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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 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 period ended May 31, 2006



| ̈ | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ----------------------------------------------------------------------------------------

for the transition period from  to
.

Commission file number 0-16206



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NEW WORLD BRANDS, INC.

(Exact name of small business issuer as specified in its charter)



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|                                                             |  |                                     
|------------------------------------------------------------ |  | ------------------------------------
|Delaware                                                     |  | 02-0401674                          
|State or other jurisdiction of incorporation or organization |  | (I.R.S. Employer Identification No.)

2019 SW 20thStreet, Suite 109, Fort Lauderdale, Florida 33315

(Address of principal
executive offices)

(954) 713-0410

(Issuers telephone number)



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

Securities registered under Section 12(g) of the Exchange Act:  Common Stock, par value $0.01 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 Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No ̈

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

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

The Registrants revenues for its most recent fiscal year:  $716,944

Number of shares of Common Stock outstanding as of August 16, 2006: 36,803,939.

The aggregate market value of voting and non-voting Common
Stock held by non-affiliates (23,353,939 shares) computed by reference to the closing price of the Common Stock as of August 16, 2006: $6,305,564.

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



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##### Table of Contents

PART I

Disclosure Regarding Forward Looking Statements

We caution readers that this Report contains forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on current expectations rather than historical facts and they are indicated by words or phrases such as
anticipate, could, may, might, potential, predict, should, estimate, expect, project, believe, intend,
plan, envision, continue, intend, target, contemplate, or will and similar words or phrases or comparable terminology. We have based such forward-looking statements
on our current expectations, assumptions, estimates and projections. While we believe these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks
and uncertainties, and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements, many of which
are beyond our control. Some of these factors that could affect our financial performance, cause actual results to differ from our estimates, or underlie such forward-looking statements, are as set forth below and in various places in this report,
including under the headings Item 1 Business - Certain Risks, and Item 6 Managements Discussion and Analysis of Financial Condition and Results of Operations in this report. These factors include:



| |  |  | general economic conditions,
| | - |  | ----------------------------



| |  |  | a significant decrease in business from or loss of any of our major customers,
| | - |  | ------------------------------------------------------------------------------



| |  |  | the effectiveness of our planned advertising, marketing and promotional campaigns,
| | - |  | ----------------------------------------------------------------------------------



| |  |  | our ability to contain costs,
| | - |  | -----------------------------



| |  |  | our future capital needs and our ability to obtain financing,
| | - |  | -------------------------------------------------------------



| |  |  | our ability to carry out growth strategies,
| | - |  | -------------------------------------------



| |  |  | our ability to compete,
| | - |  | -----------------------



| |  |  | our ability to predict consumer preferences in wine and spirits,
| | - |  | ----------------------------------------------------------------



| |  |  | possible disruption in commercial activities due to terrorist activity and unarmed conflict, and
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | other factors set forth in this report and in our other Securities and Exchange Commission (SEC) filings.
| | - |  | -----------------------------------------------------------------------------------------------------------

You are cautioned not to place undue reliance on these forward-looking statements, which are valid only as of the date they were made. We undertake no
obligation to update or revise any forward looking statements to reflect new information or the occurrence of unanticipated events or otherwise.



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##### Table of Contents

ITEM 1. BUSINESS

Introduction and Background

New World Brands, Inc. (the Company, we, us,
our) was incorporated in Delaware in May 1986 under the name Oak Tree Construction Computers, Inc. From 1986 through 1990, we were engaged in the sale of computer systems for the construction industry. For a number of years thereafter,
we were inactive. In August 1994, the Company changed its name to Oak Tree Medical Systems, Inc. From January 1995 through May 2000, we were engaged in the business of operating and managing physical care centers and related medical practices.

On October 16, 2001, the Company and its subsidiary, Oak Tree Spirits, Inc., entered into a Merger Agreement with International
Importers, Inc. (Importers) and its stockholders whereby Importers merged with and into the Company. The merger marked a change in direction for our business to the wine and spirits industry. In line with this change in business
direction, in December 2001, we changed our name to New World Brands, Inc.

Unless otherwise indicated by the text, reference herein to the
term Company will be deemed to refer to New World Brands, Inc. and its subsidiary, International Importers, Inc.

The Business and Recent
Developments

We import wine and spirits for distribution in the United States. We hold the exclusive right to import various wines into
the United States and have established arrangements for distribution with major wine and spirit wholesale distributors. In some cases, we have written agreements with our distributors. In other cases, the agreements with its distributors are oral
and products are delivered to the distributors pursuant to purchase orders.

We entered into an agreement with Maple Leaf Distillers, Inc.,
a related party distiller based in Canada (MLD), pursuant to which we would act as an importer of the MLD line of alcoholic beverages in the United States. Pursuant to this Agreement, we would jointly develop and market additional
products for importation into the United States. In this regard, we had gone to market with a new line of ready to drink cocktails called Norms Extreme Cocktails, a line of products jointly developed and marketed by us and MLD. However, on
January 13, 2006, MLD was placed into receivership and then on April 5, 2006 filed for bankruptcy. As a result, we do not currently have a marketing partner for our brands and we do not have a contract with a manufacturer for our ready to
drink cocktails.



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The Board of Directors has evaluated the financial condition of the Company and our prospects as a wine
importer and distributor. The Board has determined that the interests of our stockholders might be better served by restructuring the Company or changing our business plan. As a result, on June 22, 2006, we entered into an asset purchase
agreement with Qualmax, Inc., a Delaware corporation (Qualmax), which agreement was amended as of August 28, 2006, to acquire all of the assets of Qualmax in exchange for the assumption of the Qualmax liabilities and the issuance to
Qualmax of shares of voting preferred stock of the Company. Following consummation of the transaction, Qualmax will own approximately 86% of the voting power of the Company, and the operations of Qualmax will be the operations of the Company. Our
current Board of Directors and officers will also be replaced with designees of Qualmax (provided that one Board member shall be designated by Selvin Passen, M.D., our Chairman of the Board and a principal stockholder).

As a condition to and simultaneously with the asset acquisition, we will sell all of the shares of our wholly owned subsidiary International Importers,
Inc. (III), the entity through which we currently conduct all of our operations. The III shares will be sold to International Spirits, LLC, a Nevada limited liability company (International Spirits), pursuant to a stock
purchase agreement entered into among the Company, International Spirits and III as of June 22, 2006, and amended as of August 28, 2006. The purchaser will pay us $500,000 cash in consideration for the acquisition. International Spirits is
controlled by Dr. Passen.

Consummation of these transactions is subject to a number of contingencies. One contingency to both
agreements is that Dr. Passen make an additional investment in the Company of $1,500,000 in exchange for 7,500,000 shares of our common stock. No assurance can be given that consummation of these transactions will occur.

Competition

There are significant barriers to entry
into the wine and spirits importation business. These barriers include but are not limited to:



| |  |  | the need to establish importer/supplier to distributor relationships;
| | - |  | ---------------------------------------------------------------------



| |  |  | significant government regulation of the alcohol-based beverages industry by federal, state and local regulatory agencies; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------



| |  |  | important industry knowledge regarding importation rules, consumer demand and pricing.
| | - |  | --------------------------------------------------------------------------------------

The wine and spirits industry is highly competitive. Distributors compete for new suppliers based on reputation, market share, access to customers and ability to satisfy supplier demands. However, importers/suppliers
must be able to anticipate consumer demand, provide such products and be able to provide them on a consistent basis. Many of our competitors are better capitalized, better financed, more established and more experienced than us. Should we not be
able to compete effectively, its results of operations and financial condition could be materially adversely affected.



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Governmental Regulation

The manufacturing, importation, distribution and sale of alcohol-based beverages is subject to regulation by the federal government through the Department of the Treasury, Bureau of Alcohol, Tobacco and Firearms
(BATF), as well as by state and local regulatory agencies. Suppliers, distributors and retailers must be properly licensed in order to sell alcohol-based beverages.

In most states, the alcohol-based beverage industry operates within what is commonly referred to as a three-tier system of distribution. Tier one is
comprised of suppliers that produce alcohol-based beverages and/or importers of alcohol-based beverages, tier two is comprised of distributors, and tier three is comprised of retail licensees.

Under this system, suppliers and importers sell to distributors, distributors sell to retailers, and retailers sell to consumers. For the most part,
suppliers may not sell to retailers or consumers and distributors may not sell directly to consumers. All states prohibit suppliers or distributors from having an interest in retail licensees, directly and through our affiliates, we hold federal
basic permits and state permits/licenses as an importer.

Each of our officers, directors and principal stockholders who own 5% or more of
the issued and outstanding stock is required to be qualified by federal and state governmental agencies to have an interest in a licensed company. Our officers, directors and principal stockholders have been qualified by BATF and state regulatory
agencies to hold licenses/permits as a wholesaler/importer.

Importers like us face scrutiny in a number of important areas, including
initial licensing or permitting and sales and marketing activities. We believe that we are in compliance with applicable regulations in all-material respects. Consistent with industry practice, the sales and marketing activities permitted by
distributors for the benefit of tier one suppliers are generally regulated by state licensing authorities, which authorize various trade practice activities by statute, regulation or administrative bulletin. We rely on such enforcement guidance,
which is subject to change at the discretion of the regulatory authorities, in determining the scope of its permitted sales and marketing activities.

Employees

As of May 31, 2006, we had four full-time employees and no part-time employees. We consider our employee
relationships to be good.



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Certain Risks

Our business faces certain risks. The risks described below may not be the only risks we face. Additional risks that we do not yet know of or that we currently believe are immaterial may also impair our business. If any of the events or
circumstances described as risks below actually occurs, our business, results of operations or financial condition could be materially and adversely affected.

We will need additional capital, which may or may not be available to use. Our future is contingent upon our sales reaching a level that will fund operations. To the extent that we do not achieve that sales
level, it will have a material adverse effect on our liquidity, financial position, and operations. Historically, we have not been able to achieve such levels of sales. We have no agreements for financing our operations. Instead, we rely on loans
from Selvin Passen, our Chairman and principal stockholder. There can be no assurance that Dr. Passen will continue to fund us or that we will be able to obtain funds elsewhere when needed on satisfactory terms or at all. Any limitation on our
ability to obtain additional financing could have a material adverse effect on our business, financial condition and results of operations.

Our business was heavily dependent upon our relationship with Maple Leaf Distillers, Inc. and that relationship has ended.Pursuant to an Agreement dated March 23, 2005, MLD transferred and assigned to us 50% of all
MLDs rights, title, and interest in various brands. MLD granted to us the exclusive right to market and sell these brands in the United States. We worked closely with MLD to market these brands. On January 13, 2006, MLD was placed into
receivership and then on April 5, 2006 filed for bankruptcy. Currently, we do not have a marketing partner for our brands or a contract with a manufacturer for our ready to drink cocktails.

Our business is dependent upon our distribution network, which is currently comprised of a relatively small number of distributors. We import
wines and spirits and sell these products principally to distributors for resale to restaurants and retail outlets. Because we are in the initial stages of implementing our business plan, we are dependent on a relatively small number of
distributors. As a result, the loss of one or more of the our distributors could have a material adverse effect on our business, financial condition and results of operations. Our success will largely depend on our ability to expand our
relationships with distributors and other entities involved in the process of wine and spirits distribution and sales. The failure to expand such relationships could impact adversely on our business.

Additionally, the laws and regulations of several states prohibit changes of distributors, except under certain limited circumstances, making it
difficult to terminate a distributor without reasonable cause, as defined by applicable statutes. The resulting difficulty or inability to replace non-performing distributors, poor performance of our major distributors or our inability to collect
accounts receivable from its major distributors could have a material adverse effect on our business, financial condition and results of operations.



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Our suppliers are heavily dependent upon raw materials, which may or may not be available in the
future on commercially reasonable terms.Additionally, current and future suppliers we utilize will be heavily dependent upon raw materials, such as grapes, grape juice concentrate, grains, alcohol and packaging materials from third-party
suppliers. If our current or future suppliers experience raw material supply, production or shipment difficulties, such difficulties could adversely affect our suppliers ability to supply goods to us. These suppliers are also directly affected
by increases in the costs of such raw materials. In the past, these suppliers have experienced increases in the cost of grapes. In the event demand for certain wine products exceeds expectations, these suppliers could experience shortages. Also,
these suppliers must be able to obtain a sufficient number of glass bottles, which have only a small number of producers. The inability of glass bottle suppliers to satisfy requirements of these suppliers could adversely affect these suppliers
ability to fulfill our purchase requirements from such supplier, which in turn could have a material adverse effect on our business, financial condition and results of operations.

We have a limited operating history. In October 2001, we acquired International Importers, Inc. (III) pursuant to a merger agreement.
III was incorporated in March 2000 for the purpose of acquiring the exclusive rights to import L.A. Cetto wines into the United States. In September 2000, III acquired the exclusive importation rights of L.A. Cetto wines in the United States and its
territories. III began distributing wine in January 2001. Immediately prior to the acquisition of III, we had substantially no operations. Moreover, since the acquisition, we have had only limited operations.

We are dependent upon consumer spending and preferences.The success of our business depends upon a number of factors related to the level of
consumer spending, including the general state of the economy and consumer confidence in future economic conditions. Changes in consumer spending can affect both the quantity and price level of wines and spirits that customers are willing to
purchase at restaurants or through retail outlets. Reduced consumer confidence and spending may result in reduced demand for our products, limitations on its ability to increase prices and increased selling and promotional expenses. A sudden and
unexpected shift in consumer preferences or a reduction in sales of wine and spirits generally could have a material adverse effect on our business, financial condition and results of operations.

The industry in which we operate is highly competitive. The wine and spirits industry is highly competitive and highly fragmented. The wine and
spirits industry has also experienced significant consolidation in recent years and many of our competitors have significantly greater capital resources than we have. There can be no assurance that our products will be able to successfully compete
with our competitors. In addition, our distributors (and the retailers that are the customers of distributors) offer products that compete directly with our products for retail shelf space and consumer purchases. Accordingly, there is a risk that
these distributors or retailers may give higher priority to products of our competitors. In the future, our distributors and retailers may not continue to purchase our products or provide our products with adequate levels of promotional support.



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Our business is subject to significant government regulation and compliance involves significant
expense. The wine and spirits industry is subject to extensive regulation by the U.S. Federal Bureau of Alcohol, Tobacco and Firearms and various foreign agencies, state liquor authorities 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. In addition, new regulations or requirements or
increases in excise taxes, income taxes, property and sales taxes and international tariffs could materially adversely affect our financial results. We can provide no assurance that there will not be future legal or regulatory challenges to the
industry, which could have a material adverse effect on our business, financial condition and results of operations.

Consumer
perception of health issues relating to the consumption of alcohol may affect our business. While a number of research studies suggest that various health benefits may result from the moderate consumption of alcohol, other studies conclude or
suggest that alcohol consumption does not have any health benefits and may in fact increase the risk of stroke, cancer and other illnesses. If an unfavorable report on alcohol consumption gains general support, it could have a material adverse
effect on our business, financial condition and results of operations.

We rely on certain key personnel with whom we do not have
written agreements. Our success is greatly dependent upon the continued participation of our executive officers, with whom we do not have any signed agreements. In addition to providing general supervision and direction, our executive officers
provide active direction, supervision and management of our sales and marketing efforts. The loss of our management and/or key personnel could have a material adverse impact on us. In addition, we will need to retain additional qualified and
experienced personnel to implement our business plan. There can be no assurance that we will be able to retain our current employees, or that we will be able to recruit additional knowledgeable and experienced employees and consultants in the future
to meet its business needs.

Our dealings in foreign currency may have an adverse effect. We conduct some of our import activity for
wine, spirits and packaging supplies in foreign currency. Accordingly, there is a risk that a shift in certain foreign exchange rates or the imposition of unforeseen and adverse trade regulations could adversely impact the costs of these items and
have an adverse impact on our profitability. In addition, the imposition of unforeseen and adverse trade regulations could have an adverse effect on our imported wine and spirits operations and thus on our business, financial condition and results
of operations.

Present management controls approximately 34% of our outstanding common stock. Such percentage does provide our
officers and directors with significant control over the ability to elect a majority of the Board of Directors, to control management, and to influence the outcome of corporate transactions or other matters submitted to our stockholders for
approval. The interests of our stockholders and those of our officers and directors could differ from the interests of other stockholders.



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We may issue additional shares which will dilute the equity interest of our existing stockholders.
We will likely issue additional shares of common stock either in connection with future acquisitions of assets, contract negotiations, retention of key personnel or subsequent fund raising endeavors. The potential transaction with Qualmax described
above will result in the issuance of a significant number of shares. Any additional issuance of shares of common stock will have the effect of diluting the equity interest of the holders of shares of common stock.

We do not intend to declare any dividends. Payment of dividends on the common stock is within the discretion of the Board of Directors and will
depend upon our future earnings, our capital requirements and financial condition, and other relevant factors. We do not intend to declare any dividends on our common stock for the foreseeable future.



|ITEM 2. | PROPERTY
|------- | --------

As of June 1, 2004, we moved our
headquarters to 2019 SW 20 Street, Suite 109, Fort Lauderdale, Florida 33315. The space is leased from a related party on a month to month basis.



|ITEM 3. | LEGAL PROCEEDINGS
|------- | -----------------

We are a defendant in a lawsuit
filed by a former employee. The former employee is seeking damages for unpaid salary of $1,000 a week from September 15, 1998 to October 17, 2001 and for 20,000 shares of our stock in which he alleges he tendered a check to us in the
amount of $2,000. In August 2005 the Company prevailed and the Court ordered the Plaintiff to pay the Company $4,673 in Attorneys fees and cost.



|ITEM 4. | SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
|------- | ----------------------------------------------------

Not Applicable.



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PART II



|ITEM 5. | MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
|------- | --------------------------------------------------------

Market
for Common Stock

Our common stock is currently traded in the over-the-counter market on the OTC Electronic Bulletin Board (OTC
BB) under the symbol NWBD.OB. The following table sets forth, for the fiscal quarters indicated, high and low closing bid prices for the common stock in the over-the-counter market as reported by the NASD. The information below
reflects inter-dealer prices, without retail mark-up, mark-down or commissions, and may not necessarily represent actual transactions.



|                               |  |         |       |          |   |      
|------------------------------ |  | ------- | ----- | -------- | - | -----
|                               |  | Low Bid |       | High Bid
|Fiscal Year Ended May 31, 2006 |  |         |       |          |   |      
|First Quarter                  |  | $       | 0.131 |          | $ | 0.220
|Second Quarter                 |  |         | 0.085 |          |   | 0.180
|Third Quarter                  |  |         | 0.075 |          |   | 0.300
|Fourth Quarter                 |  |         | 0.150 |          |   | 0.245
|                               |  |        
|Fiscal Year Ended May 31, 2005 |  |         |       |          |   |      
|First Quarter                  |  | $       | 0.240 |          | $ | 0.600
|Second Quarter                 |  |         | 0.220 |          |   | 0.310
|Third Quarter                  |  |         | 0.240 |          |   | 0.360
|Fourth Quarter                 |  |         | 0.180 |          |   | 0.270
|                               |  |        
|Fiscal Year Ended May 31, 2004 |  |         |       |          |   |      
|First Quarter                  |  | $       | 0.360 |          | $ | 0.850
|Second Quarter                 |  |         | 0.250 |          |   | 0.680
|Third Quarter                  |  |         | 0.180 |          |   | 0.330
|Fourth Quarter                 |  |         | 0.190 |          |   | 0.630

Stockholders

As of August 16, 2006, there were approximately 165 holders of record of our common stock. The closing bid and asked prices for our common stock on August 16, 2006, were $0.19 and $0.27, respectively.

We have not paid any cash dividends on our common stock to date, and we do not contemplate the payment of cash dividends in the
foreseeable future. The future dividend policy will depend on our earnings, capital requirements, financial condition, and other factors considered relevant to our ability to pay dividends.



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Recent Sales of Unregistered Securities

For the twelve months ended May 31, 2006, we granted options to employees and consultants to purchase 2,850,000 shares of our common stock. The
options were issued in a transaction exempt from registration under the Securities Act of 1933, as amended.



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

General

The following discussion and analysis provides information which management believes is
relevant to an assessment and understanding of our results of operations and financial operations and financial conditions. This discussion should be read in conjunction with the consolidated financial statements and notes thereto appearing
elsewhere herein.

Results of Operations

Revenue increased from $514,699 to $716,944 for the year ended May 31, 2006 (Fiscal 2006) compared to the year ended May 31, 2005 (Fiscal 2005). The increase in sales results from our establishing better
relationships with our distributors. Moreover, other income increasd by $18,741, which is made up of the following; a $9,769 decrease in interest income on two notes, an increase in interest expense of $9,307, and an increase in gain on a sale of
fixed assets of $37,817.

Cost of sales increased to $581,212 in Fiscal 2006 from $359,204 in Fiscal 2005 due to increased sales. Selling,
general, and administrative expenses increased to $830,115 for Fiscal 2006 from $824,344 for Fiscal 2005. Management expects that the cost of sales will increase in the year ended May 31, 2007 (Fiscal 2007) as we continue to improve
sales. Cost of goods sold as a percentage of revenue increased from 70% in Fiscal 2005 to 81% in Fiscal 2006. This is due to several factors, including increased Tequila sales at lower margins and samples and promotional items given to the sales
team at our distributors to promote our products.

Total expenses decreased to $1,003,601 for Fiscal 2006 from $1,004,475 for Fiscal 2005.
Consulting fees and stock option repricing adjustment increased to $45,200 in Fiscal 2006 from ($121,245) in Fiscal 2005, respectively. We previously retained consultants to assist with promotions, marketing, and investor relations. In the past,
consultants were used to initiate contacts and pursue negotiations with potential customers as well as attempt to increase the image and visibility of our products. The consultants were also used to identify and pursue potential mergers,
acquisitions, and investors for the company. The consultants were compensated with a combination of cash, our common stock, and options to purchase our common stock. The consulting and repricing expense recorded by us in Fiscal 2005 is made up of
$80,865 in common stock options to purchase our common stock, $(346,800) in variable accounting for stock options that were re-priced, and $144,692 paid in cash. The consulting and repricing expense recorded by us in Fiscal 2006 is made up of
$45,000 in options to purchase our common stock, $200 in variable accounting expense for stock options that were re-priced, and $0



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paid in cash. We intend to reduce our dependence on consultants and perform much of our own promotion and marketing efforts in the future. However, we will
continue to incur consulting expenses as the current consultants finish up their contracts. Management believes that consulting expense will decrease in the future; however, there can be no assurance that this will be the case. Moreover, any
decrease in consulting expense will be partially offset by an increase in selling, general and administrative expenses as we perform more of these functions itself.

The above factors contributed to a net loss of $803,805 or $0.02 per share for Fiscal 2006 as compared to a net loss of $803,657 or $0.02 per share for Fiscal 2005. While management is attempting to improve sales and
reduce costs of goods sold and operating expenses, management expects that net losses will continue for the fiscal year ended May 31, 2007.

Liquidity and Capital Resources

The accompanying consolidated financial statements have been prepared in conformity with
generally accepted accounting principals generally accepted in the United States (GAAP), which contemplates operating continuation of our company as a going concern. We have recurring net losses including a net loss in fiscal 2006 of
$803,805 and has cash used in operations in 2006 of $725,822. These conditions raise substantial doubt about our ability to continue as a going concern. These consolidated financial statements do not include any adjustments to reflect the possible
future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of these uncertainties.

In the past, we have funded our cash requirements from sales of product, bank borrowings, and sales of equity securities. Moreover, we have also issued
equity securities in exchange for services rendered. To date, sales of our products have not been sufficient to fund cash requirements. We have negative cash flow from operating activities. Thus, we have relied heavily on bank borrowings, loans from
our principal stock-holder and sales of our securities.

We had negative working capital of $9,930 at May 31, 2006. We also received
loans of $225,000 made by one of our officers. However, we incurred substantial losses in Fiscal 2006 and in Fiscal 2005. These conditions raise substantial doubt about our ability to continue as a going concern.

Net cash used in operating activities decreased to $725,822 in Fiscal 2006 from $898,137 in Fiscal 2005. The decrease is primarily due to the adjustment
for variable accounting of stock options, accounts receivable, and accounts payable. (The adjustment for variable accounting of stock options of $200 in Fiscal 2006 versus a negative adjustment of ($346,800) in Fiscal 2005). Accounts receivable
collections outpaced sales resulting in a decrease of receivables of $110,433 in Fiscal 2006 verses an increase of $193,054 in Fiscal 2005. The increase in accounts payable in Fiscal 2006 of $15,394 was higher versus a pay down of $111,758 in Fiscal
2005.

There was $13,125 of net cash used in investing activities in Fiscal 2006. There was $10,744 of net cash used in investing
activities in Fiscal 2005. The Company foresees minimal capital expenditures in the near future.



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Net cash provided by financing activities increased to $420,000 in Fiscal 2006 from $20,000 in Fiscal
2005 due primarily to loan from officer that incurred in Fiscal 2006.

The Board of Directors has evaluated the financial condition of the
Company and our prospects as a wine importer and distributor. The Board has determined that the interests of our stockholders might be better served by restructuring the Company or changing our business plan. As a result, on June 22, 2006, we
entered into an asset purchase agreement with Qualmax, Inc., a Delaware corporation (Qualmax), which agreement was amended as of August 28, 2006, to acquire all of the assets of Qualmax in exchange for the assumption of the Qualmax
liabilities and the issuance to Qualmax of shares of voting preferred stock of the Company. Following consummation of the transaction, Qualmax will own approximately 86% of the voting power of the Company, and the operations of Qualmax will be the
operations of the Company. Our current Board of Directors and officers will also be replaced with designees of Qualmax (provided that one Board member shall be designated by Selvin Passen, M.D., our Chairman of the Board and a principal
stockholder).

As a condition to and simultaneously with the asset acquisition, we will sell all of the shares of our wholly owned
subsidiary International Importers, Inc. (III), the entity through which we currently conduct all of our operations. The III shares will be sold to International Spirits, LLC, a Nevada limited liability company (International
Spirits), pursuant to a stock purchase agreement entered into among the Company, International Spirits and III as of June 22, 2006, and amended as of August 28, 2006. The purchaser will pay us $500,000 cash in consideration for the
acquisition. International Spirits is controlled by Dr. Passen.

Consummation of these transactions is subject to a number of
contingencies. One contingency to both agreements is that Dr. Passen make an additional investment in the Company of $1,500,000 in exchange for 7,500,000 shares of our common stock. No assurance can be given that consummation of these
transactions will occur.

Intangible Assets

In May 2003, we purchased the rights, title and ownership of the formulation for Xtreme Delight ready to drink cocktails. This intangible asset is subject to an annual impairment testing. Since the acquisition and since our
infusion of capital in May 2004, we have evaluated the marketing of and potential for this product. However, the product was never fully launched due to cash flow limitations and operating losses.



12



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##### Table of Contents

In December 2004, management began discussing with MLD the development and marketing of an already
established and complete line of ready to drink cocktails to be marketed under the label Norms Extreme Delight. Because this brand has already been developed and is part of a complete line of ready to drink cocktails, we have
entered into an agreement with MLD to jointly own this line of products called Norms Extreme Delight. We had an oral agreement with MLD to jointly market the product. Based on these facts, management conducted a re-evaluation of the fair value
of the recorded formulation intangible for Xtreme Delight and determined an impairment existed. The intangible was written down to $0 for the quarter ended February 28, 2005 resulting in an impairment expense of $300,000 charged to
operations.

Critical Accounting Policies

Use of Estimates

The accompanying consolidated financial statements have been prepared in conformity with accounting
principles generally accepted in the United States. When more than one accounting principle, or method of application, is generally accepted, management selects the principle or method that is appropriate in our specific circumstances. Application
of the accounting principles requires that our management make estimates about the future resolution of existing uncertainties and that affect the reported amounts of assets, liabilities, revenues, expenses which in the normal course of business are
subsequently adjusted to actual results. Actual results could differ from such estimates. In preparing these financial statements, we have made our best estimates and judgments of the amounts and disclosures included in the consolidated financial
statements giving due regard to materiality.

Revenue Recognition and Accounts Receivable

We follow the criteria of the U.S. Securities and Exchange Commission Staff Accounting Bulletin 104 for revenue recognition. We recognize revenue when
persuasive evidence of an arrangement exists, delivery of product has occurred, the sales price is fixed or determinable, and collectibility is reasonably assured.

We recognize revenue upon acceptance of delivery of its product by its customers at agreed prices which is when the title transfers at the shipping point. Based on market conditions, the Company or our suppliers may
choose to promote certain brands by offering free product or case volume discounts. The cost of any supplier-sponsored promotion may be recoverable in whole or in part from the supplier. We follow the guidance of Emerging Issues Task Force (EITF)
Issue 09-9 Accounting for Consideration Given by a Vendor to a Customer and (EITF) Issue 02-16 Accounting By a Customer (Including a Reseller) for Certain Considerations Received from Vendors. Accordingly, any incentives
received such as free promotional products, discounts or rebates are recognized as a reduction of the cost of products. Promotional products given to customers are recognized as a cost of sales, net of any charge-backs received from vendors. Cash
incentives provided to customers are recognized as a reduction of the related sale price, and, therefore, are a reduction in sales. Shipping and handling fees are recorded as revenues and the related costs are recorded as costs of sales. However,
one single exception for



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##### Table of Contents

Fiscal 2006 and 2005 was the revenue realized from our three-year agreement entered into in 2004 with an individual pursuant to which the individual was
granted the exclusive rights to market and sell Xtreme Delight cocktails in the Country of Honduras in consideration for a fee of $105,000. We are amortizing this revenue over the three-year term of the agreement.

Accounts receivable result from the sale of our products and is reported at anticipated realizable value. We estimate our allowance for doubtful accounts
based on a specific identification basis and additional allowance as needed based upon historical collections experience. Accounts receivable is considered past due if payment has not been received from the customer within sixty days from the
invoice date and management reviews the customer accounts on a routine basis to determine if an account should be written off. There was no allowance for bad debt at May 31, 2006 and no bad debt expense related to accounts receivable during
2006 (the $126,173 of bad debt expense on the Statement of Operations is related to a note receivable).

We market our products to a
diverse customer base in the United States and in other countries. Credit is extended after a credit review by management, which is based on a customers ability to perform its obligations. Such reviews are regularly updated. Accounts
receivable at May 31, 2006 and May 31, 2005 were $99,146 and $209,579, respectively.

Stock-Based Compensation

We have elected to follow Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees and related
interpretations in accounting for stock options and awards. Accordingly, no compensation costs for stock options is included in operating results since all awards were made at exercise prices at or above their fair value on the dates of grants.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock- Based CompensationTransition and Disclosure,
amending FASB Statement No. 123, Accounting for Stock Based Compensation. This statement amends SFAS No. 123 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 operating results of an entitys accounting policy decisions with respect to
stock-based employee compensation. SFAS No. 148 also amend APB 28, Interim Financial Reporting to require disclosure about those effects in interim financial information. We adopted the disclosure provisions for the year ended
May 31, 2003.



|ITEM 7. | FINANCIAL STATEMENTS
|------- | --------------------

The financial statements and
information required by Item 7 are included in this Report.



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##### Table of Contents

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

Effective March 8, 2005, our Board of Directors dismissed Mahoney Cohen & Company, CPA, P.C. (Mahoney Cohen) as our principal
independent registered public accounting firm. The reports of Mahoney Cohen on the consolidated financial statements of the Registrant for the fiscal year ended May 31, 2004, did not contain any adverse opinion or a disclaimer of opinion, and
were not qualified or modified as to uncertainty, audit scope or accounting principles; however, the audit report for the year ended May 31, 2004 contained an explanatory paragraph regarding the substantial doubt about the Registrants
ability to continue as a going concern. During fiscal year 2004 and the subsequent interim period through March 8, 2005, there were no disagreements with Mahoney Cohen regarding any matters of accounting principles or practices, financial
statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Mahoney, would have caused Mahoney to make reference to the subject matter of the disagreements in connection with its report.

Effective March 8, 2005, we engaged Salberg & Company, P.A. as our independent registered public accounting firm for the
year ended May 31, 2005. The decision to engage Salberg & Company, P.A. was approved by the Board of Directors. Management had not previously consulted Salberg & Company, P.A. regarding any matter, including but not limited
to:



| |  |  | the application of accounting principals to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on our financial statements;
or
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | any matter that was either the subject matter of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-B and the related instructions) or a reportable event (as
defined in Item 304(a)(1)(v) of Regulation S-B).
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|ITEM 8A. | CONTROLS AND PROCEDURES
|-------- | -----------------------

As of the end of the
period covered by this report, we carried out an evaluation under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of
our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(c) and 5d-15(c). Based upon that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective in
ensuring that information required to be disclosed by us in the reports that we file or submit under the Securities Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons
performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

There have been no changes in our
internal controls over financial reporting or other factors, which has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



15



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##### Table of Contents

|ITEM 8B. | OTHER INFORMATION
|-------- | -----------------

Not Applicable.

PART III



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

Directors and Officers

Our directors and executive
officers and their positions at August 15, 2006 were as follows:



|                    |  |     |  |                                                           
|------------------- |  | --- |  | ----------------------------------------------------------
|Name                |  | Age |  | Position                                                  
|Selvin Passen, M.D. |  | 71  |  | Chairman of the Board                                     
|David Rudden        |  | 71  |  | President, Chief Executive Officer and Director           
|Mark Weber          |  | 50  |  | Chief Financial Officer, Secretary, Treasurer and Director

SELVIN PASSEN, M.D. has served our Chairman of the Board since May 22, 2004. Dr. Passen
is a retired Pathologist who was the Medical Director of Maryland Medical Laboratory, Inc., a subsidiary of Corning, until 1994. Since then Dr. Passen has been involved in real estate development and is the principal holder in Baltimore Marine
Center in Baltimore, Maryland, and Lauderdale Marine Center in Fort Lauderdale, Florida. Dr. Passen is the owner of 22% of Maple Leaf Distillers, a former major supplier for New World Brands, Inc. prior to filing for bankruptcy.

DAVID RUDDEN was appointed President and Chief Executive Officer on November 10, 2005. Mr. Rudden has been with New World Brands, Inc. since
March 2005 when he was appointed Senior Vice President of Sales and Marketing for the Company. Mr. Rudden has over twenty-five years of experience in the wine and spirits industry. He has held various positions with large wine and liquor
distributors. His most recent position was Senior Vice President of Sales and Marketing for A.V. Imports, Inc.

MARK WEBER has served as
our Chief Financial Officer, Secretary and Treasurer and a Director since May 2004. In addition, Mr. Weber has served since 1996 and continues to serve as financial advisor and Chief Financial Officer for Dr. Passens various other
ventures. From 1985 to 1996, Mr. Weber was controller of Maryland Medical Laboratory, Inc. prior to the sale to Metpath Laboratory, a division of Corning. He is a Certified Public Accountant with a Bachelor of Administration in Accounting from
Towson State University.



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##### Table of Contents

Compliance with Section 16(a)

Section 16(a) of the Exchange Act requires our officers, directors, and persons who beneficially own more than 10% of a registered class of our equity securities (10% stockholders) to file reports of
ownership and changes in ownership with the Securities and Exchange Commission (the SEC). Officers, directors and 10% stockholders also are required to furnish us with copies of all Section 16(a) forms they file.

To our knowledge, based solely upon a review of the copies of such reports furnished to us and written representations that no other reports were
required during the Fiscal 2005, and except as specifically noted below, all Section 16(a) filing requirements applicable to its directors, executive officers and 10% beneficial owners were complied with.



|ITEM 10. | EXECUTIVE COMPENSATION
|-------- | ----------------------

The following table sets
forth compensation earned, whether paid or deferred, by our former Chief Executive Officer Allen Salzman who resigned on April 29, 2004, and David Rudden, our most highly compensated executive officer who earned over $100,000 during the current
fiscal year (collectively, the Named Executive Officers), for services rendered in all capacities to us during fiscal years ended May 31, 2006, 2005 and 2004.



|                                             |      |            |  |                     |         |                        |   |                          |   |                                   |   |                       |  
|-------------------------------------------- | ---- | ---------- |  | ------------------- | ------- | ---------------------- | - | ------------------------ | - | --------------------------------- | - | --------------------- | -
|                                             |      |            |  | Annual Compensation |         | Long Term Compensation
|Name and Principal Position                  |      | FiscalYear |  | Salary $            |         | Bonus$                 |   | Other AnnualCompensation |   | No. ofSecuritiesUnderlyingOptions |   | All OtherCompensation
|Allen Salzman1Former Chief Executive Officer |      | 2006       |  | $                   |        |                        |  |                          |  |                                   |  |                       | 
|                                             | 2005 |            |  |                    |         |                       |   |                         |   |                                  |   |                     
|                                             | 2004 |            |  | 136,800             |         |                       |   |                         |   |                                  |   |                     
|David Rudden2Chief Executive Officer         |      | 2006       |  | $                   | 111,700 |                        |  |                          |  |                                   |  |                       | 
|                                             | 2005 |            |  |                    |         |                       |   |                         |   |                                  |   |                     
|                                             | 2004 |            |  |                    |         |                       |   |                         |   |                                  |   |                     

---

|1 | Mr. Salzman resigned as Chief Executive Officer on April 29, 2004.
|- | ------------------------------------------------------------------

|2 | Mr. Rudden became Chief Executive Officer on November 10, 2005.
|- | ---------------------------------------------------------------



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##### Table of Contents

Option/SAR Grants in the Last Fiscal Year

The following table reflects option grants to our Named Executive Officers in the prior fiscal year.



|             |  |                                                 |  |                                                          |   |  |                              |  |               
|------------ |  | ----------------------------------------------- |  | -------------------------------------------------------- | - |  | ---------------------------- |  | --------------
|Name         |  | # of SecuritiesUnderlying Options/SARs Granted |  | % Total Options/SARs Granted toEmployees in Fiscal Year |   |  | Exercise orBase Price ($/Sh) |  | ExpirationDate
|David Rudden |  | 300,000                                         |  | 10.53                                                    | % |  | 0.50                         |  | 5/31/10       

Aggregate Option Exercises and Fiscal Year-End Option Values

The following table sets forth certain information relating to the exercise of stock options during fiscal year for each of our Named Executive Officers
and the fiscal year-end value of the unexercised options held by our named Executive Officers.



|             |  |             |  |          |  |                          |  |                      |  |                      |  |              
|------------ |  | ----------- |  | -------- |  | ------------------------ |  | -------------------- |  | -------------------- |  | -------------
|             |  |             |  |          |  |                          |  |                      |  | Value of Unexercised
|             |  | Shares      |  |          |  | # of Unexercised Options |  | In-The-Money Options
|             |  | Acquired    |  | Value    |  | At Fiscal Year End       |  | At Fiscal Year End  
|Name         |  | On Exercise |  | Realized |  | Exercisable              |  | Unexercisable        |  | Exercisable (1)      |  | Unexercisable
|David Rudden |  |            |  |         |  | 300,000                  |  |                     |  |                     |  |             

---

|(1) | Value is calculated on the basis of the difference between the option exercise price and the closing price for the Common Stock at $0.23 as of May 31, 2006 as quoted on the
over-the-counter market, multiplied by the number of shares underlying the option.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

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

The following table sets forth certain information as of August 28, 2006 with respect to (i) those persons known to us to beneficially own more
than 5% of our Common Stock, (ii) each of our directors, (iii) each of our executive officers, and (iv) all directors and executive officers as a group. The information is determined in accordance with Rule 13d-3 promulgated under the
Securities Exchange Act. Except as indicated below, the beneficial owners have sole voting and dispositive power with respect to the shares beneficially owned.



|                                                             |  |                      |  |                 |  
|------------------------------------------------------------ |  | -------------------- |  | --------------- | -
|                                                             |  | Beneficial Ownership | 
|Name and Address of Beneficial Owner 1 2                     |  | Number ofShares      |  | Percent ofTotal |  
|Selvin and Sylvia Passen, TBTE3                              |  | 11,750,000           |  | 30.5            | %
|Maple Leaf Distillers, Inc.4                                 |  | 7,000,000            |  | 18.3            | %
|Marvin Ribotsky                                              |  | 2,525,000            |  | 7.5             | %
|Mark Weber5                                                  |  | 1,200,000            |  | 3.2             | %
|David Rudden6                                                |  | 500,000              |  | 1.3             | %
|All directors and executive officers as a group (3 persons)7 |  | 13,450,000           |  | 33.7            | %

---

|* | Indicates beneficial ownership of less than one percent of the total outstanding Common Stock.
|- | ----------------------------------------------------------------------------------------------

|1 | Except as otherwise indicated, the address of each beneficial owner is c/o New World Brands,
Inc., 2019 SW 20 Street, Suite 109, Fort Lauderdale, Florida 33315.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

|2 | Except as otherwise indicated, the persons named in this table have sole voting and investment power with respect to all shares of Common Stock listed, which include
shares of Common Stock that such persons have the right to acquire within 60 days from the record date.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3 | Includes (i) 750,000 shares of Common Stock subject to currently exercisable warrants,
and (ii) 1,000,000 shares subject to currently exercisable options.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------

|4 | Includes 1,500,000 shares of Common Stock subject to currently exercisable warrants.
|- | ------------------------------------------------------------------------------------

|5 | Includes 1,000,000 shares of Common Stock subject to currently exercisable options.
|- | -----------------------------------------------------------------------------------

|6 | Includes 300,000 shares of Common Stock subject to currently exercisable options.
|- | ---------------------------------------------------------------------------------

|7 | Includes (i) 750,000 shares of Common Stock subject to currently exercisable warrants, and (ii) 2,300,000 shares subject to currently exercisable options.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------

The following table provides information, as of May 31, 2006, with respect to all of our compensation plans under which
equity securities are authorized for issuance:



|                                   |  |                                                                                          |           |                                                                           |   |                                                            |  |   |        
|---------------------------------- |  | ---------------------------------------------------------------------------------------- | --------- | ------------------------------------------------------------------------- | - | ---------------------------------------------------------- |  | - | -------
|Plan Category                      |  | Number of Securitiesto be issued uponexercise ofoutstanding options,warrants, and
rights |           | Weighted averageexercise price ofoutstanding options,warrants, and rights |   | Number of securitiesremaining availablefor future issuance
|Plans approved by stockholders     |  |                                                                                          |          |                                                                           |   |                                                           |  |   |       
|Plans not approved by stockholders |  | $                                                                                        | 3,105,000 |                                                                           | $ | 0.40                                                       |  | $ | 845,000



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##### Table of Contents

|ITEM 12. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
|-------- | ----------------------------------------------

Relationship
with MLD

Selvin Passen, M.D., our Chairman of the Board, owns 22% of Maple Leaf Distillers, Inc., a former supplier for the Company
(MLD), and, was a member of the Board Directors of MLD until July 2005. Dr. Passen also loaned money to MLD and its affiliates. Mark Weber, Chief Financial Officer, provided consulting services to MLD as well. MLD also owns
5,500,000 shares of our common stock and warrants to purchase 1,500,000 additional shares, which represent approximately 15% of the total shares outstanding at May 31, 2006.

For Fiscal 2006 and Fiscal 2005, purchases of supplies from MLD included in cost of goods sold approximated $239,811 and $104,402 respectively. For
Fiscal 2006 and Fiscal 2005, MLD was paid $259,620 and $127,474, respectively, for product, freight, marketing, and travel. We owed this related party $46,254 as of May 31, 2006 which is included in Accounts Payable-Related Party.

We have an agreement with MLD, pursuant to which we would act as an importer of the MLD line of alcoholic beverages into the United
States. Pursuant to the joint venture agreement, we would jointly develop and market additional products for importation into the United States. In this regard, we have gone to market with a new line of ready to drink cocktails called Norms
Extreme Cocktails. This line of products was jointly developed and marketed by us and MLD.

In addition, Dr. Passen, individually or
through affiliates, loaned significant sums of money to MLD. These amounts were not re-paid. Dr. Passen alleges he is owed in excess of $2,000,000.

In November 2005, MLD announced that it was in the process of selling its assets to Angostura Limited (Angostura). Upon consummation of this transaction, certain secured creditors of MLD would be repaid;
however, certain of MLD unsecured creditors, like Dr. Passen, would not be repaid. Dr. Passen was concerned about the effect this sale would have on our agreements with MLD and, despite several requests, was not able to obtain assurances
that the agreements with MLD would be honored. Also, Dr. Passen was concerned that the determination to sell MLD assets to Angostura was an attempt to defraud, defeat or delay the creditors of MLD which include Dr. Passen. Thus,
Dr. Passen determined, upon consultation with his counsel, that it was in his best interest to initiate the claims described above to protect his interest in MLD.

In December 2006, Selvin Passen, our Chairman of the Board and largest stockholder, initiated certain legal proceedings against MLD and MLDs principals Costas Ataliotis, a former Director and Chief Executive
Officer of the Company, and David Wolinsky. On December 6, 2005, Dr. Passen caused to be filed in Winnipeg, Canada, various Statements of Claim against, among others, MLD. On December 19, 2005, Dr. Passen filed a Complaint in
Broward County, Florida, against, among others, Costas Ataliotis. Finally, Dr. Passen has filed a petition in Winnipeg, Canada, to have MLD involuntarily adjudged bankrupt. On January 13, 2006, MLD was placed into receivership and then on
April 5, 2006 filed for bankruptcy.



20



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##### Table of Contents

These actions were initiated by Dr. Passen on his own behalf and not on our behalf. However, while
attempting to work out a settlement with MLD and Ataliotis regarding his own claims, Dr. Passen also sought assurances from MLD as to the continuity of the co-branding agreement between MLD and us upon consummation of the transaction with
Angostura. Dr. Passen was never able to receive written confirmation of our ability to operate under the brand names upon consummation of the transaction with Angostura. Thus, while the initiation of these claims against MLD and
Mr. Ataliotis is unfortunate, Dr. Passen believes that they are in his best interest. Moreover, Dr. Passen believes that he has also continued to exercise his fiduciary responsibility to us and our stockholders by attempting to obtain
assurances about the continuity of the co-branding agreement between MLD and the Company.

Relationship with Selvin Passen

We lease our office space on a month-to-month basis from a company in which the current Chairman of the Board is a partner. For the fiscal years ended
May 31, 2005 and May 31, 2006, rent payments to this related party totaled $13,335 and $17,063, respectively. In addition, we paid $48,432 and $39,188 in 2006 and 2005 respectively, for accounting and office services to a company in which
the current Chairman of the Board is a partner. We owed this related party $27 as of May 31, 2006 which is included in Accounts Payable  Related Parties.

To fund operations, we have had to rely on loans from Selvin Passen, our Chairman and principal stockholder. As of May 31, 2006, and 2005, the
amounts for principal and accrued interest due to Dr. Passen were $229,674 and $0, respectively. The loans are evidenced by promissory notes which accrue interest at prime rate and become due beginning April 2008.



|ITEM 13. | EXHIBITS
|-------- | --------

The following exhibits are filed as part
of this Annual Report on form 10-KSB.



|     |  |                                                                                                                                                   
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|31.1 |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002                                                
|     | 
|31.2 |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002                                                
|     | 
|32.1 |  | Certification of Chief Executive Officer pursuant to 18 U.S.C., Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002
|     | 
|32.2 |  | Certification of Chief Financial Officer pursuant to 18 U.S.C., Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002



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##### Table of Contents

|ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES
|-------- | --------------------------------------

Fees Paid to Independent
Registered Public Accounting Firms

The following table sets forth, for each of the years indicated, the fees paid to our independent registered public
accounting firms and the percentage of each of the fees out of the total amount paid to the accountants.



|                  |  |                    |        |             |      |   |      |   |             |  |     |  
|----------------- |  | ------------------ | ------ | ----------- | ---- | - | ---- | - | ----------- |  | --- | -
|                  |  | Year Ended May 31, |       
|                  |  | 2006               |        |             | 2005 |  
|Services Rendered |  | Fees               |        | Percentages |      |   | Fees |   | Percentages | 
|Audit (1)         |  | $                  | 36,267 |             | 100  | % |      | $ | 46,441      |  | 100 | %
|Audit-related (2) |  |                    |       |             |     |   |      |   |            |  |    |  
|Tax (3)           |  |                    |       |             |     |   |      |   |            |  |    |  
|Other             |  |                    |       |             |     |   |      |   |            |  |    |  
|Total             |  | $                  | 36,267 |             | 100  | % |      | $ | 46,441      |  | 100 | %
|                  |  |                    |        |             |      |   |      |   |             |  |     |  

---

|(1) | Audit fees consist of services that would normally be provided in connection with statutory and regulatory filings or engagements, including services that generally only the
independent accountant can reasonably provide.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Audit-related fees relate to assurance and associated services that traditionally are performed by the independent accountant, including: attest services that are not required by
statute or regulation; accounting consultation and audits in connection with mergers, acquisitions and divestitures; employee benefit plans audits; and consultation concerning financial accounting and reporting standards.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Tax fees relate to services performed by the tax division for tax compliance, planning, and advice.
|--- | ---------------------------------------------------------------------------------------------------

Pre-Approval Policies and Procedures

Our Board of Directors has adopted a policy and procedures for
the pre-approval of audit and non-audit services rendered by our independent public accountants, Salberg & Company, P.A. The policy generally pre-approves certain specific services in the categories of audit services, audit-related
services, and tax services up to specified amounts, and sets requirements for specific case-by-case pre-approval of discrete projects, those which may have a material effect on our operations or services over certain amounts. Pre-approval may be
given as part of the Board of Directors approval of the scope of the engagement of our independent auditor or on an individual basis. The pre-approval of services may be delegated to one or more of the Board members, but the decision must be
presented to the full Board at its next scheduled meeting. The policy prohibits retention of the independent public accountants to perform the prohibited non-audit functions defined in Section 201 of the Sarbanes-Oxley Act or the rules of the
SEC, and also considers whether proposed services are compatible with the independence of the public accountants.



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##### Table of Contents

SIGNATURES

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



|                      |  |                        |  |                                      
|--------------------- |  | ---------------------- |  | -------------------------------------
|                      |  | NEW WORLD BRANDS, INC.
|                      |  |                       
|Date: August 28, 2006 |  | By:                    |  | /s/ David Rudden                     
|                      |  |                        |  | David Rudden, Chief Executive Officer

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



|                        |  |                                      |  |                
|----------------------- |  | ------------------------------------ |  | ---------------
|SIGNATURE               |  | TITLE                                |  | DATE           
|                        |  |                                     
|/s/ Selvin Passen, M.D. |  | Chairman of the Board                |  | August 28, 2006
|Selvin Passen, M.D.     |  |                                      |  |                
|                        |  |                                     
|/s/ David Rudden        |  | President, Chief Executive           |  | August 28, 2006
|David Rudden            |  | Officer and Director                 |  |                
|                        |  |                                     
|/s/ Mark Weber          |  | Chief Financial Officer,             |  | August 28, 2006
|Mark Weber              |  | Secretary and Treasurer and Director |  |                



23



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##### Table of Contents

INDEX OF CONSOLIDATED FINANCIAL STATEMENTS



|                                                                                                     |  |     
|---------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                     |  | Page
|                                                                                                     | 
|Report of Independent Registered Public Accounting Firm                                              |  | F-1 
|                                                                                                     | 
|Consolidated Balance Sheet as of May 31, 2006                                                        |  | F-2 
|                                                                                                     | 
|Consolidated Statements of Operations for the years ended May 31, 2006 and 2005                      |  | F-3 
|                                                                                                     | 
|Consolidated Statements of Changes in Stockholders Equity for the Years ended May 31, 2006 and 2005 |  | F-4 
|                                                                                                     | 
|Consolidated Statements of Cash Flows for the years ended May 31, 2006 and 2005                      |  | F-5 
|                                                                                                     | 
|Notes to Consolidated Financial Statements                                                           |  | F-6 



---

##### Table of Contents

Report of Independent Registered Public Accounting Firm

To the Board of Directors and
Stockholders of

New World Brands, Inc.

We have audited the accompanying consolidated balance sheet of New World Brands, Inc. and Subsidiary as of May 31, 2006 and the related consolidated statements of operations, changes in stockholders equity
(deficiency) and cash flows for the years ended May 31, 2006 and 2005. 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 audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audits 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 consolidated financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to
above present fairly in all material respects, the consolidated financial position of New World Brands, Inc. and Subsidiary as of May 31, 2006, and the consolidated results of its operations and its cash flows for the years ended May 31,
2006 and 2005 in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial
statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note C to the consolidated financial statements, the Company has recurring net losses including a net loss and cash used in operations for the
year ended May 31, 2006 of $803,805 and $725,822, respectively. In addition, the Company has an accumulated deficit, stockholders deficiency and working capital deficit of $23,244,208, $209,211 and $9,930, respectively, at May 31,
2006. These matters raise substantial doubt about its ability to continue as a going concern. Managements Plan in regards to this matter is also described in Note C. The consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.

SALBERG & COMPANY, P.A.

Boca Raton, Florida

August 16, 2006



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##### Table of Contents

New World Brands, Inc. and Subsidiary

Consolidated Balance Sheet



|                                                                                                       |  |              |             |  
|------------------------------------------------------------------------------------------------------ |  | ------------ | ----------- | -
|                                                                                                       |  | May 31, 2006 |            
|Assets:                                                                                                |  |              |             |  
|Cash                                                                                                   |  | $            | 6,075       |  
|Prepaid expenses                                                                                       |  |              | 10,945      |  
|Accounts receivable                                                                                    |  |              | 99,146      |  
|Inventory                                                                                              |  |              | 250,035     |  
|                                                                                                       |  |              |             |  
|Total current assets                                                                                   |  |              | 366,201     |  
|                                                                                                       | 
|Loan fees, net of accumulated amortization of $1,006                                                   |  |              | 719         |  
|Investment in restricted certificate of deposit                                                        |  |              | 25,000      |  
|Total assets                                                                                           |  | $            | 391,920     |  
|                                                                                                       |  |              |             |  
|Liabilities and stockholders deficiency:                                                               |  |              |             |  
|Accounts payable                                                                                       |  | $            | 89,460      |  
|Accrued liabilities                                                                                    |  |              | 11,098      |  
|Accounts payable - related party                                                                       |  |              | 46,281      |  
|Accounts payable - employees                                                                           |  |              | 9,234       |  
|Current portion of deferred revenue                                                                    |  |              | 23,333      |  
|Line of Credit                                                                                         |  |              | 196,725     |  
|                                                                                                       |  |              |             |  
|Total current liabilities                                                                              |  |              | 376,131     |  
|                                                                                                       | 
|Note payable - stockholder                                                                             |  |              | 225,000     |  
|                                                                                                       |  |              |             |  
|Total liabilities                                                                                      |  |              | 601,131     |  
|                                                                                                       |  |              |             |  
|Contingencies (see Note H)                                                                             |  |              |             |  
|                                                                                                       | 
|Preferred Stock - $0.01 par value, 10,000,000 authorized, none issued.                                 |  |              |            |  
|Common stock - $0.01 par value, 50,000,000 shares authorized, 36,803,939 shares issued and outstanding |  |              | 368,040     |  
|Additional paid-in-capital                                                                             |  |              | 22,766,957  |  
|Accumulated deficit                                                                                    |  |              | (23,344,208 | )
|                                                                                                       |  |              |             |  
|Total stockholders deficiency                                                                         |  |              | (209,211    | )
|                                                                                                       |  |              |             |  
|Total liabilities and stockholders deficiency                                                         |  | $            | 391,920     |  
|                                                                                                       |  |              |             |  

See Accompanying Notes to Consolidated Financial Statements



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##### Table of Contents

New World Brands, Inc. and Subsidiary

Consolidated Statements of Operations



|                                                                        |  |                        |            |   |                         |   |            |  
|----------------------------------------------------------------------- |  | ---------------------- | ---------- | - | ----------------------- | - | ---------- | -
|                                                                        |  | Year EndedMay 31, 2006 |            |   | Year Ended May 31, 2005 |  
|Revenues                                                                |  |                        |            |   |                         |   |            |  
|Wine and spirit sales                                                   |  | $                      | 716,944    |   |                         | $ | 514,699    |  
|                                                                        |  |                       
|Cost of goods sold                                                      |  |                        | 581,212    |   |                         |   | 359,204    |  
|                                                                        |  |                        |            |   |                         |   |            |  
|Gross Profit                                                            |  |                        | 135,732    |   |                         |   | 155,495    |  
|                                                                        |  |                        |            |   |                         |   |            |  
|Operating Expenses                                                      |  |                        |            |   |                         |   |            |  
|Bad debt                                                                |  |                        | 126,173    |   |                         |   |           |  
|Selling, general, and administrative                                    |  |                        | 830,115    |   |                         |   | 824,344    |  
|Depreciation and amortization                                           |  |                        | 2,113      |   |                         |   | 1,374      |  
|Consulting fees                                                         |  |                        | 45,000     |   |                         |   | 225,557    |  
|Stock option repricing adjustment                                       |  |                        | 200        |   |                         |   | (346,800   | )
|Impairment of intangible assets                                         |  |                        |           |   |                         |   | 300,000    |  
|                                                                        |  |                        |            |   |                         |   |            |  
|Total expenses                                                          |  |                        | 1,003,601  |   |                         |   | 1,004,475  |  
|                                                                        |  |                        |            |   |                         |   |            |  
|Loss from Operations                                                    |  |                        | (867,869   | ) |                         |   | (848,980   | )
|                                                                        |  |                       
|Other Income and (Expenses)                                             |  |                        |            |   |                         |   |            |  
|Interest expense                                                        |  |                        | (9,307     | ) |                         |   |           |  
|Gain(Loss) on sale of assets                                            |  |                        | 30,117     |   |                         |   | (7,700     | )
|Distribution rights                                                     |  |                        | 35,000     |   |                         |   | 35,000     |  
|Interest income                                                         |  |                        | 8,254      |   |                         |   | 18,023     |  
|                                                                        |  |                        |            |   |                         |   |            |  
|Total Other Income and (Expenses)                                       |  |                        | 64,064     |   |                         |   | 45,323     |  
|                                                                        |  |                       
|Net loss                                                                |  | $                      | (803,805   | ) |                         | $ | (803,657   | )
|                                                                        |  |                        |            |   |                         |   |            |  
|Basic and diluted net (loss) per share :                                |  | $                      | (0.02      | ) |                         | $ | (0.02      | )
|                                                                        |  |                       
|Weighted average number of common shares outstanding-basic and diluted: |  |                        | 36,803,939 |   |                         |   | 36,626,405 |  
|                                                                        |  |                        |            |   |                         |   |            |  

See Accompanying Notes to Consolidated Financial Statements



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##### Table of Contents

New World Brands, Inc. and Subsidiary

Consolidated Statements of Changes in Stockholders Equity
(Deficiency)

For the Years Ended May 31, 2006 and 2005



|                                           |  |              |  |                       |         |        |                            |   |        |       |        |   |            |   |            |                                       |  |   |          |   |  |   |             |   |  |   |           |  
|------------------------------------------ |  | ------------ |  | --------------------- | ------- | ------ | -------------------------- | - | ------ | ----- | ------ | - | ---------- | - | ---------- | ------------------------------------- |  | - | -------- | - |  | - | ----------- | - |  | - | --------- | -
|                                           |  | Common Stock |  | Common Stock Issuable |         |        | Additional Paid-in-Capital |   |        | Notes |        |   |            |   |            | Total StockholdersEquity (Deficiency) | 
|                                           |  | Shares       |  | Amount                |         | Shares |                            |   | Amount |       |        |   | Receivable |   |            | Deficit                               |  |  
|BALANCE MAY 31, 2004                       |  | 36,603,939   |  | $                     | 366,040 |        |                           |   |        |       |       |   |            | $ | 22,785,942 |                                       |  | $ | (113,366 | ) |  | $ | (21,736,746 | ) |  | $ | 1,301,870 |  
|Exercise of stock options                  |  |             |  |                       |        |        | 200,000                    |   |        |       | 2,000  |   |            |   | 18,000     |                                       |  |   |         |   |  |   |            |   |  |   | 20,000    |  
|Amortization of stock options for services |  |             |  |                       |        |        |                           |   |        |       |       |   |            |   | 80,865     |                                       |  |   |         |   |  |   |            |   |  |   | 80,865    |  
|Repricing of options                       |  |             |  |                       |        |        |                           |   |        |       |       |   |            |   | (346,800   | )                                     |  |   |         |   |  |   |            |   |  |   | (346,800  | )
|Interest accrual on note receivable        |  |             |  |                       |        |        |                           |   |        |       |       |   |            |   |           |                                       |  |   | (5,975   | ) |  |   |            |   |  |   | (5,975    | )
|Acquisition of label rights                |  |             |  |                       |        |        |                           |   |        |       |       |   |            |   | 149,750    |                                       |  |   |         |   |  |   |            |   |  |   | 149,750   |  
|Contributed services                       |  |             |  |                       |        |        |                           |   |        |       |       |   |            |   | 24,000     |                                       |  |   |         |   |  |   |            |   |  |   | 24,000    |  
|Net loss                                   |  |             |  |                       |        |        |                           |   |        |       |       |   |            |   |           |                                       |  |   |         |   |  |   | (803,657    | ) |  |   | (803,657  | )
|                                           |  |              |  |                       |         |        |                            |   |        |       |        |   |            |   |            |                                       |  |   |          |   |  |   |             |   |  |   |           |  
|BALANCE MAY 31, 2005                       |  | 36,603,939   |  | $                     | 366,040 |        | 200,000                    |   |        | $     | 2,000  |   |            | $ | 22,711,757 |                                       |  | $ | (119,341 | ) |  | $ | (22,540,403 | ) |  |   | 420,053   |  
|                                           |  |              |  |                       |         |        |                            |   |        |       |        |   |            |   |            |                                       |  |   |          |   |  |   |             |   |  |   |           |  
|Issuance of issuable shares                |  | 200,000      |  |                       | 2,000   |        | (200,000                   | ) |        |       | (2,000 | ) |            |   |           |                                       |  |   |         |   |  |   |            |   |  |   |          |  
|Repricing of options                       |  |             |  |                       |        |        |                           |   |        |       |       |   |            |   | 200        |                                       |  |   |         |   |  |   |            |   |  |   | 200       |  
|Interest accrual on note receivable        |  |             |  |                       |        |        |                           |   |        |       |       |   |            |   |           |                                       |  |   | (6,832   | ) |  |   |            |   |  |   | (6,832    | )
|Contributed services                       |  |             |  |                       |        |        |                           |   |        |       |       |   |            |   | 10,000     |                                       |  |   |         |   |  |   |            |   |  |   | 10,000    |  
|Issuance of options for services           |  |             |  |                       |        |        |                           |   |        |       |       |   |            |   | 45,000     |                                       |  |   |         |   |  |   |            |   |  |   | 45,000    |  
|Write off of note receivable               |  |             |  |                       |        |        |                           |   |        |       |       |   |            |   |           |                                       |  |   | 126,173  |   |  |   |             |   |  |   | 126,173   |  
|Net loss                                   |  |             |  |                       |        |        |                           |   |        |       |       |   |            |   |           |                                       |  |   |         |   |  |   | (803,805    | ) |  |   | (803,805  | )
|                                           |  |              |  |                       |         |        |                            |   |        |       |        |   |            |   |            |                                       |  |   |          |   |  |   |             |   |  |   |           |  
|BALANCE MAY 31, 2006                       |  | 36,803,939   |  | $                     | 368,040 |        |                           |   |        |       |       |   |            | $ | 22,766,957 |                                       |  |   |         |   |  | $ | (23,344,208 | ) |  | $ | (209,211  | )
|                                           |  |              |  |                       |         |        |                            |   |        |       |        |   |            |   |            |                                       |  |   |          |   |  |   |             |   |  |   |           |  

See Accompanying Notes to Consolidated Financial Statements



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##### Table of Contents

New World Brands, Inc. and Subsidiary

Consolidated Statements of Cash Flows



|                                                                            |  |                        |          |   |                        |   |           |  
|--------------------------------------------------------------------------- |  | ---------------------- | -------- | - | ---------------------- | - | --------- | -
|                                                                            |  | Year EndedMay 31, 2006 |          |   | Year EndedMay 31, 2005 |  
|Cash flow from operating activities:                                        |  |                        |          |   |                        |   |           |  
|Net loss                                                                    |  | $                      | (803,805 | ) |                        | $ | (803,657  | )
|Adjustments to reconcile net loss to net cash used in operating activities: |  |                        |          |   |                        |   |           |  
|Acquisition of label rights                                                 |  |                        |         |   |                        |   | 149,750   |  
|Depreciation and amortization                                               |  |                        | 2,113    |   |                        |   | 1,374     |  
|Common stock options issued for services                                    |  |                        | 45,000   |   |                        |   | 80,865    |  
|Repricing of options                                                        |  |                        | 200      |   |                        |   | (346,800  | )
|Impairment of intangible asset                                              |  |                        |         |   |                        |   | 300,000   |  
|(Gain)Loss on disposal of fixed assets                                      |  |                        | (437     | ) |                        |   | 7,700     |  
|(Gain)Loss on exchange of equipment for inventory                           |  |                        | (29,680  | ) |                        |   |          |  
|Contributed services                                                        |  |                        | 10,000   |   |                        |   | 24,000    |  
|Bad debt expense                                                            |  |                        | 126,173  |   |                        |   |          |  
|Changes in operating assets and liabilities:                                |  |                        |          |   |                        |   |           |  
|Accounts receivable                                                         |  |                        | 110,433  |   |                        |   | (193,054  | )
|Prepaid expenses                                                            |  |                        | (9,908   | ) |                        |   | 7,468     |  
|Inventory                                                                   |  |                        | (201,480 | ) |                        |   | 9,075     |  
|Deposits                                                                    |  |                        | 3,269    |   |                        |   |          |  
|Accrued interest on note receivable                                         |  |                        | (6,832   | ) |                        |   | (5,975    | )
|Accounts payable                                                            |  |                        | 15,394   |   |                        |   | (111,758  | )
|Accrued liabilities                                                         |  |                        | 621      |   |                        |   | 10,477    |  
|Accounts payable - related party                                            |  |                        | 44,885   |   |                        |   | 1,396     |  
|Accounts payable - employees                                                |  |                        | 3,232    |   |                        |   | 6,002     |  
|Deferred revenue                                                            |  |                        | (35,000  | ) |                        |   | (35,000   | )
|                                                                            |  |                        |          |   |                        |   |           |  
|Net cash used in operating activities                                       |  |                        | (725,822 | ) |                        |   | (898,137  | )
|                                                                            |  |                        |          |   |                        |   |           |  
|Cash flows from investing activities:                                       |  |                        |          |   |                        |   |           |  
|Purchase of fixed assets                                                    |  |                        | (18,875  | ) |                        |   | (7,744    | )
|Investment in restricted certificate of deposit                             |  |                        |         |   |                        |   | (25,000   | )
|Proceeds from sale of fixed assets                                          |  |                        | 5,700    |   |                        |   | 22,000    |  
|                                                                            |  |                        |          |   |                        |   |           |  
|Net cash provided by investing activities                                   |  |                        | (13,175  | ) |                        |   | (10,744   | )
|                                                                            |  |                       
|Cash flows from financing activities:                                       |  |                        |          |   |                        |   |           |  
|Net borrowings from (repayments to) stockholder                             |  |                        | 225,000  |   |                        |   |          |  
|Net proceeds from issuance of Common Stock                                  |  |                        |         |   |                        |   | 20,000    |  
|Net borrowings (repayments) - line of credit                                |  |                        | 196,725  |   |                        |   |          |  
|Line of credit fees                                                         |  |                        | (1,725   | ) |                        |   |          |  
|                                                                            |  |                        |          |   |                        |   |           |  
|Net cash provided by financing activities                                   |  |                        | 420,000  |   |                        |   | 20,000    |  
|                                                                            |  |                        |          |   |                        |   |           |  
|Net change in cash                                                          |  |                        | (318,997 | ) |                        |   | (888,881  | )
|                                                                            |  |                        |          |   |                        |   |           |  
|Cash at beginning of period                                                 |  |                        | 325,072  |   |                        |   | 1,213,953 |  
|                                                                            |  |                        |          |   |                        |   |           |  
|Cash at end of period                                                       |  | $                      | 6,075    |   |                        | $ | 325,072   |  
|                                                                            |  |                        |          |   |                        |   |           |  
|Supplemental disclosure of cash flow information:                           |  |                        |          |   |                        |   |           |  
|Interest paid                                                               |  | $                      | 9,307    |   |                        | $ |          |  
|                                                                            |  |                        |          |   |                        |   |           |  
|Taxes paid                                                                  |  | $                      |         |   |                        | $ |          |  
|                                                                            |  |                        |          |   |                        |   |           |  
|Supplemental disclosure of non-cash inventory and financing activities:     |  |                        |          |   |                        |   |           |  
|Value of inventory received in exchange for equipment                       |  | $                      | 48,555   |   |                        | $ |          |  

See Accompanying Notes to Consolidated Financial Statements



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##### Table of Contents

NEW WORLD BRANDS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A  BACKGROUND OF THE COMPANY

New World
Brands, Inc., a Delaware corporation, and its subsidiary (the Company, we, us, our) import wine and spirits for distribution in the United States. The Company holds the exclusive rights to import the
wines of Vinicola L.A. Cetto, S.A. de C.V. (L.A. Cetto) in the United States. We have established arrangements for distribution of its products with major wine and spirit wholesale distributors from New York to California. Also, we have
gone to market in the summer of 2005 with a new line of ready to drink cocktails.

On October 16, 2001, the Company entered into a
Plan and Agreement of Reorganization with International Importers, Inc. (Importers) whereby all shares of Common Stock of Importers were converted into and became the right to receive, in the aggregate, 5,500,000 shares of our Common
Stock. For accounting purposes, the acquisition of Importers was recorded as a recapitalization of Importers, with Importers as the acquirer.

On October 17, 2001, the Board of Directors adopted a resolution to change our name to New World Brands, Inc. This reflects the new business plan of the company after the October 16, 2001 reorganization with International
Importers, Inc., a wine and spirits importer.

On May 19, 2004, the Company received an equity infusion $1,700,000. The investment
group making the investment was led by Dr. Selvin Passen, M.D., Chairman of Board and principal executive officer of the Company. $500,000 (5,000,000 Common Stock shares) of the equity investment was made by Maple Leaf Distillers, Inc. (See
Note K)

NOTE B  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of New World Brands, Inc. and Subsidiary. All significant intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

In
preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required 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, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates in
2006 and 2005 include the allowance for doubtful accounts and subscription notes receivable, valuation of stock based fees paid and repricing of options and valuation of deferred tax asset.



F-6



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##### Table of Contents

Cash and Cash Equivalents

The Company considers all highly liquid debt investments purchased with a maturity of three months or less to be cash equivalents.

Concentration of Credit Risk for Cash Deposits

The Company maintains its cash in bank deposit and financial institution deposit accounts, which, at times, exceed federally insured limits. We have not experienced any losses in such accounts through May 31,
2006.

Inventory

Inventories are stated at the lower of cost (first-in, first-out basis) or market.

Accounts Receivable

Accounts Receivable result from the sale of our products and is reported at anticipated realizable
value. The Company estimates its allowance for doubtful accounts based on a specific identification basis and additional allowance as needed based upon historical collections experience. Accounts receivable is considered past due if payment has not
been received from the customer within sixty days from the invoice date and management reviews the customer accounts on a routine basis to determine if an account should be written off. There was no allowance for bad debt at May 31, 2006 and no
bad debt expense related to accounts receivable (the $126,173 of bad debt expense on the Statement of Operations is related to a note receivable during 2006.-See Note K)

Fixed Assets

There
are no fixed assets at May 31, 2006. The office equipment was sold to a related party for a gain of $437 as we moved into a furnished suite at a reduced rate.

We also exchanged a piece of equipment with a vendor for inventory at a gain of $29,680. (See Note E)

Depreciation expense for the years ending May 31, 2006 and 2005 amounted to $1,107 and $1,374, respectively.

Stock Based Compensation

Statement of Financial Accounting Standards No. 123 (SFAS No. 123),
Accounting for Stock-Based Compensation, establishes financial accounting and reporting standards for stock-based employee compensation plans. The financial accounting standards of SFAS No. 123 permits companies to either continue
accounting for stock-based compensation under APB 25 or use the fair value method under SFAS 123. The disclosure requirements of SFAS No. 123 and



F-7



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##### Table of Contents

SFAS 148 require companies that elect not to record the fair value in the statement of operations to provide pro forma disclosures of net income and earnings
per share in the notes to the financial statements as if the fair value of stock-based compensation had been recorded.

The Company follows
Accounting Principles Board Opinion No. 25 and its related interpretations in accounting for its stock-based compensation plan. The Company utilized the Black-Scholes option-pricing model to quantify the expense of options issued to
non-employees and the pro forma effects on net income (loss) and net income (loss) per share for the value of the options granted to employees during the fiscal years ended May 31, 2006 and 2005.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock- Based Compensation - Transition and Disclosure, amending FASB Statement
No. 123, Accounting for Stock Based Compensation. This statement amends SFAS No. 123 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 operating results of an entitys accounting policy decisions with respect to stock-based employee
compensation. SFAS No. 148 also amends APB 28, Interim Financial Reporting to require disclosure about those effects in interim financial information. We adopted the disclosure provisions for the year ended May 31, 2003. The
following table illustrates the effect on results of operations if the Company had applied the fair value recognition provisions of SFAS No. 123 for the years ended May 31, 2006 and 2005:



|                                                                                                                 |  |      |          |   |      |   |          |  
|---------------------------------------------------------------------------------------------------------------- |  | ---- | -------- | - | ---- | - | -------- | -
|                                                                                                                 |  | 2006 |          |   | 2005 |  
|Net loss as reported                                                                                             |  | $    | (803,805 | ) |      | $ | (803,657 | )
|Deduct: Total stock-based employee compensation determined under fair value method for stock options, net of tax |  |      |         |   |      |   |         |  
|Pro forma loss applicable to Common Stockholders                                                                 |  |      | (803,805 | ) |      |   | (803,657 | )
|                                                                                                                 |  |      |          |   |      |   |          |  
|Basic net loss per share, as reported                                                                            |  |      | (0.02    | ) |      |   | (0.02    | )
|                                                                                                                 |  |      |          |   |      |   |          |  
|Basic net loss per share, pro forma                                                                              |  |      | (0.02    | ) |      |   | (0.02    | )
|                                                                                                                 |  |      |          |   |      |   |          |  
|Diluted net loss per share, as reported                                                                          |  |      | (0.02    | ) |      |   | (0.02    | )
|                                                                                                                 |  |      |          |   |      |   |          |  
|Diluted net loss per share, pro forma                                                                            |  | $    | (0.02    | ) |      | $ | (0.02    | )
|                                                                                                                 |  |      |          |   |      |   |          |  

Revenue Recognition

The Company follows the criteria of the United States Securities and Exchange Commission Staff Accounting Bulletin 104 for revenue recognition. The
Company recognizes revenue when persuasive evidence of an arrangement exists, delivery of product has occurred, the sales price is fixed or determinable, and collectibility is reasonably assured.

The Company recognizes revenue upon acceptance of delivery of its product by its customers at agreed prices which is when the title transfers at the
shipping point. Based on market conditions, the Company or its suppliers may choose to promote certain brands by offering free product or case volume discounts. The cost of any supplier-sponsored promotion



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may be recoverable in whole or in part from the supplier. The Company follows the guidance of Emerging Issues Task Force (EITF) Issue 01-9 Accounting
for Consideration Given by a Vendor to a Customer and (EITF) Issue 02-16 Accounting By a Customer (Including a Reseller) for Certain Considerations Received from Vendors. Accordingly, any incentives received such as free
promotional products, discounts or rebates are recognized as a reduction of the cost of products. Promotional products given to customers are recognized as a cost of sales, net of any charge-backs received from vendors. Cash incentives provided to
customers are recognized as a reduction of the related sale price, and, therefore, are a reduction in sales. Shipping and handling fees are recorded as revenues and the related costs are recorded as costs of sales. However, one single exception for
Fiscal 2006 and 2005 was the revenue realized from our three-year agreement entered into in 2004 with an individual pursuant to which the individual was granted the exclusive rights to market and sell Xtreme Delight cocktails in the Country of
Honduras in consideration for a fee of $105,000. We are amortizing this revenue over the three-year term of the agreement.

Impairment of Long-Lived Assets

The Company evaluates its long-lived assets and intangible assets for impairment whenever
events or change in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset to the future net undiscounted
cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is the excess of the carrying amount over the fair value of the asset.

Income Taxes

Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases
(principally net operating loss carry forwards). Deferred tax assets and liabilities are measured using enacted tax rates in effect for the years in which those temporary differences are expected to be recovered or settled. A valuation allowance has
been established to reduce deferred tax assets as it is more likely than not that such deferred tax assets will not be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.

Earnings (Loss) Per Share

Basic net earnings (loss) per common share is based on the weighted-average number of all common shares outstanding. The computation of diluted net
earnings (loss) per share does not assume the conversion, exercise or contingent issuance of securities that would have an anti-dilutive effect on net earnings (loss) per share.



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|                                       |  |                        |            |   |                        |   |            |  
|-------------------------------------- |  | ---------------------- | ---------- | - | ---------------------- | - | ---------- | -
|                                       |  | Year EndedMay 31, 2006 |            |   | Year EndedMay 31, 2005 |  
|Numerator:                             |  |                        |            |   |                        |   |            |  
|Net Loss  Basic                       |  | $                      | (803,805   | ) |                        | $ | (803,657   | )
|                                       |  |                        |            |   |                        |   |            |  
|Net Loss  Diluted                     |  | $                      | (803,805   | ) |                        | $ | (803,657   | )
|                                       |  |                        |            |   |                        |   |            |  
|Denominator                            |  |                        |            |   |                        |   |            |  
|Denominator for basic loss per share   |  |                        |            |   |                        |   |            |  
|Weighted average shares                |  |                        | 36,803,939 |   |                        |   | 36,626,405 |  
|                                       |  |                        |            |   |                        |   |            |  
|Effect of dilutive securities          |  |                        |            |   |                        |   |            |  
|Stock options                          |  |                        |           |   |                        |   |           |  
|                                       |  |                        |            |   |                        |   |            |  
|Denominator for diluted loss per share |  |                        | 36,803,939 |   |                        |   | 36,626,405 |  
|                                       |  |                        |            |   |                        |   |            |  
|Loss per share                         |  |                        |            |   |                        |   |            |  
|Basic:                                 |  | $                      | (0.02      | ) |                        | $ | (0.02      | )
|                                       |  |                        |            |   |                        |   |            |  
|Diluted:                               |  | $                      | (0.02      | ) |                        | $ | (0.02      | )
|                                       |  |                        |            |   |                        |   |            |  

At May 31, 2006 and 2005, approximately 5,150,000 and 3,105,000 potential common shares,
respectively, are excluded from the determination of diluted net loss per share, as the effect of such shares is non-dilutive. There are 5,150,000 Common Stock equivalents in the form of options to purchase Common Stock outstanding at year end which
may dilute future net earnings per share.

Financial Instruments

Financial instruments include cash, accounts receivable, accounts payable, accrued liabilities, line of credit and notes payable. The amounts reported for
financial instruments are considered to be reasonable approximations of their fair values. The fair value estimates presented herein were based on market or other information available to management. The use of different market assumptions and/or
estimation methodologies could have a material effect on the estimated fair value amounts.

Recent Accounting
Pronouncements

In December 2004, the Financial Accounting Standards Board (FASB) released a revision to Statement of
Financial Accounting Standard (SFAS) No. 123, Accounting for Stock-Based Compensation (FAS 123R). FAS 123R addresses the accounting for share-based payment transactions in which an enterprise receives employee services
in exchange for (a) equity instruments of the enterprise or (b) liabilities that are based on the fair value of the enterprises equity instruments or that may be settled by the issuance of such equity instruments. The statement
eliminates the ability to account for share-based compensation transactions using APB Opinion No. 25, Accounting for Stock Issued to Employees, and generally requires instead



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that such transactions be accounted for using a fair-value-based method. The Company adopted FAS 123R effective with the year beginning June 1, 2006.
With the adoption of this new statement, we will recognize substantially more compensation expense than would have been recorded under APB 25.

In December 2004, the Financial Accounting Standards Board issued SFAS No. 151, Inventory Costs, an amendment of ARB No. 43, Chapter 4, which clarifies the accounting for abnormal amounts of idle facility expense,
freight, handling costs, and charges regardless of whether they meet the criterion of so abnormal that was originally stated in Accounting Research Bulletin No. 43, chapter 4. In addition, SFAS No. 151 requires that the
allocation of fixed production overheads to conversion costs be based on the normal capacity of the production facilities. SFAS No. 151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. Management
does not expect the implementation of this new standard to have a material impact on its financial position, results of operations or cash flows.

In December 2004, the Financial Accounting Standards Board Statement issued SFAS No. 153, Exchanges of Nonmonetary Assets - an amendment of APB Opinion No. 29, which amends Opinion 29 by eliminating the exception for
nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the
entity are expected to change significantly as a result of the exchange. SFAS No. 153 is effective for a fiscal year beginning after June 15, 2005, and implementation is done prospectively. Management does not expect the implementation of
this new standard to have a material impact on its financial position, results of operations and cash flows.

In May 2005, the FASB issued
Statement of Financial Accounting Standards No. 154, Accounting Changes and Error Corrections, (SFAS 154). SFAS 154 replaces APB Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting
Accounting Changes in Interim Financial Statements, and changes the requirements for the accounting for and reporting of a change in accounting principle. We are required to adopt SFAS 154 in 2007. Our results of operations and financial
condition will only be impacted by SFAS 154 if the Company implements changes in accounting principles that are addressed by the standard or correct accounting errors in future periods.

Reclassification

Certain amounts in the 2005 consolidated financial statements have been reclassified to conform with the 2006 presentation.

NOTE C 
LIQUIDITY AND GOING CONCERN

The accompanying consolidated financial statements have been prepared in conformity with accounting
principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. We have recurring net losses



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including a net loss in 2006 of $803,805 and has cash used in operations in 2006 of $725,822. In addition, at May 31, 2006 we had an accumulated
deficit, stockholders deficiency and working capital deficit of $23,344,208, $209,211 and $9,930, respectively. These conditions raise substantial doubt about our ability to continue as a going concern. These consolidated financial statements
do not include any adjustments to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of these uncertainties.

The Board of Directors has evaluated the financial condition of the Company and our prospects as a wine importer and distributor. The Board has
determined that the interests of our stockholders might be better served by restructuring the Company or changing our business plan. As a result, on June 22, 2006, we entered into an asset purchase agreement with Qualmax, Inc., a Delaware
corporation (Qualmax), which agreement was amended as of August 28, 2006, to acquire all of the assets of Qualmax in exchange for the assumption of the Qualmax liabilities and the issuance to Qualmax of shares of voting preferred
stock of the Company. Following consummation of the transaction, Qualmax will own approximately 86% of the voting power of the Company, and the operations of Qualmax will be the operations of the Company. Our current Board of Directors and officers
will also be replaced with designees of Qualmax (provided that one Board member shall be designated by Selvin Passen, M.D., our Chairman of the Board and a principal stockholder).

As a condition to and simultaneously with the asset acquisition, we will sell all of the shares of our wholly owned subsidiary International Importers,
Inc. (III), the entity through which we currently conduct all of our operations. The III shares will be sold to International Spirits, LLC, a Nevada limited liability company (International Spirits), pursuant to a stock
purchase agreement entered into among the Company, International Spirits and III as of June 22, 2006, and amended as of August 28, 2006. The purchaser will pay us $500,000 cash in consideration for the acquisition. International Spirits is
controlled by Dr. Passen.

Consummation of these transactions is subject to a number of contingencies. One contingency to both
agreements is that Dr. Passen make an additional investment in the Company of $1,500,000 in exchange for 7,500,000 shares of our common stock. No assurance can be given that consummation of these transactions will occur.

NOTE D  CERTIFICATE OF BANK DEPOSIT AND LETTER OF CREDIT

The Company owns a $25,000 Certificate of Deposit which matures on July 12, 2007 and collateralizes a $25,000 Standby Letter of Credit. As of May 31, 2006 the Letter of Credit has not been used. This
Certificate of Deposit is reflected on the accompanying consolidated Balance Sheet as a non-current restricted asset.

NOTE E  INVENTORY

Inventory of $250,035 at May 31, 2006 consisted of all finished goods.



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During 2006, the Company purchased equipment at a discount for $18,875 and then exchanged such equipment
for inventory valued at $48,555. The Company recognized a gain of $29,680.

NOTE F  INTANGIBLE ASSETS AND IMPAIRMENT CHARGE

In May 2003, the Company purchased the rights, title and ownership of the formulation for Xtreme Delight ready to drink cocktails. This
intangible asset is subject to an annual impairment testing. Since acquisition and since our infusion of capital in May 2004, we have evaluated the marketing of and potential for this product. However, the product was never fully launched due to
cash flow limitations and operating losses.

In December 2004, management has been discussing with MLD, the development and marketing of an
already established and complete line of ready to drink cocktails to be marketed under the label Norms Extreme Delight. Because this brand has already been developed and is part of a complete line of ready to drink cocktails, we
have entered into an agreement with MLD to jointly own this line of products called Norms Extreme Delight. The Company and MLD have an oral agreement to jointly market the product. Based on these facts, management conducted a re-evaluation of
the fair value of the recorded formulation intangible for Xtreme Delight and determined an impairment existed. The intangible was written down to $0 for the quarter ended February 28, 2005 resulting in an impairment expense of
$300,000 charged to operations.

NOTE G  NOTES AND LOANS PAYABLE

The Company entered into a line of credit on November 8, 2005 with Stonegate Bank for $200,000 at an interest rate of 7.50%. The interest rate is subject to change based on changes on the Wall Street Journal
Prime Rate as published weekly in the morning section of the Wall Street Journal adjusted each day. The interest rate to be applied to the unpaid principle balance will be the rate of 0.500 percentage points over the index. Advances may
be requested either orally or in writing. The note is secured by inventory, chattel paper, accounts, equipment and general intangibles. Selvin Passen has guaranteed this note. The note is due on demand and the Company pays regular monthly payments
of interest which began December 8, 2005. As of May 31, 2006, the Company has a balance due of $196,725.

The Company paid loan
fees totaling $1,725 which is being amortized through October 2006.

On April 26, 2006 New World Brands, Inc. entered into a
promissory note with Selvin Passen, who is chairman of the board and largest stockholder. The interest rate is based on the prime rate as published by CitiBank, N.A. Interest payments are due each month commencing on June 1, 2006. The principle
amount plus any unpaid interest is due in one balloon payment on April 1, 2008.

International Importers, Inc. entered into five
promissory notes dating from March 30, 2006 through May 24, 2006 totaling $200,000 with Selvin Passen. The interest rate for all the



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notes is based on the prime rate as published by Citibank, N.A. Interest payments are due each month commencing May 1, 2006, June 1, 2006 and
July 1, 2006. The principle amount plus any unpaid interest is due in one balloon payment on April 1, 2008 for $170,000 of the notes and July 1, 2008 for the $30,000 note.

The total balance of $225,000 due to Selvin Passen is reflected as a long term liability in the accompanying consolidated financial statements.

NOTE H  CONTINGENCIES

The
Company from time to time may be party to various litigation, claims or assessments. Management believes that the ultimate outcome of these matters will not have a material affect on our financial position or results of operations.

We are a defendant with a former employee of the Company whereby the former employee is seeking damages for unpaid salary of $1,000 a week from
September 15, 1998 to October 17, 2001 and for 20,000 shares of our stock in which he alleges he tendered a check to the Company in the amount of $2,000. In August 2005 the Company prevailed and the court ordered the plaintiff to pay the
Company $4,673 in attorneys fees and costs.

The manufacturing, importation, distribution and sale of alcohol-based beverages is
subject to regulation by the federal government through the Department of the Treasury, Bureau of Alcohol, Tobacco and Firearms (BATF), as well as by state and local regulatory agencies. Suppliers, distributors and retailers must be
properly licensed in order to sell alcohol-based beverages. Any changes in laws or regulations or violations thereof could adversely affect our operations.

The Board of Directors has evaluated the financial condition of the Company and our prospects as a wine importer and distributor. The Board has determined that the interests of our stockholders might be better served
by restructuring the Company or changing our business plan. As a result, on June 22, 2006, we entered into an asset purchase agreement with Qualmax, Inc., a Delaware corporation (Qualmax), which agreement was amended as of
August 28, 2006, to acquire all of the assets of Qualmax in exchange for the assumption of the Qualmax liabilities and the issuance to Qualmax of shares of voting preferred stock of the Company. Following consummation of the transaction,
Qualmax will own approximately 86% of the voting power of the Company, and the operations of Qualmax will be the operations of the Company. Our current Board of Directors and officers will also be replaced with designees of Qualmax (provided that
one Board member shall be designated by Selvin Passen, M.D., our Chairman of the Board and a principal stockholder).

As a condition to and
simultaneously with the asset acquisition, we will sell all of the shares of our wholly owned subsidiary International Importers, Inc. (III), the entity through which we currently conduct all of our operations. The III shares will be
sold to International Spirits, LLC, a Nevada limited liability company (International Spirits), pursuant to a stock purchase agreement entered into among the Company, International Spirits and III as of June 22, 2006, and amended as
of August 28, 2006. The purchaser will pay us $500,000 cash in consideration for the acquisition. International Spirits is controlled by Dr. Passen.



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Consummation of these transactions is subject to a number of contingencies. One contingency to both
agreements is that Dr. Passen make an additional investment in the Company of $1,500,000 in exchange for 7,500,000 shares of our common stock. No assurance can be given that consummation of these transactions will occur.

NOTE I  STOCKHOLDERS EQUITY (DEFICIENCY)

Common Stock

In April 2005 the Company issued 200,000 common shares upon the exercise of options for
$20,000.

Consulting Agreements and Option Grants

During the year ended May 31, 2005, the Company recorded an amortization expense of $12,291 relating to options granted in years prior to 2005. The
expense was being recorded ratably over the term of each agreement and was fully amortized as of May 31, 2005.

In November 2004, the
Company granted 325,000 options to purchase the Companys common stock at an exercise price of $0.10 per share which expires on June 30, 2005 pursuant to an amended service agreement. The options were valued at $68,574 (based on a
Black-Scholes valuation using zero dividends and 68% volatility, interest rate of 2.427% and a term of 190 days) and expensed immediately since they were for services previously rendered. The consultant performed services related to product
promotion, general business, financing, and public/investor relations.

Under an agreement dated March 23, 2005 the Company acquired
certain intellectual property ownership rights for various product brands from Maple Leaf Distillers, Inc., a related party. As payment for such rights the Companys Chairman and principal stockholder transferred 750,000 common stock options
held by him to Maple Leaf Distillers, Inc. The options were valued at $149,750 using a Black-Scholes option pricing method, using the following assumptions: 292% volatility, 4.3% interest rate, zero dividends and 4.156 expected term. The Company
charged operations $149,750, which is included in General and Administration expenses which amount was treated as contributed capital.

During 2006 and 2005 variable options were repriced resulting in an expense of $200 in 2006 and a credit to expense of $346,800 in 2005 (see discussion below).

For the year ended May 31, 2006, we have granted 2,850,000 options to purchase our Common Stock in exchange for services rendered. The employees and consultant performed services related to product promotion,
general business, financing, and public/investor relations. The total consisted of 2,550,000 options granted to employees at an exercise price equal to the fair value of the common stock on the grant date resulting in no compensation expense under
the



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intrinsic value method of APB 25. The remaining 300,000 were granted to a non-employee resulting in an immediate expense of $45,000 based on a fair value
method using a Black-Scholes option pricing computation with the following assumptions: common stock price of $0.18, exercise price of $0.18, volatility of 312%, dividends of zero, discount rate of 4.82%.

Contributed Services

During 2006
and 2005 our former Chief Executive Officer did not get paid a salary. We recorded an estimate of the services he provided as contributed capital with $10,000 in 2006 and $24,000 in 2005.

Subscription Note Receivable

The
Company had been carrying a subscription note receivable as a component of equity and has been attempting to collect on it. During 2006 the Company expensed the full amount of the note plus accrued interest of $126,173 as bad debt expense. (see Note
K)

Stock Option Plans

1. We have a Performance Equity Plan (the Plan) under which it may grant incentive and nonqualified stock options, stock appreciation rights, restricted stock awards, deferred stock, stock reload options,
and other stock-based awards to purchase up to 600,000 shares of Common Stock to officers, directors, key employees, and consultants. The Company may not grant any options with a purchase price less than fair market value of Common Stock as of the
date of grant.

2. During October 2001, the Company adopted a stock option plan (2001 Plan) whereby we have reserved 5,000,000
shares of its Common Stock for purposes of granting options to purchase such shares pursuant to the Plan. Options are granted to its officers and employees by the Board of Directors and to members of the Board on a non-discretionary basis, provided
that the exercise price of the options is equal or greater than the fair market price of our Common Stock on the date the option is granted. The Plan terminates 10 years from its effective date.

For the years ended May 31, 2006 and 2005, a summary of the status of stock options was as follows:



|                                         |  |                 |   |      |                              |      |                 |           |   |                              |   |     
|---------------------------------------- |  | --------------- | - | ---- | ---------------------------- | ---- | --------------- | --------- | - | ---------------------------- | - | ----
|                                         |  | 2006            |   | 2005
|                                         |  | Number ofShares |   |      | WeightedAverageExercisePrice |      | Number ofShares |           |   | WeightedAverageExercisePrice
|Outstanding-beginning of year            |  | 3,105,000       |   |      | $                            | 0.40 |                 | 4,155,000 |   |                              | $ | 0.38
|Granted                                  |  | 2,850,000       |   |      | $                            | 0.21 |                 | 325,000   |   |                              | $ | 0.10
|Exercised                                |  | 0               |   |      | $                            | 0.00 |                 | (200,000  | ) |                              | $ | 0.10
|Expired                                  |  | (555,000        | ) |      | $                            | 0.10 |                 | (400,000  | ) |                              | $ | 0.48
|Cancelled                                |  | (250,000        | ) |      | $                            | 0.10 |                 | (775,000  | ) |                              | $ | 0.10
|                                         |  |                 |   |      |                              |      |                 |           |   |                              |   |     
|Outstanding and exercisable- end of year |  | 5,150,000       |   |      | $                            | 0.34 |                 | 3,105,000 |   |                              | $ | 0.40
|                                         |  |                 |   |      |                              |      |                 |           |   |                              |   |     



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The following table summarizes option data as of May 31, 2006:



|            |  |                   |  |                                         |  |                              |  |                  
|----------- |  | ----------------- |  | --------------------------------------- |  | ---------------------------- |  | -----------------
|            |  | NumberOutstanding |  | WeightedAverageRemainingContractualLife |  | WeightedAverageExercisePrice |  | NumberExercisable
|$0 to $0.99 |  | 5,150,000         |  | 4.20                                    |  | 0.34                         |  | 5,150,000        
|$1 to $1.99 |  |                  |  |                                        |  |                             |  |                 
|$2 to $2.99 |  |                  |  |                                        |  |                             |  |                 
|            |  |                   |  |                                         |  |                              |  |                  
|            |  | 5,150,000         |  |                                         |  |                              |  | 5,150,000        
|            |  |                   |  |                                         |  |                              |  |                  

Under FASB Interpretation No, 44, Accounting for Certain Transactions Including Stock Compensation
(An interpretation of APB No.25), our repriced options must be valued on a quarterly basis, and the compensation cost must be recognized and adjusted quarterly for vested options or ratably over the vesting period for unvested options. Repriced
options covering a total of 0 shares of our Common Stock were fully vested on issuance and are exercisable at $0 per share at May 31, 2006. On May 31, 2006, the closing price of our Common Stock was $0.23 per share. The increase in market
price from the end of the prior year resulted in an expense adjustment of $200 for the year ended May 31, 2006, adjusting the previously recorded compensation adjustment for the year ended May 31, 2005. As long as the repriced options
remain outstanding, the compensation adjustment remains subject to ongoing quarterly adjustments based on changes in the market price of our Common Stock. There are no longer any repriced options outstanding as of May 31, 2006.

NOTE J  INCOME TAXES

Our tax expense differs from the
expected tax expense (benefit) for the years ended May 31, 2006 and 2005 (computed by applying the Federal Corporate tax rate of 35% and State tax rate of 5% to loss before taxes), as follows:



|                                          |  |      |          |   |      |   |          |  
|----------------------------------------- |  | ---- | -------- | - | ---- | - | -------- | -
|                                          |  | 2006 |          |   | 2005 |  
|Computed expected tax expense (benefit) |  | $    | (321,522 | ) |      | $ | (319,213 | )
|                                          |  |      |          |   |      |   |          |  
|Stock based expenses                      |  |      | 50,549   |   |      |   | (138,720 | )
|                                          |  |      |          |   |      |   |          |  
|Contributed services                      |  |      | 4,000    |   |      |   | 9,600    |  
|                                          |  |      |          |   |      |   |          |  
|Other                                     |  |      | (11,249  | ) |      |   |         |  
|                                          |  |      |          |   |      |   |          |  
|Change in valuation allowance             |  |      | (278,222 | ) |      |   | (448,333 | )
|                                          |  |      |          |   |      |   |          |  
|                                          |  | $    |         |   |      | $ |         |  
|                                          |  |      |          |   |      |   |          |  



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The effects of temporary differences that gave rise to significant portions of deferred tax assets and liabilities at
May 31, 2006 are as follows:



|                                       |  |   |            |  
|-------------------------------------- |  | - | ---------- | -
|Deferred tax assets:                   |  |   |            |  
|Net operating loss carry forward       |  | $ | 4,443,207  |  
|                                       |  |   |            |  
|Adjustment to tax basis (of reporting) |  |   | (32,761    | )
|                                       |  |   |            |  
|Impairment loss                        |  |   | 120,000    |  
|                                       |  |   |            |  
|Total gross deferred tax assets        |  |   | 4,530,446  |  
|                                       |  |   |            |  
|Less valuation allowance               |  |   | (4,530,446 | )
|                                       |  |   |            |  
|Net deferred tax assets                |  | $ |           |  
|                                       |  |   |            |  

For the years ended May 31, 2006 and 2005, the Company had no current tax expense and a
deferred tax benefit of approximately $278,222 and $448,333. The deferred tax benefit of $278,222 was offset by an increase to the valuation allowance for the same amount, resulting in no income tax expense.

At May 31, 2006, the Company had a deferred tax asset of approximately $4,530,446, which had a full valuation allowance taken against it.

We have a net operating loss carryforward of approximately $11,018,018 at May 31, 2006, which can be used to offset future taxable
income through 2025.

The Company believes there is a limitation on the usage of Federal net operating losses under Internal Revenue Code
Section 382.

NOTE K  RELATED PARTY TRANSACTIONS

The Chairman of the Board owns 22% of Maple Leaf Distillers, Inc.,(MLD) a supplier for the Company. Selvin Passen, the Chairman of the Board, was a Board Director of Maple Leaf Distillers, Inc. until July 2005. Mark
Weber, Chief Financial Officer, provided consulting services to Maple Leaf Distillers, Inc. as well. Purchases of supplies from Maple Leaf Distillers, Inc. included in cost of goods sold approximated $239,811 and $104,402 for the fiscal years 2006
and 2005, respectively. Maple Leaf Distillers, Inc. also owns 5,500,000 shares of our Common Stock and warrants to purchase 1,500,000 additional shares, which represent approximately 15% of the total shares outstanding at May 31, 2006. Maple
Leaf Distillers, Inc. is therefore a principal stockholder of the Company.

For the fiscal years ended May 31, 2006 and May 31,
2005 MLD was paid $259,620 and $127,474, respectively, for product, freight, marketing, and travel. We owed this related party $46,254 as of May 31, 2006 which is included in Accounts Payable-Related Party.

During the month of December 2005, Selvin Passen, our Chairman of the Board and largest stockholder, has initiated certain legal proceedings against
Maple Leaf Distillers, Inc., our second largest stockholder, and Maple Leaf Distillers, Inc. principals Costas Ataliotis, a former



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Director and Chief Executive Officer of the Company, and David Wolinsky. On December 6, 2005, Dr. Passen caused to be filed in Winnipeg, Canada,
various Statements of Claim against, among others, Maple Leaf Distillers, Inc. On December 19, 2005, Dr. Passen filed a Complaint in Broward County, Florida, against, among others, Costas Ataliotis. Finally, Dr. Passen has filed a
petition in Winnipeg, Canada, to have Maple Leaf Distillers, Inc. involuntarily adjudged bankrupt.

Over the last eighteen months,
Dr. Passen, individually or through affiliates, loaned significant sums of money to Maple Leaf Distillers, Inc. These amounts were not re-paid. Dr. Passen alleges he is owed in excess of $2,000,000. In addition, Dr. Passen also
invested in Maple Leaf Distillers, Inc. through the acquisition of shares of Maple Leaf Distillers, Inc. In his complaint, Dr. Passen claims that fraudulent statements were made to him by Costas Ataliotis and his partner David Wolinsky to
induce him to invest money in Maple Leaf Distillers, Inc.

Maple Leaf Distillers, Inc. recently announced that it was in the process of
selling its assets to Angostura Limited (Angostura). Upon consummation of this transaction, certain secured creditors of Maple Leaf Distillers, Inc. would be repaid; however, certain of Maple Leaf Distillers, Inc. unsecured creditors,
like Dr. Passen, would not be repaid. Dr. Passen was concerned that the determination to sell Maple Leaf Distillers, Inc. assets to Angostura was an attempt to defraud, defeat or delay the creditors of Maple Leaf Distillers, Inc. which
include Dr. Passen. Thus, Dr. Passen determined, upon consultation with his counsel, that it was in his best interest to initiate the claims described above to protect his interest in Maple Leaf Distillers, Inc.

These actions were initiated by Dr. Passen on his own behalf and not on behalf of the Company. However, while attempting to work out a settlement
with Maple Leaf Distillers, Inc. and Ataliotis regarding his own claims, Dr. Passen also sought assurances from Maple Leaf Distillers, Inc. as to the continuity of the co-branding agreement between Maple Leaf Distillers, Inc. and the Company
upon consummation of the transaction with Angostura. Dr. Passen was never able to receive written confirmation of our ability to operate under the brand names upon consummation of the transaction with Angostura. Thus, while the initiation of
these claims against Maple Leaf Distillers, Inc. and Mr. Ataliotis is unfortunate, Dr. Passen believes that they are in his best interest. Moreover, Dr. Passen believes that he has also continued to exercise his fiduciary
responsibility to the Company and its stockholders by attempting to obtain assurances about the continuity of the co-branding agreement between Maple Leaf Distillers, Inc. and the Company.

The Company had an agreement with Maple Leaf Distillers, Inc., a related party distiller based in Canada (MLD), pursuant to which the Company
acts as an importer of the MLD line of alcoholic beverages in the United States. The Company and MLD have entered into a joint venture agreement pursuant to which they will jointly develop and market additional products for importation into the
United States. In this regard, we have gone to market with a new line of ready to drink cocktails called Norms Extreme Cocktails. This line of products was jointly developed and marketed by the Company and MLD. On January 13, 2006 MLD was
placed into receivership, then on April 5, 2006 filed for bankruptcy. Currently we do not have a contract with a manufacturer for our ready to drink cocktails.



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Under an agreement dated March 23, 2005 the Company acquired certain intellectual property ownership
rights for various product brands from Maple Leaf Distillers, Inc., a related party. As payment for such rights the Companys Chairman and principal stockholder transferred 750,000 common stock options held by him to Maple Leaf Distillers, Inc.
The options were valued at $149,750 using a Black-Scholes option pricing method, using the following assumptions: 292% volatility, 4.3% interest rate, zero dividends and expected term of 4.15 years. The Company charged operations $149,750, included
in General and Administration expenses which amount was treated as contributed capital.

We leased our office space on a month-to-month
basis from a company in which the current Chairman of the Board is a partner. For the fiscal years ended May 31, 2006 and May 31, 2005, rent payments to this related party totaled $17,063 and $13,335, respectively. In addition, we paid
$48,432 and $39,188 in 2006 and 2005 respectively, for accounting and office services to a company in which the current Chairman of the Board is a partner. We owed this related party $27 as of May 31, 2006 which is included in Accounts
Payable  Related Parties.

At May 31, 2006 we owed our Chief Executive Officer $225,000 in notes payable, and $4,674 in
accrued interest.

In July 2001, a consulting company owned by the daughter in law of the former Chairman of the Board, exercised stock
options to purchase 800,000 shares of the Companys Common Stock at $0.10 per share. The consulting company offset a $23,102 advance to the Company as a partial payment and the Company issued a three-year, interest-bearing note at prime plus 1%
for the remaining amount of $56,898. In October 2001, the consulting company exercised stock options to purchase 500,000 shares of the Companys common stock. The consulting company offset a $7,414 advance to the Company as a partial payment
and issued to the Company a three-year, interest-bearing note at the prime interest rate for the remaining $42,586. The consulting company has defaulted on its obligation under the note and the Company has initiated a lawsuit to collect the amount
due. During 2006 the Company expensed the full $126,173 of principal and accrued interest due as bad debt expense.

During 2006 and 2005
our former Chief Executive Officer did not get paid a salary. We recorded an estimate of the services he provided as contributed capital with $10,000 in 2006 and $24,000 in 2005.

NOTE L  VENDOR CONCENTRATIONS

We are dependent on a relatively small number of vendors as
suppliers. As a result, the loss of one or more of our vendors could have a material adverse effect on our business, financial condition and results of operations.

Our primary vendors are located outside of the United States. As of May 31, 2006 the vendors were in Mexico, Australia, Italy, and Spain.

We have an exclusive distributorship agreement with a Mexican company, which maintains a vineyard and produces various types of wines and other related
wine mixes. We



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have approval from the Federal Agency (Bureau of Alcohol, Tobacco, Firearms [BATF]) for the importation of wines into the United States from Mexico and
includes provisions for minimum annual quantity commitments. The agreement expires August 30, 2006 with a three-year renewal option, if agreeable by both parties. The penalty for not meeting minimum commitment is loss of exclusive
distributorship.

NOTE M  CONCENTRATIONS OF REVENUE AND ACCOUNTS RECEIVABLE

We are dependent on a relatively small number of distributors as customers. As a result, the loss of one or more of our distributors could have a material
adverse effect on our business, financial condition and results of operations

Sales for May 31, 2006 is made up of 43% Wine, 53%
Tequila, 4% Ready to Drink Cocktails and Spirits.

Sales for May 31, 2005 is made up of 36% Wine, 62% Tequila, 2% Ready to Drink
Cocktails and Spirits.

Sales to three major customers totaled 77% of our total net sales, made up of $447,200 (62%), $54,265 (8%) and
$51,199 (7%) in 2006.

Sales to three major customers totaled 70% of our total net sales, made up of $150,524 (29%), $149,475
(29%) and $62,894 (12%) in 2005.

Accounts Receivable at May 31, 2006 for three major customers totaled 72% of total
Accounts Receivable made up of $36,299 (37%), $17,652 (18%) and $16,870 (17%).

NOTE N  SUBSEQUENT EVENTS

New World Brands, Inc. (the Company) entered into an asset purchase agreement with Qualmax, Inc., a Delaware corporation, as of June 22,
2006, which agreement was amended as of August 28, 2006, to acquire all of the assets of Qualmax. In consideration for the acquisition of the Qualmax assets, we will assume the Qualmax liabilities and will issue to Qualmax shares of our voting
preferred stock. Following consummation of the transaction, Qualmax will own approximately 86% of the voting power of the Company. We anticipate that this transaction will be accounted for as a recapitalization of Qualmax.

As a condition to and simultaneously with the asset acquisition, we will sell all of the shares of its wholly owned subsidiary International Importers,
Inc. (III), the entity through which the Company currently conducts all of its operations. The III shares will be sold to International Spirits, LLC a Nevada limited liability company (International Spirits), pursuant to a
stock purchase agreement (the Stock Purchase Agreement) entered into among the Company, International Spirits and III as of June 22, 2006, and amended as of August 28, 2006. The purchaser will pay to the Company $500,000 cash
in consideration for the acquisition. International Spirits is controlled by Selvin Passen, M.D., Chairman of the Board and a principal stockholder of the Company.

Consummation of the these transactions is subject to a number of contingencies. One contingency to both agreements is that Dr. Passen make an additional investment in the Company of $1,500,000 in exchange for
7,500,000 shares of our common stock. No assurance can be given that consummation of these transactions will occur.

Qualmax is a
specialized IT business solutions provider, communications equipment manufacturer, and research and development company focused on the deployment of best of breed VolP (or voice over internet protocol) networks, virtual private networks, wireless
connectivity, direct call traffic routing and custom billing applications.



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Exhibit Index



|               |  |                                                                                                                                                   
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                                                       
|31.1           |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002                                                
|               | 
|31.2           |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002                                                
|               | 
|32.1           |  | Certification of Chief Executive Officer pursuant to 18 U.S.C., Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002
|               | 
|32.2           |  | Certification of Chief Financial Officer pursuant to 18 U.S.C., Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002