UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

(Mark One)

[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF1934
                  For the fiscal year ended: December 31, 2005

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

              For the transition period from _________ to _________

                        Commission file number: 000-27199

                          LION-GRI INTERNATIONAL, INC.
                 (Name of Small Business Issuer in Its Charter)

           Colorado                                       91-2015608
  ------------------------------                        ------------
 (State or Other Jurisdiction of                       (I.R.S. Employer
Incorporation or Organization)                      Identification No.)

801 Muncesti Street, Chisinau, Moldova                    MD-2029
----------------------------------------                  -------
(Address of principal executive offices)                (Zip Code)

Issuer's telephone number:  011 373-22-41-40-81
                            -------------------

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

     Title of each class      Name of each exchange on which registered
            None                                 None
     -------------------     -------------------------------------------

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

                     Common Stock, par value $.001 per share
                                (Title of Class)

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

         Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [x] No [ ]

         Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not 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. [X]

<PAGE>

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

         State issuer's revenues for its most recent fiscal year. $13,337,329
for the fiscal year ended December 31, 2005.

         State the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at which the
common equity was sold, or the average bid and asked prices of such common
equity, as of a specified date within the past 60 days. The aggregate market
value of the common equity held by non-affiliates computed at the closing price
of the registrant's common stock on April 14, 2006 is approximately $1,097,149

         On April 10, 2006, 46,665,000 shares of common stock are issued and
outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

         If the following documents are incorporated by reference, briefly
describe them and identify the part of the Form 10-KSB (e.g., Part I, Part II,
etc.) into which the document is incorporated: (1) any annual report to security
holders; (2) any proxy or information statement; and (3) any prospectus filed
pursuant to Rule 424(b) of the Securities Act of 1933 ("Securities Act"). The
listed documents should be clearly described for identification purposes (e.g.,
annual report to security holders for fiscal year ended December 24, 1990). Not
Applicable.

Transitional Small Business Disclosure Form (check one): Yes       No   X
                                                            -----     -----

Forward Looking Statements
--------------------------

Certain statements contained herein constitute "forward looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act") and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). These forward-looking statements can be identified
by the use of predictive, future-tense or forward-looking terminology, such as
"believes," "anticipates," "expects," "estimates," "plans," "may," "intends,"
"will," or similar terms. These statements appear in a number of places in this
report and include statements regarding the intent, belief or current
expectations of the Company, its directors or its officers with respect to,
among other things: (i) trends affecting the Company's financial condition or
results of operations, (ii) the Company's business and growth strategies (iii)
the Company's financing plans.

Investors are cautioned that any such forward-looking statements are not
guarantees of future performance and involve significant risks and
uncertainties, and that actual results may differ from these projected in the
forward-looking statements. The discussion of the financial condition and
results of operations of the Company should be read in conjunction with the
financial statements and notes related thereto included elsewhere in this
report.

<PAGE>

                                TABLE OF CONTENTS

PART I
 ITEM 1   -   DESCRIPTION OF BUSINESS..........................................1
 ITEM 2   -   DESCRIPTION OF PROPERTY..........................................4
 ITEM 3   -   LEGAL PROCEEDINGS................................................4
 ITEM 4   -   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..............5

PART II
 ITEM 5   -   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.........5
 ITEM 6   -   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION........6
 ITEM 7   -   FINANCIAL STATEMENTS............................................19
 ITEM 8   -   CHANGES IN AND DISCUSSIONS WITH ACCOUNTANTS ON ACCOUNTING AND
              FINANCIAL DISCLOSURE............................................19
 ITEM 8A  -   CONTROLS AND PROCEDURES.........................................19

PART III
 ITEM 9   -   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT..............20
 ITEM 10  -   EXECUTIVE COMPENSATION..........................................21
 ITEM 11  -   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..22
 ITEM 12  -   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................22
 ITEM 13  -   EXHIBITS........................................................23
 ITEM 14  -   PRINCIPAL ACCOUNTANT FEES AND SERVICES..........................24

FINANCIAL STATEMENTS .................................................F-1 - F-21

<PAGE>

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS.
---------------------------------

General. Lion-Gri International, Inc. (formerly Napoli Enterprises, Inc.) and
its subsidiaries (collectively, the "Company") produce, market and sell premium
Moldovan wines in countries outside Moldova, with approximately 90% percent of
revenue coming from sales to the Russian Federation.

The Company was incorporated under the laws of the State of Colorado in January
1999 as IDS Internet Distribution systems Inc. In July 1999 the Company changed
its name to Denmans.com Inc. The business of the Company was to develop an
electronic website for the purpose of retail sale of jewelry and jewelry related
items. In November 2001, the Company changed its name to Impulse Media
Technologies, Inc. and shifted its business purpose. In November 2002, the
Company changed its name to Napoli Enterprise, Inc.

In June 2002, the Company incorporated a new subsidiary, Napoli Resources (USA)
Inc., to explore new business opportunities. As of December 31, 2005, the new
subsidiary has had no transactions.

In July 2004, the Company entered into a stock purchase agreement (the "Stock
Purchase Agreement") with the shareholders ("Novotech Shareholders") of Novotech
Holdings, Inc. ("Novotech"), a corporation organized under the laws of the
British Virgin Islands. Pursuant to the Stock Purchase Agreement the Novotech
Shareholders acquired the common stock constituting approximately 87% of
Napoli's issued and outstanding stock. The Novotech Shareholders together owned
100% of the issued and outstanding capital stock of Novotech. Novotech, in turn,
owns an approximate 99% ownership interest in Lion-Gri, S.R.L. ("Lion-Gri"), a
company organized under the laws of the Republic of Moldova which is engaged in
the production and sale of wine.

Pursuant to the Stock Purchase Agreement, the Novotech Shareholders sold to
Napoli approximately 90% of the issued and outstanding capital stock of Novotech
and thereby a controlling indirect ownership interest in Lion-Gri. As
consideration for the transfer of a controlling interest in Novotech and
Lion-Gri, the Company issued to the Novotech Shareholders 34,474,451
newly-issued shares of common stock of Napoli constituting approximately 87% of
Napoli's outstanding capital stock after such issuance on a fully-diluted basis.
As a result of the acquisition Lion-Gri is now the operating business of the
Company.

The Company's subsidiary, Lion-Gri, a limited liability company in the Republic
of Moldova, commenced operations in 1998 and is 99.97% owned by Novotech with
the remaining .03% owned by Grineva S.R.L., a limited liability company in the
Republic of Moldova controlled by the Company's President, Gregory Sonic.
Additionally, Lion-Gri acquired controlling interest in Botritis S.A. (50.3%), a
Moldovan entity in the fiscal year 1998.

Lion-Gri Plus SRL was incorporated on April 10, 2004 as a limited liability
company in the Republic of Moldova and is a wholly-owned subsidiary of Lion-Gri,
with operations commencing in 2004.

                                       1
<PAGE>

Suppliers. Generally, a significant amount of grapes are not produced from newly
planted vines or vines which are grafted to a new variety. As several of the
Company's vineyards are young (newly planted in last three (3) years), the
vineyards will only begin to bear grapes at full capacity in two (2) years,
subject to some variation due to the effects of factors such as weather
conditions, geographic location, variety of grape grown, vine density, quality
and type of soil and water quality.

As a result, the Company purchases more than 53% of the wine raw material used
in its wine production from third party suppliers, including Botritis S.A.,
Tomai Vin S.A., Vinar S.A., Generallv inproduct S.A. and Vierul-Vin S.R.L., each
of which is located in Moldova.

Products. Lion-Gri is a wine producer operated out of the Republic of Moldova
with its primary market in Russia and Western Europe. The wine industry in
Moldova is among the most historically well established in all of the former
Soviet Union. Lion-Gri is among the largest wine producers in Moldova. Lion-Gri
currently markets and sells over 120 varieties of wine including red and white
varietals, cognac, champagne, and desert wine. The Company also introduced a
brandy line to the Russian market in 2004.

Sales. Two customers, Vinnii Mir and Rusimport Ltd., accounted for approximately
90% of Company sales for the years ended December 31, 2005 and 2004. The primary
market for the Company's wines is the Russian Federation, which accounts for
approximately 90% of the Company's sales. The Company exports its remaining
products, in varying amounts, to the United States, Poland, Ukraine, Belarus,
Czech Republic, Turkey, Belgium, the Netherlands, and Luxembourg, Germany and
Taiwan. The distribution strategies in each country are conducted and
implemented by the Company's importers.

The Company's operations are conducted in the Republic of Moldova. Accordingly,
the Company 's business, financial condition, and results of operations maybe
influenced by the political, economic, and legal environments in the Republic of
Moldova, and by the general state of the Moldovan economy.

Seasonality. The wine making business is seasonal. The Company normally produces
substantially all of its wine in September and October of each year, and
receives the majority of its cash from wine sales in the third quarter.

Government and Environmental Regulation. The Company's operations in the
Republic of Moldova are subject to considerations and significant risks not
typically associated with companies operating in North America and Western
Europe. These include risks associated with, among others the political economic
and legal environments and foreign currency exchange. The Company's results may
be adversely affected by changes in the political and social conditions in the
Republic of Moldova, and by changes in governmental policies with respect to
laws and regulations, anti-inflationary measures, currency conversion and
remittance abroad, and rates and methods of taxation among other things.

Administrative Offices. The Company's main offices and each winery are located
at the Lion-Gri facilities in Chisinau City in the Republic of Moldova.

                                       2
<PAGE>

The Company does not currently maintain an office in the United States, but does
anticipate the need for an office within the New York City area in the near
future.

Employees. The Company currently has 971 full time employees of which 40 people
serve in various managerial capacities, all of which are employed in the Company
facilities in Chisinau City in the Republic of Moldova.

Risk Factors. In connection with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, important risk factors are identified
below that could affect the Company's financial performance and could cause the
Company's actual results for future periods to differ materially from any
opinions or statements expressed with respect to such future periods in any
current statements. The Company undertakes no obligation to publicly revise any
forward-looking statements to reflect future events or circumstances. Such
factors, risks and uncertainties include, but are not limited to: the dependence
of the Russian Federation market for 90% of the Company's sales;

     o the  dependence on two customers for  approximately  90% of the Company's
     sales;

     o the requirement to commit substantial capital to vineyards and processing
     facilities in advance of realizing income on such investments;

     o success in  planting,  cultivating  and  harvesting  of existing  and new
     vineyards, including the effects of weather conditions;

     o effects of  variances  in grape yields and prices from harvest to harvest
     due to agricultural,  market and other factors and relatively fixed farming
     costs;

     o the  potential  effect on the  Company's  vineyards of certain  diseases,
     insects and pests;

     o success in, and the timing of, future acquisitions, if any, of additional
     properties  for  vineyard  development  and related  businesses  as well as
     variability in acquisition and development costs;

     o consumer  demand and  preferences  for the wine grape  varieties that the
     Company produces;

     o general  health and social  concerns  regarding  consumption  of wine and
     spirits;

     o the size and growth rate of the Moldovan wine industry;

     o the seasonality of the wine grape producing business;

     o  the   increases   or  changes  in   government   regulations   regarding
     environmental   impact,  water  use,  labor  or  consumption  of  alcoholic
     beverages;

     o the continued  reliance upon, and retention of, the executive  management
     members of the Sonic family, especially Gregory Sonic;

     o competition from other producers and wineries;

     o the availability of financing on terms acceptable to the Company; and

     o the Company's labor relations.

                                       3
<PAGE>

         As a material subsequent event, on March 1, 2006, we entered into a
share exchange agreement with Promotora Valle Hermosa, Inc. a Florida
corporation ("PROMOTORA"). In connection with the share exchange agreement, we
shall effect a 1 for 20 reverse split of our outstanding common stock.
Additionally, we will acquire 100% of the issued and outstanding securities of
PROMOTORA in exchange for the issuance of 3,000,000 post-reverse split shares of
common shares of the Company. PROMOTORA will issue a Promissory Note in favor of
the Company in the amount of $300,000 payable in six consecutive monthly
installments with prevailing interest, with first payment due within 30 days
after Closing. In connection with the share exchange agreement, certain
shareholders of the Company shall cancel 1,723,725 post-reverse split shares of
common stock. The closing date is expected to be prior to May 20, 2006.

Item 2. DESCRIPTION OF PROPERTY
-------------------------------

The Company's main offices and winery are at the Company facilities in Chisinau
City in the Republic of Moldova. The Company's telephone number in Moldova is
011 373-22-41-40-81. The Company anticipates that it will require an executive
office in Oveido, Florida in the near future as a result of the recent charges
in the Company's management.

Lion-Gri owns 2870 acres of agricultural land, leases 952 acres, all of which is
in Moldova, and 1509 acres of which are vineyards. The Company owns two plants
for primary wine making, with total capacity of approximately 20,000 tons of
grapes per year and a bottling wine factory with the capacity of approximately
50,000,000 bottles per year. The Company is also constructing wine-cellars with
100,000 square meters of total acreage for maturing of vines out of which 20,000
square meters are presently being actively used for maturing of wines and
production of sparkling wines. Substantially all of the Company's property,
plant and equipment serve as collateral for debt.

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

The Company is not a party to any pending legal proceedings, and no such
proceedings are known to be contemplated, except that in April 2005, the Company
received notice of service of process naming the Company in an action brought in
the Supreme Court of British Columbia. The plaintiff, Alexander Bardin, is
alleging that on or about January 3, 2002, he and the defendants, Marshall
MacLeod, Impulse Media Technologies (BC) Inc. and the Company, reached an
agreement wherein defendants would issue one million shares of the Company's
common stock to plaintiff, in consideration of which plaintiff was required to
pay defendants U.S.$100,000.00. Plaintiff alleges that although defendants
received plaintiff's payment, from the date of payment to July 15, 2002,
defendant's failed to deliver the shares and that since that time, defendants
have failed or refused to return the U.S. $100,000.00. The Company believes that
this action is without merit and intends to vigorously pursue the defense of
this action.

No director, officer or affiliate of the Company and no owner of record or
beneficial owner of more than 5.0% of the securities of the Company, or any
associate of any such director, officer or security holder is a party adverse to
the Company or has a material interest adverse to the Company in reference to
pending litigation.

                                       4
<PAGE>

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

No matters were submitted to a vote of security holders during the fourth
quarter of fiscal 2005.

                                     Part II
                                     -------

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

The following table sets forth the high and low bid prices for the periods
ending December 31, 2005 and December 31, 2004. All quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commissions, and may
not reflect actual transactions.



 2005            QUARTER                   HIGH                        LOW
                   4TH                     .13                         .06
                   3RD                     .13                         .06
                   2ND                     .27                         .07
                   1ST                     .22                         .08

 2004            QUARTER                   HIGH                        LOW
                   4TH                     .30                         .12
                   3RD                     .37                         .16
                   2ND                     .28                         .20
                   1ST                     .34                         .16

As of December 31, 2005, there were 107 holders of record of the Company's
Common Stock. At April 12, 2006, our closing stock price was $.08.

Recent Issuances of Unregistered Securities. On August 1, 2004, the Company
entered into a consulting agreement with a public relations firm. The term of
the agreement is two years. The Company must pay a monthly retainer of $10,000,
and additionally, the Company granted the consultants 1,900,000 shares of Common
Stock, 35% of which vested upon the execution of the agreement and the remainder
of which vested on February 5, 2005. On January 12, 2005, in partial payment of
the above, the Company issued 665,000 shares of its Common Stock to the public
relations firm.

The offer and sale of the securities in the foregoing transaction was exempt
from registration under the Act by virtue of Section 4(2) thereof and the rules
promulgated thereunder.

                                       5
<PAGE>

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
------------------------------------------------------------------

     Certain matters discussed in this Management's Discussion and Analysis of
Financial Condition and Plan of Operation are "forward-looking statements".
These forward-looking statements can generally be identified as such because the
context of the statement will include such words as the Company "believes,"
"anticipates," "expects," or words of similar meaning. Similarly, statements
that describe the Company's future operating performance, financial results,
plans, objectives or goals are also forward-looking statements. Such
forward-looking statements are subject to certain factors, risks and
uncertainties which could cause actual results to differ materially from those
currently anticipated. Such factors, risks and uncertainties include, but are
not limited to:

     o Success in  planting,  cultivating  and  harvesting  of existing  and new
     vineyards, including the effects of weather conditions,

     o Effects of  variances  in grape yields and prices from harvest to harvest
     due to agricultural,  market and other factors and relatively fixed farming
     costs,

     o The  potential  effect on the  Company's  vineyards of certain  diseases,
     insects and pests,

     o Success in, and the timing of, future acquisitions, if any, of additional
     properties  for  vineyard  development  and related  businesses  as well as
     variability in acquisition and development costs,

     o Consumer demand and preferences for the wine grape varieties we produce,

     o General  health and social  concerns  regarding  consumption  of wine and
     spirits,

     o The size and growth rate of the Moldovan wine industry,

     o Seasonality of the wine grape producing business,

     o Increases or changes in government regulations regarding environmental

     o impact, water use, labor or consumption of alcoholic beverages,

     o Competition from other producers and wineries,

     o The availability of financing on terms acceptable to us, and

     o Our labor relations.

     The following analysis of the results of operations and financial condition
of the Company should be read in conjunction with the consolidated financial
statements of Lion-Gri International, Inc. for the year ended December 31, 2005
and notes thereto contained herein.

                                       6
<PAGE>

OVERVIEW

     Lion-Gri International, Inc. (the "Company," or "Lion-Gri") was
incorporated under the laws of the State of Colorado in January 1999 as IDS
Internet Distribution Systems, Inc. In July 1999 the Company changed its name to
Denmans.com Inc. In November 2001, the Company changed its name to Impulse Media
Technologies, Inc. and shifted its business purpose. In November 2002, the
Company changed its name to Napoli Enterprise, Inc. On October 20, 2004, the
Company changed its name to Lion-Gri International, Inc.

     In July 2004, the Company entered into a stock purchase agreement (the
"Stock Purchase Agreement") with the shareholders (Novotech Shareholders") of
Novotech Holdings, Inc. ("Novotech"), a corporation organized under the laws of
the British Virgin Islands. Pursuant to the Stock Purchase Agreement the
Novotech Shareholders acquired Lion-Gri's common stock constituting
approximately 87% of the Lions-Gri's issued and outstanding stock. The Novotech
Shareholders together own 100% of the issued and outstanding capital stock of
Novotech. Novotech, in turn, owns a 99.97% ownership interest in Lion-Gri,
S.R.L. ("Lion-Gri S.R.L."), a company organized under the laws of the Republic
of Moldova which is engaged in the production and sale of wine.

     Pursuant to the Stock Purchase Agreement, the Novotech Shareholders sold to
Lion-Gri approximately 90% of the issued and outstanding capital stock of
Novotech and thereby a controlling indirect ownership interest in Lion-Gri. As
consideration for the transfer of a controlling interest in Novotech and
Lion-Gri, the Company issued to the Novotech Shareholders 34,474,451
newly-issued shares of common stock of Lion-Gri constituting approximately 87%
of Lion-Gri's outstanding capital stock after such issuance on a fully-diluted
basis. As a result of the acquisition Lion-Gri S.R.L. and its subsidiaries are
now the operating business of the Company.

     Lion-Gri is a wine producer operated out of The Republic of Moldova with
its primary market in Russia and Western Europe. The wine industry in Moldova is
among the most historically well-established in all of the former Soviet Union.
Lion-Gri is among the largest wine producers in Moldova. Lion-Gri currently
markets and sells over 120 varieties of wine including red and white varietals,
cognac, champagne, and desert wine. The primary market for the Company's wines
is Russia which accounts for in excess of 90% of the Company's sales.

REGULATORY AND ECONOMIC CONDITIONS IN MOLDOVA

     We produce all of our wines in Moldova, and as a result we may be affected
by changes in the regulatory and economic conditions in Moldova. The wine
industry is subject to extensive regulation by the Moldovan Ministry of
Agriculture and various foreign agencies, and local authorities. These
regulations and laws dictate such matters as licensing requirements, trade and
pricing practices, permitted distribution channels, permitted and required
labeling, advertising and relations with wholesalers and retailers. Any
expansion of our existing facilities or development of new vineyards or wineries
may be limited by present and future zoning ordinances, environmental
restrictions and other legal requirements.

     New regulations, requirements and/or increases in excise taxes, income
taxes, property and sales taxes or international tariffs, could reduce our
profits.

                                       7
<PAGE>

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

ECONOMIC CONDITIONS IN OUR KEY MARKETS

     We derived approximately 99% of our total revenue in the fiscal 2005 and
2004 from sales of our products outside Moldova, with approximately 90% of our
total revenue coming from sales in the Russian Federation. While the Russian
market will remain our principal channel of distribution for the foreseeable
future, over the last three years we have worked to lessen our dependence on
this market and increase our sales to other geographic areas. Our plan is to
attempt to reduce our reliance on sales in the Russian Federation by increasing
our sales to our other current markets and entering new markets, including the
United States. However, our business will remain heavily influenced by the
general economic conditions in the countries in which we currently do business,
especially the Russian Federation. A significant deterioration in these
conditions, including a reduction in consumer spending levels, could reduce our
sales. In addition, we are affected by political and economic developments in
any of the other countries where we market and distribute our products. Our
operations are also subject to the imposition of import, investment or currency
restrictions, including tariffs and import quotas or any restrictions on the
repatriation of earnings and capital.

                                       8
<PAGE>

FOREIGN EXCHANGE CONSIDERATIONS

     Because revenues from our operations in The Republic of Moldova accounted
for approximately 99% of our total operations for the fiscal year ended December
31, 2005 and the fiscal year ended December 31, 2004, respectively, how we
report net revenues from our Moldovan-based companies is of particular
importance to understanding our financial statements. We incur most of our
expenses in Moldovan lei, however, many of our sales are to customers outside of
Moldova and are therefore denominated in currencies other than the lei.
Additionally, we have certain bank loans that are denominated in U.S. dollars
and EUROS, and make certain purchases that are denominated in U.S. dollars and
EUROS. As a result, our operating results can be affected by changes in the
exchange rate between the lei and other currencies. Such exchange rates reflect,
and may change, as a result of changes in economic and political conditions in
Moldova.

     Transactions and balances originally denominated in U.S. dollars are
presented at their original amounts. Transactions and balances in other
currencies are converted into U.S. dollars in accordance with Statement of
Financial Accounting Standards (SFAS) No. 52, "Foreign Currency Translation,"
and are included in determining net income or loss. For foreign operations with
the local currency as the functional currency, assets and liabilities are
translated from the local currencies into U.S. dollars at the exchange rate
prevailing at the respective balance sheet date. Revenues and expenses are
translated at weighted average exchange rates for the period to approximate
translation at the exchange rates prevailing at the dates those elements are
recognized in the financial statements. Translation adjustments resulting from
the process of translating the local currency financial statements into U.S.
dollars are included in determining comprehensive loss.

     The functional currency of our Moldovan subsidiaries is the Moldovan Lei,
the local currency. The financial statements of the subsidiaries are translated
to U.S. dollars using period-end rates of exchange for assets and liabilities,
and average rates of exchange for the period for revenues, costs, and expenses.
Net gains and losses resulting from foreign exchange transactions are included
in the consolidated statements of operations. The cumulative translation
adjustment and effect of exchange rate changes on cash at December 31, 2005 was
not material.

                                       9
<PAGE>

RESULTS OF OPERATIONS
---------------------

Seasonality and Quarterly Results
---------------------------------

     We have experienced and expect to continue to experience seasonal and
quarterly fluctuations in our revenues. Because of the inherent seasonality of
our operations, we have historically reported our highest revenues and net
income in our third fiscal quarter as we sell most of our bulk wine in the third
quarter, immediately after crush, and perform many of our wine processing
services in the first and second quarters. As a result, we typically report
lower revenues and net income (loss) in the first and fourth fiscal quarters.

YEAR ENDED DECEMBER 31, 2005 COMPARED TO YEAR ENDED DECEMBER 31, 2004

Revenues
--------

     For the year ended December 31, 2005, we had consolidated revenues of
$13,337,329 as compared to $12,528,613 for the year ended December 31, 2004, an
increase of $808,716 or 6.5%. The increase in sales of our wines was
attributable to an increase in wine shipments to the Russian market during the
period. We had a slight increase in price of $.02 - $.03 per bottle. We continue
to seek increases in our revenues from the sale of our wines into the United
States markets. Currently, sales in the U.S. market were not significant.

Cost of Sales and Gross Profit
------------------------------

     For the year ended December 31, 2005, cost of sales amounted to $10,720,737
or 80.4% of net revenues as compared to $9,425,672 or 75.2% of net revenues for
the year ended December 31, 2004, an increase of 5.2%. This increase resulted
from increased revenues was proportional to the increase in our revenues.

     Gross profit is calculated by subtracting from total revenues the costs of
producing grapes and bulk wine that were sold, and costs related to the sales of
wine and wine-related merchandise. Gross profit for the year ended December 31,
2005 was $2,616,592 or 19.6% of revenues as compared to $3,102,941 or 24.8% of
revenues for the year ended December 31, 2004, a decrease of $486,349, or 15.7%.
The decrease was primarily due to increased revenues for the period offset by a
increase in the cost of grapes and other production costs. Our gross profit
margin is materially affected by the price we pay to purchase grapes and bulk
wine. In the harvest, which took place in the fall of 2005 the prices we paid
for grapes and bulk wine were generally higher than they were in 2004. The
grapes and bulk wine purchased in the fall of 2005 will produce wines that will
be marketed by us in 2006 and subsequent years. If we are not able to increase
the prices we charge our distributors to offset this higher cost of grapes and
bulk wine our gross profit percentage may decrease.

                                       10
<PAGE>

         It has not yet been determined what effect the construction and
completion of the Company's new winery facility will have on gross profit
margins during the remainder of fiscal 2005.

Operating Expenses
-------------------

         For the year ended December 31, 2005, selling and marketing expenses
were $1,262,823 as compared to $1,128,132 for the year ended December 31, 2004,
an increase of $134,691 or 11.9%. Selling and marketing expenses includes
transportation cost for wine delivery. We experienced an increase in
transportation costs of approximately $95,000. Additionally, we had an increase
in packaging and design of approximately $90,000 primarily due to increased
sales. For the year ended December 31, 2005, we reduced certain marketing costs
such as trade shows as compared to the previous period.

         For the year ended December 31, 2005, general and administrative
expenses were $782,472 as compared to $687,745 for the year ended December 31,
2004, an increase of $94,727 or 13.8%. We experienced an increase in
professional fees associated with our SEC filings of approximately $60,000 and
an increase in certain governmental taxes incurred by us of $80,000. This
increase was offset by a decrease in general and administrative expense due to
cost cutting measures.

         For the year ended December 31, 2005, non-cash consulting expenses were
$59,375 as compared to $277,083 for the year ended December 31, 2004, a decrease
of $217,708 or 78.6%. In 2004, we issued common shares to consultants for
business development and investor relations services which was amortized over
the service period.

         For the year ended December 31, 2005, other operating expenses were
$153,506 as compared to $591,995 for the year ended December 31, 2004, a
decrease of $438,489 or 74%. This decrease was primarily attributable to a
decrease in penalties and fines paid for late delivery of product.

Other Income (Expense)

            During the year ended December 31, 2005, the Company recorded other
income of $5,070. During the year ended December 31, 2004, we recognized other
income of $827,016. In 2004, we recognized other income of approximately
$737,000 related to the sale of certain trade secrets.

Interest Expense

            Interest expense, net was $591,891 for the year ended December 31,
2005 as compared to $514,760 for the year ended December 31, 2004, an increase
of $77,131 or 15% due to increased borrowings and excludes interest capitalized
on borrowings related to our property, plant an equipment.

Foreign currency gain (loss)

     Foreign currency gains were $198,158 for the year ended December 31, 2005
as compared to foreign currency loses of $(62,305) for the year ended December
31, 2004. This change related to the fluctuation of the Moldovan Lei against
other currencies.

                                       11
<PAGE>

OVERALL
-------
     We reported a net loss for the year ended December 31, 2005 of $18,267
compared to net income for the year ended December 31, 2004 of $666,726. This
translates to overall per-share income (loss) of $(0.00) for the year ended
December 31, 2005 compared to per-share income of $.01 for the year ended
December 31, 2004.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

     At December 31, 2005, we had a cash balance of $66,324 with substantially
of our cash balances located in Moldova.

     Our primary sources of cash have historically been funds provided by
internally generated cash flow and bank borrowings. We have made substantial
capital expenditures to redevelop our existing vineyard properties, to acquire
and develop new acreage, and to construct our wine-cellars with 100,000 square
meters of total acreage for maturing of vines out of which 20,000 square meters
are presently being actively used for maturing of wines and production of
sparkling wines. We intend to continue these types of expenditures. Cash
generated from operations has not been sufficient to satisfy all of our working
capital and capital expenditure needs. As a consequence, we have depended upon
and continue to rely upon, both short and long-term bank borrowings. The Company
had working capital at December 31, 2005 of $693,385 as compared to $828,604 at
December 31, 2004, a decrease of $135,219.

     Under the Company's historical working capital cycle, working capital is
required primarily to finance the costs of growing and harvesting its wine grape
crop. We normally produce substantially all of our wine in September and
October, and receive the majority of our cash from wine sales in the third
quarter. In order to bridge the gap between incurrence of expenditures and
receipt of cash from wine sales, large working capital outlays are required each
year. Historically, we have obtained these funds pursuant to credit agreements
with banks.

     We currently have borrowings under credit agreements that provide both
short-term and long-term funds. We have long-term credit agreements which are
secured by property, plant and equipment and inventory. At December 31, 2005,
the outstanding amount owed by the Company under these credit agreements was
approximately $4,994,000. Interest on the borrowings is due monthly at rates
ranging from 9% to 22%. At December 31, 2005, the weighted average interest rate
on these facilities was approximately 16%. Additionally, we have short-term
credit agreements which are secured by property, plant and equipment and
inventory. At December 31, 2005, the outstanding amount owed by the Company
under these short-term credit agreements was approximately $408,000. Interest on
the borrowings is due monthly at rates ranging from 11% to 22%. At December 31,
2005, the weighted average interest rate on these facilities was approximately
16%.

     During the year ended December 31, 2005 and 2004 our operations produced
positive cash flows, which we used during both periods to invest in property,
plant and equipment.

                                       12
<PAGE>

     Although no assurances can be given, management believes that the Company's
anticipated working capital levels and short-term borrowing capabilities will be
adequate to meet the Company's currently anticipated liquidity needs during the
next twelve months.

     Management anticipates that additional capital requirements will be needed
to support expected improvements in the Company's existing vineyard properties
and wine cellars and that this will result in the expenditure of the Company's
available cash and additional borrowing under credit lines and/or new
arrangements for term debt. The Company's planned vineyard development and
improvements are expected to require approximately $7.0 million in capital
investment over the next three years. In addition, the Company expects to invest
approximately $3.5 million in equipment purchases. Management believes it should
be able to obtain long-term funds from its present principal lender, but there
can be no assurance that the Company will be able to obtain financing when
required or that such financings will be available on favorable terms.

     Net cash provided by operations  was $1,740,120 for the year ended December
31, 2005, as compared to net cash provided by operations of $1,881,920 for the
year ended December 31, 2004. In 2005, we used cash to fund our net loss of
$18,267, the purchase of inventory of $1,382,098, advances to suppliers of
$243,051 and other current and non-current assets of $413,372, and the repayment
of related party payables of $417,791 offset by non-cash items such as
depreciation and amortization expense of $319,707, and stock-based consulting
expense of $59,375. Additionally, we had a decrease in accounts receivable of
$51,747, an increase in accounts payable and accrued expenses of $2,324,481,
received advances from customers of $1,052,217 and an increase in long-term
liabilities pf $426,002. Net cash provided by operations was $1,881,920 for the
year ended December 31, 2004. In 2004, we used cash to reduce our accounts
payable and accrued expense of $454,534, the repayment of related parties of
$156,770 and funded an increase in accounts receivable of $862,408 and other
current and non-current assets of $107,342 offset by net income of $666,726,
non-cash items such as depreciation and amortization expense of $328,135 and
stock-based consulting expense of $277,083. Additionally, we had lower levels of
inventories and advances to suppliers by 705,184 and received advances from
customers of $1,057,297 and advances from related parties of $407,265.

     Net cash used in investing activities for the year ended December 31, 2005
was $1,346,918 as compared to net cash used in investing activities for the year
ended December 31, 2004 of $2,891,885. For the year ended December 31, 2005, we
used cash for capital expenditures and the purchase of intangibles of $1,479,711
and $6,481, respectively, and received cash of $139,274 from the repayment of
related party notes receivable. For the year ended December 31, 2004, we used
cash for capital expenditures and the purchase of intangibles of $2,854,589 and
$38,319, respectively.

                                       13
<PAGE>

     Net cash used in financing activities were $(400,758) for the year ended
December 31, 2005 as compared to cash provided by financing activities of
$1,032,449 for the year ended December 31, 2004 and was primarily attributable
to our credit facilities and the repayment of related party loans.

     We currently have no material commitments for capital expenditures. Our
future growth is dependent on our ability to raise capital for expansion, and to
seek additional revenue sources. If we decide to pursue any acquisition
opportunities or other expansion opportunities, we may need to raise additional
capital, although there can be no assurance such capital-raising activities
would be successful.

CRITICAL ACCOUNTING POLICIES
----------------------------

     A summary of significant accounting policies is included in Note 1 to the
audited consolidated financial statements included herein. Management believes
that the application of these policies on a consistent basis enables the Company
to provide useful and reliable financial information about the company's
operating results and financial condition.

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates. Significant estimates in 2004
and 2004 include the allowance for doubtful accounts, the evaluation of
intangible assets, and the useful life of property, plant and equipment.

     We account for stock options issued to employees in accordance with the
provisions of Accounting Principles Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations. As such,
compensation cost is measured on the date of grant as the excess of the current
market price of the underlying stock over the exercise price. Such compensation
amounts, if any, are amortized over the respective vesting periods of the option
grant. We adopted the disclosure provisions of SFAS No. 123, "Accounting for

     Stock-Based Compensation" and SFAS 148, "Accounting for Stock-Based
Compensation -Transition and Disclosure", which permits entities to provide pro
forma net income (loss) and pro forma earnings (loss) per share disclosures for
employee stock option grants as if the fair-valued based method defined in SFAS
No. 123 had been applied. We account for stock options and stock issued to
non-employees for goods or services in accordance with the fair value method of
SFAS 123.

     Inventories are stated at the lower of cost or market on the weighted
average cost basis, and includes finished goods, raw materials, packaging
material and product merchandise. Finished goods include costs of raw materials
(grapes and bulk wine), packaging, labor used in wine production, bottling,
shipping and warehousing of winery facilities and equipment. In accordance with
general practice in the wine industry, wine inventories are included in current
assets, although a portion of such inventories may be aged for periods longer
than one year.

                                       14
<PAGE>

     Property, plant and equipment are carried at cost. The cost of repairs and
maintenance is expensed as incurred; major replacements and improvements are
capitalized. Costs incurred in developing vineyards, including interest costs,
are capitalized until the vineyards become commercially productive. When assets
are retired or disposed of, the cost and accumulated depreciation are removed
from the accounts, and any resulting gains or losses are included in income in
the year of disposition. In accordance with Statement of Financial Accounting
Standards (SFAS) No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets", the Company examines the possibility of decreases in the
value of property, plant and equipment when events or changes in circumstances
reflect the fact that their recorded value may not be recoverable.

     The Company follows the guidance of the Securities and Exchange
Commission's Staff Accounting Bulletin 104 for revenue recognition. In general,
the Company records revenue when persuasive evidence of an arrangement exists,
services have been rendered or product delivery has occurred, the sales price to
the customer is fixed or determinable, and collectability is reasonably assured.

RECENT ACCOUNTING PRONOUNCEMENTS
--------------------------------

            In December  2004,  the FASB issued FASB  Statement No. 123R,
Share-Based  Payment, an Amendment of FASB Statement No. 123" ("FAS No. 123R").
FAS No. 123R requires  companies to recognize in the statement of operations the
grant-date  fair  value of stock  options  and other  equity-based  compensation
issued  to  employees.  FAS No.  123R is  effective  for the first  fiscal  year
beginning after December 15, 2005. We are in process of evaluating the impact of
this pronouncement on our financial statements.

            In April 2005, the Securities and Exchange Commission's Office of
the Chief Accountant and its Division of Corporation Finance has released Staff
Accounting Bulletin (SAB) No.107 to provide guidance regarding the application
of FASB Statement No. 123 (revised 2004), Share-Based Payment. Statement No.
123(R) covers a wide range of share-based compensation arrangements including
share options, restricted share plans, performance-based awards, share
appreciation rights, and employee share purchase plans. SAB 107 provides
interpretative guidance related to the interaction between Statement No. 123R
and certain SEC rules and regulations, as well as the staff's views regarding
the valuation of share-based payment arrangements for public companies.

            In May 2005, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 154, "Accounting Changes
and Error Corrections-a replacement of APB Opinion No. 20 and FASB Statement No.
3" ("SFAS 154"). This Statement replaces APB Opinion No. 20, Accounting Changes,
and FASB Statement 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. This Statement applies to all voluntary
changes in accounting principle. It also applies to changes required by an
accounting pronouncement in the unusual instance that the pronouncement does not
include specific transition provisions. When a pronouncement includes specific
transition provisions, those provisions should be followed.

                                       15

<PAGE>

            APB Opinion No. 20 previously required that most voluntary changes
in accounting principle be recognized by including in net income of the period
of the change the cumulative effect of changing to the new accounting principle.
This Statement requires retrospective application to prior periods' financial
statements of changes in accounting principle, unless it is impracticable to
determine either the period-specific effects or the cumulative effect of the
change. When it is impracticable to determine the period-specific effects of an
accounting change on one or more individual prior periods presented, this
Statement requires that the new accounting principle be applied to the balances
of assets and liabilities as of the beginning of the earliest period for which
retrospective application is practicable and that a corresponding adjustment be
made to the opening balance of retained earnings (or other appropriate
components of equity or net assets in the statement of financial position) for
that period rather than being reported in an income statement. When it is
impracticable to determine the cumulative effect of applying a change in
accounting principle to all prior periods, this Statement requires that the new
accounting principle be applied as if it were adopted prospectively from the
earliest date practicable. This Statement shall be effective for accounting
changes and corrections of errors made in fiscal years beginning after December
15, 2005. We do not believe that the adoption of SFAS 154 will have a
significant effect on our financial statements.

            On June 29, 2005, the EITF ratified Issue No. 05-2, "The Meaning of
`Conventional Convertible Debt Instrument' in EITF Issue No. 00-19, `Accounting
for Derivative Financial Instruments Indexed to, and Potentially Settled in, a
Company's Own Stock.'" EITF Issue 05-2 provides guidance on determining whether
a convertible debt instrument is "conventional" for the purpose of determining
when an issuer is required to bifurcate a conversion option that is embedded in
convertible debt in accordance with SFAS 133. Issue No. 05-2 is effective for
new instruments entered into and instruments modified in reporting periods
beginning after June 29, 2005. The adoption of this pronouncement did not have a
material effect on our financial statements.

            In September 2005, Issue No. 05-4, "The Effect of a Liquidated
Damages Clause on a Freestanding Financial Instrument Subject to EITF Issue No.
00-19, `Accounting for Derivative Financial Instruments Indexed to, and
Potentially Settled in, a Company's Own Stock.'" EITF 05-4 provides guidance to
issuers as to how to account for registration rights agreements that require an
issuer to use its "best efforts" to file a registration statement for the resale
of equity instruments and have it declared effective by the end of a specified
grace period and, if applicable, maintain the effectiveness of the registration
statement for a period of time or pay a liquidated damage penalty to the
investor. The Company has adopted view C of this pronouncement. Accordingly, the
Company has bifurcated registration rights from their related free standing
financial instruments and recorded them at fair value. The Company has adopted
view C of this pronouncement, which has resulted in the registration rights
being bifurcated and accounted for at fair value and the common stock purchase
warrants classified as equity.

                                       16
<PAGE>

            In September 2005, the FASB ratified the Emerging Issues Task
Force's ("EITF") Issue No. 05-7, "Accounting for Modifications to Conversion
Options Embedded in Debt Instruments and Related Issues," which addresses
whether a modification to a conversion option that changes its fair value
affects the recognition of interest expense for the associated debt instrument
after the modification and whether a borrower should recognize a beneficial
conversion feature, not a debt extinguishment if a debt modification increases
the intrinsic value of the debt (for example, the modification reduces the
conversion price of the debt). This issue is effective for future modifications
of debt instruments beginning in the first interim or annual reporting period
beginning after December 15, 2005. We are currently in the process of evaluating
the effect that the adoption of this pronouncement may have on our financial
statements.

            In September 2005, the FASB also ratified the EITF's Issue No. 05-8,
"Income Tax Consequences of Issuing Convertible Debt with a Beneficial
Conversion Feature," which discusses whether the issuance of convertible debt
with a beneficial conversion feature results in a basis difference arising from
the intrinsic value of the beneficial conversion feature on the commitment date
(which is recorded in the shareholder's equity for book purposes, but as a
liability for income tax purposes), and, if so, whether that basis difference is
a temporary difference under FASB Statement No. 109, "Accounting for Income
Taxes." This Issue should be applied by retrospective application pursuant to
Statement 154 to all instruments with a beneficial conversion feature accounted
for under Issue 00-27 included in financial statements for reporting periods
beginning after December 15, 2005. We are currently in the process of evaluating
the effect that the adoption of this pronouncement may have on our financial
statements.

            Other accounting standards that have been issued or proposed by the
FASB or other standards-setting bodies that do not require adoption until a
future date are not expected to have a material impact on the consolidated
financial statements upon adoption.

OFF-BALANCE SHEET ARRANGEMENTS
------------------------------

            Under SEC regulations, we are required to disclose our off-balance
sheet arrangements that have or are reasonably likely to have a current or
future effect on our financial condition, changes in financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures or
capital resources that are material to investors. An off-balance sheet
arrangement means a transaction, agreement or contractual arrangement to which
any entity that is not consolidated with us is a party, under which we have:

     o Any obligation under certain guarantee contracts;

     o  Any  retained  or  contingent  interest  in  assets  transferred  to  an
unconsolidated entity or similar arrangement that serves as credit,

     o liquidity or market risk support to that entity for such assets;

     o Any  obligation  under  a  contract  that  would  be  accounted  for as a
derivative  instrument,  except  that  it is  both  indexed  to  our  stock  and
classified in stockholder's equity in our statement of financial position; and

     o Any obligation  arising out of a material variable interest held by us in
an  unconsolidated  entity that provides  financing,  liquidity,  market risk or
credit  risk  support to us, or  engages in  leasing,  hedging or  research  and
development services with us.

                                       17
<PAGE>

            As of the date of this report, we do not have any off-balance sheet
arrangements that we are required to disclose pursuant to these regulations. In
the ordinary course of business, we enter into operating lease commitments,
purchase commitments and other contractual obligations. These transactions are
recognized in our financial statements in accordance with generally accepted
accounting principles in the United States.

OPERATING RISK AND GOING CONCERN CONSIDERATIONS
-----------------------------------------------

(a)  Country risk

     Our operations are conducted in the Republic of Moldova. Accordingly, the
Group's business, financial condition, and results of operations may be
influenced by the political, economic, and legal environments in the Republic of
Moldova, and by the general state of the Moldovan economy.

     Our operations in the Republic of Moldova are subject to considerations and
significant risks not typically associated with companies in North America and
Western Europe. These include risks associated with, among others the political,
economic and legal environments and foreign currency exchange. Our results may
be adversely affected by changes in the political and social conditions in the
Republic of Moldova, and by changes in governmental policies with respect to
laws and regulations, anti-inflationary measures, currency conversion and
remittance abroad, and rates and methods of taxation among other things.

(b) Our future performance is dependent on its ability to retain key personnel

     Our performance is substantially dependent on the performance of our senior
management. In particular, the Company's success depends on the continued effort
of our Senior Management to maintain all contact with our Moldovan subsidiaries.
Our inability to retain Senior Management could have a material adverse effect
on our prospects, businesses, Moldovan operations, financial conditions.

(b) Going concern considerations

            The accompanying financial statements have been prepared assuming
that we will continue as a going concern. The Russian government may ban alcohol
imports from Moldova, claiming impurities in the drinks posed a threat to public
health. This raises substantial doubt about its ability to continue as a going
concern. Management believes that these claims are politically motivated and is
related to worsening relations with both the countries. Management believes that
these claims are false and that these issues will be resolved in the near
future. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

                                       18
<PAGE>

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

See Financial Statements beginning on page F-1.

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

FINANCIAL DISCLOSURE.
---------------------

There have been no disagreements with accountants on accounting matters or
financial disclosure during fiscal year ended December 31, 2005.

ITEM 8A. Controls and procedures
--------------------------------

     We carried out an evaluation as of the end of the period covered by this
Annual Report on Form 10-KSB for the year ended December 31, 2005, under the
supervision and with the participation of our management, including our former
chief executive officer and former chief financial officer, of the effectiveness
of the design and operation of our "disclosure controls and procedures," as such
term is defined under Exchange Act Rule 13a-15(e).

     Based on this evaluation, our chief executive officer and chief financial
officer concluded that, as of the end of the period covered by this report, such
disclosure controls and procedures were reasonably designed to ensure that
information required to be disclosed by us in the reports we file or submit
under the Exchange Act is: (a) recorded, processed, summarized and reported
within the time periods specified in the rules and forms of the Securities and
Exchange Commission, and (b) accumulated and communicated to our management,
including our chief executive officer and chief financial officer, as
appropriate to allow timely decisions regarding required disclosure.

     In designing and evaluating the disclosure controls and procedures, our
management recognized that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the
desired control objectives and in reaching a reasonable level of assurance our
management necessarily was required to apply its judgment in evaluating the
cost-benefit relationship of possible controls and procedures.

     There were no changes in our internal controls over financial reporting
during the fourth fiscal quarter for the fiscal year ended December 31, 2005,
that materially affected, or were reasonably likely to materially affect, our
internal controls over financial reporting.

                                       19
<PAGE>

                                    Part III
                                    --------

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

The directors and executive officers currently serving the Company are as
follows:

   Name                         Age                 Position(s) held
  ------                       -----               ------------------

Maria Gracia Rosales            27          President and Chairman of the Board

Maria-Fernanda Rosales          37          Director and Chief Financial Officer

Fanny P. Narvaez                44          Director and Secretary

The directors named above will serve until the next annual meeting of the
Company's stockholders. Thereafter, directors will be elected for one year terms
at the annual stockholders' meeting. Officers will hold their positions at the
pleasure of the board of directors, absent any employment agreement, of which
none currently exists or is contemplated. There is no arrangement or
understanding between any of the directors or officers of the Company and any
other person pursuant to which any director or officer was or is to be selected
as a director or officer.

Biographical Information
------------------------

PRESIDENT AND CHAIRMAN OF THE BOARD

Maria Gracia Rosales, Age 27, President and Chairman of the Board, Bachelor of
Arts degree, 2001, from University of San Francisco, Quito, Equador in
Gastronomy. Diplomas from Le Cordon Bleu, Paris, France in 2003 in French
cuisine and 2005 in Pastry. From July 2000 to August 2001, assistant in the
Import-Export Department of Progetrol CIA, Ltd.

                                       20
<PAGE>

DIRECTOR AND CHIEF FINANCIAL OFFICER

Maria-Fernanda Rosales, Age 37, Director and Chief Financial Officer, Bachelor
of Arts degrees from University of San Franciso, Quito, Equador, in Managerial
Communications, 1996, and from Tecnologico de Monterrey, Social Studies, 2000.
From 2001 to present has been Sales Manager of Promotora Valle Hermoso, Inc.,
Oviedo, Florida.

DIRECTOR AND SECRETARY
----------------------

Fanny P. Narvaez, Age 44, Director,  Secretary, Educated in Quito, Equador. From
2002-2004  Operations  Manager  of Segrest  Enterprises,  Quito,  Ecuador.  From
2005-2006  realtor  for Watson  Realty  Corp in Oviedo,  Floria.  Since 2006 has
served as Secretary to the Board of Directors of Promotora Valle Hermoso,  Inc.,
Oviedo, Florida.

Committees
----------

The Company does not maintain any committees. Our former board of directors
acted as our audit committee. Currently, no members of our board are
"independent" in accordance with rule 4200(a)(14) of the Nasdaq Marketplace
Rules. Our board of directors does not have an "audit committee financial
expert," within the meaning of that phrase under applicable regulations of the
SEC, serving on the audit committee. In an attempt to comply with the "audit
committee financial expert" requirement, the board of directors engages the
services of Adam Wasserman. The board believes that, as Mr. Wasserman is a
certified public accountant, he (1) understands generally accepted accounting
principles ("GAAP") and financial statements, (2) has experience assessing the
general application of GAAP principles in connection with a company's accounting
for estimates, accruals and reserves, (3) is capable of analyzing and evaluating
the Company's financial statements, (4) understands the Company's internal
controls and procedures for financial reporting, and (5) understands audit
committee functions, all of which are attributes of an audit committee financial
expert. As is the case with many small companies, it is difficult for the
Company to attract and retain board members who qualify as "audit committee
financial experts," and competition for such individuals is significant. The
board of directors believes that its current audit committee, with the
assistance of Mr. Wasserman, is able to fulfill its role under SEC regulations
despite not having a designated "audit committee financial expert."

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

None of the executive officers of the Company receive compensation in excess of
$100,000.

The Company has no stock option, retirement, pension, or profit-sharing programs
for the benefit of directors, officers or other employees, but the Board of
Directors may recommend adoption of one or more such programs in the future.

                                       21
<PAGE>

ITEM 11.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
----------------------------------------------------------------------

The following table sets forth, as of the end of the Company's most recent
fiscal year, the number of shares of Common Stock owned of record and
beneficially by executive officers, directors and persons who hold 5.0% or more
of the outstanding Common Stock of the Company. Also included are the shares
held by all executive officers and directors as a group.

 Name and Address             Number of Shares Owned     Percent of Class Owned
                                   Beneficially

Gregory Sonic                        11,721,315                   25.5%
801 Muncesti Street
MD-2029, Chisinau, Moldova

                                     11,376,568                   24.7%
Nelly Sonic
801 Muncesti Street
MD-2029, Chisinau, Moldova

Vladimir Sonic                       11,376,568                   24.7%
801 Muncesti Street
MD-2029 Chisinau, Moldova

Executive Officers  (3) Persons          -0-                        -0-


o Gregory Sonic and Nelly Sonic are husband and wife.  Vladimir Sonic is Gregory
Sonic's brother.

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

There were no transactions during the last two years to which the Company was or
is a party in which any of the directors, executive officers, nominee for
election as a director beneficial owner of more than 5% of the Company shares or
members of the immediate family of any of the forgoing had a direct or indirect
material interest. Gregory Sonic, President of the Company until March 13, 2006,
had and has minority interest in certain entities in which the Company has
business relationships as is more fully described in the Notes to the attached
financial statement.

Indemnification of Officers and Directors
-----------------------------------------

As permitted by Colorado law, the Company's Articles of Incorporation provide
that the Company will indemnify its directors and officers against expenses and
liabilities they incur to defend, settle, or satisfy any civil or criminal
action brought against them on account of their being or having been Company
directors or officers unless, in any such action, they are adjudged to have
acted with gross negligence or willful misconduct. Insofar as indemnification
for liabilities arising under the Securities Act of 1933 may be permitted to
directors, officers or persons controlling the Company pursuant to the foregoing
provisions, the Company has been informed that, in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in that Act and is, therefore, unenforceable.

                                       22
<PAGE>

ITEM 13. EXHIBITS

Exhibit No.                                                          Document

3.1       Articles   of   Incorporation   (incorporated   by   reference   from
          Registration  Statement on Form 10 SB filed with the  Securities  and
          Exchange Commission on August 31, 1999.)

3.2       By-laws  (incorporated  by reference from  Registration  Statement on
          Form 10-SB  filed with the  Securities  and  Exchange  Commission  on
          August 31, 1999).

14.1      Company Code of Ethics Statement  (incorporated by reference from the
          Annual Report on Form 10-KSB filed with the  Securities  and Exchange
          Commission on April 16, 2004).

31.1      Rule 13a-14(a) Certification of Chief Executive Officer

31.2      Certification   Pursuant  to  18  U.S.C.  Section  1350,  as  Adopted
          Pursuant  to Section 906 of the  Sarbanes-Oxley  Act of 2002 of Chief
          Executive Officer.

32.1      Certification   Pursuant  to  18  U.S.C.  Section  1350,  as  Adopted
          Pursuant  to Section 906 of the  Sarbanes-Oxley  Act of 2002 of Chief
          Financial Officer.

                                       23
<PAGE>

ITEM 14. Principal Accountant Fees & Services
---------------------------------------------

Audit Fees
----------

Sherb & Company provided audit services to us for our annual reports for the
fiscal years ended December 31, 2005 and 2004. The aggregate fees billed for the
audit of our annual financial statements and review of financial statements
included 10-QSB's was approximately $45,000 for the two fiscal years.

Audit-Related Fees
------------------

There were no fees billed in each of 2005 and 2004 for professional services
that are reasonably related to the audit or review of your financial statements
that are not covered in the "Audit Fees" disclosure above.

Tax Fees
--------

There were no fees billed for the years 2005 and 2004 for professional services
rendered by our auditors for tax advice and planning.

All Other Fees
--------------

There were no fees billed in each of 2005 and 2004 for professional services
rendered by our auditors for all other services not disclosed above.

                                       24
<PAGE>

                                   SIGNATURES
                                   ----------

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


Dated:   April 18, 2006


                                                    LION-GRI INTERNATIONAL, INC.



                                                 By: /s/ Maria Gracia Rosales
                                                 -----------------------------
                                                 Name:  Maria Gracia Rosales
                                                 Title: President and Chairman
                                                        of the Board



                                                 By: /s/ Maria-Fernanda Rosales
                                                 ------------------------------
                                                 Name:  Maria-Fernanda Rosales
                                                 Title: Director and Chief
                                                        Financial Officer



                                                 By: /s/ Fanny P. Narvaez
                                                 -------------------------------
                                                 Name:  Fanny P. Narvaez
                                                 itle:  Director and Secretary

<PAGE>

                  LION-GRI INTERNATIONAL, INC. AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2005 AND 2004



















                                       F-1

<PAGE>

                  LION-GRI INTERNATIONAL, INC. AND SUBSIDIARIES

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS





                                                                   Pages
                                                                 --------

    Report of Independent Registered Public Accounting Firm         F-3

    Consolidated Balance Sheet                                      F-4

    Consolidated Statements of Operations                           F-5

    Consolidated Statements of Changes in Stockholders' Equity      F-6

    Consolidated Statements of Cash Flows                           F-7

    Notes to Consolidated Financial Statements                      F-8 to F-21


                                       F-2

<PAGE>

 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Shareholders of
Lion-Gri International, Inc.


         We have audited the accompanying consolidated balance sheet of Lion-Gri
International, Inc and Subsidiaries as of December 31, 2005 and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for the years ended December 31, 2005 and 2004. 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 audit to obtain reasonable  assurance about
whether the financial statements are free of material misstatement.  The Company
is not  required  to  have,  nor were we  engaged  to  perform,  an audit of its
internal control over financial reporting.  Our audit included  consideration of
internal  control  over  financial  reporting  as a basis  for  designing  audit
procedures that are appropriate in the  circumstances,  but not for the purposes
of expressing an opinion on the effectiveness of the Company's  internal control
over  financial  reporting.  Accordingly,  we express no such opinion.  An audit
includes  examining  on  a  test  basis,  evidence  supporting  the  amount  and
disclosures in the  consolidated  financial  statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our 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 financial position of Lion-Gri
International, Inc. and Subsidiaries as of December 31, 2005 and the results of
their operations and their cash flows for the years ended December 31, 2005 and
2004 in conformity with accounting principles generally accepted in the United
States of America.

         The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 16 to the
financial statements, the Russian government may ban alcohol imports from
Moldova, claiming impurities in the drinks posed a threat to public health. This
raises substantial doubt about its ability to continue as a going concern.
Management's plans in regards to these matters are also described in Note 16.
The consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.



                                                   Sherb & Co., LLP
New York, New York                                 Certified Public Accountants
April 10, 2006


                                       F-3

<PAGE>


<TABLE>
<CAPTION>
                              LION-GRI INTERNATIONAL, INC. AND SUBSIDIARIES
                                        CONSOLIDATED BALANCE SHEET

                                                 ASSETS

CURRENT ASSETS:
<S>                                                                               <C>
  Cash                                                                            $         66,324
  Trade receivables                                                                      1,583,712
  Inventories                                                                            7,399,668
  Advances to suppliers                                                                  1,355,483
  Due from related party                                                                   107,409
  Other current assets                                                                     220,701
                                                                                  -----------------

        Total Current Assets                                                            10,733,297

INVESTMENT IN EQUITY-METHOD INVESTEES                                                       47,688
PROPERTY, PLANT AND EQUIPMENT, net                                                      10,319,561
OTHER ASSETS                                                                               358,287
                                                                                  -----------------
        Total Assets                                                              $     21,458,833
                                                                                  =================

                                 LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
   Current portion of long-term debt                                              $      1,065,696
   Short-term bank loans                                                                   408,487
   Other short-term loans                                                                   38,150
   Short-term advances from customers                                                    3,439,043
   Trade accounts payable                                                                4,627,658
   Accrued liabilities                                                                     460,878
                                                                                  -----------------

        Total Current Liabilities                                                       10,039,912

LONG-TERM LIABILITIES:
   Long-term debt                                                                        3,928,301
   Other                                                                                   622,832
                                                                                  -----------------

        Total Liabilities                                                               14,591,045
                                                                                  -----------------

MINORITY INTEREST                                                                           90,759
                                                                                  -----------------

STOCKHOLDERS' EQUITY:
    Common stock ($.001 Par Value; 500,000,000 Shares Authorized;
        46,665,000 shares issued and outstanding)                                           46,665
    Additional paid-in capital                                                           4,043,599
    Retained earnings                                                                    2,515,615
    Accumulated other comprehensive income                                                 171,150
                                                                                  -----------------

        Total Stockholders' Equity                                                       6,777,029
                                                                                  -----------------

        Total Liabilities and Stockholders' Equity                                $     21,458,833
                                                                                  =================

                                      See accompanying notes to consolidated financial statements.
                                                                         F-4
</TABLE>
<PAGE>

<TABLE>
<CAPTION>

                                            LION-GRI INTERNATIONAL, INC. AND SUBSIDIARIES
                                                 CONSOLIDATED STATEMENTS OF OPERATIONS



                                                                    For the Year
                                                                  Ended December 31,
                                                             -----------------------------
                                                                 2005            2004
                                                             -------------   -------------
<S>                                                          <C>             <C>
NET REVENUES                                                 $ 13,337,329    $ 12,528,613

COST OF SALES                                                  10,720,737       9,425,672
                                                             -------------   -------------
GROSS PROFIT                                                    2,616,592       3,102,941
                                                             -------------   -------------
OPERATING EXPENSES:
  Selling and marketing                                         1,262,823       1,128,132
  General and administrative                                      782,472         687,745
  Stock-based consulting expenses                                  59,375         277,083
  Other operating expenses                                        153,506         591,995
                                                             -------------   -------------
        Total Operating Expenses                                2,258,176       2,684,955
                                                             -------------   -------------
INCOME FROM OPERATIONS                                            358,416         417,986
                                                             -------------   -------------
OTHER INCOME (EXPENSE):
    Other income                                                    5,070         827,016
    Foreign currency gain (loss)                                  198,158         (62,305)
    Interest expense, net                                        (591,891)       (514,760)
                                                             -------------   -------------

        Total Other Income (Expense)                             (388,663)        249,951
                                                             -------------   -------------

INCOME (LOSS) BEFORE INCOME TAXES                                 (30,247)        667,937

PROVISION FOR INCOME TAXES                                         (6,850)         (1,674)
                                                             -------------   -------------

INCOME (LOSS) BEFORE MINORITY INTEREST                            (37,097)        666,263

MINORITY INTEREST IN INCOME OF SUBSIDIARY                          18,830             463
                                                             -------------   -------------
NET INCOME (LOSS)                                                 (18,267)        666,726

OTHER COMPREHENSIVE INCOME (LOSS):
   Unrealized foreign currency translation                       (205,480)        338,098
                                                             -------------   -------------
COMPREHENSIVE INCOME (LOSS)                                  $   (223,747)   $  1,004,824
                                                             =============   =============
  Net income per common share - basic and diluted            $      (0.00)   $       0.01
                                                             =============   =============

  Weighted common shares outstanding - basic and diluted       46,972,904      46,789,071
                                                             =============   =============

                                See accompanying notes to consolidated financial statements.
                                                                F-5
</TABLE>
<PAGE>

<TABLE>
<CAPTION>

                                             LION-GRI INTERNATIONAL, INC. AND SUBSIDIARIES
                                        CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                                              For the Years Ended December 31, 2005 and 2004

                                           Common Stock,
                                          $.001 Par Value                                          Accumulated
                                      --------------------- Additional                                Other           Total
                                        Number of             Paid-in       Retained    Deferred   Comprehensive   Stockholders'
                                        Shares      Amount    Capital       Earnings  Compensation    Income          Equity
                                      ------------- ------- ----------- ------------- -------------  ----------  -----------------

<S>                                    <C>          <C>      <C>          <C>          <C>            <C>             <C>
Balance, December 31, 2003             46,000,000   $46,000 $ 3,707,801   $ 1,867,156  $         -    $ 38,532        $ 5,659,489

Common stock issued for services        1,900,000     1,900     473,100             -     (475,000)          -                  -

Amortization of deferred compensation           -         -           -             -      277,083           -            277,083

Comprehensive income:
     Net income for the year                    -         -           -       666,726            -           -            666,726

     Foreign currency translation
     adjustment                                 -         -           -             -            -     338,098            338,098
                                      ------------- -------- ----------- ------------- ------------ -----------  -----------------

Balance, December 31, 2004             47,900,000    47,900   4,180,901     2,533,882     (197,917)    376,630          6,941,396

Cancellation of common stock           (1,235,000)   (1,235)   (137,302)            -      138,542           -                  5

Amortization of deferred compensation           -         -           -             -       59,375           -             59,375

Comprehensive income:
     Net loss for the year                      -         -           -       (18,267)           -           -            (18,267)

     Foreign currency translation
     adjustment                                 -         -           -             -            -    (205,480)          (205,480)
                                       ------------ -------- ----------- ------------- ------------ -----------  -----------------
Balance, December 31, 2005             46,665,000   $46,665  $4,043,599   $ 2,515,615          $ -   $ 171,150        $ 6,777,029
                                       ============ ======== =========== ============= ============ ===========  =================

                                      See accompanying notes to consolidated financial statements.
                                                                      F-6
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
                                      LION-GRI INTERNATIONAL, INC. AND SUBSIDIARIES
                                           CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                 For the Year
                                                                                Ended December 31,
                                                                         -----------------------------
                                                                             2005            2004
                                                                         --------------  -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                          <C>            <C>
Net income (loss)                                                        $     (18,267)   $   666,726
Adjustments to reconcile net income (loss) to net cash
   provided by operating activities:
     Depreciation and amortization                                             319,707        328,135
     Loss (gain) on sale/disposal of property, plant and equipment                   -         (4,691)
     Stock-based compensation                                                   59,375        277,083
     Minority interest                                                         (18,830)          (463)
Changes in operating assets and liabilities:
     Trade receivables                                                          51,747       (862,408)
     Inventories                                                            (1,382,098)       148,958
     Advances to suppliers                                                    (243,051)       556,226
     Due from related parties                                                        -       (156,770)
     Other current and non-current assets                                     (413,372)      (107,342)
     Advances from customers                                                 1,052,217      1,057,297
     Accounts payable and accrued liabilities                                2,324,481       (454,534)
     Related party payables                                                   (417,791)       407,265
     Other long-term liabilities                                               426,002         26,438
                                                                         --------------  -------------

Net cash provided by operating activities                                    1,740,120      1,881,920
                                                                         --------------  -------------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Capital expenditures                                                   (1,479,711)    (2,854,589)
     Purchase of intangibles                                                    (6,481)       (38,319)
     Proceeds from repayment of note receivable- related party                 139,274              -
     Reduction in long-term investments                                              -          1,023
                                                                         --------------  -------------
Net cash used in investing activities                                       (1,346,918)    (2,891,885)
                                                                         --------------  -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
     Principal payments on related party loans                                       -     (1,390,650)
     Proceeds from bank debt                                                 3,087,695      4,781,052
     Proceeds from other short-term loans                                            -      1,780,678
     Principal payments on bank debt                                                 -     (2,349,842)
     Principal payments on other short-term loans                           (3,488,453)    (1,788,789)
                                                                         --------------  -------------
Net cash provided by financing activities                                     (400,758)     1,032,449
                                                                         --------------  -------------
Effect of exchange rate changes on cash                                         (2,060)         2,851

NET INCREASE (DECREASE) IN CASH                                                 (9,616)        25,335

Cash, at beginning of year                                                      75,940         50,605
                                                                         --------------  -------------

Cash, at end of year                                                     $      66,324   $     75,940
                                                                         ==============  =============

Supplementary disclosures of cash flow information:
      Interest paid                                                      $     855,454   $    735,773
                                                                         ==============  =============
      Taxes paid                                                         $      14,285   $        651
                                                                         ==============  =============

Non-cash investing and financing activities:
      Common stock issued for deferred compensation                      $           -   $     475,000
                                                                         ==============  =============


                                See accompanying notes to consolidated financial statements.
                                                             F-7

</TABLE>
<PAGE>
  LION-GRI INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Lion-Gri International, Inc. (formerly Napoli Enterprises, Inc.) (the "Company")
was incorporated on January 6, 1999 in the State of Colorado as IDS Internet
Distribution Systems, Inc. On July 23, 1999, the Company changed its name to
Denmans.com, Inc., and subsequently on November 19, 2001, following an
acquisition changed its name to Impulse Media Technologies, Inc. In the
acquisition, the Company acquired Impulse Media Technologies, Inc., a Nevada
corporation (Impulse). Prior to the acquisition, the Company had nominal assets
and considerable liabilities. The transaction was treated as a reverse
acquisition for accounting purposes, which is a capital transaction and not a
business combination. The financial statements of the acquired subsidiary are
presented for the period prior to the acquisition. The Company changed its name
to Napoli Enterprises in November, 2002. On October 20, 2004, the Company
changed its name to Lion-Gri International, Inc.

In June 2002, the Company incorporated a new subsidiary, Napoli Resources (USA)
Inc., which will explore new business opportunities. As of December 31, 2004,
the new subsidiary has had no transactions.

During July 2003, the Company issued 34,474,451 shares of the Company's common
stock for the acquisition of all of the outstanding capital stock of Novotech
Holdings, Inc. ("Novotech"), a corporation organized under the laws of the
British Virgin Islands. This transaction closed on October 29, 2003. Novotech
has a 99.7% ownership interest in Lion Gri, S.R.L., a company organized under
the laws of the Republic of Moldova, which is engaged in the production and sale
of wine. Under the agreement, the Company issued 34,474,451 shares of its common
stock in exchange for each and every share of common stock of Novotech. For
financial accounting purposes, the exchange of stock was treated as a
recapitalization of Novotech with the former shareholders of the Company
retaining 5,525,549 or approximately 13.8% of the outstanding stock. The
stockholders' equity section reflects the change in the capital structure of
Novotech due to the recapitalization and the consolidated financial statements
reflect the operations of Novotech and its subsidiaries for the periods
presented.

The Company's subsidiary, Lion-Gri S.R.L.("Lion-Gri"), a limited liability
company in the Republic of Moldova, commenced operations in 1998 and is 99.97%
owned by Novotech with the remaining .03% owned by Grineva S.R.L., a limited
liability company in the Republic of Moldova controlled by the Company's
President, Gregory Sonic. Additionally, Lion-Gri acquired controlling interest
in Botritis S.A. (50.3%), a Moldovan entity in the fiscal year 1998, which was
recorded as a purchase. Activities of Botritis S.A. include grape processing and
the manufacturing and sale of raw wine.

Lion-Gri Plus, SRL was incorporated on April 10, 2004 as a limited liability
company in the Republic of Moldova and is a wholly-owned subsidiary of Lion-Gri,
with operations commencing in 2004. Activities include the cultivation of
vineyards and growing of grapes and the manufacture, storage and sale of
alcoholic products.

Basis of presentation

The consolidated financial statements are prepared in accordance with generally
accepted accounting principles in the United States of America ("US GAAP"). This
basis of accounting differs from that used in the statutory financial statements
of the Moldovan subsidiaries which are prepared in accordance with the
accounting principles generally accepted in Moldova. The principal difference in
which adjustments were made to conform to US GAAP include write downs of
property, plant and equipment with an offset to paid-in capital of approximately
$3,280,000 for the year ended December 31, 2002. Significant adjustments for the
year ended December 31, 2005 and 2004 to conform to US GAAP were made to reverse
depreciation and amortization on revalued property, plant and equipment. The
consolidated financial statements of the Company include the Company and its
wholly-owned subsidiaries, Lion-Gri Plus, SRL and its partially-owned
subsidiaries Botritis S.A. (50.3%) and Uzum Tenesi SRL (97%). All material
intercompany balances and transactions have been eliminated.

                                       F-8

<PAGE>

                  LION-GRI INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
         -----------------------------------------------------------------------

Use of estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates. Significant estimates in 2005 and 2004
include the allowance for doubtful accounts, the evaluation of intangible assets
and property, plant and equipment, and the useful life of property, plant and
equipment.

Fair value of financial instruments

The carrying amounts reported in the balance sheet for cash, accounts
receivable, accounts payable and accrued expenses, payroll taxes payable, and
loans payable approximate their fair market value based on the short-term
maturity of these instruments.

Cash and cash equivalents

For purposes of the statement of cash flows, the Company considers all cash and
other demand deposits to be cash and cash equivalents. As of December 31, 2005,
the Company had no cash equivalents.

Accounts receivable

Accounts receivable are reported at net realizable value. The Company has
established an allowance for doubtful accounts based upon factors pertaining to
the credit risk of specific customers, historical trends, and other information.
Delinquent accounts are written-off when it is determined that the amounts are
uncollectible. At December 31, 2005, the allowance for doubtful accounts was $0.

Inventories

Inventories are stated at the lower of cost or market on the weighted average
cost basis, and includes finished goods, raw materials, packaging material and
product merchandise. Finished goods include costs of raw materials (grapes and
bulk wine), packaging, labor used in wine production, bottling, shipping and
warehousing of winery facilities and equipment. In accordance with general
practice in the wine industry, wine inventories are included in current assets,
although a portion of such inventories may be aged for periods longer than one
year.

Property, plant and equipment

Property, plant and equipment are carried at cost. The cost of repairs and
maintenance is expensed as incurred; major replacements and improvements are
capitalized. Costs incurred in developing vineyards, including interest costs,
are capitalized until the vineyards become commercially productive. When assets
are retired or disposed of, the cost and accumulated depreciation are removed
from the accounts, and any resulting gains or losses are included in income in
the year of disposition. In accordance with Statement of Financial Accounting
Standards (SFAS) No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets", the Company examines the possibility of decreases in the
value of property, plant and equipment when events or changes in circumstances
reflect the fact that their recorded value may not be recoverable. Depreciation
is calculated on a straight-line basis over the estimated useful life of the
assets as follows (in years):

                          Buildings                            10-30
                          Machines and equipment                2-10
                          Vehicles and other                     3-7


                                       F-9

<PAGE>

                  LION-GRI INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005


NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
         -----------------------------------------------------------------------

Investments in equity-method investees

Investments in which the Company does not have a majority voting or financial
controlling interest are accounted for under the equity method of accounting
unless its ownership constitutes less than 20% interest in such entity for which
such investment would then be included in the consolidated financial statements
utilizing the cost method.

Other assets

Other assets include licenses, trademarks, technology process know-how, and
other receivables and cost method investments. Intangible assets are amortized
using the straight-line method over the term of the agreement or estimated
useful lives.

Intangibles and other long-lived assets

The Company reviews the carrying value of intangibles and other long-lived
assets for impairment at least annually or whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of long-lived assets is measured by comparison of
its carrying amount to the undiscounted cash flows that the asset or asset group
is expected to generate. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the property, if any, exceeds its fair market value.

Advances to suppliers

Advances to suppliers consist of advances made by the Company to suppliers for
raw materials that will be used in the production of wine products.

Revenue recognition

The Company follows the guidance of the Securities and Exchange Commission's
Staff Accounting Bulletin 104 for revenue recognition. In general, the Company
records revenue when persuasive evidence of an arrangement exists, services have
been rendered or product delivery has occurred, the sales price to the customer
is fixed or determinable, and collectibility is reasonably assured. The
following policy reflects specific criteria for the revenue stream of the
Company:

Revenues derived from the sale of wine and wine products are recognized upon
shipment and title passing to the customer.

Stock-based compensation

The Company accounts for stock options issued to employees in accordance with
the provisions of Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations. As
such, compensation cost is measured on the date of grant as the excess of the
current market price of the underlying stock over the exercise price. Such
compensation amounts are amortized over the respective vesting periods of the
option grant. The Company adopted the disclosure provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation" and SFAS 148, "Accounting for
Stock-Based Compensation -Transition and Disclosure", which permits entities to
provide pro forma net income (loss) and pro forma earnings (loss) per share
disclosures for employee stock option grants as if the fair-valued based method
defined in SFAS No. 123 had been applied. The Company accounts for stock options
and stock issued to non-employees for goods or services in accordance with the
fair value method of SFAS 123.


                                      F-10

<PAGE>

                  LION-GRI INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005


NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
         -----------------------------------------------------------------------

Advertising

Advertising costs are expensed when incurred. For the years ended December 31,
2005 and 2004, advertising expense amounted to $36,760 and $103,642,
respectively.

Non-employee stock based compensation

The cost of stock based compensation awards issued to non-employees for services
are recorded at either the fair value of the services rendered or the
instruments issued in exchange for such services, whichever is more readily
determinable, using the measurement date guidelines enumerated in Emerging
Issues Task Force Issue ("EITF") 96-18, "Accounting for Equity Instruments That
Are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services" ("EITF 96-18").

Income per common share

Basic income per share is computed by dividing net income by the weighted
average number of shares of common stock outstanding during the period. Diluted
income per share is computed by dividing net income by the weighted average
number of shares of common stock, common stock equivalents and potentially
dilutive securities outstanding during each period. As of December 31, 2005 and
2004, the Company did not have any common stock equivalents or potentially
dilutive securities outstanding.

Foreign currency translation

Transactions and balances  originally  denominated in U.S. dollars are presented
at their original  amounts.  Transactions  and balances in other  currencies are
converted into U.S. dollars in accordance with Statement of Financial Accounting
Standards  (SFAS) No. 52, "Foreign  Currency  Translation,"  and are included in
determining net income or loss.

For foreign operations with the local currency as the functional currency,
assets and liabilities are translated from the local currencies into U.S.
dollars at the exchange rate prevailing at the balance sheet date. Revenues and
expenses are translated at weighted average exchange rates for the period to
approximate translation at the exchange rates prevailing at the dates those
elements are recognized in the financial statements. Translation adjustments
resulting from the process of translating the local currency financial
statements into U.S. dollars are included in determining comprehensive income
(loss).

The functional currency of the Company's Moldovan subsidiaries is the local
currency (Moldovan Lei). The financial statements of the subsidiaries are
translated into United States dollars using year-end rates of exchange for
assets and liabilities (12.832 Lei to one U.S. dollar at December 31, 2005), and
average rates of exchange for the period for revenues, costs, and expenses
(12.6003 Lei to one U.S. dollar for the year ended December 31, 2005). Net gains
and losses resulting from foreign exchange transactions are included in the
consolidated statements of operations and were not material during the periods
presented.

Comprehensive (loss) income

The Company uses Statement of Financial Accounting Standards No. 130 (SFAS 130)
"Reporting Comprehensive Income". Comprehensive income (loss) is comprised of
net income and all changes to the statements of stockholders' equity, except
those due to investments by stockholders', changes in paid-in capital and
distributions to stockholders. Comprehensive income (loss) for the years ended
December 31, 2005 and 2004 amounted to $(223,747) and $1,004,824, respectively.


                                      F-11

<PAGE>

                  LION-GRI INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005


NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
         -----------------------------------------------------------------------

Concentrations of credit risk and major customers

Financial instruments which potentially subject the Company to concentrations of
credit risk consist principally of cash and trade accounts receivable. The
Company places its cash with high credit quality financial institutions. Almost
all of the Company's sales are credit sales which are primarily to customers
whose ability to pay is dependent upon the industry economics prevailing in
these areas; however, concentrations of credit risk with respect to trade
accounts receivables is limited due to generally short payment terms. The
Company also performs ongoing credit evaluations of its customers to help
further reduce credit risk.

Two customers accounted for approximately 65% and 90% of sales for the year
ended December 31, 2005 and 2004 respectively. Over 85 % of the Company's
revenues are from sales in Russia.

Income taxes

Taxes are calculated in accordance with taxation principles currently effective
in the Republic of Moldova. Income taxes are accounted for under the asset and
liability method of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes ("SFAS 109"). Under SFAS 109 deferred tax assets
and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. Under SFAS 109, 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.

Economic and political risks

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

Segment reporting

The Company produces and sells average to premium quality table wines and has
determined that its product line operating segments, although consisting of
multiple products and brands, all have similar production processes, customer
types, distribution methods and other economic characteristics. Accordingly,
these operating segments have been aggregated as a single operating segment in
the consolidated financial statements.

Shipping and costs

Shipping costs are included in selling and marketing expenses and totaled
$767,767 and $672,384 for the years ended December 31, 2005 and 2004,
respectively.

Short-term advances from customers

Short-term advances from customers at December 31, 2005 of $3,439,043 consist of
prepayments from third party customers to the Company for merchandise that had
not yet shipped. The Company will recognize the deposits as revenue as customers
take delivery of the goods, in compliance with its revenue recognition policy.


                                      F-12

<PAGE>

                  LION-GRI INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
         -----------------------------------------------------------------------

Recent accounting pronouncements

In December 2004, the FASB issued FASB Statement No. 123R, "Share-Based Payment,
an Amendment of FASB Statement No. 123" ("FAS No. 123R").  FAS No. 123R requires
companies to recognize in the statement of operations the grant-date  fair value
of stock options and other equity-based  compensation  issued to employees.  FAS
No. 123R is effective  for the first fiscal year  beginning  after  December 15,
2005. The Company is in process of evaluating  the impact of this  pronouncement
on its financial statements.

In April 2005, the Securities and Exchange Commission's Office of the Chief
Accountant and its Division of Corporation Finance has released Staff Accounting
Bulletin (SAB) No.107 to provide guidance regarding the application of FASB
Statement No. 123 (revised 2004), Share-Based Payment. Statement No. 123(R)
covers a wide range of share-based compensation arrangements including share
options, restricted share plans, performance-based awards, share appreciation
rights, and employee share purchase plans. SAB 107 provides interpretative
guidance related to the interaction between Statement No. 123R and certain SEC
rules and regulations, as well as the staff's views regarding the valuation of
share-based payment arrangements for public companies.

In May 2005, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 154, "Accounting Changes and Error
Corrections-a replacement of APB Opinion No. 20 and FASB Statement No. 3" ("SFAS
154"). This Statement replaces APB Opinion No. 20, Accounting Changes, and FASB
Statement 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. This Statement applies to all voluntary changes in
accounting principle. It also applies to changes required by an accounting
pronouncement in the unusual instance that the pronouncement does not include
specific transition provisions. When a pronouncement includes specific
transition provisions, those provisions should be followed.

APB Opinion No. 20 previously required that most voluntary changes in accounting
principle be recognized by including in net income of the period of the change
the cumulative effect of changing to the new accounting principle. This
Statement requires retrospective application to prior periods' financial
statements of changes in accounting principle, unless it is impracticable to
determine either the period-specific effects or the cumulative effect of the
change. When it is impracticable to determine the period-specific effects of an
accounting change on one or more individual prior periods presented, this
Statement requires that the new accounting principle be applied to the balances
of assets and liabilities as of the beginning of the earliest period for which
retrospective application is practicable and that a corresponding adjustment be
made to the opening balance of retained earnings (or other appropriate
components of equity or net assets in the statement of financial position) for
that period rather than being reported in an income statement. When it is
impracticable to determine the cumulative effect of applying a change in
accounting principle to all prior periods, this Statement requires that the new
accounting principle be applied as if it were adopted prospectively from the
earliest date practicable. This Statement shall be effective for accounting
changes and corrections of errors made in fiscal years beginning after December
15, 2005. The Company does not believe that the adoption of SFAS 154 will have a
significant effect on its financial statements.

On June 29, 2005, the EITF ratified Issue No. 05-2, "The Meaning of
`Conventional Convertible Debt Instrument' in EITF Issue No. 00-19, `Accounting
for Derivative Financial Instruments Indexed to, and Potentially Settled in, a
Company's Own Stock.'" EITF Issue 05-2 provides guidance on determining whether
a convertible debt instrument is "conventional" for the purpose of determining
when an issuer is required to bifurcate a conversion option that is embedded in
convertible debt in accordance with SFAS 133. Issue No. 05-2 is effective for
new instruments entered into and instruments modified in reporting periods
beginning after June 29, 2005. The adoption of this pronouncement did not have a
material effect on the Company's financial statements.


                                      F-13

<PAGE>

                  LION-GRI INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
         -----------------------------------------------------------------------

Recent accounting pronouncements (continued)

In September 2005, Issue No. 05-4, "The Effect of a Liquidated Damages Clause on
a Freestanding Financial Instrument Subject to EITF Issue No. 00-19, `Accounting
for Derivative Financial Instruments Indexed to, and Potentially Settled in, a
Company's Own Stock.'" EITF 05-4 provides guidance to issuers as to how to
account for registration rights agreements that require an issuer to use its
"best efforts" to file a registration statement for the resale of equity
instruments and have it declared effective by the end of a specified grace
period and, if applicable, maintain the effectiveness of the registration
statement for a period of time or pay a liquidated damage penalty to the
investor. The Company has adopted view C of this pronouncement. Accordingly, the
Company has bifurcated registration rights from their related free standing
financial instruments and recorded them at fair value. The Company has adopted
view C of this pronouncement, which has resulted in the registration rights
being bifurcated and accounted for at fair value and the common stock purchase
warrants classified as equity.

In September 2005, the FASB ratified the Emerging Issues Task Force's ("EITF")
Issue No. 05-7, "Accounting for Modifications to Conversion Options Embedded in
Debt Instruments and Related Issues," which addresses whether a modification to
a conversion option that changes its fair value affects the recognition of
interest expense for the associated debt instrument after the modification and
whether a borrower should recognize a beneficial conversion feature, not a debt
extinguishment if a debt modification increases the intrinsic value of the debt
(for example, the modification reduces the conversion price of the debt). This
issue is effective for future modifications of debt instruments beginning in the
first interim or annual reporting period beginning after December 15, 2005. The
Company is currently in the process of evaluating the effect that the adoption
of this pronouncement may have on its financial statements.

In September 2005, the FASB also ratified the EITF's Issue No. 05-8, "Income Tax
Consequences of Issuing Convertible Debt with a Beneficial Conversion Feature,"
which discusses whether the issuance of convertible debt with a beneficial
conversion feature results in a basis difference arising from the intrinsic
value of the beneficial conversion feature on the commitment date (which is
recorded in the shareholder's equity for book purposes, but as a liability for
income tax purposes), and, if so, whether that basis difference is a temporary
difference under FASB Statement No. 109, "Accounting for Income Taxes." This
Issue should be applied by retrospective application pursuant to Statement 154
to all instruments with a beneficial conversion feature accounted for under
Issue 00-27 included in financial statements for reporting periods beginning
after December 15, 2005. The Company is currently in the process of evaluating
the effect that the adoption of this pronouncement may have on its financial
statements.

Other accounting standards that have been issued or proposed by the FASB or
other standards-setting bodies that do not require adoption until a future date
are not expected to have a material impact on the consolidated financial
statements upon adoption.

Reclassifications

Certain amounts in the 2004 consolidated financial statements have been
reclassified to conform to the 2005 consolidated financial statement
presentation. These reclassifications had no impact on previously reported net
results of operations or stockholders' equity (deficit).

                                      F-14

<PAGE>

                  LION-GRI INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005

NOTE 2 - TRADE RECEIVABLES

Trade receivables are summarized as follows at December 31, 2005:


        Domestic (Moldova)              $             198,204
        Foreign (Outside Moldova)                   1,385,508
                                        ---------------------

                                        $           1,583,712
                                        =====================

Certain trade receivables are pledged as collateral for loans.

NOTE 3 - INVENTORIES

Inventories are summarized as follows at December 31, 2005:



           Raw materials                $           2,367,701
           Work-in-process                          4,611,011
           Finished goods                             420,956
                                        ---------------------

                                        $           7,399,668
                                        =====================

Certain inventory is pledged as collateral for loans.


NOTE 5 - PROPERTY, PLANT AND EQUIPMENT

Property, plant, and equipment consisted of the following at December 31, 2005:

           Land and buildings                   $       2,781,934
           Construction in progress                     5,691,219
           Machinery and equipment                      3,580,881
           Vehicles and other                             272,428
                                                ------------------
                                                       12,326,462
           Less accumulated depreciation               (2,006,901)
                                                ------------------
                                                $      10,319,561

Certain  property,  plant and  equipment  are pledged as  collateral  for loans.
Depreciation   expense  for  2005  and  2004  totaled   $316,407  and  $321,707,
respectively

                                      F-15

<PAGE>

                  LION-GRI INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005

NOTE 6 - INVESTMENT IN EQUITY-METHOD INVESTEES

The Company holds investments accounted for under the equity method. The Company
accounts for investments under the equity method if the investment gives the
Company the ability to exercise significant influence, but not control, over an
investee. Significant influence is generally deemed to exist if the Company has
an ownership interest in the voting stock of the investee of between 20% and
50%, although other factors, such as representation on the investee's Board of
Directors and the impact of commercial arrangements, are considered in
determining whether the equity method of accounting is appropriate. As of
December 31, 2004, the Company owned various interests in wine producing and
farming operations. The Company has the ability to exercise significant
influence, but not control these investees. Accordingly, under the equity method
of accounting, the Company's share of the investee's earnings or loss is
included in the consolidated statements of operations. The Company records its
investments in equity-method investees on the consolidated balance sheet as
"Investment in equity-method investee" and its share of the investee's earnings
or losses in "Loss on equity-method investment." In the statement of operations
for the years ended December 31, 2005 and 2004, the Company recorded equity in
losses of investee of $0 and $0, respectively.

NOTE 7 - INTANGIBLE ASSETS

Intangible assets are included in other assets and consisted of the following at
December 31, 2005:

           Licenses and trademarks              $       7,647
           Technology process know-how                 22,319
           Other intangibles                           43,816
                                                --------------
                                                       73,782
           Less accumulated amortization              (22,186)
                                                --------------
                                                $      51,596

Amortization expense on intangible assets during 2005 and 2004 was $3,300 and
$6,428, respectively. For the next five years, amortization of intangible assets
will approximate $6,200 per year.

NOTE 8 - TRADE ACCOUNTS PAYABLE

Trade payables are summarized as follows at December 31, 2005:

                                                        2005

     Domestic (Moldova)                 $           2,718,070
     Foreign (Outside Moldova)                      1,849,588
     Other                                             60,000
                                        ---------------------

                                        $           4,627,658
                                        =====================

                                      F-16

<PAGE>

                  LION-GRI INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005

<TABLE>
<CAPTION>

NOTE 9 - LONG-TERM DEBT

Long-term debt consisted of the following at December 31, 2005:

                                                                          Interest Rate
                                                                          --------------
Note to Victoria Bank, Moldova dated September 15, 2005, due in monthly
installments through September 2008.  Secured by equipment and
<S>                                                                           <C>            <C>
inventory.                                                                    17%            $  389,651

Note to Banca de Economii dated April 15, 2003, due in monthly
installments through March 2006.  Secured by equipment                         9%                55,000

Note to Victoria Bank, Moldova dated September 17, 2004, due in January
2006. Secured by equipment and inventory.                                     22%                18,727

Note to Victoria Bank, Moldova dated June 29, 2005, due in monthly
installments through August 2008. Secured by equipment and
inventory.                                                                    11%               311,236

Note to Mobiasbanca, Moldova dated September 28, 2005, due in monthly
installments through September 2008.  Secured by equipment and
inventory.                                                                    17%               779,301

Note to Banca de Economii dated November 19, 2003, due in monthly
installments through May 2006.  Secured by equipment                          19%               522,990

Note to Banca de Economii dated January 26, 2004, due in monthly
installments through January 2006.  Secured by equipment                      11%                49,734

Note to Victoria Bank, Moldova dated March 7, 2003, due in monthly
installments through March 2008. Secured by equipment and
inventory.                                                                    19%                56,015

Note to Moldova Agroindbank dated May 14, 2004, due in monthly
installments through November 2007.  Secured by equipment                     20%               315,617

Note to Moldova Agroindbank dated May 14, 2004, due in monthly
installments through November 2007.  Secured by equipment                     11%             1,124,943

Loan payable to vendor payable on December 5, 2008. Secured by
equipment and land.                                                           n/a               105,479

Note to Moldova AIB, dated June 27, 2005, due in monthly installments
through May 2009. Secured by equipment and inventory.                         12%               828,904

Note to Victoria Bank, Moldova dated March 17, 2003, due in monthly
installments through March 2008. Secured by equipment and
inventory.                                                                     9%               436,400
                                                                                        --------------------
     Total                                                                                    4,993,997

     Less current portion                                                                    (1,065,696)
                                                                                        --------------------

                                                                                        $     3,928,301
                                                                                        ====================
</TABLE>

                                      F-17

<PAGE>

                  LION-GRI INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005

NOTE 9 - LONG-TERM DEBT (continued)

The scheduled maturities of long-term debt are as follows:

    2006 (included in current liabilities)               $          1,065,696
    2007                                                            1,633,608
    2008                                                            1,707,846
    2009                                                              586,847
                                                           --------------------

                                                         $          4,993,997
                                                           ====================
<TABLE>
<CAPTION>

NOTE 10 - SHORT-TERM BANK LOANS

Short-term bank loans consisted of the following at December 31, 2005:

<S>                                                                         <C>
  Notes to Banca de Economii, Moldova dated March 24, 2005 due March 24,     $  252,626
  2006. Interest rate 11%. Secured by equipment and inventory

  Notes to Banca de Economii, Moldova dated December 23, 2004 due December
  2005. Interest rate 22%. Secured by equipment and
  inventory                                                                      38,965

  Note to Moldova Agroindbank dated September 23, 2005 due August 2006.
  Interest rate 19.5%. Secured by equipment and
  nventory                                                                      116,896
                                                                           ---------------
  Total                                                                      $  408,487
                                                                           ===============
</TABLE>

NOTE 11 - RELATED PARTY TRANSACTIONS

During August 2003, the Company entered into an unsecured non-interest bearing
loan agreement of approximately $900,000 with Grineva S.R.L. (Grineva), the .03%
owner of the Company and controlled by the Company's President. According to the
agreement, the Company is obligated to export wine on behalf of Grineva as
repayment of the loan. The agreement calls for annual penalties of 19% for
products that are not delivered in accordance with the agreement. For the year
ended December 31, 2004, the Company recorded $57,575, respectively, in
penalties as certain products were not delivered in accordance with the
agreement. At December 31, 2005, Grineva owed the Company $107,409 and is
included in due from related party on the accompanying balance sheet.

The consolidated financial statements include balances and transactions with
related parties. For the years ended December 31, 2005 and 2004, the Company
purchased approximately $2,098 and $176,179, respectively, of equipment and
transportation services from a Fabbri-Inox S.R.L, (Fabbri-Inox) which was
controlled by the President of the Company. At December 31, 2005, the Company
had a payable to Fabbri-Inox of $185,473, which has been included in accounts
payable.

                                      F-18

<PAGE>

                  LION-GRI INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005

NOTE 11 - RELATED PARTY TRANSACTIONS (continued)

The Company purchased $1,325 and $44,731 of property, plant and equipment and
services from Agrotehnica-Invest S.A. during 2005 and 2004 respectively. The
Company had a trade payable to Agrotehnica of $1,325, which has been in included
in trade accounts payable. The Company has an investment in Agrotechnica-Invest,
S.A.

For the yeas ended December 31, 2005 and 2004, the Company purchased grapes
amounting to $213,763 and $168,311, respectively, from Weis-MD Vine Co. SRL , a
company 40.4% owed by the Company. At December 31, 2005, the Company has a
payable to Weis-MD Vine Co. SRL in the amount of $109,547, which has been
included in accounts payable.

In March 2005, the Company entered into an unsecured non-interest bearing loan
agreement amounting to approximately $1,557,000 with Rabel S.A. (Rabel). The
Company's President was a former Executive Director of Rabel. According to the
agreement, the Company is obligated to export wine on behalf of Rabel as
repayment of the loan. The agreement calls for annual penalties of 20% for
products that are not delivered in accordance with the agreement. As of December
31, 2005, the Company borrowed approximately $1,012,000 under this loan
agreement.

NOTE 12 - INCOME TAXES

The nominal statutory tax rate in the Republic of Moldova is 18% in 2005 and 20%
in 2004. Taxes are calculated in accordance with Moldovan regulations and are
paid on an annual basis. Taxes are calculated on a separate entity basis since
consolidation is not allowed in Moldova. Based on compliance with certain tax
laws of the Republic of Moldova, Lion Gri S.R.L. has qualified for the "Free
Enterprise Zone" for five years (years 2001 through 2005), in which Lion-Gri
S.R.L. is not required to pay income taxes for these years. No significant
deferred tax assets or liabilities existed for Lion-Gri S.R.L., at December 31,
2005 and 2004. Botritis S.A. and Lion-Gri Plus SRL are subject to the applicable
statutory tax rates and the provision for taxes on earnings for Botritis S.A.
and Lion-Gri Plus SRL were $6,850 and $1,674 for the years ended December 31,
2005 and 2004, respectively. No significant deferred tax assets or liabilities
existed at December 31, 2005.

The income tax expense was different than the amount computed using the U.S.
Federal Income tax rate of 35% as a result of the following:
<TABLE>
<CAPTION>
                                                                                    Years Ended December 31,
                                                                                  2005                      2004
                                                                        --------------------    -------------------
<S>                                                                     <C>                    <C>
                  Computed "expected" tax expense (benefit)             $            30,192     $          233,354
                  Difference in foreign subsidiary rates                            (12,950)              (136,283)
                  Income tax exemption                                              (10,392)              (192,377)
                  Permanent differences                                                   -                 96,980
                                                                        --------------------    -------------------
                                                                        $             6,850     $            1,674
                                                                        ====================    ===================

The unaudited proforma effect of the tax holiday on net income (loss) is as follows:

<CAPTION>
                                                                                    Years Ended December 31,
                                                                                  2005                      2004
                                                                        --------------------    -------------------
<S>                                                                     <C>                     <C>
                  Net income (loss) as reported                         $           (18,264)    $          666,726
                                                                        ====================    ===================

                  Proforma net income (loss)                            $           (28,659)    $         (479,349)
                                                                        ====================    ===================

</TABLE>

                                      F-19

<PAGE>

                  LION-GRI INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005


NOTE 13 - STOCKHOLDERS' EQUITY


On August 1, 2004, the Company entered into a consulting agreement with a public
relations firm. The term of the agreement was for two years with the Company
having the right to terminate the agreement after six months. The Company was to
pay a monthly retainer of $10,000, and additionally, the Company was to grant
the consultants 1,900,000 shares of common stock which vests 35% upon the
execution of the agreement and the remainder vesting on February 5, 2005. In
April 2005, the Company issued 665,000 of these shares and cancelled the
remaining shares issuable under this contract. The Company valued these common
shares at the fair market value on the dates of grant or $0.25 based on the
quoted trading price. For the year ended December 31, 2005 and 2004, in
connection with these shares, the Company recorded stock-based compensation of
$59,375 and $277,083, respectively.

N0TE 14 - CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS

The Company's operations are conducted in the Republic of Moldova. Accordingly,
the Group's business, financial condition, and results of operations may be
influenced by the political, economic, and legal environments in the Republic of
Moldova, and by the general state of the Moldovan economy.

The Company's operations in the Republic of Moldova are subject to
considerations and significant risks not typically associated with companies in
North America and Western Europe. These include risks associated with, among
others the political, economic and legal environments and foreign currency
exchange. The Company's results may be adversely affected by changes in the
political and social conditions in the Republic of Moldova, and by changes in
governmental policies with respect to laws and regulations, anti-inflationary
measures, currency conversion and remittance abroad, and rates and methods of
taxation among other things.

NOTE 15 - COMMITMENTS AND CONTINGENCIES

Guarantee of Credit

The Company guarantees credit of approximately $426,000 plus interest granted to
Weis-MD Vine Co., S.R.L.  (Weis).  The Company has a 40.4% equity  investment in
Weis.  The  obligation  is due on March 18, 2007,  with a daily  penalty rate of
0.15% for non-payment.

NOTE 16 - GOING CONCERN CONSIDERATIONS

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Russian government may ban alcohol
imports from Moldova, claiming impurities in the drinks posed a threat to public
health. This raises substantial doubt about its ability to continue as a going
concern. Management believes that these claims are politically motivated and is
related to worsening relations with both the countries. Management believes that
these claims are false and that these issues will be resolved in the near
future. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

                                      F-20

<PAGE>

                  LION-GRI INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005

NOTE 17 - SUBSEQUENT EVENTS

On March 1, 2006, the Company has entered into a share exchange agreement with
Promotora Valle Hermosa, Inc. a Florida corporation ("PROMOTORA"). In connection
with the share exchange agreement, the Company shall effect, as a condition
prior to the execution of this Agreement, a 1 for 20 reverse split of its
outstanding common stock. Additionally, the Company will acquire 100% of the
issued and outstanding securities of PROMOTORA in exchange for the issuance of
3,000,000 post-reverse split shares of common shares of the Company. PROMOTORA
will issue a Promissory Note in favor of the Company in the amount of $300,000
payable in six consecutive monthly installments with prevailing interest, with
first payment due within 30 days after Closing. In connection with the share
exchange agreement, certain shareholders of the Company shall cancel 1,723,725
post-reverse split shares of common stock. The closing date is expected to be
prior to April 20, 2006.

In  connection  with the Share  Exchange  Agreement,  the  Company  elected  new
officers and directors,


                                      F-21