by political and economic developments in any of
the other countries where we market and distribute our products. Our operations are also subject to the imposition of import, investment or currency restrictions, including tariffs and import quotas or any restrictions on the repatriation of
earnings and capital. For example, the Government of Ukraine unilaterally doubled excise taxes on imported wines during fiscal 2003 in order to protect Ukrainian producers. Although our sales to Ukraine have not decreased as a result of this
increased excise tax, the growth of our sales in the Ukrainian market might otherwise have been higher. These disruptions can affect our ability to import and export products and repatriate funds, which in turn can affect the level of consumer
demand for our products, leading to a decrease in our levels of sales or profitability.



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Competition. Our wines compete in all of the wine market segments with many other Moldovan and foreign wines. Our
wines 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.



We have made a concerted effort to increase the quality of
our products, as we believe that offering a superior product will increase our ability to both enter new markets and increase our market share in our current markets. Our competitive advantage in the Russian Federation market is our large product
line and strong brand image, which is maintained through the efforts, including advertising and sales campaigns, of our distributors in the Russian Federation. Our goal is to increase to use the popularity of our wines and our brand recognition to
increase the volume of our sales and to obtain increases in the prices we obtain from our distributors.



However, wholesaler, retailer and consumer purchasing decisions are influenced by, among other things, the perceived absolute or relative overall value of our products, including their quality or pricing, compared to
competitive products. Unit volume and dollar sales could also be affected by pricing, purchasing, financing, operational, advertising or promotional decisions made by wholesalers and retailers which could affect their purchases of, or consumer
demand for, our products. We could also experience higher than expected selling, general and administrative expenses if we find it necessary to increase advertising or promotional expenditures, or the number of our personnel to maintain our
competitive position, or for other reasons.



Distribution network. We
sell our products to distributors for resale to retail outlets including grocery stores, package liquor stores, club and discount stores and restaurants. Sales to our largest buyer, who is an importer and a distributor in the Russian Federation, GB
Holding Vin, represented approximately 24% of our revenues in fiscal 2004, while sales to our largest distributor during fiscal 2003 and fiscal 2002, Iantarnaia Grozdi, represented approximately 24% of our revenues in each of fiscal 2003 and 2002.
Sales to our five largest distributors combined, Iantarnaia Grozdi, GB Holding Vin, Expovin, Sever and Davis, all of whom are in the Russian Federation, represented approximately 74% of our revenue in fiscal 2004 and 82% of our revenues for fiscal
2003. Our sales to these distributors are expected to continue to represent a substantial amount of our net revenues in the near future. Distribution channels for alcoholic beverage products have been characterized in recent years by rapid change,
including consolidations of certain distributors. In addition, distributors and retailers of our products offer products which compete directly with our products for retail shelf space and consumer purchases. Our agreements with our distributors are
for a one year term, and are renewed on an annual basis. In the future, our distributors and retailers may decide to not continue to purchase our products or provide our products with adequate levels of promotional support. Changes in the financial
condition of these distributors, consumer preferences or consumer spending in the Russian Federation could affect both the quantity and price level of the wines that we are able to sell to these distributors.



Cost and availability of grapes and other raw materials. Our business is heavily
dependent upon raw materials, such as grapes, grape juice in bulk, grains and packaging materials which we purchase from third-party suppliers. We could experience shortages of raw materials due to supply, production or shipment difficulties, which
could decrease our ability to supply goods to our customers. We are also directly affected by increases in the costs of such raw materials. In the past, we have experienced significant increases in the cost of grapes. In fiscal 2004 we planted
approximately 925 acres of vineyards. Those vineyards would be expected to produce their first harvest in the fall of 2007, and reach their full production capacity in the fall of 2009. We believe that having our own vineyards will provide us with
more control over the access to and cost and quality of the grapes we use. Although we believe we have adequate sources of grape supplies, in the event demand for certain wine products exceeds expectations, we could experience shortages. A shortage
in the supply of wine grapes could result in an increase in the price of some or all of the grape varieties we purchase and a corresponding increase in our wine production costs. If we cannot increase prices because of competitive pressure,
increased grape supply costs could reduce our profits.



Seasonality. Our
revenues and operating results may vary from quarter to quarter due to seasonal changes in consumer consumption habits. For example, sales volumes tend to increase during the summer months and the holiday season and decrease after the holiday
season. As a result, our sales and earnings are typically highest during the third and fourth calendar quarters and lowest in the first calendar quarter. Seasonal factors also affect our cash flows and the levels of borrowing. For example, our
borrowing levels typically are highest during fall when we have to pay growers for grapes harvested and make payments related to the harvest.



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Capital.The wine industry is a capital-intensive business which requires substantial capital expenditures to
improve or expand wine production and to develop or acquire vineyards. We estimate our need for capital expenditures at approximately $10 million over three years to be used for planting additional acres of vineyards, renovating and upgrading our
production facilities. Further, the acquisition of grapes and bulk wine require substantial amounts of working capital. In order to ensure continued growth in our operations, we estimate that we will need to increase our working capital by 30%
annually. These funds will be used to increase our purchases of grapes as well as other raw materials such as glass, cork and labels. These capital expenditures and working capital requirements will have to be financed from cash flows from
operations, additional borrowings or additional equity financing. There is no assurance we will be able to attract sufficient debt or equity capital, and in particular our ability to attract equity capital may be adversely due to the litigation that
followed the restatement of our financial statements for fiscal 2002 and the first three quarters of fiscal 2003 .(see Item 3  Legal Proceedings). If we do not attract capital for current operations and capital expenditures, we may not be able
to increase our production and sales, and our ability to compete with our more technologically advanced competitors who are able to invest in modern winemaking equipment will be adversely affected.



Foreign currency exchange rates. Our net income may be significantly affected by
changes in the exchange rates between the lei and other currencies, in particular the U. S. Dollar. See Critical Accounting Policies and Estimates  Foreign currency accounting.



Results of Operations



Year Ended December 31, 2004 Compared to Year Ended December 31, 2003



Revenues. Revenues increased $2,878,987 or 17.5% from $16,439,613 in fiscal 2003 to
$19,318,600 in fiscal 2004. Our case sales increased by approximately 330,000 cases, or 20.1% to approximately 1,970,000 cases in fiscal 2004 from approximately 1,640,000 cases in fiscal 2003. The average price of a case decreased from $10.02 in
fiscal 2003 to $9.81 in fiscal 2004. The average price decreased as the result in the shift in the assortment of wines sold during fiscal 2004 as compared to fiscal 2003. The average price per case of bottled wine will vary from period to period
based on the trends in consumer behavior, seasonal and other effects on the nature of the wine sold (i.e., higher priced versus lower priced wines), as well as based on changes in market conditions, as a result of which average per case prices for a
single fiscal year may not be indicative of trends in average prices that will continue into the next fiscal year.



Cost of Sales and Gross Profit. Cost of sales increased by $2,495,869 or 25.0% from $9,997,596 in fiscal 2003 to $12,493,465 in fiscal 2004. Gross profit increased
by $383,118 from $6,442,017 in fiscal 2003 to $6,825,135 in fiscal 2004. The gross profit percentages were 35.3% and 39.2% in fiscal 2004 and 2003, respectively. The gross profit percentage decreased in fiscal 2004 from fiscal 2003 as the result of
increase in costs of raw material, primarily grapes we purchase to produce our wines and the decline in the average per case price in fiscal 2004, as discussed above.



Our gross profit margin is materially affected by the price we pay to purchase grapes and bulk wine. In the harvest which took place in the
fall of 2003 the prices we paid for grapes and bulk wine were generally higher than they were in 2002. The grapes and bulk wine purchased in the fall of 2003 produced wines that were marketed by us in 2004 and also will produce wines that will be
marketed in subsequent years. In the harvest that took place in the fall of 2004 the prices we paid for grapes and bulk wine were generally lower than they were in 2003. If we are not able to increase the prices we charge our distributors to offset
higher cost we incur in periods when the price of grapes and bulk wine increase, such as in 2003, our gross profit percentage may decrease.



Selling and Administrative Expenses. Selling and administrative expenses increased by $2,095,572 or 102.6% from $2,042,245 in fiscal 2003 to $4,137,817 in fiscal
2004. Selling, general and administrative expenses were 20.9% of revenues in fiscal 2004 and 12.4% of revenues in fiscal 2003. The principal components of the increase in selling, general and administrative expenses were increases in consulting fees
and professional fees. Consulting fees increased by $1,180,700, including an expense of $952,000 relating to the strategic consulting contract entered into in February, 2004 (see Note 9 of Notes to Consolidated Financial Statements). Professional
fees increased by approximately $400,000, in part due to the expenses associated with the restatement of our fiscal 2002 and interim 2003 financial statements as well as shareholder litigation (See Note 11 of Notes to Consolidated Financial
Statements) and SEC investigation (see Note 12 of Notes to Consolidated Financial Statements). Additional expenses related to the SEC investigation and certain remaining litigation are expected to affect fiscal 2005. We also incurred a non-cash
charge of $455,295, which we view as non-recurring, related to the issuance of additional shares and the repricing of warrants to the investors which participated in 2003 private placement (see Note 9 of Notes to Consolidated Financial Statements).
In addition, our fiscal 2004 expenses included approximately $260,000 for the use of trademarks owned by the government of Moldova. This became obligatory during fiscal 2004 and will continue into future years. Shipping costs increased by $51,295 as
the result of the increase in our sales. These increases were partially offset by decreases in advertising expenses of approximately $100,000 and decreases in certain other expenses.



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Depreciation and Amortization. Depreciation and amortization expense increased from $576,585 in fiscal 2003 to
$717,264 in fiscal 2004 as the result of additions to our property, plant and equipment during fiscal 2004, which primarily included the fermentation, pressing and aging equipment for our Puhoi winery.



Stock Issuance Expense. On April 22, 2003, our board of directors approved the
issuance of 5,000,000 shares of common stock to each of Constantin Jitaru and Anatolie Sirbu. The board of directors approved the issuance of the shares in order to increase the ownership levels of Messrs. Jitaru and Sirbu to the levels contemplated
under the terms of the Merger. Pursuant to those terms, Messrs. Jitaru and Sirbu were to each become the beneficial owners of approximately 46.5% of our issued and outstanding shares. However, as a result of the issuance of shares of our common
stock to persons other than Messrs. Jitaru and Sirbu, which we viewed as improper, the ownership levels of Messrs. Jitaru and Sirbu were less than required under the terms of the Merger. After initiating and later settling litigation over those
issuances (see Note 9 of Notes to Consolidated Financial Statements), the board of directors determined that these shares should be issued. The 10,000,000 shares were valued on the basis of the closing price on the date of the board of directors
resolution, resulting in the recording of $40,000,000 of stock issuance expense. This expense was non-cash in nature, and is not expected to recur at this level.



Stock Compensation Expense. On April 22, 2003 our board of directors approved the issuance of 100,000 shares of common stock to
Serguei Melnik as compensation for his services as an officer of Asconi. As the award had no vesting or forfeiture provisions, it was charged to expense as of the date of the award on the basis of the market price of our common stock on the date of
the board resolution. This expense was non-cash in nature, and is not expected to recur at this level.



Income (loss) from Operations. As a result of the foregoing, income from operations was $1,970,054 in fiscal 2004 as compared to a loss from operations of $36,576,813 in fiscal 2003. However, the income (loss)
from operations for both fiscal 2004 and 2003 included the effects of non-recurring or unusual items. The loss from operations in fiscal 2003 included the $40,400,000 of non-recurring non-cash expenses related to the issuance of 10,100,000 shares
discussed above. Without those expenses, our income from operations would have been $3,823,187 in fiscal 2003. The income from operations in 2004 included the effects of non-recurring consulting fees, the expense recorded from the issuance of
additional shares and the repricing of the warrants to the 2003 private placement investors, and higher than usual professional fees aggregating approximately $1,874,000. Without the effects of those expenses our income from operations in fiscal
2004 would have been $3,844,054, representing a $20,867 or 0.5% increase over the income from operations in 2003 calculated without that periods non-recurring items. Therefore the income from operations without the effects of the non-recurring
and unusual items discussed above remained substantially the same in 2004 as compared in 2003, primarily reflecting the increase in our sales and resulting gross profit offset by increases in sales and marketing costs from the trademark fee paid to
the state of Moldova and higher depreciation.



Minority Interest in Income
of Subsidiaries. Minority interest in income of subsidiaries represents the portion of the income of in S.A. Fabrica de Vinuri din Puhoi, S.A. Orhei-vin, and S.A. Vitis Hincesti attributable to the portions of those companies owned by others.
The minority interest in income of subsidiaries decreased from $318,893 in fiscal 2003 to a negative $30,650 in fiscal 2004 as the result of the lower net income or higher net loss in subsidiaries with smaller ownership by the parent such as S.A.
Orhei Vin and S.A. Vitis Hincesti.



Interest Expense. Interest expenses
increased by $62,493 or 8.3% from $752,373 in fiscal 2003 to $814,866 in fiscal 2004. This increase was primarily due to the increase in our average borrowing rate on debt we incurred to support the increased level of our operations including the
purchase of grapes during 2003 and 2004 harvest for production of wines to be sold in future years.



Income Taxes. Income taxes decreased by $223,161 or 62.1% from $359,273 in fiscal 2003 to $136,112 in fiscal 2004 as the result of the decrease in the taxable income reported by our operating subsidiaries in
Moldova. Our effective tax rates were a negative 1.0% in fiscal 2003 and 13.8% in fiscal 2004. The effective tax rates differ from the statutory rates due to foreign taxes and the effects of changes in the valuation allowance we have recorded
against the deferred tax asset for our net operating loss carryforwards in the U.S. (see Note 13 of Notes to Consolidated Financial Statements). We have recorded a valuation allowance for all of the deferred tax asset related to our net operating
loss carryforwards as currently we cannot determine that it is more likely than not that we will generate sufficient taxable income in the U.S. to use those net operating loss carryforwards.



Net Income (loss). As a result of the foregoing, our net income in fiscal 2004 was
$877,688 as compared with a net loss of $37,865,050 in fiscal 2003. However, the net income (loss) for both the fiscal 2003 and 2004 included the effects of non-recurring or unusual items. The net loss for fiscal 2003 included the $40,400,000 of
non-recurring non-cash expenses related to the issuance of 10,100,000 shares discussed above. Without those expenses, our net income for fiscal 2003 would have been $2,534,950. The net income for fiscal 2004 included the effects of non-recurring
consulting fees, the expense recorded from the issuance of additional shares and the repricing of the warrants to the 2003 private placement investors, and higher than usual professional fees aggregating $1,874,000. Without the effects of those
expenses our net income for fiscal 2004 would have been $2,751,638 representing a $216,688, or 8.5% increase over the net income for fiscal 2003 calculated without that periods non-recurring items. This $216,528 increase reflects the effects
of changes in our effective tax rates and the minority interests in the income or losses of our subsidiaries, partially offset by increases in our interest expense and the absence from 2004 of other income similar to the $226,000 recognized in
fiscal 2003 from the settlement of certain litigation.



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Liquidity and Capital Resources



In both fiscal 2004 and 2003, our operations produced positive cash flows, which we used during both periods to invest in property, plant
and equipment and to repay bank loans.



Cash flows from operations were
$4,060,640 in fiscal 2004, compared to $572,894 in fiscal 2003. Operating cash flows,computed by adjusting net income (loss) for non-cash expenses, was $3,311,396 in fiscal 2004 as compared to $3,624,526. The increase in our cash flows from
operations was principally generated from increases in our accounts payable and prepayments received of $1,188,870, and a decrease of $1,182,664 in advance payments made to purchase grapes, partially offset by aggregate cash outflows of $1,843,209
required to support higher levels of accounts receivable and inventory, all of which reflect our increasing level of operations and revenues, as well as a $301,780 decrease in taxes payable. At December 31, 2004, our accounts receivable represented
70 days of sales on the basis of our sales for the fourth quarter of fiscal 2004, as compared to 54 days of sales at December 31, 2003 on the basis of our sales for the fourth quarter of fiscal 2003. A significant portion of our sales take place
before the holiday season, and therefore increases in sales can have the effect of increasing the days outstanding in our accounts receivable at December 31. We do not believe that the 16 day increase in the number of days of sales outstanding at
December 31, 2004 as compared to December 31, 2003 indicates any decline in the collectability of our trade receivables. Our accounts payable increased from December 31, 2003 to December 31, 2004 as a result of increase in our operations. Although
our operating cash flows for fiscal 2004 include the effect of an increase in our accounts payable of approximately $1.2 million, and a decrease in advance payments made to purchases grapes of $1.2 million from December 31, 2003 to December 31,
2004, even if our accounts payable had not increased and our advance payments had not decreased, our operations for fiscal 2004 would have generated positive cash flows of $1.7 million.



In fiscal 2004, we used $2,769,577 in investing activities to invest in additional production facilities and the development of our
vineyards. We financed these investments using cash flows from operations. We also used $1,365,119 for repayment of short-term debt and $68,758 to reduce capital lease obligations.



In fiscal 2003, we used $1,938,654 in investing activities to invest in additional production facilities and purchase land that will be
developed as a vineyard. For the first three quarters of fiscal 2003, we financed these investments through a combination of our cash flows from operations and borrowings. Our investments in the fourth quarter of fiscal 2003 were financed with the
proceeds of a private placement of common stock and warrants. As a result, total cash provided by financing activities was $1,533,871. In fiscal 2005, we plan to plant approximately 865 acres of the land we have acquired for vineyards



Our debt capital has been in the form of borrowings secured by inventory and equipment and
capital leases. At December 31, 2004 we have an aggregate of approximately $5.6 million of such borrowings, all of which is due in fiscal 2004 except for $6,861 of capital lease obligations. Our equipment borrowings are generally secured by specific
assets, while our inventory borrowings generally allow us to borrow up to specified percentages of our inventories. Our debt agreements do not contain covenants that require the maintenance of specified financial ratios. We are in compliance with
all of the covenants in our debt agreements.



We have no unused lines of credit
or other borrowing facilities at December 31, 2004. However, we have been negotiating with our current lenders to extend our debt repayment schedules, which will have the effect of increasing the cash flow from operations we can use to finance our
capital expenditures.



At December 31, 2004, we had net working capital of
$4,533,436 compared to net working capital of $3,988,572 at December 31, 2003. We currently believe that our existing working capital and the cash flows from our operations (including the cash flows from operations made available by negotiating
extensions of debt repayments) will be sufficient to fund our operations and capital expenditures for fiscal 2005. However, additional increases in the level of our operations could require additional capital, and there can be no assurance that we
would be able to obtain any such additional working capital. If we need additional working capital and are unable to obtain it our operations could be adversely affected.



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Off Balance Sheet Arrangements



We do not currently have any off balance sheet arrangements falling within the definition of Item 303(c) of Regulation S-B.



Inflation



To date inflation has not had a material impact on our operations.



Recent Accounting Pronouncements



In June 2001, the FASB issued SFAS No. 143 Accounting for Asset Retirement Obligations. The statement addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The statement was effective for us in fiscal 2003. The adoption of SFAS No. 143 did not have a material impact on our financial
position, results of operations or cash flows.



In April 2002, the FASB issued
SFAS No. 145, Rescission of FASB Statements Nos. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections. SFAS No. 145 eliminates the requirement to classify gains and losses from extinguishments of indebtedness as
extraordinary, requires certain lease modifications to be treated the same as a sale-leaseback transaction, and makes other non-substantive technical corrections to existing pronouncements. SFAS No. 145 is effective for fiscal years beginning after
May 15, 2002, with earlier adoption encouraged. We adopted SFAS No. 145 effective fiscal 2003. The adoption of SFAS No. 145 did not have a material effect on our financial position, results of operations, or cash flows.



In July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit
or Disposal Activities. SFAS No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (including Certain costs Incurred in a Restructuring). SFAS No. 146 requires recognition of a liability for a cost associated with an exit or disposal activity when the
liability is incurred, as apposed to when the entity commits to an exit plan under EITF No. 94-3. SFAS No. 146 is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. We adopted SFAS No. 146 in fiscal 2003.
The adoption of SFAS No. 146 did not have a material effect on our financial position, results of operations, or cash flows.



In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation  Transition and Disclosure. This standard amends SFAS No. 123,
Accounting for Stock-Based Compensation, to provide alternative methods of transition for an entity that voluntarily changes to the fair value based method of accounting for stock-based employee compensation. It also amends the
disclosure provisions of SFAS No. 123 to require prominent disclosure about the effects on reported net income of an entitys accounting policy decisions with respect to stock-based employee compensation. Finally, SFAS No. 148 amends APB No.
28, Interim Financial Reporting, to require disclosure about those effects in interim financial information. SFAS No. 148 is effective for fiscal years beginning after December 15, 2002. The adoption of SFAS No. 148 did not have a
material impact on our financial position, results of operations, or cash flows.



In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. SFAS No. 150 establishes standards for how an issuer classifies and measures in its
statement of financial position certain financial instruments with characteristics of both liabilities and equity. SFAS 150 requires that an issuer classify a financial instrument that is within SFAS No. 150s scope as a liability (or an asset
in some circumstances) because that financial instrument embodies an obligation of the issuer. Many of those instruments were previously classified as equity. SFAS No. 150 requires an issuer to classify the following instruments as liabilities (or
assets in some circumstances): mandatory redeemable financial instruments; obligations to repurchase the issuers equity shares by transferring assets; and certain obligations to issue a variable number of its equity shares. SFAS No. 150 is
effective for all financial instruments entered into or modified after May 31, 2003, and otherwise shall be effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of SFAS No. 150 did not have a material
effect on our consolidated balance sheet.



In November 2002, the FASB issued
FASB Interpretation No. 45 (FIN 45), Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. FIN 45 requires a liability to be recognized at the time a company
issues a guarantee for the fair value of the obligations assumed under certain guarantee agreements. The provisions for initial recognition and measurement of guarantee agreements are effective on a prospective basis for guarantees that are issued
or modified after December 31, 2002. We adopted FIN 45 in fiscal 2003. Our adoption of FIN 45 did not have a material impact on our financial position, results of operations, or cash flows.



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In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation of Variable Interest Entities an
interpretation of ARB No. 51 (FIN 46). FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling
financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The disclosure provisions of FIN 46 are effective for financial statements
initially issued after January 31, 2003. Public entities with a variable interest in a variable interest entity created before February 1, 2003 shall apply the consolidation requirements of FIN 46 to that entity no later than the beginning of the
first annual reporting period beginning after June 15, 2003. FIN 46 is effective for all new variable interest entities created or acquired after January 31, 2003. Additionally, in December 2003, the FASB issued FASB Interpretation No. 46R (FIN 46R)
to update certain aspects of FASB 46. FIN 46R must be adopted no later than the end of the first interim or annual reporting period ending after March 15, 2004. The adoption of FIN 46 and FIN 46R did not have a material impact on our financial
position, results of operations, or cash flows.



In November 2004, the FASB
issued SFAS No. 151, Inventory Costs, an Amendment of ARB No. 43, Chapter 4. SFAS No. 151 retains the general principle of ARB No. 43, Chapter 4, Inventory Pricing, that inventories are presumed to be stated at cost; however,
it amends ARB No. 43 to clarify that abnormal amounts of idle facilities, freight, handling costs and spoilage should be recognized as current period expenses. Also, SFAS No. 151 requires fixed overhead costs be allocated to inventories based on
normal production capacity. The guidance of SFAS No. 151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. We believe that implementing SFAS No. 151 should not have a material impact on our financial
condition or results of operations.



In December 2004, the FASB issued SFAS No.
123R (Revised 2004), Share Based Payment, which eliminates the use of APB Opinion No. 25 and will require us to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair
value of the award. That cost will be recognized over the period during which an employee is required to provide service in exchange for the rewardthe requisite service period. No compensation cost is recognized for equity instruments for
which employees do not render the requisite service. The grant-date fair value of employee share options and similar instruments will be estimated for the company using option-pricing models adjusted for the unique characteristics of those
instruments. SFAS No. 123R (Revised 2004) is effective for the first interim reporting period that begins after January 1, 2006 and must be applied to all options granted or modified after its effective date and also to recognize the cost associated
with the portion of any option awards made before its effective date for with the associated service has not been rendered as of its effective date. We are still studying the requirements of SFAS No. 123R (Revised 2004) and have not yet determined
what impact it will have on our results of operations and financial position.



In December, 2004 the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assetsan amendment of APB Opinion No. 29. APB Opinion No. 29 provided an exception to the basic measurement principle (fair value) for exchanges of
similar productive assets. That exception required that some nonmonetary exchanges, although commercially substantive, be recorded on a carryover basis. SFAS No. 153 amends APB Opinion No. 29 to eliminate the exception to fair value for exchanges of
similar productive assets and replace it with a general exception for exchange transactions that do not have commercial substance, which are defined as transactions that are not expected to result in significant changes in the cash flows of the
reporting entity. SFAS No. 153 is effective for nonmonetary exchanges occurring in fiscal periods beginning after June 15, 2005. We do not expect that SFAS No. 153 will have a material affect on our financial statements.



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ITEM 7. FINANCIAL STATEMENTS



Our financial
statements are set forth on pages F-1 through F-23 of this annual report.



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



On June 22, 2004, Michaelson & Co., P.A. (Michaelson) advised us that Michaelson was declining to continue its engagement with us as our independent
accountants. As of June 22, 2004, upon the approval of our board of directors, we engaged Moore Stephens Lovelace, P.A. to serve as our independent accountants. The change in our independent auditors was previously reported, along with all required
disclosures, on Form 8-K filed on June 24, 2004.



ITEM 8A. CONTROLS AND PROCEDURES



As of December
31, 2004, the end of the period covered by this annual report, the Chief Executive Officer and Chief Financial Officer of the Company (the Certifying Officers) conducted evaluations of the Companys disclosure controls and
procedures. As defined under Sections 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act), the term disclosure controls and procedures means controls and other procedures of an issuer
that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the
Commissions rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the
Exchange Act is accumulated and communicated to the issuers management, including the Certifying Officers, to allow timely decisions regarding required disclosure. Based on this evaluation, the Certifying Officers have concluded that the
Companys disclosure controls and procedures were effective to ensure that material information is recorded, processed, summarized and reported by management of the Company on a timely basis in order to comply with the Companys disclosure
obligations under the Exchange Act, and the rules and regulations promulgated thereunder.



Further, there were no changes in the Companys internal control over financial reporting during the fourth fiscal quarter that have materially affected, or are reasonably likely to materially affect, the
Companys internal control over financial reporting.



In our annual report
on Form 10-KSB for the year ended December 31, 2003, as well as in our quarterly reports for the quarters ended March 31, 2004, June 30, 2004 and September 30, 2004, we disclosed that our Certifying Officers have concluded that the Companys
disclosure controls and procedures were not effective to ensure that material information is recorded, processed, summarized and reported by management of the Company on a timely basis in order to comply with the Companys disclosure
obligations under the Exchange Act, and the rules and regulations promulgated thereunder.



On March 23, 2004, we issued a public announcement that our periodic public reports for the fiscal quarters ended June 30, 2003 and September 30, 2003 will be restated. We cautioned the marketplace not to rely upon
our financial statements for the stated periods or any earnings guidance we had previously released with respect to fiscal 2003 until we published the restated financial statements. Under the supervision of our audit committee, we inquired into the
concerns raised by the SEC staff in its correspondence to us. We noted that the restatements would change, among other things, the accounting for our issuance of 10,000,000 shares during fiscal 2003 to Constantin Jitaru and Anatolie Sirbu, our named
executive officers. The issuance of those shares was disclosed in our December 4, 2003 proxy statement and was ratified by our shareholders at our December, 2003 shareholders meeting.



Our March 23, 2004 announcement followed our receipt on March 5, 2004 of a letter from the
staff of the SEC containing the SEC Division of Corporation Finance staffs comments relating to our financial and non-financial disclosures contained in our Registration Statement on Form S-3 filed with the SEC on February 6, 2004, our Annual
Report on Form 10-KSB for the fiscal year ended December 31, 2002 and our proxy statement (Schedule l4A) filed December 4, 2003. The SEC staff inquired, among other things, into our accounting treatment of the ten million share issuance. The March
5, 2004 SEC staff letter followed an informal inquiry from the SECs Denver regional office requesting voluntary production of documents relating to our accounting and financial policies, practices and procedures in fiscal 2001, fiscal
2002 and fiscal 2003, including accounting treatment of certain related-party transactions. As discussed in Item 3 Legal Proceedings and in Note 12 to Consolidated Financial Statements, the SEC staff elevated the informal inquiry to a formal
investigation in January, 2005, and on March 29, 2005 advised the Company and Mr. Brinister that it intended to recommend that civil or administrative enforcement actions be brought against the Company and Mr. Brinister for violations of the certain
sections of the Exchange Act and the rules thereunder relating to the Companys alleged failure to record expenses relating to the May 2003 issuances of 10,000,000 shares of its securities to two of its executive officers and 100,000 shares to
Serguei Melnik.



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As discussed in Notes 3 and 19 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-KSB
for the year ended December 31, 2003, as the result of our inquiries into the matters raised in the letters from the SEC staff, our fiscal 2002 and interim 2003 financial statements were restated to correct the manner in which we accounted for: (1)
the issuance of the 10,000,000 shares to Constantin Jitaru and Anatolie Sirbu; (2) the accounting for certain shares issued under consulting and employee stock awards in fiscal 2003; (3) the portion of fiscal 2002 for which our consolidated results
of operations included the operations of S.A. Vitis Hincesti; and (4) certain accounting related to the Merger.



The evaluation of our disclosure controls and procedures carried out by our management considered whether weaknesses in our disclosure controls and procedures were a
cause of the errors for which our fiscal 2002 and interim 2003 financial statements had to be restated. We concluded that at December 31, 2003 our disclosure controls and procedures were not effective to ensure that material information is recorded,
processed, summarized and reported by our management on a timely basis in order to comply with our disclosure obligations under the Exchange Act and the rules and regulations thereunder due to the following reasons:



| |  |  | we lacked a chief accounting officer having the necessary level of experience with U.S. generally accepted accounting principles (US GAAP) and SEC reporting;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we lacked controls to insure that agreements, contracts and other documents relating to debt and equity transactions, and investments in subsidiaries or investees, including
transactions such as those discussed above, were provided to and reviewed by accounting and financial reporting personnel on a timely basis to insure that the financial reporting and disclosure implications of such transactions could be considered
and reflected in the financial statements in the proper periods;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we lacked controls to insure that actions taken by our board of directors were documented in their minutes on a timely basis to insure that the financial reporting and disclosure
implications of such actions could be considered and reflected in the financial statements in the proper periods; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our audit committee was not adequately manned, or sufficiently active in accordance with its charter, including its duties to discuss, with management and our independent auditors,
prior to the release of each periods financial statements, the financial statements themselves, significant accounting policies and estimates, our internal controls, and the scope and findings of the work performed by our independent auditor
in its audit or review of the financial statements.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



As a result
of these findings, we determined to take the following steps to improve our disclosure controls and procedures:



| |  |  | create the position of chief accounting officer who will report both to the chief executive officer and the audit committee, and hire for that position a person having adequate
experience in the application of US GAAP and SEC reporting;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | require that all contracts, agreements and other documents relating to debt or equity transactions, acquisition of assets or securities and investments in subsidiaries or investees,
including transactions such as those discussed above, be reviewed and approved by the chief accounting officer prior to their execution;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | require that all other material contracts or agreements be: (1) in writing; (2) executed only by the chief executive officer or chief financial officer; (3) if not in English,
translated into English as soon as practicable after execution; and (4) immediately forwarded to the chief accounting officer and our outside legal counsel;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | require that the chief accounting officer attend all of the meetings of our board of directors to be aware of actions taken by the board of directors that have accounting or
disclosure implications, and that the chief accounting officer act as the secretary for the board of director meetings and be responsible for the timely preparation of minutes of those meetings;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | reconstitute our audit committee to, in accordance with its charter, be made up of independent directors who are financially literate, and to contain at least one member who is a
financial expert as that term is defined in the SECs rules; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | require our audit committee to meet at least once every quarter, prior to the release of that periods financial statements, to, among other things, discuss, with management
and our independent auditors, prior to the release of each periods financial statements, the financial statements themselves, significant accounting policies and estimates, our internal controls, and the scope and findings of the work
performed by our independent auditor in its audit or review of the financial statements.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



As of December 31, 2004 we have instituted all of the steps described above, except that at December 31, 2004 the position of chief accounting officer is presently being filled by an interim chief
accounting officer while we continue our efforts to identify and hire a permanent chief accounting officer. However, while we continue this search our current accounting and financial reporting personnel are consulting regularly with our auditors,
and with our audit committee, which has engaged outside counsel which attends each audit committee meeting.



We believe that the completion of these steps now allow us to conclude that our disclosure controls and procedures are effective to ensure that material information is recorded, processed, summarized and reported by
our management on a timely basis in order to comply with our disclosure obligations under the Exchange Act and the rules and regulations thereunder. We will continue to evaluate our disclosure controls and procedures, and to seek to both implement,
on a timely basis, changes to our disclosure controls and procedures that may be necessary to keep them effective in light of any changes in the nature of our business and any rapidly changing environment, and improve them.



Item 8B. Other Information



Officer/Director Resignation



On May 10, 2005, Serguei Melnik resigned as Chief Operating Officer and a
director of Asconi Corporation. Mr. Melniks resignation was for personal reasons.



As a result of Mr. Melniks resignation, the Board currently consists of eight members and one vacancy: Constantin Jitaru, Anatolie Sirbu, Nurlan Arinov, Nicolae Sterbets, Radu Bujoreanu, Tatiana Radu, Anatolyi
Krupskyi and Andrei Gani.



32



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##### Table of Contents

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, positions and ages of our executive officers and directors, both as of as of December 31, 2004.



|                            |  |     |  |                                                             
|--------------------------- |  | --- |  | ------------------------------------------------------------
|Name                        |  | Age |  | Title                                                       
|Constantin Jitaru           |  | 45  |  | Chairman of the Board, Chief Executive Officer and President
|Anatolie Sirbu              |  | 41  |  | Director, Chief Financial Officer, Secretary and Treasurer  
|Serguei Melnik(6)           |  | 32  |  | Director, Chief Operating Officer                           
|Nurlan Arinov (1)(3)(4)(5)  |  | 34  |  | Director                                                    
|Radu Bujoreanu(4)           |  | 33  |  | Director                                                    
|Nicolae Sterbets            |  | 53  |  | Director                                                    
|Tatiana Radu                |  | 39  |  | Director                                                    
|Anatolii Krupskyi (2)(3)(4) |  | 36  |  | Director                                                    
|Andrew Gani (2)(3)(4)       |  | 34  |  | Director                                                    

---

|(1) | Appointed to the Board of Director on October 12, 2004, to fill in the vacancy created by Frank Clears resignation.
|--- | --------------------------------------------------------------------------------------------------------------------

|(2) | Appointed to the Board of Directors on February 16, 2005.
|--- | ---------------------------------------------------------

|(3) | Member of the Audit Committee.
|--- | ------------------------------

|(4) | Independent Director.
|--- | ---------------------

|(5) | Audit Committee Financial Expert.
|--- | ---------------------------------

|(6) | Resigned as of May 10, 2005.
|--- | ----------------------------



The Board currently consists of eight members and one vacancy resulting from Serguei Melniks resignation as of May 10, 2005: Constantin Jitaru, Anatoie Sirbu, Nicolae Sterbets, Radu Bujoreanu, Tatiana Radu,
Nurlan Arinov, Anatolyi Krupskyi and Andrew Gani.



Set forth below is a brief
description of the background of each of our executive officers and directors, based on the information provided to us by them.



Constantin Jitaru has served as our Chairman since April 2001, our Chief Executive Officer since June 2001 and our President since July 2001. From 1996 to April 2001, Mr.
Jitaru was a Director, the Director General and one of two members of Asconi S.R.L. From 1993 to 1996, Mr. Jitaru was the General Director of VinInvest, a wine investment project in the Republic of Moldova initiated by the European Bank of
Reconstruction and Development. Mr. Jitaru was responsible for managing VinInvests investments, sales and marketing and wine production process. From 1989 to 1993, Mr. Jitaru worked in the viticultury and wine making department of the Ministry
of Agriculture in the Republic of Moldova, ascending to the head of the department in late 1993. Mr. Jitaru earned a Bachelor Degree, with honors, from the National College of Viticulture and Wine Making and a Masters Degree, with honors, from the
Technical University of Moldova, majoring in Wine Making Technology.



Anatolie
Sirbu has served as a director since April 2001 and our Chief Financial Officer, Secretary and Treasurer since June 2001. From 1994 to April 2001, Mr. Sirbu was one of two members and the Finance Director of Asconi S.R.L. From 1993 to 1994, Mr.
Sirbu was the leading specialist at the Ministry of Agriculture of the Republic of Moldova where he was responsible for the operation and production of the scientific wine making plant in Gidighich. From 1990 to 1993, Mr. Sirbu served at the
Ministry of Agriculture for the Republic of Moldova as the Quality Inspector of Alcohol Production and then as the leading wine specialist at the Department of Viticulture and Wine Making. During this time, Mr. Sirbu was responsible for the
supervision of Moldovas wine industry and research. Mr. Sirbu earned a Bachelor and a Masters degree, both with honors, from the Technical University of Moldova, majoring in Wine Making Technology.



33



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Nicolae Sterbets has served as a director since July 2003 and has been the General Manager of S.A. Vitis Hincesti since
1988. Mr. Sterbets oversees the operations of all six locations of our subsidiary. Previously, Mr. Sterbets was Deputy Director of Modvinprom Agroindustrial Association, a private Moldovan entity in Hincest, between 1981 and 1988. From 1970 to 1981,
he worked as a wine technologist and deputy director of Sophiisky winery. Mr. Sterbets was a founder of the Association of Winemakers of Moldova and has served as its president since 1998. Mr. Sterbets received his Bachelors Degree in
winemaking from the National College of Viticulture and Wine Making in Moldova and his Masters of Science in winemaking degree form the Moldova Agricultural University.



Nurlan Arinov has joined our Board of Directors as an independent director and a member of the Audit Committee of the Board in October 2004.
From April 2004 to present, Mr. Arinov has served as the auditor with PriceWaterhouseCoopers in Kazakhstan. From 1999 to 2002, he was a logistics and procurement manager of the Coca-Cola bottlers in Uzbekistan. Mr. Arinov graduated with honors from
the University of Illinois with a Masters degree in accounting. He is a US Certified public accountant. Mr. Arinov also holds a Masters degree in engineering from the Bauman State Technical University in Moscow, Russia.



Radu Bajoreanu has served as an independent director since July 2003. Since December 2002,
Mr. Bujoreanu has been the President of Consular Assistance, Inc. of Washington, DC. From August 1999 to September 2002 he served as the Second Secretary and Consul of the Embassy of the Republic of Moldova to the U.S., also accredited to Canada.
Prior to that, from February 1995 to August 1999, he had been in various positions of responsibility with the Ministry of Foreign Affairs of the Republic of Moldova ascending to the Attaché and the First Secretary, Chief of Treaties section
within the Department of International Law and Treaties. Mr. Bujoreanu earned a Law degree from the State University of Moldova.



Tatiana Radu has served as a director since July 2003 and has been the Director of Sales and Marketing of Asconi S.R.L. since January 2001. Her primary responsibilities
are direct communication with distributors of Asconi wines worldwide as well as the development and implementation of marketing and sales strategies. From June 1999 until January 2001, Mrs. Radu was the Director of Asconis Export-Import
Department. From 1993 to 1999, Mrs. Radu was the Sales Manager of Perla. Mrs. Radu earned a Masters Degree, with honors, from the International Institute of Management, with a major in Management. Mrs. Radu also earned a Masters Degree,
with honors, from the Teachers University, where she majored in Fine Arts and Drawing.



Anatolyi Krupskyi joined our Board of Directors as an independent director and as a member of the Audit Committee in February 2005. From December 2002 to present, Mr. Krupskyi has served as the General Director of
Expowine in Moscow, the Russian Federation. From 1995 to 2002, he has served as the leading specialist of the Federal Tax Enforcement Service of the Russian Federation. Mr. Krupskyi graduated with Masters degrees in economics and engineering
from the Executive Military School in Voli, the Russian Federation in 1998. He also holds a law degree from the Saratov State Law Academy.



Andrew Gani has joined our Board of Directors as an independent director in February 2005. From November 2003 to present, Mr. Gani has served as the Sales Director of
Expowine in Moscow, the Russian Federation. From 1998 to 2003, he has served as the Regional Manager of Epsilon in Moscow. Mr. Gani graduated from Stavropol Technical University with a Masters degree in Economics and Management.



No director is related to any other director or officer of Asconi or our subsidiaries, and
there are no arrangements or understandings between a director and any other person pursuant to which such person was elected as director.



No director, director nominee, officer or affiliate of Asconi, owner of record or beneficially of more than five percent of any class of our voting securities has, to our
knowledge, during the last five years: (1) been convicted of any criminal proceeding (excluding traffic violations or similar misdemeanors); or (2) been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and
as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, U.S. federal or state securities laws or finding any violations with respect to
such laws.



34



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##### Table of Contents

Board of Directors and Committees



Directors are elected at the annual stockholder meeting or appointed by our Board of Directors and serve for one year or until their
successors are elected and qualified. When a new director is appointed to fill a vacancy created by an increase in the number of directors, that director holds office until the next election of one or more directors by stockholders. Our current
directors except for Nurlan Arinov, Anatolyi Krupskyi and Andrew Gani, were elected at our annual meeting of stockholders held on December 22, 2003. Mr. Arinov was appointed to our Board of Directors in October 2004 and Mr. Krupskyi and Mr. Gani
were appointed in February 2005. Officers are appointed by our Board of Directors and their terms of office are at the discretion of our Board of Directors.



Our Board of Directors held two meetings during fiscal 2004. All Board members attended the meetings. In addition, our Board of Directors acted by unanimous written
consent four times in fiscal 2004. In connection with his appointment to our Board of Directors in July 2003, Serguei Melnik purported to appoint Constantin Jitaru as his proxy to vote for him as a member of our Board of Directors with regard to any
question, action, resolution, election or other matter presented to the members of our Board of Directors for vote or approval. We, however, do not believe that the proxy is valid or enforceable, and therefore have obtained Serguei Melniks
signature on all written consents of our board of directors since July 2003. Mr. Melnik resigned from the Board and as the COO of the Company effective as of May 10, 2005 (See Item 8B. Other Events).



Our Board of Directors has a standing audit committee, which met five times during fiscal
2004. All committee members were in attendance. Our Board of Directors does not have any other committees.



The audit committee acts under a written charter adopted by our board of directors, which was filed as Appendix A to our Schedule 14A filed on December 4, 2003. Under its charter, the audit committee oversees the
integrity of the audit process, financial reporting and internal accounting controls of Asconi and the compliance by Asconi with legal and regulatory requirements. The audit committee is also directly responsible for the appointment, compensation
and oversight of our independent auditor. The audit committee is composed of three members, Nurlan Arinov, Radu Bujoreanu and Anatolyi Krupskyi, all of whom are independent as such term is defined in Section 121A of the AMEX listing
standards and Rule 10A-3 under the Exchange Act. Our Board determined that Mr. Arinov meets the qualifications of audit committee financial expert as provided under the federal securities laws.



Section 16(a) Beneficial Ownership Reporting Compliance



Section 16(a) of the Exchange Act requires our directors, executive officers and persons who
beneficially own more than ten percent of our outstanding common stock to file reports with the SEC and AMEX regarding initial statement of ownership, statement of changes of ownership and, where applicable, annual statement of ownership of our
common stock. Such persons are required by SEC regulations to furnish us with copies of all such statements they file. Based solely upon a review of Forms 3 and Forms 4 furnished to us pursuant to Rule 16a-3 under the Exchange Act during our most
recent fiscal year, and Forms 5 with respect to our most recent fiscal year, we believe that all such forms required to be filed pursuant to Section 16(a) were timely filed as necessary, by the executive officers, directors and security holders
required to file same during the fiscal year ended December 31, 2004, except that a Form 3 for Nurlan Arinov has not filed as of the date hereof.



Code of Ethics



We have adopted a Code of Ethics and Conduct within the meaning of Item 406(b) of Regulation S-B of the Exchange Act. This Code applies to our directors and executive officers, such as our principal executive officer,
principal financial officer, controller, and persons performing similar functions for us. We have posted a copy of our Code on our website at www.asconi.com.



ITEM 10. EXECUTIVE COMPENSATION



Summary
Compensation Table



The following table sets forth all compensation
awarded to, earned by, or paid for all services rendered to Asconi during fiscal 2004, 2003 and 2002 by our Chief Executive Officer and any executive officer who received annual compensation in salary and bonus combined in excess of $100,000 during
those years. Each person below is referred to as a named executive officer.



SUMMARY COMPENSATION TABLE



|                                                                   |  |                                   |  |                           |           |                           |                    |  |              |    
|------------------------------------------------------------------ |  | --------------------------------- |  | ------------------------- | --------- | ------------------------- | ------------------ |  | ------------ | ---
|Name and Principal Position                                        |  | Period                            |  | AnnualCompensation (2)(3) |           | All OtherCompensation ($) |                   
|                                                                   |  | Salary ($)                        |  |                           | Bonus ($) |                          
|Constantin Jitaru(1) Chairman of the Board Chief Executive Officer |  | Fiscal 2004Fiscal 2003Fiscal 2002 |  | 30,00030,00030,000        | (4)       |                           | 40,00040,00040,000 |  | 20,000,000 | (5)
|                                                                   |  |                                   |  |                          
|Anatolie Sirbu Chief Financial Officer Secretary and Treasurer     |  | Fiscal 2004Fiscal 2003            |  | 30,00030,000              |           |                           | 40,00040,000       |  | 20,000,000  | (5)

---

|(1) | Mr. Jitaru became our Chief Executive Officer on June 29, 2001, and has been the Chief Executive Officer of our wholly-owned subsidiary, Asconi S.R.L., since April 12, 2001.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(2) | Compensation is paid in Moldovan leí, the official currency of Moldova, and the amount set forth in this table is the equivalent in U.S. dollars.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | The amounts reflected in the above table do not include any amounts for perquisites and other personal benefits extended to the named executive officer. The aggregate amount of such
compensation for the named executive officer is less than 10% of the total annual salary and bonus.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Represents compensation of $1,200 per month in salary and periodic bonuses for services performed from April 12, 2001 to December 31, 2001.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Mr. Jitaru and Mr. Sirbu were each issued 5,000,000 shares of common stock in a transaction that was not registered under the Securities Act. Such shares were valued at $4.00 per
share, the market value of the stock on April 22, 2003, the date our board of directors approved the issuance of the shares. See Note 11 of Notes to Consolidated Financial Statements.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Stock Options Granted and Exercised in Fiscal 2004



No stock option grants were made to either Constantin Jitaru or Anatolie Sirbu in fiscal
2004, and no stock options were exercised by either Constantin Jitaru or Anatolie Sirbu in fiscal 2004.



Director Compensation



Currently, our
directors do not receive compensation for serving on our board of directors or on the audit committee. Directors are reimbursed for their reasonable expenses incurred in attending meetings, which during fiscal 2004 was a nominal amount.



Employment Agreements



Neither us, nor any of our subsidiaries, have entered into an employment contract with a
named executive officer. Furthermore, we do not, nor do any of our subsidiaries, anticipate entering into an employment contract with any named executive officer in the near future.



Employee Benefit Plans



We do not currently have any type of employee compensation plan for our employees, officers or directors. Furthermore, we do not anticipate offering any such plans in the
near future.



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



The table below sets forth information regarding the beneficial ownership of our common stock as of December 31, 2004 by the following individuals or groups:



| |  |  | each person or entity who we know beneficially owns more than 5.0% in the aggregate;
| | - |  | ------------------------------------------------------------------------------------



| |  |  | each of our named executive officers;
| | - |  | -------------------------------------



| |  |  | each of our directors; and
| | - |  | --------------------------



| |  |  | all directors and named executive officers as a group.
| | - |  | ------------------------------------------------------



Unless otherwise indicated, the address of each of the individuals listed in the table is c/o Asconi Corporation, 2200 Winter Springs Blvd., Suite 106, #330, Oviedo,
Florida 32765.



The percentage of beneficial ownership in the following table
is based upon 12,057,442 shares of common stock outstanding as of December 31, 2004. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of
our common stock issuable under options, warrants or other conversion rights that are presently exercisable or exercisable within 60 days of December 31, 2004 are deemed to be outstanding and beneficially owned by the person holding the options,
warrants or conversion rights for the purpose of computing the percentage of ownership of that person, but are not treated as outstanding for the purpose of computing the percentage of any other person.



|                                                                  |  |                                    |  |                                            |  
|----------------------------------------------------------------- |  | ---------------------------------- |  | ------------------------------------------ | -
|Name of Beneficial Owner                                          |  | Number of SharesBeneficially Owned |  | Approximate Percentageof Class Outstanding |  
|Constantin Jitaru                                                 |  | 5,460,813                          |  | 45.3                                       | %
|Anatolie Sirbu                                                    |  | 5,460,813                          |  | 45.3                                       | %
|Serguei Melnik                                                    |  | 30,000                             |  | *                                          |  
|Nurlan Arinov                                                     |  | 0                                  |  | *                                          |  
|Radu Bujoreanu                                                    |  | 300                                |  | *                                          |  
|Nicolae Sterbets                                                  |  | 0                                  |  | *                                          |  
|Tatiana Radu                                                      |  | 0                                  |  | *                                          |  
|All directors and named executive officers as a group (7 persons) |  | 10,951,926                         |  | 90.8                                       | %

---

|* | Less than 1%.
|- | -------------



Securities Authorized for Issuance Under Equity Compensation Plans



We do not currently have any type of equity compensation plan for our employees, officers or directors. Furthermore, we do not

anticipate offering any such plans in the near future.



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##### Table of Contents

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS



We purchased approximately $320,000 and $1,050,000 worth of bulk wine at the then current market price of approximately $0.20 and $0.27 per liter from VinExport, a Romanian company, in fiscal 2004 and fiscal 2003, respectively. Constantin
Jitaru and Anatolie Sirbu, two of our directors and officers each own 30% of the outstanding securities of VinExport. We purchased the bulk wine for the purpose of blending, bottling and selling in the regular course of business primarily throughout
2004 and 2005. We entered into this transaction without taking bids from other parties and have not determined whether or not the terms of this transaction are as favorable to us as those which could have been obtained from a non-affiliated party.
However, management believes that the terms were reasonable and comparable with the market prices throughout the industry.



On February 10, 2003, our wholly owned subsidiary, Asconi S.R.L., entered into an employment agreement with Serguei Melnik, who subsequently was elected as a member of
our board of directors in July 2003. The employment agreement is for a three-year period ending on February 9, 2006. Pursuant to the agreement, we agreed to issue Mr. Melnik 100,000 shares of our common stock as well as reimburse him for reasonable
and justifiable expenses incurred in the course of his employment. The shares were issued in May 2003 and were therefore not subject to our reverse split in May 2003. Mr. Melniks duties are restricted to marketing services relating to the
promotion of our products in the U.S. market as well as investor relations and public awareness campaigns in the U.S. He also supports our efforts to secure loans and grants from the U.S. government for our development programs in the Republic of
Moldova and consultations regarding general corporate matters. We previously paid Kerr-Weismann Associates $40,000 in fiscal 2001 and fiscal 2002 to perform similar marketing services relating to the promotion of our products in the U.S. market as
well as investor relations and public awareness campaigns in the U.S. Prior to our employment of Mr. Melnik, he was a defendant, along with several other individuals and entities, in the lawsuit we initiated in July 2001 for breach of contract,
breach of fiduciary duty, civil conspiracy, fraudulent inducement and violation of Florida Securities Investors Protection Act, among other remedies. Our complaint also alleged that Mr. Melnik and Vadim Enikeev abused limited authority given to them
to act as corporate promoters and entered into a civil conspiracy with the remaining defendants to issue corporate stock without our approval for their individual and collective profit. We sought monetary damages from Mr. Melnik and the other
defendants in the amount of approximately $11.2 million, rescission of agreements and return of the stock still possessed by any of the defendants. We entered into a mutual release agreement with Mr. Melnik in February 2003 pursuant to which we
agreed to drop all claims against Mr. Melnik and he agreed to drop his motion to have our then-current legal counsel dismissed from representing us in the lawsuit.



On April 15, 2003, we entered into a consulting agreement with Iurie Turcan, the brother-in-law of Serguei Melnik, an officer and director
of Asconi. Under the agreement, Mr. Turcan is to act as our exclusive distributor for wine and spirits in the Republic of Poland. The agreement is for a term of five years. As compensation for the services to be received, we issued Mr. Turcan
100,000 shares of our common stock. We entered into this agreement without taking bids from other parties and we are unable to state whether or not the terms of this agreement are as favorable to us as those which could have been obtained from a
non-affiliated party.



On April 22, 2003, our board of directors approved the
issuance of 5,000,000 shares of common stock to each of Constantin Jitaru and Anatolie Sirbu. The board of directors approved the issuance of the shares in order to increase the ownership levels of Messrs. Jitaru and Sirbu to the levels contemplated
under the terms of the Merger. Pursuant to those terms, Messrs. Jitaru and Sirbu were to each become the beneficial owners of approximately 46.5% of our issued and outstanding shares. However, as a result of the issuance of shares of our common
stock to persons other than Messrs. Jitaru and Sirbu, which we viewed as improper, the ownership levels of Messrs. Jitaru and Sirbu were less than required under the terms of the Merger. After initiating and later settling litigation over those
issuances (see Note 10 of Notes to Consolidated Financial Statements and Item 3  Legal Proceedings), the board of directors determined that these shares should be issued. The 10,000,000 shares were valued on the basis of the closing price on
the date of the board of directors resolution, resulting in the recording of $40,000,000 of stock issuance expense.



In May 2003, we entered into a consulting agreement with Vasile Melnik, the father of Serguei Melnik, an officer and director of Asconi. Under the agreement, Vasile
Melnik is to provide us with consulting services relating to the design, construction and renovation of our winery facilities in Moldova. The agreement is for a term of five years. As compensation for the services to be received, we issued Vasile
Melnik 100,000 shares of our common stock. We entered into this agreement without taking bids from other parties and we are unable to state whether or not the terms of this agreement are as favorable to us as those which could have been obtained
from a non-affiliated party.



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PART IV



ITEM 13. EXHIBITS



Exhibits



|        |  |                                                                                                                                                       
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  | Description of Exhibit                                                                                                                                
|2.1     |  | Exchange Agreement between Asconi Corporation (formally Grand Slam Treasures, Inc., Asconi Holdings Limited and Asconi Ltd.), dated April 12, 2001.(1)
|        | 
|3.1     |  | Restated Articles of Incorporation.(2)                                                                                                                
|        | 
|3.2     |  | Amended and Restated Bylaws.(2)                                                                                                                       
|        | 
|4.1     |  | Form of Stock Purchase Agreement for Common Stock of Registrant.(3)                                                                                   
|        | 
|10.1    |  | General Contract for Delivery No. 1 Agreement with Josef Smilek dated December 3, 2001.(4)                                                            
|        | 
|10.2    |  | Contract No. 498/B-43142800/011 with Sovagroimport, Ltd., dated September 9, 2000.(4)                                                                 
|        | 
|10.3    |  | Contract No. 498/41286111/001 with Sovagroimport, Ltd., dated April 12, 2001.(4)                                                                      
|        | 
|10.4    |  | Contract of Sale No. X-075 with I.E. Hordex, dated January 10, 2002.(4)                                                                               
|        | 
|10.5    |  | Contract No. 05-04/01-A with Winnice Moldowy, dated March 1, 2001.(4)                                                                                 
|        | 
|10.6    |  | Contract with EstateDesign S.R.L., dated 1999.(4)                                                                                                    
|        | 
|10.7    |  | Contract No. S2001/018 with Glass Container Company, S.A., dated January 22, 2001.(4)                                                                 
|        | 
|10.8    |  | Contract of Buying-Selling with Ilitax-Pac, Ltd., dated January 1, 2000.(4)                                                                           
|        | 
|10.9    |  | Contract No. M3-001 with Pomul, Ltd., dated January 4, 2001.(4)                                                                                       
|        | 
|10.10   |  | Contract No. 1/2002 with Agro-Inedit, Ltd., dated November 29, 2001.(4)                                                                               
|        | 
|10.11   |  | Contract for Brokerage Services No. 051 by and between Asconi S.R.L. and C.B. Agroindbank S.A., dated December 13, 2001.(5)                           
|        | 
|10.12   |  | Agreement of Termless Share Management (Irrevocable Trust) by and between Asconi S.R.L. and Talmaci Irina, dated June 12, 2002.(5)                    
|        | 
|10.13   |  | Contract No. 09/01 on goods delivery by and between Asconi S.R.L. and Torgovii Dom Moldova Ltd., dated September 3, 2001.(6)                          
|        | 
|10.14   |  | Contract No. 1/1 for sale and purchase by and between Asconi S.R.L. and Beijing Machinery Imp and Exp Corp., Ltd. dated March 1, 2002.(6)             
|        | 
|10.15   |  | Contract for sale and purchase by and between Asconi S.R.L. and Beijing Machinery Imp and Exp Corp., Ltd., dated April 3, 2002.(6)                    
|        | 
|10.16   |  | Contract No. 010/12/03-IP between Asconi S.R.L. and Bonus-Bord Ltd., dated October 23, 2003.(8)                                                       
|        | 
|10.17   |  | Contract No. 1903 with Israel Colonial Food Ltd. dated April 18, 2003.(8)                                                                             
|        | 
|10.18   |  | Consulting Agreement with Serguei Melnik, dated February 10, 2003.(8) *                                                                               
|        | 
|10.19   |  | Consulting Agreement with Iurie Turcan, dated April 15, 2003.(8)                                                                                      
|        | 
|10.20   |  | Consulting Agreement with Vasile Melnik, dated May, 2003.(8)                                                                                          
|        | 
|10.21   |  | Agreement with Divine Capital Markets, LLC, dated June 1, 2003.(8)                                                                                    
|        | 
|10.22   |  | Consultant Agreement with CEOcast, Inc. dated January 12, 2003.(8)                                                                                    
|        | 
|10.23   |  | Conditional Sale Contract No. CM-106-03 with TF Group LLC, dated November 10, 2003.(8)                                                                



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|      |  |                                                                                                                                                                             
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.24 |  | Conditional Sale Contract No. CM-108-03 with Tecno-Food SAS, dated November 10, 2003 with Annex.(8)                                                                         
|      | 
|10.25 |  | Conditional Sale Contract No. CM 107-03 with TF Group LLC, dated November 10, 2003 with Annex.(8)                                                                           
|      | 
|10.26 |  | Sales Contract with Vivai Viveros Marchi Company, dated December 7, 2003.(8)                                                                                                
|      | 
|10.27 |  | Sales Contract with Pepinieres Philippe Dayde Montans 81600, dated December 7, 2003.(8)                                                                                     
|      | 
|10.28 |  | Contract No. MO/A8 042 with Moro Ltd, dated November 25, 2002(9)                                                                                                            
|      | 
|10.29 |  | Release of Claims and Covenant Not to Sue relating to settlement with investors in December, 2003 private placement(9)                                                      
|      | 
|16.1  |  | Letter of Thomas Leger & Co., LLP, dated August 17, 2003.(7)                                                                                                                
|      | 
|21.1  |  | List of Subsidiaries.(4)                                                                                                                                                    
|      | 
|31.1  |  | Rule 13(a)-14(a) Certification of Chief Executive Officer. .(10)                                                                                                            
|      | 
|31.2  |  | Rule 13(a)-14(a) Certification of Chief Financial Officer. .10)                                                                                                             
|      | 
|32.1  |  | Certification by Constantin Jitaru, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. .(10)
|      | 
|32.2  |  | Certification by Anatolie Sirbu, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(10)     

---

|* | Indicates a management contract or compensation plan or arrangement.
|- | --------------------------------------------------------------------

|(1) | Incorporated by reference to our Current Report on Form 8-K, filed on April 19, 2001, file no. 000-23712.
|--- | ---------------------------------------------------------------------------------------------------------

|(2) | Incorporated by reference to our Quarterly Report on Form 10-QSB, filed on August 20, 2001, file no. 000-23712.
|--- | ---------------------------------------------------------------------------------------------------------------

|(3) | Incorporated by reference to our Form 8-K filed on December 18, 2003, file no. 000-23712.
|--- | -----------------------------------------------------------------------------------------

|(4) | Incorporated by reference to our Annual Report on Form 10-KSB, filed on April 15, 2002, file no. 000-23712.
|--- | -----------------------------------------------------------------------------------------------------------

|(5) | Incorporated by reference to our Current Report on Form 8-K, filed on June 27, 2002, file no. 0-23712.
|--- | ------------------------------------------------------------------------------------------------------

|(6) | Incorporated by reference to our Quarterly Report on Form 10-QSB, filed on August 19, 2002, file no. 000-23712.
|--- | ---------------------------------------------------------------------------------------------------------------

|(7) | Incorporated by reference to our Form 8-K/A filed on June 4, 2003, file no. 000-23712.
|--- | --------------------------------------------------------------------------------------

|(8) | Incorporated by reference to our Annual Report on Form 10-KSB, filed on May 27, 2004, file no. 000-23712.
|--- | ---------------------------------------------------------------------------------------------------------

|(9) | Incorporated by reference to our Form 8-K filed on December 23, 2004, file no. 000-23712.
|--- | -----------------------------------------------------------------------------------------

|(10) | Filed herewith.
|---- | ---------------



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##### Table of Contents

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES



The following table presents fees accrued for audit services and other serices provided by Michaelson & Co. P.A. and by Moore Stephens
Lovelace, P.A. during the fiscal years 2004 and 2003. Michaelson & Co., P.A. was our independent auditor during fiscal 2003 and through June 22, 2004, at which time it advised us that it was declining to continue its engagement with us. Moore
Stephens Lovelace, P.A. was engaged as our independent auditor on June 22, 2004.



|                   |  |         |  |      |       
|------------------ |  | ------- |  | ---- | ------
|                   |  | 2004    |  | 2003
|Audit Fees         |  | 134,623 |  | $    | 38,200
|Audit-related Fees |  |        |  |      |      
|Tax Fees           |  | 2,500   |  |      |      
|All Other Fees     |  |        |  |      | 1,650 
|                   |  |         |  |      |       
|Total Fees         |  | 137,123 |  | $    | 39,850



Audit Fees



Audit fees were for professional services rendered for the audit of our annual financial
statements, the review of the financial statements included in our quarterly reports on Form 10-QSB, services in connection with our statutory and regulatory filings for fiscal 2004 and fiscal 2003, and reaudit work related to the refiling of our
2002 financial statements.



Audit-Related Fees



Audit related fees were for assurance and related services rendered that are reasonably
related to the audit and reviews of our financial statements for fiscal 2004 and fiscal 2003, exclusive of the fees disclosed as Audit Fees above. These fees include assistance with registration statements and consents not performed directly in
connection with audits.



All Other Fees



We did not incur fees for any services, other than the fees disclosed above relating to
audit, audit-related and tax services, rendered during fiscal 2004 and fiscal 2003.



Audit and Non-Audit Service Pre-Approval Policy



The Audit
Committee has formally approved the audit and tax fees related to the services being performed by our current independent public accountant. The Audit Committee did not formally approve the fees for audit, audit-related or other services during
fiscal 2002, fiscal 2003 or the first half of fiscal 2004. In accordance with the requirements of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated thereunder, the Audit Committee has adopted an informal approval policy that
it believes will result in an effective and efficient procedure to pre-approve services performed by the independent auditor.



Audit Services. Audit services include the annual financial statement audit (including quarterly reviews) and other procedures required to be performed by the
independent auditor to be able to form an opinion on our financial statements. The Audit Committee may pre-approve specified annual audit services engagement terms and fees and other specified audit fees. All other audit services must be
specifically pre-approved by the Audit Committee. The Audit Committee will monitor the audit services engagement and may approve, if necessary, any changes in terms, conditions and fees resulting from changes in audit scope or other items.



Audit-Related Services. Audit-related services are assurance and
related services that are reasonably related to the performance of the audit or review of our financial statements which historically have been provided to us by the independent auditor and are consistent with the SECs rules on auditor
independence. The Audit Committee may pre-approve specified audit-related services within pre-approved fee levels. All other audit-related services must be pro-approved by the Audit Committee.





40



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##### Table of Contents

Tax Services. The Audit Committee may pre-approve specified tax services that the Audit Committee believes would
not impair the independence of the auditor and that are consistent with SEC rules and guidance. All other tax services must be specifically approved by the Audit Committee.



All Other Services. Other services are services provided by the independent auditor that do not fall within the established audit,
audit-related and tax services categories. The Audit Committee may pre-approve specified other services that do not fall within any of the specified prohibited categories of services.



Procedures. All requests for services to be provided by the independent auditor, which must include a detailed description of the
services to be rendered and the amount of corresponding fees, are submitted to the Chief Financial Officer. The Chief Financial Officer authorizes services that have been pre-approved by the Audit Committee. If there is any question as to whether a
proposed service fits within a pre-approved service, the Audit Committee chair is consulted for a determination. The Chief Financial Officer submits requests or applications to provide services that have not been pre-approved by the Audit Committee,
which must include an affirmation by the Chief Financial Officer and the independent auditor that the request or application is consistent with the SECs rules on auditor independence, to the Audit Committee (or its chair or any of its other
members pursuant to delegated authority) for approval.



41



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In accordance with Section 13 or 15(d) of the Exchange Act of 1934, the registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.



|                   |  |                    |  |                                                                                                 
|------------------ |  | ------------------ |  | ------------------------------------------------------------------------------------------------
|                   |  | ASCONI CORPORATION
|                   |  |                   
|Date: May 25, 2005 |  | By:                |  | /s/ Constantin Jitaru                                                                           
|                   |  |                    |  | Constantin Jitaru, Chairman, Chief Executive Officer and President (Principal Executive Officer)



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 25, 2005 |  | By: |  | /s/ Anatolie Sirbu                                                                                 
|                   |  |     |  | Anatolie Sirbu, Chief Financial Officer (Principal Financial Officer)                              
|                   |  |    
|Date: May 25, 2005 |  | By: |  | /s/ Alex Brinister                                                                                 
|                   |  |     |  | Alex Brinister, VP U.S. Operations, Interim Chief Accounting Officer (Principal Accounting Officer)
|                   |  |    
|Date: May 25, 2005 |  | By: |  | /s/ Nurlan Arinov                                                                                  
|                   |  |     |  | Nurlan Arinov, Director                                                                            
|                   |  |    
|Date: May 25, 2005 |  | By: |  | /s/ Radu Bujoreanu                                                                                 
|                   |  |     |  | Radu Bujoreanu, Director                                                                           
|                   |  |    
|Date: May 25, 2005 |  | By: |  | /s/ Nicolae Sterbets                                                                               
|                   |  |     |  | Nicolae Sterbets, Director                                                                         
|                   |  |    
|Date: May 25, 2005 |  | By: |  | /s/ Tatiana Radu                                                                                   
|                   |  |     |  | Tatiana Radu, Director                                                                             
|                   |  |    
|Date: May 25, 2005 |  | By: |  | /s/ Anatolyi Krupskii                                                                              
|                   |  |     |  | Anatolyi Krupskii, Director                                                                        
|                   |  |    
|Date: May 25, 2005 |  | By: |  | /s/ Andrew Gani                                                                                    
|                   |  |     |  | Andrew Gani, Director                                                                              



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ASCONI CORPORATION



INDEX TO FINANCIAL
STATEMENTS



|                                                                                                                                 |  |          
|-------------------------------------------------------------------------------------------------------------------------------- |  | ---------
|                                                                                                                                 |  | Page     
|Report of Independent Registered Public Accounting Firm                                                                          |  | F-2      
|                                                                                                                                 | 
|Statement Regarding 2003 Unaudited Financial Statements                                                                          |  | F-3      
|                                                                                                                                 | 
|Consolidated Balance Sheets as of December 31, 2004 and 2003 (unaudited)                                                         |  | F-4      
|                                                                                                                                 | 
|Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended December 31, 2004 and 2003 (unaudited) |  | F-5      
|                                                                                                                                 | 
|Consolidated Statements of Changes in Shareholders Equity for the years ended December 31, 2004 and 2003 (unaudited)            |  | F-6      
|                                                                                                                                 | 
|Consolidated Statements Of Cash Flow for the years ended December 31, 2004 and 2003 (unaudited)                                  |  | F-7  F-8
|                                                                                                                                 | 
|Notes to Consolidated Financial Statements                                                                                       |  | F-9 F-23



F-1



---

##### Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Board of Directors and Stockholders

of Asconi Corporation



We have audited the accompanying consolidated balance sheet of Asconi Corporation (a Nevada Corporation) and its subsidiaries as of December
31, 2004, and the related consolidated statements of operations and comprehensive income (loss), changes in shareholders equity and cash flows for the year then ended. These consolidated financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these consolidated 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 consolidated 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 financial position of Asconi Corporation and subsidiaries as of December 31, 2004, and the results of their operations and cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of America.



Moore Stephens Lovelace, P.A.

Orlando, Florida

April
4, 2005



F-2



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##### Table of Contents

STATEMENT REGARDING 2003 UNAUDITED FINANCIAL STATEMENTS



The accompanying consolidated financial statements, including the information in the notes thereto, as of and for the year ended December 31, 2003 are unaudited.



The Companys consolidated financial statements as of and for the year ended December 31, 2003, as included in the Companys
Annual Report on Form 10-KSB/A for the year ended December 31, 2003, were audited by Michaelson & Co., P.A., which firm in its report dated April 2, 2004 expresses an unqualified opinion on those financial statements.



Michaelson & Co., P.A. has advised the Company that it will not grant the Company
permission to reuse its report on the fiscal 2003 consolidated financial statements in this Annual Report on Form 10-KSB. However, Michaelson & Co., P.A. has not, as of the date of the filing of this Annual Report on Form 10-KSB for the year
ended December 31, 2004, withdrawn its opinion on the Companys consolidated financial statements as of and for the year ended December 31, 2003, as included in the Companys Annual Report on Form 10-KSB/A for the year ended December 31,
2003.



Accordingly the fiscal 2003 consolidated financial statements, as
included herein, are deemed unaudited. Except for certain reclassifications to conform to fiscal 2004 presentations, the fiscal 2003 consolidated financial statements, as included herein, have been derived from, without adjustment, those included in
the Companys Annual Report on Form 10-KSB/A for the year ended December 31, 2003.



The omission of a report on the audit of the fiscal 2003 consolidated financial statements from this Annual report on Form 10-KSB means that this Annual Report on Form 10-KSB fails to comply, in that respect, with the rules and regulations
of the SEC. The Company is presently exploring the feasibility of having the Companys 2003 consolidated financial statements reaudited for the purpose of curing the aforementioned 2004 Form 10-KSB filing deficiency.



F-3



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##### Table of Contents



ASCONI CORPORATION

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2004 AND 2003

(UNITED STATES DOLLARS)



|                                                                                                                         |  |              |             |   |             |   |             |  
|------------------------------------------------------------------------------------------------------------------------ |  | ------------ | ----------- | - | ----------- | - | ----------- | -
|                                                                                                                         |  | December 31, |            
|                                                                                                                         |  | 2004         |             |   | 2003        |  
|                                                                                                                         |  |              |             |   | (unaudited) |  
|ASSETS                                                                                                                   |  |              |             |   |             |   |             |  
|CURRENT ASSETS                                                                                                           |  |              |             |   |             |   |             |  
|Cash and cash equivalents                                                                                                |  | $            | 7,256       |   |             | $ | 155,010     |  
|Accounts receivable, net                                                                                                 |  |              | 3,832,629   |   |             |   | 3,455,732   |  
|Inventories                                                                                                              |  |              | 10,876,878  |   |             |   | 8,672,424   |  
|Refundable taxes and tax deposits                                                                                        |  |              | 854,161     |   |             |   | 961,828     |  
|Advance payments                                                                                                         |  |              | 732,660     |   |             |   | 1,820,045   |  
|Other                                                                                                                    |  |              | 43,026      |   |             |   | 12,549      |  
|                                                                                                                         |  |              |             |   |             |   |             |  
|TOTAL CURRENT ASSETS                                                                                                     |  |              | 16,346,610  |   |             |   | 15,077,588  |  
|                                                                                                                         |  |             
|PROPERTY, PLANT AND EQUIPMENT, NET                                                                                       |  |              | 8,026,764   |   |             |   | 5,715,380   |  
|GOODWILL                                                                                                                 |  |              | 228,183     |   |             |   | 205,352     |  
|OTHER                                                                                                                    |  |              | 72,296      |   |             |   | 20,462      |  
|                                                                                                                         |  |              |             |   |             |   |             |  
|TOTAL ASSETS                                                                                                             |  | $            | 24,673,853  |   |             | $ | 21,018,782  |  
|                                                                                                                         |  |              |             |   |             |   |             |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                     |  |              |             |   |             |   |             |  
|                                                                                                                         |  |             
|CURRENT LIABILITIES                                                                                                      |  |              |             |   |             |   |             |  
|Accounts payable                                                                                                         |  | $            | 4,934,403   |   |             | $ | 3,099,994   |  
|Short-term debt                                                                                                          |  |              | 5,640,234   |   |             |   | 6,511,169   |  
|Deferred revenue                                                                                                         |  |              | 850,715     |   |             |   | 758,704     |  
|Taxes payable                                                                                                            |  |              | 12,896      |   |             |   | 293,626     |  
|Accrued expenses and other current liabilities                                                                           |  |              | 374,926     |   |             |   | 425,523     |  
|                                                                                                                         |  |              |             |   |             |   |             |  
|TOTAL CURRENT LIABILITIES                                                                                                |  |              | 11,813,174  |   |             |   | 11,089,016  |  
|LONG-TERM LIABILITIES                                                                                                    |  |              |             |   |             |   |             |  
|Lease obligations                                                                                                        |  |              | 6,861       |   |             |   | 64,505      |  
|Deferred taxes                                                                                                           |  |              | 464,483     |   |             |   | 387,511     |  
|                                                                                                                         |  |              |             |   |             |   |             |  
|TOTAL LIABILITIES                                                                                                        |  |              | 12,284,518  |   |             |   | 11,541,032  |  
|                                                                                                                         |  |             
|MINORITY INTEREST                                                                                                        |  |              | 1,480,550   |   |             |   | 1,420,876   |  
|                                                                                                                         |  |             
|COMMITMENTS AND CONTINGENCIES                                                                                            |  |              |             |   |             |   |             |  
|                                                                                                                         |  |             
|SHAREHOLDERS EQUITY                                                                                                     |  |              |             |   |             |   |             |  
|Preferred Stock $.001 par value 5,000,000 authorized, 0 outstanding at December 31, 2004 and 2003                        |  |              |            |   |             |   |            |  
|Common Stock $.001 par value 100,000,000 authorized, 12,168,678 and 12,018,735 outstanding at December 31, 2004 and 2003 |  |              | 12,169      |   |             |   | 12,019      |  
|Additional paid in capital                                                                                               |  |              | 49,405,620  |   |             |   | 48,361,031  |  
|Deferred consulting expense                                                                                              |  |              | (441,703    | ) |             |   | (1,033,070  | )
|Retained earnings (deficit)                                                                                              |  |              | (38,193,706 | ) |             |   | (39,071,344 | )
|Accumulated other comprehensive income (loss)                                                                            |  |              | 126,405     |   |             |   | (211,762    | )
|                                                                                                                         |  |              |             |   |             |   |             |  
|Total Shareholders Equity                                                                                               |  |              | 10,908,785  |   |             |   | 8,056,874   |  
|                                                                                                                         |  |              |             |   |             |   |             |  
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY                                                                               |  | $            | 24,673,853  |   |             | $ | 21,018,782  |  
|                                                                                                                         |  |              |             |   |             |   |             |  



See Notes to
Consolidated Financial Statements



F-4



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##### Table of Contents



ASCONI CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

YEARS ENDED DECEMBER 31, 2004 AND 2003

(UNITED STATES DOLLARS)



|                                                        |  |                         |            |   |             |   |             |  
|------------------------------------------------------- |  | ----------------------- | ---------- | - | ----------- | - | ----------- | -
|                                                        |  | Year Ended December 31, |           
|                                                        |  | 2004                    |            |   | 2003        |  
|                                                        |  |                         |            |   | (unaudited) |  
|Net Sales                                               |  | $                       | 19,318,600 |   |             | $ | 16,439,613  |  
|                                                        |  |                        
|Cost of Sales (excluding depreciation and amortization) |  |                         | 12,493,465 |   |             |   | 9,997,596   |  
|                                                        |  |                         |            |   |             |   |             |  
|Gross Profit                                            |  |                         | 6,825,135  |   |             |   | 6,442,017   |  
|                                                        |  |                        
|Depreciation and Amortization                           |  |                         | 717,264    |   |             |   | 576,585     |  
|Stock Issuance Expense                                  |  |                         |           |   |             |   | 40,000,000  |  
|Stock Compensation Expense                              |  |                         |           |   |             |   | 400,000     |  
|Selling and Administrative Expenses                     |  |                         | 4.137,817  |   |             |   | 2,042,245   |  
|                                                        |  |                         |            |   |             |   |             |  
|Income (loss) From Operations                           |  |                         | 1,970,054  |   |             |   | (36,576,813 | )
|                                                        |  |                        
|Interest Expense                                        |  |                         | 814,866    |   |             |   | 752,373     |  
|Other (Income) Expense                                  |  |                         | 172,088    |   |             |   | (142,302    | )
|                                                        |  |                         |            |   |             |   |             |  
|Income (Loss) Before Income Taxes and Minority Interest |  |                         | 983,100    |   |             |   | (37,186,884 | )
|                                                        |  |                         |            |   |             |   |             |  
|Provision for Income Taxes                              |  |                         | 136,112    |   |             |   | 359,273     |  
|                                                        |  |                        
|Income (Loss) Before Minority Interest                  |  |                         | 846,988    |   |             |   | (37,546,157 | )
|                                                        |  |                         |            |   |             |   |             |  
|Minority Interest in Income (loss) of Subsidiaries      |  |                         | (30,650    | ) |             |   | 318,893     |  
|                                                        |  |                         |            |   |             |   |             |  
|Net Income (Loss)                                       |  |                         | 877,638    |   |             |   | (37,865,050 | )
|                                                        |  |                        
|Other Comprehensive Income (Loss)-                      |  |                         |            |   |             |   |             |  
|Foreign Currency Translation                            |  |                         | 338,167    |   |             |   | 230,281     |  
|                                                        |  |                         |            |   |             |   |             |  
|Comprehensive Income (Loss)                             |  | $                       | 1,215,805  |   |             | $ | (37,634,769 | )
|                                                        |  |                         |            |   |             |   |             |  
|Net Income (Loss) Per Share of Common Stock:            |  |                         |            |   |             |   |             |  
|Basic and Diluted                                       |  | $                       | 0.07       |   |             | $ | (4.71       | )
|                                                        |  |                         |            |   |             |   |             |  
|Weighted Average Number of Common Shares Outstanding    |  |                         |            |   |             |   |             |  
|Basic and Diluted                                       |  |                         | 12,055,333 |   |             |   | 8,034,035   |  
|                                                        |  |                         |            |   |             |   |             |  



See Notes to
Consolidated Financial Statements



F-5



---

##### Table of Contents



ASCONI CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY

YEARS ENDED DECEMBER 31, 2004 AND 2003 (UNAUDITED)

(UNITED STATES DOLLARS)



|                                                       |  |              |  |             |        |                          |   |            |                           |  |   |                           |   |  |                                             |             |   |                          |   |          |   |  |   |             |  
|------------------------------------------------------ |  | ------------ |  | ----------- | ------ | ------------------------ | - | ---------- | ------------------------- |  | - | ------------------------- | - |  | ------------------------------------------- | ----------- | - | ------------------------ | - | -------- | - |  | - | ----------- | -
|                                                       |  | CommonShares |  | CommonStock |        | AdditionalPaid inCapital |   |            | DeferredConsultingExpense |  |   | RetainedEarnings(Deficit) |   |  | Accumulated OtherComprehensive Income(Loss) |             |   | TotalShareholdersEquity |  
|Balance at December 31, 2002                           |  | 1,459,135    |  | $           | 1,459  |                          | $ | 5,521,755  |                           |  | $ |                          |   |  | $                                           | (1,206,294  | ) |                          | $ | (442,043 | ) |  | $ | 3,874,877   |  
|Stock issuance to Directors and Officers               |  | 10,000,000   |  |             | 10,000 |                          |   | 39,990,000 |                           |  |   |                          |   |  |                                             |            |   |                          |   |         |   |  |   | 40,000,000  |  
|Stock issuance for Consulting Services                 |  | 200,000      |  |             | 200    |                          |   | 799,800    |                           |  |   | (800,000                  | ) |  |                                             |            |   |                          |   |         |   |  |   |            |  
|Adjustments to deferred consulting expense             |  |              |  |             |        |                          |   |            |                           |  |   |                           |   |  |                                             |             |   |                          |   |          |   |  |   |             |  
|Change in value of shares                              |  |             |  |             |       |                          |   | 351,836    |                           |  |   | (351,836                  | ) |  |                                             |            |   |                          |   |         |   |  |   |            |  
|Amortization of expense                                |  |             |  |             |       |                          |   |           |                           |  |   | 118,766                   |   |  |                                             |            |   |                          |   |         |   |  |   | 118,766     |  
|Stock issuance for stock compensation                  |  | 100,000      |  |             | 100    |                          |   | 399,900    |                           |  |   |                          |   |  |                                             |            |   |                          |   |         |   |  |   | 400,000     |  
|Stock issuance - private placement                     |  | 259,600      |  |             | 260    |                          |   | 1,297,740  |                           |  |   |                          |   |  |                                             |            |   |                          |   |         |   |  |   | 1,298,000   |  
|                                                       |  |              |  |             |        |                          |  
|Comprehensive income (loss):                           |  |              |  |             |        |                          |   |            |                           |  |   |                           |   |  |                                             |             |   |                          |   |          |   |  |   |             |  
|Net income (loss)                                      |  |             |  |             |       |                          |   |           |                           |  |   |                          |   |  |                                             | (37,865,050 | ) |                          |   |         |   |  |   | (37,865,050 | )
|Foreign currency translation                           |  |             |  |             |       |                          |   |           |                           |  |   |                          |   |  |                                             |            |   |                          |   | 230,281  |   |  |   | 230,281     |  
|                                                       |  |              |  |             |        |                          |   |            |                           |  |   |                           |   |  |                                             |             |   |                          |   |          |   |  |   |             |  
|Balance at December 31, 2003                           |  | 12,018,735   |  |             | 12,019 |                          |   | 48,361,031 |                           |  |   | (1,033,070                | ) |  |                                             | (39,071,344 | ) |                          |   | (211,762 | ) |  |   | 8,056,874   |  
|                                                       |  |              |  |             |        |                          |   |            |                           |  |   |                           |   |  |                                             |             |   |                          |   |          |   |  |   |             |  
|                                                       |  |              |  |             |        |                          |  
|Stock issuance - private placement                     |  | 38,686       |  |             | 39     |                          |   | 67,661     |                           |  |   |                          |   |  |                                             |            |   |                          |   |         |   |  |   | 67,700      |  
|Warrant issuance for Consulting Services               |  |             |  |             |       |                          |   | 952,000    |                           |  |   |                          |   |  |                                             |            |   |                          |   |         |   |  |   | 952,000     |  
|Amortization of deferred consulting expense            |  |              |  |             |        |                          |   |            |                           |  |   |                           |   |  |                                             |             |   |                          |   |          |   |  |   |             |  
|Change in value of shares                              |  |             |  |             |       |                          |   | (430,367   | )                         |  |   | 430,367                   |   |  |                                             |            |   |                          |   |         |   |  |   |            |  
|Amortization of expense                                |  |             |  |             |       |                          |   |           |                           |  |   | 161,000                   |   |  |                                             |            |   |                          |   |         |   |  |   | 161,000     |  
|Stock issuance and warrant repricing private placement |  | 111,257      |  |             | 111    |                          |   | 455,295    |                           |  |   |                          |   |  |                                             |            |   |                          |   |         |   |  |   | 455,406     |  
|                                                       |  |              |  |             |        |                          |  
|Comprehensive income (loss):                           |  |              |  |             |        |                          |   |            |                           |  |   |                           |   |  |                                             |             |   |                          |   |          |   |  |   |             |  
|Net income (loss)                                      |  |             |  |             |       |                          |   |           |                           |  |   |                          |   |  |                                             | 877,638     |   |                          |   |         |   |  |   | 877,638     |  
|Foreign currency translation                           |  |             |  |             |       |                          |   |           |                           |  |   |                          |   |  |                                             |            |   |                          |   | 338,167  |   |  |   | 338,167     |  
|                                                       |  |              |  |             |        |                          |   |            |                           |  |   |                           |   |  |                                             |             |   |                          |   |          |   |  |   |             |  
|Balance at December 31, 2004                           |  | 12,168,678   |  | $           | 12,169 |                          | $ | 49,405,620 |                           |  | $ | (441,703                  | ) |  | $                                           | (38,193,706 | ) |                          | $ | 126,405  |   |  | $ | 10,908,785  |  
|                                                       |  |              |  |             |        |                          |   |            |                           |  |   |                           |   |  |                                             |             |   |                          |   |          |   |  |   |             |  



See Notes to
Consolidated Financial Statements



F-6



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##### Table of Contents



ASCONI CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOW

YEARS ENDED DECEMBER 31, 2004 AND 2003

(UNITED STATES DOLLARS)



|                                                                                         |  |                         |            |   |             |   |             |  
|---------------------------------------------------------------------------------------- |  | ----------------------- | ---------- | - | ----------- | - | ----------- | -
|                                                                                         |  | Year Ended December 31, |           
|                                                                                         |  | 2004                    |            |   | 2003        |  
|                                                                                         |  |                         |            |   | (unaudited) |  
|CASH FLOWS FROM OPERATING ACTIVITIES                                                     |  |                         |            |   |             |   |             |  
|Net income (loss)                                                                        |  | $                       | 877,638    |   |             | $ | (37,865,050 | )
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |                         |            |   |             |   |             |  
|Depreciation and amortization                                                            |  |                         | 717,264    |   |             |   | 576,585     |  
|Deferred income taxes                                                                    |  |                         | 178,738    |   |             |   | 75,342      |  
|Stock issuance expense                                                                   |  |                         |           |   |             |   | 40,000,000  |  
|Stock compensation expense                                                               |  |                         |           |   |             |   | 400,000     |  
|Deferred consulting expense                                                              |  |                         | 161,000    |   |             |   | 118,766     |  
|Minority interest                                                                        |  |                         | (30,650    | ) |             |   | 318,893     |  
|Warrant issuance for consulting services                                                 |  |                         | 952,000    |   |             |   |            |  
|Stock issuance and warrant repricing private placement                                   |  |                         | 455,406    |   |             |   |            |  
|                                                                                         |  |                        
|(Increase) decrease in assets:                                                           |  |                         |            |   |             |   |             |  
|Trade receivables                                                                        |  |                         | (150,107   | ) |             |   | (1,036,413  | )
|Inventories                                                                              |  |                         | (1,693,102 | ) |             |   | (2,074,739  | )
|Refundable taxes                                                                         |  |                         | 167,121    |   |             |   | (76,752     | )
|Advance payments                                                                         |  |                         | 1,182,664  |   |             |   | (922,191    | )
|Other                                                                                    |  |                         | (72,581    | ) |             |   | 525         |  
|                                                                                         |  |                        
|Increase (decrease) in liabilities                                                       |  |                         |            |   |             |   |             |  
|Accounts payable and prepayments received                                                |  |                         | 1,188,870  |   |             |   | 343,573     |  
|Taxes payable                                                                            |  |                         | (301,780   | ) |             |   | 90,724      |  
|Accrued expenses and other current liabilities                                           |  |                         | 428,160    |   |             |   | 623,631     |  
|                                                                                         |  |                         |            |   |             |   |             |  
|Net cash provided by operating activities                                                |  |                         | 4,060,640  |   |             |   | 572,894     |  
|                                                                                         |  |                         |            |   |             |   |             |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                                     |  |                         |            |   |             |   |             |  
|Purchase of fixed assets                                                                 |  |                         | (2,769,577 | ) |             |   | (1,938,654  | )
|                                                                                         |  |                         |            |   |             |   |             |  
|Cash used by investing activities                                                        |  |                         | (2,769,577 | ) |             |   | (1,938,654  | )
|                                                                                         |  |                         |            |   |             |   |             |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                                     |  |                         |            |   |             |   |             |  
|Short-term borrowings / (repayments), net                                                |  |                         | (1,365,119 | ) |             |   | 1,063,081   |  
|Repayment of long-term debt                                                              |  |                         |           |   |             |   | (725,395    | )
|Lease obligations                                                                        |  |                         | (68,758    | ) |             |   | (101,815    | )
|Proceeds from stock issuance in private placement                                        |  |                         |           |   |             |   | 1,298,000   |  
|                                                                                         |  |                         |            |   |             |   |             |  
|Cash provided (used) by financing activities                                             |  |                         | (1,433,877 | ) |             |   | 1,533,871   |  
|                                                                                         |  |                         |            |   |             |   |             |  
|Effect of changes in exchange rates                                                      |  |                         | (4,940     | ) |             |   | (60,463     | )
|                                                                                         |  |                         |            |   |             |   |             |  
|Net increase (decrease) in cash and cash equivalents                                     |  |                         | (147,754   | ) |             |   | 107,648     |  
|Cash and bank equivalents, beginning of year                                             |  |                         | 155,010    |   |             |   | 47,362      |  
|                                                                                         |  |                         |            |   |             |   |             |  
|Cash and bank equivalents, end of year                                                   |  | $                       | 7,256      |   |             | $ | 155,010     |  
|                                                                                         |  |                         |            |   |             |   |             |  



See Notes to
Consolidated Financial Statements



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ASCONI CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOW (continued)

YEARS ENDED DECEMBER 31, 2004 AND 2003

(UNITED STATES DOLLARS)



|                                                                      |  |                         |         |             |   |        
|--------------------------------------------------------------------- |  | ----------------------- | ------- | ----------- | - | -------
|                                                                      |  | Year Ended December 31,
|                                                                      |  | 2004                    |         | 2003       
|                                                                      |  |                         |         | (unaudited)
|Suplemental Disclosure of Non-cash Investing and Financing Activities |  |                         |         |             |   |        
|                                                                      |  |                        
|Acquisition of additional interest in S.A. Vitis Hincesti in 2003     |  |                         |         |             | $ | 181,418
|                                                                      |  |                         |         |             |   |        
|Purchases of equipment under capital leases                           |  |                         |         |             | $ | 242,556
|                                                                      |  |                         |         |             |   |        
|Suplemental Disclosures of Cash Flow Information                      |  |                         |         |             |   |        
|Interest paid                                                         |  | $                       | 927,536 |             | $ | 785,594
|                                                                      |  |                         |         |             |   |        
|Taxes paid                                                            |  | $                       | 270,774 |             | $ | 183,747
|                                                                      |  |                         |         |             |   |        



See Notes to
Consolidated Financial Statements



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##### Table of Contents

Asconi Corporation



Notes to
Consolidated Financial Statements



(Information as of
and for the year ended December 31, 2003 is unaudited)



|1. | ORGANIZATION, PRINCIPAL ACTIVITIES AND BASIS OF PRESENTATION
|-- | ------------------------------------------------------------



Asconi Corporation and its subsidiaries (collectively the Company) produce, market and sell premium Moldavian wines in countries outside
Moldova, with approximately 89% percent of their revenue coming from sales to the Russian Federation.



In April 2001, Asconi Corporation, then known as Grand Slam Treasures, Inc. (Grand Slam) acquired 100% of the outstanding common stock of
Asconi S.R.L. (a limited liability company formed in the Republic of Moldova in October 1994) in a share exchange (the Merger) for the issuance of 12,600,000 shares (before the affects of the April, 2003 one-for-ten reverse stock split
(see Note 9) of the common stock of Grand Slam. Subsequent to the Merger, Grand Slam changed its name to Asconi Corporation.



Since Grand Slam had no operations and limited assets at the time of the Merger, Asconi S.R.L. was treated as the continuing entity for accounting
purposes, and the Merger was accounted for as (1) the recapitalization of Asconi S.R.L., whereby its previously outstanding common stock was converted into 12,600,000 shares of common stock, par value $.001 per share, and (2) the issuance by Asconi
S.R.L. of 386,689 shares of common stock (the number of shares of common stock of Grand Slam outstanding prior to the Merger and before giving affect to the one-for-ten reverse stock split affected in April, 2003) for the net assets of Grand Slam,
which were recorded at their book value. The recapitalization of Asconi S.R.L. was accounted for by restating all share and per share amounts. Since Asconi S.R.L. was treated as the continuing entity for accounting purposes, the consolidated
financial statements include the results of operations and cash flows for Asconi S.R.L. for all periods presented, and the results of operations and cash flows of Grand Slam from April 12, 2001.



Asconi S.R.L. was founded in 1994 and commenced significant operations in
1999. Asconi S.R.L. acquired a 70% interest in S.A. Fabrica de Vinuri din Puhoi and a 74% interest in S.A. Orhei Vin, both Moldovan entities, in October and December 2000, respectively. The interests were originally acquired by the shareholders of
Asconi S.R.L., who subsequently contributed them to Asconi S.R.L. The contribution was recorded based on the historical cost of the interests to the shareholders, $350,000, reduced by the indebtedness of $308,826 incurred in the purchase of the
interests for which Asconi S.R.L. assumed responsibility upon the contribution. Those acquisitions were accounted for as purchases.



In December 2001, the Company acquired approximately 25% of S.A. Vitis Hincesti. In March 2002, the Company acquired an additional 21% of S.A. Vitis
Hincesti. In June 2002, the Company acquired, through the acquisition of a beneficial interest in an irrevocable trust, an additional 5% interest in S.A. Vitis Hincesti. Through June 2002, the Company accounted for its investment in S.A. Vitis
Hincesti using the equity method. The acquisition of the additional interest in June 2002 gave the Company a controlling interest in S.A. Vitis Hincesti, at which time the Company began to consolidate S.A. Vitis Hincesti. In February 2003, the
Company subscribed to a subscription offering by S.A. Vitis Hincesti during February 2003 increasing its ownership in S.A. Vitis Hincesti to 61%.



Coppet Finance Limited was incorporated on February 3, 2003 as a British Virgin Island limited company and as a wholly owned subsidiary of Asconi Holding
Company Limited (AHCL). AHCL operates only as a holding company and is otherwise inactive. AHCL is wholly owned by Asconi Corporation.



|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|-- | ------------------------------------------



Generally Accepted Accounting Principles



The consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (US
GAAP).



Basis of consolidation



The consolidated financial statements of the Company include the accounts of
Asconi Corporation, Asconi Holding Company Limited, S.A. Fabrica de Vinuri din Puhoi, S.A. Orhei-Vin, Coppet Finance Limited, and S.A. Vitis Hincesti. All material intercompany balances and transactions have been eliminated.



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Asconi Corporation



Notes to Consolidated Financial Statements(Continued)



(Information as of and for the year ended December 31, 2003 is unaudited)



Economic and political risks



The Company faces a number of risks and challenges since its operations are in the Republic of Moldova and its primary
market is in the Russian Federation. The Company may withdraw funds from its subsidiaries in Moldova provided the subsidiaries have paid their income taxes and meet certain other requirements. The requirement to obtain the clearance of the
government of Moldova that these requirements have been met can cause delays in the withdrawal of funds.



Use of estimates



The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results when ultimately realized could differ
from those estimates.



Cash and cash equivalents



The Company considers cash and cash equivalents to
include cash on hand, demand deposits with banks, and cash equivalents having original maturities of three months or less.



Accounts receivable and allowance for doubtful accounts



The Company provides an allowance for doubtful accounts equal to the estimated uncollectible amounts. The Companys estimate is based on
historical collection experience and a review of the current status of trade accounts receivable. It is reasonably possible that the Companys estimate of the allowance for doubtful accounts will change. Accounts receivable are presented net of
an allowance for doubtful accounts of $41,439 and $28,595 at December 31, 2004 and 2003, respectively. (See Note 3).



Credit Risk



The Companys credit risk primarily consists of accounts receivable and advance payments. The majority of the Companys trade receivables are
from entities engaged in the distribution of wines and spirits, and a substantial portion of its trade receivables are from entities engaged in that business in the Russian Federation. The Company is therefore exposed to credit risk which can be
significantly affected by changes in the conditions in that industry and in the Russian Federation in particular.



Inventory



Inventories are stated at the lower of cost or market on the first-in, first-out basis, and include raw materials, work in process, finished goods and
other inventory such as parts and product merchandise. Raw materials include glass, cork, packaging materials and other materials used in production and bottling of wines. Work in process is primarily bulk wine and finished goods are bottled wine.
The cost of finished goods includes direct costs of raw materials such as grapes, packaging, as well as direct labor used in wine production, bottling and warehousing. Indirect production costs consisting primarily of utilities and indirect labor
related to the production of wine are also included in the cost of inventory and subsequently in the cost of goods sold. The Company applies full absorption to allocate indirect costs to the vintages in work in process inventory based on volume.
(See Note 5).



Costs and expenses not directly related to the
production activities, such as freight out, interest expense, and the compensation of sales, marketing, accounting and administrative personnel are included in selling, general and administrative expenses of the period in which they are incurred.



In accordance with general practice in the wine industry,
wine inventories are included in current assets, although a portion of such inventories may be aged for periods longer than one year.



Property, plant and equipment



Property, plant and equipment are carried at cost. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are
capitalized. (See Note 6).



When assets are retired or
disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition.



In accordance with Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, the Company reviews the carrying value of property, plant, and



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Asconi Corporation



Notes to Consolidated Financial Statements(Continued)



(Information as of and for the year ended December 31, 2003 is unaudited)



equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash
flows expected to result from its use and eventual disposition. In cases where estimated undiscounted future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value of the assets
exceeds its fair value. The factors considered by management in performing this assessment include current operating results, trends, and prospects, as well as the effects of obsolescence, demand, competition, and other economic factors.



Depreciation is calculated on a straight-line basis over the estimated
useful life of the assets. The percentages applied are:



|                              |  |          
|----------------------------- |  | ---------
|      Buildings              |  | 2% - 4.0%
|      Machines and equipment |  | 5% - 10% 
|      Vehicles               |  | 10% - 20%
|      Office equipment       |  | 20% - 33%



The costs to acquire
land for vineyards, together with the costs to prepare the planting plans, prepare the sites, acquire and plant the rootstock, install any other related equipment and maintain the vineyard are capitalized until the production from the vineyard
reaches a commercial level. Once commercial production is achieved, the Company will begin to depreciate the capitalized costs over their estimated useful lives, except that the costs of the land and any development costs such as planting plans and
site preparation that have indefinite lives will not be depreciated. Once depreciation begins, depreciation expense, together with the costs of growing, will be deferred as the costs of the unharvested grape crop until that crop is harvested and the
costs are transferred to bulk wine. The Companys vineyards are presently still in development and presently are not expected to reach commercial production until fiscal 2007.



When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any
resulting gains or losses are included in income in the year of disposition.



Goodwill



Goodwill
represents the excess purchase price paid by the Company over the fair value of the tangible and intangible assets and liabilities of S.A. Vitis Hincesti at June 30, 2002, the date of the acquisition. In January 2003, the Company purchased for
$181,418 an additional 25,380 shares of the common stock of S.A. Vitis Hincesti by exercising its right to purchase shares offered by S.A. Vitis Hincesti to its existing stockholders in a subscription rights offering. The Company was the only
stockholder of S.A. Vitis Hincesti to exercise the subscription right, as a result of which its interest in S.A. Vitis Hincesti increased to 61%. The transaction was accounted for as a purchase of minority interest. As the per share offering price
by S.A. Vitis Hincesti was below its book value per share, that accounting resulted in a reduction of goodwill by $128,221.



In accordance with SFAS 142, the goodwill is not being amortized, but instead is subject to an annual assessment of impairment by applying a fair-value
based test. As a part of the evaluation, the Company compares the carrying value of goodwill with its fair value to determine whether there has been impairment. As of December 31, 2004, the Company does not believe any impairment of goodwill has
occurred.



Revenue recognition



The Company generally recognizes product revenue at the time of shipment, at
which time persuasive evidence of an arrangement exists, delivery has occurred (generally triggered by the transfer of the merchandise to a third party shipper under FOB shipping terms), the price is fixed or determinable, and collectibility is
probable. Cash payments received in advance of shipment are recorded as deferred revenue. The Company is generally not contractually obligated to accept returns, except for defective product. However, the Company may permit its customers to return
or exchange products and may provide pricing allowances on products unsold by a customer. Revenue is recorded net of an allowance for estimated returns, price concessions, and other discounts. Such allowances are reflected as a reduction to accounts
receivable when the Company expects to grant credits for such items; otherwise, they are reflected as a liability.



Government grants



The Company receives equipment grants from various non-U.S. governmental agencies. Grants for the purchase of equipment are recorded as reductions of the
related equipment cost and reduce future depreciation expense. Grants related to items of operating expenses are recorded in earnings when received.



Starting in 2004, the Company became eligible to receive grants from a non-U.S. government agency to offset the costs of the development of vineyards.
Such grants are recorded as reductions of the related vineyard development costs and will reduce future depreciation expense. During 2004 the Company received a grant of approximately $680,000 for the development of vineyards.



Shipping and handling costs



The Company classifies shipping and handling costs as part of selling,
general and administrative expenses. Total delivery costs were $384,898 and $333,603 in fiscal 2004 and fiscal 2003, respectively.



The Companys customers are not charged for shipping and handling costs incurred by the Company prior to transfer of title to the third party shipper
under FOB shipping terms.



Employees benefits



Mandatory contributions are made by the Moldavian
subsidiaries to the Moldavian Governments health, retirement benefit and unemployment schemes at the statutory rates in force during the period, based on gross salary payments. The cost of these payments is charged to the statement of income
in the same period as the related salary cost.



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Asconi Corporation



Notes to Consolidated Financial Statements(Continued)



(Information as of and for the year ended December 31, 2003 is unaudited)



Stock based compensation



As permitted by SFAS No. 123, Accounting for Stock Based Compensation, the Company follows the intrinsic value
model of Accounting Principles Board Opinion (APB) No. 25 in measuring the cost, if any, to be recorded upon the issuance of stock options or stock awards to employees and directors. Under that method, compensation expense is recorded only for any
difference between the fair value of the stock on the date the options or awards are granted and the option exercise price or the price paid for the award.



Stock option or share awards issued to other than employees or directors are recorded at their fair value as required by SFAS No. 123.



The Company presently has no stock option plans and has no outstanding stock
options. The Companys net income (loss) and net income (loss) per share would not have been affected if the Company had accounted for stock options or awards issued to employees and directors using the fair value method of SFAS No. 123.



Other income



Other income for the year ended December 31, 2003 consists of the proceeds
of the settlement of certain litigation (see Note 10). Other income for the years ended December 31, 2004 and 2003 also includes gains and losses from foreign currency transactions.



Income taxes



Income taxes are determined under the liability method as required by Statement of Financial Accounting Standard No. 109 Accounting for Income
Taxes. Under SFAS No. 109, deferred income tax assets and liabilities arising from temporary differences between income tax and financial reporting basis of assets and liabilities are recorded based on currently enacted tax rates and laws. In
addition, a deferred tax asset can be generated by net operating loss carryforwards. If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized.



Foreign currency translation



The financial position and results of operations of the Companys
foreign subsidiaries in the Republic of Moldova are measured using the foreign subsidiaries local currency, the Moldovan lei, as the functional currency. Revenues and expenses of such subsidiaries have been translated into U.S. dollars at
average exchange rates prevailing during the period. Assets and liabilities have been translated at the rates of exchange on the balance sheet date. The resulting translation gain and loss adjustments are recorded directly as a separate component of
shareholders equity, unless there is a sale or complete liquidation of the underlying foreign investments. Foreign currency translation adjustments resulted in gains of $338,167 and $230,281 in fiscal 2004 and 2003, respectively.



Transaction gains and losses that arise from exchange rate fluctuations
on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred. Foreign currency transaction adjustments included in operations totaled losses of 198,213 and $83,698 in fiscal 2004
and fiscal 2003, respectively.



Earnings Per Share



The Company has adopted SFAS No. 128, Earnings Per
Share. Under SFAS No. 128, basic earnings per share is computed by dividing income available to common shareholders by the weighted-average number of common shares assumed to be outstanding during the period. Diluted earnings per share is
computed by assuming the issuance of additional shares of common stock (computed using the treasury stock method) for the exercise of outstanding options, warrants or conversion rights.



Diluted earnings per share is the same as basic earnings per share for the years ended December 31, 2004 and 2003 as the
effect of the outstanding common stock warrants (see Note 9) would have been anti-dilutive.



In April 2003, the Company approved a one-for-ten reverse stock split. The reverse stock split was effectuated on May 12, 2003. Except as noted in Note 1, all share and per share amounts have been retroactively
restated.



Financial instruments



The net fair value of all financial assets and liabilities approximates
their carrying value.



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Asconi Corporation



Notes to Consolidated Financial Statements(Continued)



(Information as of and for the year ended December 31, 2003 is unaudited)



Recent pronouncements



In June 2001, the FASB issued SFAS No. 143 Accounting for Asset Retirement Obligations. The statement addresses
financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The statement became effective for the Company in fiscal 2003. The adoption of SFAS No. 143
did not have a material impact on the Companys financial position, results of operations or cash flows.



In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements Nos. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections. SFAS No. 145 eliminates the requirement to classify gains and losses from extinguishments of indebtedness as extraordinary, requires certain lease modifications to be treated the same as a sale-leaseback transaction, and makes
other non-substantive technical corrections to existing pronouncements. SFAS No. 145 is effective for fiscal years beginning after May 15, 2002, with earlier adoption encouraged. The Company adopted SFAS No. 145 effective fiscal 2003. The adoption
of SFAS No. 145 did not have a material effect on the Companys financial position, results of operations, or cash flows.



In July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. SFAS No. 146 addresses financial
accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit
an Activity (including Certain costs Incurred in a Restructuring). SFAS No. 146 requires recognition of a liability for a cost associated with an exit or disposal activity when the liability is incurred, as apposed to when the entity commits
to an exit plan under EITF No. 94-3. SFAS No. 146 is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. The Company adopted SFAS No. 146 in fiscal 2003. The adoption of SFAS No. 146 did not have a material
effect on the Companys financial position, results of operations, or cash flows.



In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation  Transition and Disclosure. This standard amends SFAS No. 123, Accounting for Stock-Based
Compensation, to provide alternative methods of transition for an entity that voluntarily changes to the fair value based method of accounting for stock-based employee compensation. It also amends the disclosure provisions of SFAS No. 123 to
require prominent disclosure about the effects on reported net income of an entitys accounting policy decisions with respect to stock-based employee compensation. Finally, SFAS No. 148 amends APB No. 28, Interim Financial
Reporting, to require disclosure about those effects in interim financial information. SFAS No. 148 is effective for fiscal years beginning after December 15, 2002. The adoption of SFAS No. 148 did not have a material impact on the
Companys financial position, results of operations, or cash flows.



In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. SFAS No. 150 establishes standards for how an issuer classifies
and measures in its statement of financial position certain financial instruments with characteristics of both liabilities and equity. SFAS 150 requires that an issuer classify a financial instrument that is within SFAS No. 150s scope as a
liability (or an asset in some circumstances) because that financial instrument embodies an obligation of the issuer. Many of those instruments were previously classified as equity. SFAS No. 150 requires an issuer to classify the following
instruments as liabilities (or assets in some circumstances): mandatory redeemable financial instruments; obligations to repurchase the issuers equity shares by transferring assets; and certain obligations to issue a variable number of its
equity shares. SFAS No. 150 is effective for all financial instruments entered into or modified after May 31, 2003, and otherwise shall be effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of SFAS No.
150 did not have a material effect on the Companys consolidated balance sheet.



In November 2002, the FASB issued FASB Interpretation No. 45 (FIN 45), Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. FIN
45 requires a liability to be recognized at the time a company issues a guarantee for the fair value of the obligations assumed under certain guarantee agreements. The provisions for initial recognition and measurement of guarantee agreements are
effective on a prospective basis for guarantees that are issued or modified after December 31, 2002. The Company adopted FIN 45 in fiscal 2003. The adoption of FIN 45 did not have a material impact on the Companys financial position, results
of operations, or cash flows.



In January 2003, the FASB
issued FASB Interpretation No. 46, Consolidation of Variable Interest Entities an interpretation of ARB No. 51 (FIN 46). FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if
the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional



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Asconi Corporation



Notes to Consolidated Financial Statements(Continued)



(Information as of and for the year ended December 31, 2003 is unaudited)



subordinated financial support from other parties. The disclosure provisions of FIN 46 are effective for financial statements initially issued after January
31, 2003. Public entities with a variable interest in a variable interest entity created before February 1, 2003 shall apply the consolidation requirements of FIN 46 to that entity no later than the beginning of the first annual reporting period
beginning after June 15, 2003. FIN 46 is effective for all new variable interest entities created or acquired after January 31, 2003. Additionally, in December 2003, the FASB issued FASB Interpretation No. 46R (FIN 46R) to update certain aspects of
FASB 46. FIN 46R must be adopted no later than the end of the first interim or annual reporting period ending after March 15, 2004. The adoption of FIN 46 and FIN 46R did not have a material impact on the Companys financial position, results
of operations, or cash flows.



In November 2004, the FASB
issued SFAS No. 151, Inventory Costs, an Amendment of ARB No. 43, Chapter 4. SFAS No. 151 retains the general principle of ARB No. 43, Chapter 4, Inventory Pricing, that inventories are presumed to be stated at cost; however,
it amends ARB No. 43 to clarify that abnormal amounts of idle facilities, freight, handling costs and spoilage should be recognized as current period expenses. Also, SFAS No. 151 requires fixed overhead costs be allocated to inventories based on
normal production capacity. The guidance of SFAS No. 151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The Company believes that implementing SFAS No. 151 should not have a material impact on its
financial condition or results of operations.



In December
2004, the FASB issued SFAS No. 123R (Revised 2004), Share Based Payment, which eliminates the use of APB Opinion No. 25 and will require the Company to measure the cost of employee services received in exchange for an award of equity
instruments based on the grant-date fair value of the award. That cost will be recognized over the period during which an employee is required to provide service in exchange for the rewardthe requisite service period. No compensation cost is
recognized for equity instruments for which employees do not render the requisite service. The grant-date fair value of employee share options and similar instruments will be estimated using option-pricing models adjusted for the unique
characteristics of those instruments. SFAS No. 123R (Revised 2004) is effective for the Company for the first interim reporting period that begins after January 1, 2006, and must be applied to all options granted or modified after its effective date
and also to recognize the cost associated with the portion of any option awards made before its effective date for with the associated service has not been rendered as of its effective date. The Company is still studying the requirements of SFAS No.
123R (Revised 2004) and have not yet determined what impact it will have on its results of operations and financial position.



In December, 2004 the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assetsan amendment of APB Opinion No. 29. APB Opinion No. 29
provided an exception to the basic measurement principle (fair value) for exchanges of similar productive assets. That exception required that some nonmonetary exchanges, although commercially substantive, be recorded on a carryover basis. SFAS No.
153 amends APB Opinion No. 29 to eliminate the exception to fair value for exchanges of similar productive assets and replace it with a general exception for exchange transactions that do not have commercial substance, which are defined as
transactions that are not expected to result in significant changes in the cash flows of the reporting entity. SFAS No. 153 is effective for nonmonetary exchanges occurring in fiscal periods beginning after June 15, 2005. The Company does not expect
that SFAS No. 153 will have a material affect on its financial statements.



Reclassification



Certain reclassifications have been made to the December 31, 2003 financial statements in order to conform to the classification used in the current year.



|3. | TRADE RECEIVABLES
|-- | -----------------



|                                      |  |              |           |   |      |   |           |  
|------------------------------------- |  | ------------ | --------- | - | ---- | - | --------- | -
|                                      |  | December 31, |          
|                                      |  | 2004         |           |   | 2003 |  
|Customers outside of Moldova          |  | $            | 3,033,896 |   |      | $ | 2,751,841 |  
|Customers in Moldova                  |  |              | 840,172   |   |      |   | 732,486   |  
|Less: allowance for doubtful accounts |  |              | (41,439   | ) |      |   | (28,595   | )
|                                      |  |              |           |   |      |   |           |  
|                                      |  | $            | 3,832,629 |   |      | $ | 3,455,732 |  
|                                      |  |              |           |   |      |   |           |  



Moldovan receivables
include approximately $400,000 due from the government of Moldova for its subsidy for the planting of vineyards. Foreign receivables are primarily from the Companys five largest customers (see Note 16).



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Asconi Corporation



Notes to Consolidated Financial Statements(Continued)



(Information as of and for the year ended December 31, 2003 is unaudited)



|4. | ADVANCE PAYMENTS
|-- | ----------------



The Company makes advance payments for raw materials, equipment and services in the ordinary course of business. Advance payments as of December 31, 2004
and 2003 are summarized as follows:



|                     |  |              |         |      |   |          
|-------------------- |  | ------------ | ------- | ---- | - | ---------
|                     |  | December 31,
|                     |  | 2004         |         | 2003
|Grapes and bulk wine |  | $            | 351,968 |      | $ | 788,845  
|Other raw materials  |  |              | 57,942  |      |   | 463,458  
|Rootstocks           |  |              |        |      |   | 122,804  
|Equipment            |  |              | 32,183  |      |   | 271,728  
|Services             |  |              | 142,046 |      |   | 89,017   
|Other                |  |              | 148,521 |      |   | 84,193   
|                     |  |              |         |      |   |          
|                     |  | $            | 732,660 |      | $ | 1,820,045
|                     |  |              |         |      |   |          



|5. | INVENTORIES
|-- | -----------



Inventories are summarized as follows:



|                        |  |              |            |      |   |          
|----------------------- |  | ------------ | ---------- | ---- | - | ---------
|                        |  | December 31,
|                        |  | 2004         |            | 2003
|Raw and other materials |  | $            | 1,711,133  |      | $ | 1,233,770
|Bulk wine and alcohol   |  |              | 8,849,868  |      |   | 7,062,209
|Bottled wine            |  |              | 315,877    |      |   | 376,445  
|                        |  |              |            |      |   |          
|                        |  | $            | 10,876,878 |      | $ | 8,672,424
|                        |  |              |            |      |   |          



Inventory in the
amount of approximately $3,070,225 is pledged as collateral for loans aggregating approximately $2,151,575 at December 31, 2004.



|6. | PROPERTY, PLANT AND EQUIPMENT
|-- | -----------------------------



|                                             |  |              |            |   |      |   |            |  
|-------------------------------------------- |  | ------------ | ---------- | - | ---- | - | ---------- | -
|                                             |  | December 31, |           
|                                             |  | 2004         |            |   | 2003 |  
|Land for development of vineyards            |  | $            | 545,595    |   |      | $ | 383,399    |  
|Vineyards                                    |  |              | 1,455,184  |   |      |   | 487,614    |  
|Land, buildings and construction in progress |  |              | 2,812,594  |   |      |   | 3,178,533  |  
|Machinery and equipment                      |  |              | 9,572,069  |   |      |   | 7,243,236  |  
|Other                                        |  |              | 394,663    |   |      |   | 224,695    |  
|                                             |  |              |            |   |      |   |            |  
|                                             |  |              | 14,780,105 |   |      |   | 11,517,477 |  
|Less accumulated depreciation                |  |              | (6,753,341 | ) |      |   | (5,802,097 | )
|                                             |  |              |            |   |      |   |            |  
|                                             |  | $            | 8,026,764  |   |      | $ | 5,715,380  |  
|                                             |  |              |            |   |      |   |            |  



Property, plant and
equipment in the amount of approximately $4,871,820 is pledged as collateral for loans aggregating $3,420,294 at December 31, 2004.



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Asconi Corporation



Notes to Consolidated Financial Statements(Continued)



(Information as of and for the year ended December 31, 2003 is unaudited)



|7. | SHORT-TERM AND LONG-TERM DEBT
|-- | -----------------------------



|                                                                                                                                                                                                                                                                    |  |             |            |   |      |   |            |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------- | ---------- | - | ---- | - | ---------- | -
|                                                                                                                                                                                                                                                                    |  | December 31 |           
|                                                                                                                                                                                                                                                                    |  | 2004        |            |   | 2003 |  
|Note (credit line) to Agroind Bank, Moldova, denominated in Moldovan lei, dated May 21, 2003, refinanced in August 2004, due December 31, 2004. Interest rates 16% after refinancing and 14%
before refinancing. Collateralized by bulk wine inventory.             |  | $           | 83,915     |   |      | $ | 887,613    |  
|                                                                                                                                                                                                                                                                    |  |            
|Note (credit line) to Agroind Bank, Moldova, denominated in U.S. dollars, dated May 21, 2003, refinanced in June 2004, due December 31, 2004. Interest rate 10.5% after refinancing and 9% before
refinancing. Collateralized by bulk wine inventory and equipment. |  |             | 20,836     |   |      |   | 1,700,000  |  
|                                                                                                                                                                                                                                                                    |  |            
|Note (credit line) to Agroind Bank, Moldova, denominated in U.S. dollars, dated September 6, 2004, due August 25, 2005. Interest rate 11%. Collateralized by bulk wine inventory and
equipment.                                                                     |  |             | 2,600,000  |   |      |   |           |  
|                                                                                                                                                                                                                                                                    |  |            
|Note to Vininvest, S.R.L., Moldova, denominated in Euros and U.S. Dollars, renewed December, 2000 due December 29, 2004. Interest rate variable based on LIBOR, 11% as of December 31, 2004 and
2003. Collateralized by equipment.                                  |  |             | 99,565     |   |      |   | 75,120     |  
|                                                                                                                                                                                                                                                                    |  |            
|Note (credit line) to Agroind Bank, Moldova, denominated in Moldovan lei, dated May 21, 2003, paid during 2004. Interest rate 14%. Collateralized by bulk wine inventory.                                                                                           |  |             |           |   |      |   | 1,235,628  |  
|                                                                                                                                                                                                                                                                    |  |            
|Note (credit line) to Agroind Bank, Moldova, denominated in U.S. dollars, dated August 21, 2002, refinanced during 2003, paid August, 2004. Interest rate 9%. Collateralized by bulk wine
inventory and equipment.                                                  |  |             |           |   |      |   | 800,000    |  
|                                                                                                                                                                                                                                                                    |  |            
|Note (credit line) to Agroind Bank, Moldova, denominated in Moldovan lei, dated December 24, 2004, due August 30, 2005. Interest rate 20.5%. Collateralized by bulk wine inventory and
equipment.                                                                   |  |             | 192,616    |   |      |   |           |  
|                                                                                                                                                                                                                                                                    |  |            
|Note (credit line) to Agroind Bank, Moldova, denominated in U.S. dollars, dated September 7, 2004, due August 25, 2005. Interest rate 11%. Collateralized by bulk wine inventory and
equipment.                                                                     |  |             | 1,500,000  |   |      |   |           |  
|                                                                                                                                                                                                                                                                    |  |            
|Note (credit line) to Agroind Bank, Moldova, denominated in Moldovan lei, dated June 27, 2003, paid during 2004. Interest rate 14%. Collateralized by equipment.                                                                                                    |  |             |           |   |      |   | 1,023,791  |  
|                                                                                                                                                                                                                                                                    |  |            
|Note (credit line) to Agroind Bank, Moldova, denominated in U.S. dollars, dated September 30, 2002, refinanced during 2003 and 2004, due August 25, 2005. Interest rate 9% before refinancing and
11% after refinancing. Collateralized by equipment.               |  |             | 1,010,078  |   |      |   | 605,351    |  
|                                                                                                                                                                                                                                                                    |  |            
|Note to Vininvest, S.R.L., Moldova, denominated in Euros and U.S. Dollars, renewed December, 2000 due December 29, 2004. Interest rate variable based on LIBOR, 11% at December 31, 2004 and 2003.
Collateralized by equipment.                                     |  |             | 68,753     |   |      |   | 98,747     |  
|                                                                                                                                                                                                                                                                    |  |            
|Current maturities of lease obligations (See Note 8)                                                                                                                                                                                                                |  |             | 64,471     |   |      |   | 84,919     |  
|                                                                                                                                                                                                                                                                    |  |             |            |   |      |   |            |  
|Total Debt                                                                                                                                                                                                                                                          |  |             | 5,640,234  |   |      |   | 6,511,169  |  
|Less (current portion)                                                                                                                                                                                                                                              |  |             | (5,640,234 | ) |      |   | (6,511,169 | )
|                                                                                                                                                                                                                                                                    |  |             |            |   |      |   |            |  
|Long-term debt, less current portion                                                                                                                                                                                                                                |  | $           |           |   |      | $ |           |  
|                                                                                                                                                                                                                                                                    |  |             |            |   |      |   |            |  



All debt as of
December 31, 2003 was due in 2004. All debt at December 31, 2004 is due in 2005 Included in the total debt at December 31, 2004 is $104,751 payable to Agroind Bank which was due December 31, 2004 and was repaid in January, 2005, and $168,318 payable
to Vininvest, S.R.L. which was due as of December 31, 2004 which the Company continues to repay based on the periodic payment terms in effect in 2004.



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Asconi Corporation



Notes to Consolidated Financial Statements(Continued)



(Information as of and for the year ended December 31, 2003 is unaudited)



|8. | LEASE OBLIGATIONS
|-- | -----------------



During 2003, the Company acquired equipment of $242,556 under capital lease obligations. Accumulated amortization of the leased equipment at December 31,
2004 and 2003 was $46,785 and $15,195. Amortization of assets under capital leases is included in depreciation expense.



The future minimum lease payments required under the capital leases and the present value of the net minimum lease payments as of December 31, 2004, are
as follows:



|                                                                                                            |  |                          |  |   |         |  
|----------------------------------------------------------------------------------------------------------- |  | ------------------------ |  | - | ------- | -
|                                                                                                            |  | Year Ending December 31, |  |   |        
|                                                                                                            | 
|                                                                                                            |  | 2005                     |  | $ | 71,823  |  
|                                                                                                            |  | 2006                     |  |   | 7,089   |  
|                                                                                                            |  |                          |  |   |         |  
|Total minimum lease payments                                                                                |  |                          |  |   | 78,912  |  
|Less: Amount representing estimated taxes, maintenance, and insurance costs included in total amounts above |  |                          |  |   | (2,017  | )
|                                                                                                            |  |                          |  |   |         |  
|Net Minimum lease payments                                                                                  |  |                          |  | $ | 76,895  |  
|Less: Amounts representing interest                                                                         |  |                          |  |   | (5,563  | )
|                                                                                                            |  |                          |  |   |         |  
|Present value of net minimum lease payments                                                                 |  |                          |  |   | 71,332  |  
|Less: Current maturities of capital lease obligations (included in short-term debt)                         |  |                          |  |   | (64,471 | )
|                                                                                                            |  |                          |  |   |         |  
|Long term capital lease obligations                                                                         |  |                          |  | $ | 6,861   |  
|                                                                                                            |  |                          |  |   |         |  



|9. | SHAREHOLDERS EQUITY
|-- | --------------------



The Company is authorized to issue 100,000,000 shares of its common stock and 5,000,000 shares of preferred stock. Each share of common stock is entitled
to one vote. Preferred shares have no voting rights. At its discretion, the Board of Directors may declare dividends on shares of common stock, although the Board does not anticipate paying dividends in the foreseeable future.



On April 22, 2003, the Companys Board of Directors approved a
one-for-ten reverse stock split on the shares of the Companys common stock effective May 12, 2003. Each shareholder of record on April 22, 2003 received one share of common stock for each ten shares of common stock held. The reverse stock
split was effectuated on May 12, 2003. The Company retained the current par value of $.001 per share for all shares of common stock. Except as indicated in Note 1, all references in the financial statements to share and per share amounts have been
restated to reflect the effect of the reverse stock split for all periods presented.



On April 22, 2003, the Companys Board of Directors approved the issuance of 100,000 shares of common stock to Serguei Melnik as compensation for his services as an officer of the Company. As the award had no
vesting or forfeiture provisions, it was charged to expense as of the date of the award on the basis of the market price of the Companys common stock on the date of the board resolution.



In April and May 2003, the Company entered into two consulting contracts,
one related to the design of production facilities and the other related to the marketing of the Companys products. The terms of the agreements are five years, respectively, and each consultant was issued 100,000 shares of the Companys
common stock for the services to be received. The contracts do not contain substantial incentives for non-performance as that term is defined under EITF Issue 96-18, Accounting for Equity Instruments That Are Issued to Other Than
Employees for Acquiring, or in Conjunction with Selling, Goods or Services. Accordingly, as required by EITF 96-18, the issuance of the shares was initially recorded based on the market value of the shares when they were issued, and the final
valuation of the shares will be computed on that date on which performance is complete. Expense is



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Asconi Corporation



Notes to Consolidated Financial Statements(Continued)



(Information as of and for the year ended December 31, 2003 is unaudited)



being recorded over the lives of the contracts on a straight-line basis, with the amount of expense recorded in the periods prior to the completion of
performance based on the market price of the shares as of the end of the period in which the expense is recorded. Changes in the value of the common stock, if any, occurring after such interim expense measurements are reflected in the expense
recorded in the subsequent period in which that change occurs, and deferred expense, which is presented as a reduction of shareholders equity, is adjusted at the end of each period to equal the value of the shares not yet earned on the basis
of the market price of the shares at the end of the period. The consulting expense recorded for these contracts for the years ended December 31, 2004 and 2003 totaled $161,000 and $118,765 respectively.



On April 22, 2003, the Companys Board of Directors approved the
issuance of 5,000,000 shares of common stock to each of Constantin Jitaru and Anatolie Sirbu, the founders of Asconi S.R.L. and officers and directors of the Company. The Board of Directors approved the issuance of the shares in order to increase
the ownership levels of Messrs. Jitaru and Sirbu to the levels contemplated under the terms of the Merger. Pursuant to those terms, Messrs. Jitaru and Sirbu were to each become the beneficial owners of approximately 46.5% of the Companys
issued and outstanding shares. However, as a result of the issuance of shares of the Companys common stock to persons other than Messrs. Jitaru and Sirbu, which the Company viewed as improper, the ownership levels of Messrs. Jitaru and Sirbu
were less than required under the terms of the Merger. After initiating and later settling litigation over those issuances (see Note 10), the Board of Directors determined that these shares should be issued. The 10,000,000 shares were valued on the
basis of the closing price on the date of the Board resolution, resulting in the recording of $40 million of stock issuance expense.



In December 2003, the Company completed a private placement of 259,600 units at an offering price of $5.00 for aggregate gross offering proceeds of
$1,298,000. Each unit consists of one share of common stock and one warrant to purchase an additional share of common stock at an exercise price of $8.52. The warrants are exercisable through December 5, 2006. As discussed below, in December
2004 the Company entered into a Release of Claims and Covenant not to Sue with the private placement investors, which, among other things, reduced the exercise price of the warrants to $5.00 and issued an additional 111,257 shares of common stock to
the private placement investors.



In January 2004, the Company
issued 38,686 shares of common stock pursuant to stock purchase agreements entered into in July 2003, whereby the Company sold shares at an offering price of $1.75 for aggregate gross offering proceeds of $67,700.



In February 2004, the Company entered into a consulting agreement for
strategic consulting services. The term of the agreement is for one year, however, either party can terminate the agreement after six months. The Company issued to the consultants, who are unrelated to the Company, 100,000 warrants exercisable at
$7.00, which expire in April 2009 and 100,000 warrants exercisable at $7.50, which expire in June 2009. The contract does not contain a substantial incentives for non-performance as that term is defined under EITF Issue 96-18,
Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services, or provisions for the forfeiture of the warrants in the event of non-performance. Accordingly, as
required by EITF 96-18 and EITF 00-18, the warrants were valued as of the inception of the contract using the Black Scholes model. The value of the warrants under the Black Scholes model was $4.76 per warrant, and expense was amortized over the six
month minimum life of the contract on a straight-line basis. The consulting expense recorded for this contract for fiscal 2004 totaled $952,000 and is included in selling, general and administrative expense.



On December 17, 2004, the Company entered into a Release of Claims and
Covenant Not to Sue (the Release) with certain accredited investors who had purchased the Companys securities in the December 2003 private placement (2003 Investors). Pursuant to the Release the 2003
Investors agreed to release and discharge the Company against any and all claims and causes of action, including those specifically related in any way to the 2003 Investors purchase of the Companys securities in the 2003 private
placement (the Claims). The 2003 Investors further agreed to not to sue or bring any action in law, or in equity against us arising from or relating to the Claims. In exchange, the Company (i) agreed with the 2003 Investors to reduce the
exercise price of the 259,600 warrants issued in the 2003 private placement to $5.00 (warrant repricing) and to issue 111,257 additional shares of The Companys common stock to the 2003 Investors. The Company also granted piggy-back
registration rights to the 2003 Investors. As a result of this issuance and the warrant repricing, the Company recorded an expense in the amount of $455,406, which is included in general and administrative expense.



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Asconi Corporation



Notes to Consolidated Financial Statements(Continued)



(Information as of and for the year ended December 31, 2003 is unaudited)



Warrants outstanding at December 31, 2004 are as follows:



|                  |  |               |      |                 |                                 
|----------------- |  | ------------- | ---- | --------------- | --------------------------------
|Number ofwarrants |  | Exerciseprice |      | Exercise period
|259,600           |  | $             | 5.00 |                 | December, 2004 to December, 2006
|100,000           |  | $             | 7.00 |                 | April, 2004 to April, 2009      
|100,000           |  | $             | 7.50 |                 | June, 2004 to June, 2009        



|10. | SETTLEMENT OF LITIGATION
|--- | ------------------------



On July 17, 2001, the Company filed a complaint in the Circuit Court of the Ninth Judicial circuit in and for Orange County, Florida, against Vadim
Enikeev, an individual; Serguei Melnik, an individual; La-Sal Capital, Inc., a Florida corporation; Icara, Inc. a Florida corporation, Stoneside Development Limited, a personal services corporation, Goldberg Law Group, PA., a Florida corporation;
Glenn E. Goldberg, an individual; Alan S. Lipstein, an individual; George Carapella, an individual; Thomas L. Tedrow, an individual; Larry Eastland, an individual; Robert Klosterman, an individual; and John Does and Jane Does, fictitious parties,
the true parties intended to be those individuals or entities liable to plaintiff.



As amended the complaint sought damages for breach of contract (defendants Enikeev, La-Sal, Icara, Goldberg Law Group, Stoneside); rescission (defendants La-Sal, Icara, Goldberg Law Group, Stoneside); breach of
fiduciary duty (defendants Enikeev, Melnik, Goldberg Law Group, Goldberg, Eastland and Klosterman); aiding and abetting breach of fiduciary duty (defendants Stoneside, La-Sal, Icara, Goldberg Law Group, Goldberg, Carapella, Lipstein and Tedrow);
declaratory relief (defendants Klosterman and Eastland); civil conspiracy (defendants Enikeev, Melnik, Goldberg, Goldberg Law Group, La-Sal, Icara, Stoneside, Lipstein, Carapella, Tedrow, Eastland and Klosterman); violation of Florida Securities
Investors Protection Act (defendants La-Sal, Goldberg Law Group, Stoneside and Icara); fraudulent inducement (defendants Stoneside, La-Sal, Icara, Goldberg Law Group, Goldberg, Carapella, Lipstein and Tedrow).



The Company alleged that defendants Melnik and Enikeev abused limited
authority given to them to act as corporate promoters and entered into a civil conspiracy with the remaining defendants to issue corporate stock without the Companys approval for their individual and collective profit. The Company also alleged
that many of the defendants entered into, or facilitated entry into, unapproved consulting agreements as a vehicle to justify issuance of the stock, and that the consultants provided little or no services to the Company but
received stock valued at as much as $11,200,000. The complaint sought monetary damages, rescission and return of the stock still possessed by any of the defendants, and other relief.



In January 2003, three defendants settled the Companys complaint by paying to the Company cash of $100,000 and notes
receivable of $50,000. In June 2003, one additional defendant settled the Companys complaint by paying to the Company cash of $25,000 and shares of common stock in a publicly traded company having a value of $101,000. The cash and common stock
received in these two settlements has been reflected in other income in fiscal 2003, while the value of the notes receivable has been fully reserved due to uncertainties as to realization.



The Company also obtained a default judgment in the amount of $12.8 million
against Vadim Enikeev as a result of his failure to appear to defend the complaint. However, the Company has fully reserved the amount of the judgment as it believes that collection is unlikely.



After completing the June 2003 settlement, the Company concluded not to
further pursue its complaints against the remaining defendants in light its assessment of the likelihood of success and recovery as compared with the probable costs and duration of such further litigation.



|11. | SHAREHOLDER LITIGATION
|--- | ----------------------



Other than as set forth below, the Company is not a party to any pending legal proceedings or are aware of any pending legal proceedings against it that,
individually or in the aggregate, would have a material adverse affect on its business, results of operations or financial condition.



Shareholder Class Actions



On or about April 16, 2004, one of the Companys shareholders filed a class action complaint, Maureen E. Alfred, et al. vs. Constantin Jitaru,
Anatolie Sirbu and Asconi Corp, Case 04-CV-534 in the United States District Court,



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##### Table of Contents

Asconi Corporation



Notes to Consolidated Financial Statements(Continued)



(Information as of and for the year ended December 31, 2003 is unaudited)



Middle District of Florida (the Alfred complaint) alleging that the Company, along with Constantin Jitaru, its President, CEO and Chairman of the
Board, and Anatolie Sirbu, its CFO, Treasurer and Secretary, violated certain federal securities laws. The complaint, which requested unspecified damages, alleged, among other things, that the defendants made material misrepresentations and
omissions of material facts concerning the Companys business performance and financial condition and failed to disclose certain related party transactions, thereby overstating the Companys financial condition during a period from May
2003 to March 2004. The complaint specifically cited the Companys March 23, 2004 press release in which the Company disclosed that it would be restating its financial statements for the fiscal quarters ended June 30, 2003 and September 30,
2003. The complaint alleged violations of Section 10(b) of the Exchange Act, and Rule 10b-5 promulgated thereunder against all of the defendants, as well as Section 20(a) violations against Messrs. Jitaru and Sirbu.



Subsequent to the filing of the Alfred complaint, seven additional class
action complaints, which sought unspecified damages, were filed, in the Middle District of Florida. These complaints contained allegations that were substantially similar in nature to those in the Alfred complaint, except that while the proposed
Class Period in the Alfred complaint was from May 15, 2003 to March 23, 2004, the other complaints proposed Class Period was from June 11, 2001 to March 23, 2004.



All eight class action complaints have since been dismissed without prejudice, and none of the eight class action complaints
are pending.



Shareholder Derivative Suits



Five shareholders derivative actions, which sought unspecified damages,
were filed in the United States District Court, Middle District of Florida, commencing on or about June 30, 2004, naming seven of the Companys directors and certain executive officers as defendants, and naming the Company as a nominal
defendant. The five shareholders derivative suits alleged, among other things, breaches of fiduciary duty and other alleged common law violations by such directors and officers. The shareholder derivative actions contained allegations substantially
similar to the foregoing class actions, and claimed that the Company has been injured as a result of the foregoing now-dismissed class actions and the conduct that was alleged in the foregoing class actions. Four of the shareholders derivative suits
have since been voluntarily dismissed by the plaintiffs. The Company has filed a motion seeking dismissal of the remaining shareholders derivative suit; the Court has not yet ruled on the Companys motion to dismiss.



The Company intends to defend itself in the remaining action vigorously.
There is no assurance, however, that such matter will be resolved in the Companys favor. An unfavorable outcome of this matter may have a material adverse impact on the Companys business, results of operations, financial position, or
liquidity. Because the remaining litigation is in an early stage, the Company is unable to predict the outcome or reasonably estimate any range of loss, if any, that may result and accordingly and has not recorded any liability of any judgment or
settlement that may result from the resolution of these matters.



|12. | SEC INVESTIGATION
|--- | -----------------



On December 29, 2003, the Company received a request from the Denver regional office of the SEC to voluntarily produce documents and information as part
of an informal inquiry into certain accounting practices of Asconi. The matters under investigation include, among others, the Companys accounting treatment of the issuance of 5,000,000 shares to each of Constantin Jitaru and Anatolie Sirbu.
The SEC requested voluntary production of documents relating to the Companys accounting and financial policies, practices and procedures in fiscal 2001, fiscal 2002 and fiscal 2003.



The SEC Denver staff followed up several times on its original questions and
the Company provided, to the best of its ability, all information required to these follow up inquiries. The SEC staff also requested and received testimony from the Companys Chief Executive Officer Constantin Jitaru, Chief Financial Officer
Anatolie Sirbu, Chief Operating Officer Serguei Melnik and Interim Chief Accounting Officer Alex Brinister. Messrs. Jitru and Sirbu provided voluntary testimony in August, 2004, and Messrs. Melnik and Brinister provided voluntary testimony in
September, 2004.



In January, 2005 The Company was advised
that the SEC had elevated the informal inquiry to a formal investigation, and that they wanted to take additional testimony from Alex Brinister. Mr. Brinister provided such additional testimony on March 8, 2005.



F-20



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##### Table of Contents

Asconi Corporation



Notes to Consolidated Financial Statements(Continued)



(Information as of and for the year ended December 31, 2003 is unaudited)



On March 29, 2005, the Company received a Wells Notice from the staff of the SEC relating to the
Companys alleged failure to record expenses relating to the May 2003 issuances of 10,000,000 shares of its securities to two of its executive officers and of 100,000 shares to Serguei Melnik. The Wells Notice stated that the SEC staff intends
to recommend that a civil or administrative enforcement action be brought against the Company, alleging violations of Sections 10(b), 13(a) and 13(b)(2) of the Securities Exchange Act of 1934, as amended (the Exchange Act) and Rules
10b-5, 12b-20, 13a-11 and 13a-13 thereunder. On the same date, Alex Brinister, also received a Wells Notice from the SEC staff also relating to the May, 2003 these share issuances. This Wells Notice stated that the SEC staff intends to recommend
that a civil or administrative enforcement action be brought against Mr. Brinister, alleging violations of Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 10b-5 and 13b2-1 thereunder and aiding and abetting Asconis alleged violations
of the Exchange Act, as well as administrative proceedings against Mr. Brinister pursuant to Rule 102(e) of the SECs Rules of Practice.



Under the SECs procedures, a Wells Notice recipient has an opportunity to respond to the SEC staffs intended recommendation before the SEC
initiates a civil action. The Company and Mr. Brinister have been cooperating in the SEC staffs investigation and intend to respond promptly to the respective Wells Notices, in which responses, they intend to vigorously defend their actions.



There can be no assurance that this matter will be resolved
in a manner favorable to the Company or Mr. Brinister. The Company is unable to predict the outcome of this matter, including what action, if any, the SEC might take, including the imposition of fines, penalties or other possible remedies. The
Company will also likely continue to incur additional costs related to the SEC investigation and Wells responses, including both additional accounting and legal fees. Also, a significant amount of managements time and attention will be
diverted until these matters conclude.



|13. | INCOME TAXES
|--- | ------------



Asconi Corporation files a tax return in the United States. Each of the Companys Moldova subsidiaries file separate tax returns in Moldova.



The components of income (loss) before income taxes is as
follows:



|                                  |  |                         |            |   |      |   |             |  
|--------------------------------- |  | ----------------------- | ---------- | - | ---- | - | ----------- | -
|                                  |  | Year ended December 31, |           
|                                  |  | 2004                    |            |   | 2003 |  
|United States                     |  | $                       | (2,034,538 | ) |      | $ | (40,985,173 | )
|Foreign                           |  |                         | 3,017,638  |   |      |   | 3,798,289   |  
|                                  |  |                         |            |   |      |   |             |  
|Income (loss) before income taxes |  | $                       | 983,100    |   |      | $ | (37,186,884 | )
|                                  |  |                         |            |   |      |   |             |  



The provisions for
income taxes are as follows:



|                                 |  |                         |         |   |      |   |        
|-------------------------------- |  | ----------------------- | ------- | - | ---- | - | -------
|                                 |  | Year ended December 31,
|                                 |  | 2004                    |         |   | 2003
|Current tax expense:             |  |                         |         |   |      |   |        
|Federal                          |  | $                       |        |   |      | $ |       
|Foreign                          |  |                         | (42,626 | ) |      |   | 283,931
|                                 |  |                         |         |   |      |   |        
|Total current                    |  |                         | (42,626 | ) |      |   | 283,931
|                                 |  |                         |         |   |      |   |        
|Deferred tax expense:            |  |                         |         |   |      |   |        
|Federal                          |  |                         |        |   |      |   |       
|Foreign                          |  |                         | 178,738 |   |      |   | 75,342 
|                                 |  |                         |         |   |      |   |        
|Total deferred                   |  |                         | 178,738 |   |      |   | 75,342 
|                                 |  |                         |         |   |      |   |        
|Total provision for income taxes |  | $                       | 136,112 |   |      | $ | 359,273
|                                 |  |                         |         |   |      |   |        



F-21



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##### Table of Contents

Asconi Corporation



Notes to Consolidated Financial Statements(Continued)



(Information as of and for the year ended December 31, 2003 is unaudited)



Significant components of the Companys deferred tax assets and liabilities are as follows:



|                                    |  |              |             |   |      |   |             |  
|----------------------------------- |  | ------------ | ----------- | - | ---- | - | ----------- | -
|                                    |  | December 31, |            
|                                    |  | 2004         |             |   | 2003 |  
|Deferred tax assets:                |  |              |             |   |      |   |             |  
|Net operating loss in United States |  | $            | 15,471,224  |   |      | $ | 14,759,136  |  
|Less valuation allowance            |  |              | (15,471,224 | ) |      |   | (14,759,136 | )
|                                    |  |              |             |   |      |   |             |  
|Net deferred tax assets             |  |              |            |   |      |   |            |  
|                                    |  |             
|Deferred tax liabilities:           |  |              |             |   |      |   |             |  
|Basis difference in fixed assets    |  |              | (464,483    | ) |      |   | (387,511    | )
|                                    |  |              |             |   |      |   |             |  
|Net deferred tax liabilities        |  | $            | (464,483    | ) |      | $ | (387,511    | )
|                                    |  |              |             |   |      |   |             |  



As of December 31,
2004 and 2003, the Company had a net deferred tax asset, which primarily resulted from net operating loss carryforwards of approximately $45,340,000 and $43,400,000, respectively. The net operating losses carryforwards, if not utilized, will begin
to expire in 2021. A valuation allowance for the deferred tax asset representing the future benefit of the U.S. net operating loss carryforwards has been recorded as the future realization of these net operating loss carryforwards cannot be deemed
to be more likely than not.





A reconciliation of the provision (benefit) for income taxes with amounts determined by applying the statutory U.S. federal income tax rate to income
before income taxes is as follows:



|                                                          |  |                         |          |   |      |   |             |  
|--------------------------------------------------------- |  | ----------------------- | -------- | - | ---- | - | ----------- | -
|                                                          |  | Year ended December 31, |         
|                                                          |  | 2004                    |          |   | 2003 |  
|Taxes computed at U.S. statutory rate                     |  | $                       | 344,085  |   |      |   | (12,643,541 | )
|Valuation allowance on U.S. deferred tax assets           |  |                         | 712,088  |   |      |   | 13,934,959  |  
|Difference between U.S. and foreign tax rates             |  |                         | (920,061 | ) |      |   | (932,145    | )
|Benefit from use of U.S. net operating loss carryforwards |  |                         |         |   |      |   |            |  
|                                                          |  |                         |          |   |      |   |             |  
|Provision for income taxes                                |  | $                       | 136,112  |   |      | $ | 359,273     |  
|                                                          |  |                         |          |   |      |   |             |  



|14. | RELATED PARTY TRANSACTIONS
|--- | --------------------------



The Company purchased approximately $320,000 and $1,050,000 of bulk wine from VinExport, a Romanian company, in the fiscal years ended December 31, 2004
and 2003. Constantin Jitaru and Anatolie Sirbu, two of the Companys directors and officers, each own 30% of the outstanding securities of VinExport. The bulk wine was purchased for the purpose of blending, bottling and selling in the regular
course of business primarily throughout 2003 and 2004. Prepayments for bulk wine to VinExport equaled $224,620 and $610,424 as of December 31, 2004 and 2003. VinExport delivers the wine within three months of receipt of prepayments.



In April 2003, the Company entered into a consulting agreement with Iurie
Turcan, the brother-in-law of Serguei Melnik, an officer and director of the Company. Under the agreement, Mr. Turcan is to act as the Companys exclusive distributor for wine and spirits in the Republic of Poland. The agreement is for a term
of five years. As compensation for the services to be received, the Company issued Mr. Turcan 100,000 shares of its common stock. See Note 9.



In May 2003, the Company entered into a consulting agreement with Vasile Melnik, the father of Serguei Melnik. Under the agreement, Vasile Melnik is to
provide the Company with consulting services relating to the design, construction and renovation of its winery facilities in Moldova. The agreement is for a term of five years. As compensation for the services to be received, the Company issued
Vasile Melnik 100,000 shares of The Companys common stock. See Note 9.



|15. | PURCHASE COMMITMENTS
|--- | --------------------



At December 31, 2003, the Company had outstanding commitments of $2,421,428 for acquisition of equipment and vine rootstocks, all of which were fulfilled
in 2004. At December 31, 2004, the Company had no outstanding material purchase commitments.



F-22



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##### Table of Contents

Asconi Corporation



Notes to Consolidated Financial Statements(Continued)



(Information as of and for the year ended December 31, 2003 is unaudited)



|16. | SEGMENT AND GEOGRAPHIC INFORMATION
|--- | ----------------------------------



Business Segments



The Company operates as a single business segment; the production and distribution of wine.



Geographic Information



Revenues from sales of wine in the United States and the Republic of Moldova constitute less than 1% of the Companys total revenues. The following
table summarizes the Companys revenues in different geographic locations:



|                   |  |      |            |      |   |           
|------------------ |  | ---- | ---------- | ---- | - | ----------
|                   |  | 2004 |            | 2003
|Revenues:          |  |      |            |      |   |           
|Russian Federation |  | $    | 15,984,178 |      | $ | 14,701,763
|Ukraine            |  |      | 807,880    |      |   | 656,483   
|Belarus            |  |      | 1,076,452  |      |   | 622,436   
|Other countries    |  |      | 1,450,090  |      |   | 458,931   
|                   |  |      |            |      |   |           
|Total              |  | $    | 19,318,600 |      | $ | 16,439,613
|                   |  |      |            |      |   |           



Geographic area data
is based on product shipment destination. Export sales from the Republic of Moldova as a percentage of revenues were approximately 99% for both 2004 and 2003.



Substantially all long-lived assets of the Company are located in the Republic of Moldova.



Major Customers and Concentrations of Credit Risk



The Company derived approximately 74 % and 82% of its revenues in fiscal
2004 and fiscal 2003, respectively from five major customers who distribute the Companys products throughout the Russian Federation. The following table summarizes the Companys revenues from sales to these customers:



|          |  |      |            |      |   |           
|--------- |  | ---- | ---------- | ---- | - | ----------
|          |  | 2004 |            | 2003
|Revenues: |  |      |            |      |   |           
|Company A |  | $    | 2,645,924  |      | $ | 3,997,000 
|Company B |  |      | 4,688,284  |      |   | 3,596,000 
|Company C |  |      | 2,541,201  |      |   | 2,071,000 
|Company D |  |      | 3,692,024  |      |   | 2,513,000 
|Company E |  |      | 692,750    |      |   | 1,240,000 
|          |  |      |            |      |   |           
|Total     |  | $    | 14,260,183 |      | $ | 13,417,000
|          |  |      |            |      |   |           



Accounts receivable
from these five customers aggregated $2,331,368 and $1,819,041 at December 31, 2004 and 2003, respectively.



F-23



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##### Table of Contents

EXHIBIT INDEX



|        |  |                                                                                                                                                       
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  | Description of Exhibit                                                                                                                                
|2.1     |  | Exchange Agreement between Asconi Corporation (formally Grand Slam Treasures, Inc., Asconi Holdings Limited and Asconi Ltd.), dated April 12, 2001.(1)
|        | 
|3.1     |  | Restated Articles of Incorporation.(2)                                                                                                                
|        | 
|3.2     |  | Amended and Restated Bylaws.(2)                                                                                                                       
|        | 
|4.1     |  | Form of Stock Purchase Agreement for Common Stock of Registrant.(3)                                                                                   
|        | 
|10.1    |  | General Contract for Delivery No. 1 Agreement with Josef Smilek dated December 3, 2001.(4)                                                            
|        | 
|10.2    |  | Contract No. 498/B-43142800/011 with Sovagroimport, Ltd., dated September 9, 2000.(4)                                                                 
|        | 
|10.3    |  | Contract No. 498/41286111/001 with Sovagroimport, Ltd., dated April 12, 2001.(4)                                                                      
|        | 
|10.4    |  | Contract of Sale No. X-075 with I.E. Hordex, dated January 10, 2002.(4)                                                                               
|        | 
|10.5    |  | Contract No. 05-04/01-A with Winnice Moldowy, dated March 1, 2001.(4)                                                                                 
|        | 
|10.6    |  | Contract with EstateDesign S.R.L., dated 1999.(4)                                                                                                    
|        | 
|10.7    |  | Contract No. S2001/018 with Glass Container Company, S.A., dated January 22, 2001.(4)                                                                 
|        | 
|10.8    |  | Contract of Buying-Selling with Ilitax-Pac, Ltd., dated January 1, 2000.(4)                                                                           
|        | 
|10.9    |  | Contract No. M3-001 with Pomul, Ltd., dated January 4, 2001.(4)                                                                                       
|        | 
|10.10   |  | Contract No. 1/2002 with Agro-Inedit, Ltd., dated November 29, 2001.(4)                                                                               
|        | 
|10.11   |  | Contract for Brokerage Services No. 051 by and between Asconi S.R.L. and C.B. Agroindbank S.A., dated December 13, 2001.(5)                           
|        | 
|10.12   |  | Agreement of Termless Share Management (Irrevocable Trust) by and between Asconi S.R.L. and Talmaci Irina, dated June 12, 2002.(5)                    
|        | 
|10.13   |  | Contract No. 09/01 on goods delivery by and between Asconi S.R.L. and Torgovii Dom Moldova Ltd., dated September 3, 2001.(6)                          
|        | 
|10.14   |  | Contract No. 1/1 for sale and purchase by and between Asconi S.R.L. and Beijing Machinery Imp and Exp Corp., Ltd. dated March 1, 2002.(6)             
|        | 
|10.15   |  | Contract for sale and purchase by and between Asconi S.R.L. and Beijing Machinery Imp and Exp Corp., Ltd., dated April 3, 2002.(6)                    
|        | 
|10.16   |  | Contract No. 010/12/03-IP between Asconi S.R.L. and Bonus-Bord Ltd., dated October 23, 2003.(8)                                                       
|        | 
|10.17   |  | Contract No. 1903 with Israel Colonial Food Ltd. dated April 18, 2003.(8)                                                                             
|        | 
|10.18   |  | Consulting Agreement with Serguei Melnik, dated February 10, 2003.(8) *                                                                               
|        | 
|10.19   |  | Consulting Agreement with Iurie Turcan, dated April 15, 2003.(8)                                                                                      
|        | 
|10.20   |  | Consulting Agreement with Vasile Melnik, dated May, 2003.(8)                                                                                          
|        | 
|10.21   |  | Agreement with Divine Capital Markets, LLC, dated June 1, 2003.(8)                                                                                    
|        | 
|10.22   |  | Consultant Agreement with CEOcast, Inc. dated January 12, 2003.(8)                                                                                    
|        | 
|10.23   |  | Conditional Sale Contract No. CM-106-03 with TF Group LLC, dated November 10, 2003.(8)                                                                
|        | 
|10.24   |  | Conditional Sale Contract No. CM-108-03 with Tecno-Food SAS, dated November 10, 2003 with Annex.(8)                                                   



---

##### Table of Contents

|      |  |                                                                                                                                                                           
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.25 |  | Conditional Sale Contract No. CM 107-03 with TF Group LLC, dated November 10, 2003 with Annex.(8)                                                                         
|      | 
|10.26 |  | Sales Contract with Vivai Viveros Marchi Company, dated December 7, 2003.(8)                                                                                              
|      | 
|10.27 |  | Sales Contract with Pepinieres Philippe Dayde Montans 81600, dated December 7, 2003.(8)                                                                                   
|      | 
|10.28 |  | Contract No. MO/A8-042 with Moro Ltd, dated November 25, 2002(9)                                                                                                          
|      | 
|10.29 |  | Release of Claims and Covenant Not to Sue relating to settlement with investors in December, 2003 private placement(9)                                                    
|      | 
|16.1  |  | Letter of Thomas Leger & Co., LLP, dated August 17, 2003.(7)                                                                                                              
|      | 
|21.1  |  | List of Subsidiaries.(4)                                                                                                                                                  
|      | 
|31.1  |  | Rule 13(a)-14(a) Certification of Chief Executive Officer.(10)                                                                                                            
|      | 
|31.2  |  | Rule 13(a)-14(a) Certification of Chief Financial Officer.(10)                                                                                                            
|      | 
|32.1  |  | Certification by Constantin Jitaru, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(10)
|      | 
|32.2  |  | Certification by Anatolie Sirbu, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(10)   

---

|* | Indicates a management contract or compensation plan or arrangement.
|- | --------------------------------------------------------------------

|(1) | Incorporated by reference to our Current Report on Form 8-K, filed on April 19, 2001, file no. 000-23712.
|--- | ---------------------------------------------------------------------------------------------------------

|(2) | Incorporated by reference to our Quarterly Report on Form 10-QSB, filed on August 20, 2001, file no. 000-23712.
|--- | ---------------------------------------------------------------------------------------------------------------

|(3) | Incorporated by reference to our Form 8-K filed on December 18, 2003, file no. 000-23712.
|--- | -----------------------------------------------------------------------------------------

|(4) | Incorporated by reference to our Annual Report on Form 10-KSB, filed on April 15, 2002, file no. 000-23712.
|--- | -----------------------------------------------------------------------------------------------------------

|(5) | Incorporated by reference to our Current Report on Form 8-K, filed on June 27, 2002, file no. 0-23712.
|--- | ------------------------------------------------------------------------------------------------------

|(6) | Incorporated by reference to our Quarterly Report on Form 10-QSB, filed on August 19, 2002, file no. 000-23712.
|--- | ---------------------------------------------------------------------------------------------------------------

|(7) | Incorporated by reference to our Form 8-K/A filed on June 4, 2003, file no. 000-23712.
|--- | --------------------------------------------------------------------------------------

|(8) | Incorporated by reference to our Annual Report on Form 10-KSB, filed on May 27, 2004, file no. 000-23712.
|--- | ---------------------------------------------------------------------------------------------------------

|(9) | Incorporated by reference to our Form 8-K filed on December 23, 2004, file no. 000-23712.
|--- | -----------------------------------------------------------------------------------------

|(10) | Filed herewith.
|---- | ---------------