As filed with the Securities and Exchange Commission on November 14, 2007

Registration No.               

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM SB-2

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

NASCENT WINE COMPANY, INC.

(Name of small business issuer in its charter)

2355-A Paseo de las Americas

San Diego, California 92154

(619) 661-0458

(Address and telephone number of principal executive offices)

2355-A Paseo de las Americas

San Diego, California 92154

(Address of principal place of business or intended principal place of business)

Patrick Deparini

5440 West Sahara Avenue, Suite 202

Las Vegas, Nevada 89146

(702) 580-8565

(Name, address and telephone number of agent for service)

Copies to:

Gary A. Agron, Esquire

5445 DTC Parkway, Suite 520

Greenwood Village, CO 80111

(303) 770-7254

(303) 770-7257 (Fax)

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

If any securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box:    x

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box.    o

CALCULATION OF REGISTRATION FEE

(1)          Represents the closing price of the Registrant’s common stock on the NASD’s Electronic Bulletin Board of $.50 per share on November 9, 2007. This price is in excess of the conversion price of the preferred stock and the exercise price of the warrants.

This registration statement registers the resale of 97,348,553 shares of common stock and common stock underlying warrants and convertible securities held by security holders of the Registrant. In addition to the number of shares set forth above, the amount to be registered includes any shares of common stock issued as a result of stock splits, stock dividends and similar transactions in accordance with Rule 416.

The Proposed Maximum Offering Price per Share and the Proposed Maximum Aggregate Offering Price in the table above are estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) promulgated under the Securities Act of 1933.

The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until it shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

97,348,553 shares of common stock

NASCENT WINE COMPANY, INC.

This prospectus covers the resale by our 475 selling stockholders of 27,910,150 shares of our common stock, 37,500,000 shares of our common stock issuable upon conversion of Series A Convertible Preferred Stock, 7,500,000 shares of common stock issuable upon conversion of Series B Convertible Preferred Stock and 24,438,403 shares of our common stock underlying common stock purchase warrants. The selling stockholders’ names and share amounts are set forth under “Selling Stockholders and Plan of Distribution” in this prospectus. The shares will be offered by our selling stockholders at then prevailing market prices or privately negotiated prices. The offering will terminate on the earlier of the date all of the shares are sold or one year from the date hereof. We will not receive any proceeds from the sale of shares offered by the selling stockholders. Any proceeds we receive from the exercise of warrants will be added to our working capital.

Our common stock is quoted on the NASD’s over-the-counter Electronic Bulletin Board under the symbol “NCTW.” On November 2, 2007, the closing price of the common stock on the Bulletin Board was $.50 per share.

Investing in our common stock involves substantial risks. See “Risk Factors” beginning on page 4.

The Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

The date of this prospectus is                    , 2007.

TABLE OF CONTENTS

ABOUT THIS PROSPECTUS

You should rely only on the information contained in this prospectus as we have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not making an offer to sell these securities in any jurisdiction where such an offer or sale is not permitted.

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SUMMARY

This summary highlights material information regarding our company and the offering contained in this prospectus. However, you should read the entire prospectus carefully, including the financial information and related notes, before making an investment decision.

Business

We market and distribute more than 2,000 food and food-related products to over 2,300 customers throughout Mexico. Our customers include grocery stores, convenience stores, hotels, resorts, cafeterias, schools, industrial caterers and restaurants. We distribute a full line of frozen foods, such as meats, fully prepared entrees and desserts, and a full line of canned and dry goods, fresh meats and imported specialties. We also distribute a wide variety of food-related items such as disposable napkins, plates and cups, and have the exclusive right to distribute Miller beer in Baja California. In addition to sales and distribution of food products, we merchandise and promote food and beverage products using point of purchase displays and related store merchandising techniques in over 240,000 retail food stores primarily in Mexico through our Grupo Sur Promociones operating unit.

History

We were incorporated in Nevada in December 2002 as a wine distribution company. In April 2006 we acquired the right to distribute Miller beer in Baja California. In October 2006 we acquired the assets of Piancone Food Group, Inc. and in November 2006 we acquired all of the outstanding common stock of Palermo Foods, LLC. Both of these companies distribute food products primarily in Mexico. In May 2007 we acquired all of the outstanding stock of two other Mexican food distributors, Pasani S.A. de C.V. and Eco-Pak Distributing. In July 2007 we acquired Grupo Sur Promociones, a primarily Mexican food merchandising and promotion company. In October 2007 we acquired all of the outstanding common stock of Comercial Targa, S.A., De C.V., a Mexican food distributor specializing in cheeses and other dairy products. References to our operations include the operations of all of these acquired companies

Our corporate headquarters are located at 2355-A Paseo de las Americas, San Diego, California 92154, in a 12,000 square foot facility, which we also use as a receiving and importation warehouse. Our telephone number is (619) 661-0458 and our Web site address is www.nascentfoodservice.com. Information on our Web site is not a part of this prospectus.

The Offering

(1)          Excluding shares issuable upon exercise of common stock purchase warrants and conversion of preferred stock.

Description of Selling Stockholders

Through this prospectus, we are registering for resale (i) 27,910,150 shares of our common stock which we sold for $.40 per share in June 2007 in a private placement to a group of 474 accredited investors, and 5,649,850 shares of our common stock underlying warrants, which were issued to employees of Brookstreet Securities Corporation, the Placement Agent of our private placement, exercisable at a fixed price of $.40 per share until June 2010, (ii) an aggregate of 37,500,000 shares of our common stock issuable upon conversion of Series A Convertible Preferred Stock and an aggregate of 7,500,000 shares of our common stock issuable upon conversion of Series B Convertible Preferred Stock held by York Select Unit Trust, York Credit Opportunities Fund, L.P. and York Select, L.P., which we refer to collectively as “York” throughout this prospectus. All such preferred stock was sold to York in July 2007 and October 2007, (iii) an aggregate of 17,188,553 shares underlying other warrants we issued to bridge lenders and finders, and (iv) warrants to purchase 1,600,000 shares issued to a finder involved in our July 2007 sale of Series A and Series B Convertible Preferred Stock to York.

The names and share amounts of the selling stockholders are set forth under “Selling Stockholders and Plan of Distribution” in this prospectus. None of the selling stockholders are officers, directors or 10% or greater stockholders of our company except York.   All of the common stock issuable to York is at fixed prices of $.40 and $.178 per share, subject to standard and value-based anti-dilution protection. Before the financing, we had no prior relationship with York.

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SUMMARY FINANCIAL DATA

The following summary financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited and unaudited financial statements and related notes included elsewhere in this prospectus. This financial information for the years ended December 31, 2005 and 2006 is derived from our audited financial statements contained elsewhere herein. The financial information for the six months ended June 30, 2006 and 2007 is derived from our unaudited financial statements contained elsewhere herein.

Statement of Operations Data

Balance Sheet Data

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RISK FACTORS

The shares of common stock offered by this prospectus involve a high degree of risk and represent a highly speculative investment. You should not purchase these shares if you cannot afford the loss of your entire investment. In addition to the other information contained in this prospectus, you should carefully consider the following risk factors in evaluating our company, our business prospects and an investment in our shares of common stock.

Risks Related to the Company

We have ongoing losses, negative working capital and limited net tangible book value which could require us to reduce our operations.

As of June 30, 2006, we had an accumulated deficit of $5,886,608, negative working capital of $3,645,000 and a limited net tangible book value of $1,153,738. If we are unable to improve working capital and net tangible book value positions through earnings or equity investments, we could be required to reduce our operations.

Our auditors believe there is substantial doubt that we can continue as a going concern.

In their audit report dated March 30, 2007, our auditors indicated that there was substantial doubt that we could continue as a going concern. If we are unable to generate cash from earnings from the sale of equity securities, we could be required to reduce our operations.

Our food service distribution is a low-margin business such that any increase in our product costs or reduction in the selling price of our products could reduce our earnings.

We operate in the food service distribution industry, which is characterized by a high volume of sales with relatively low profit margins. Certain of our sales are at prices that are based on product cost plus a percentage markup. As a result, our earnings, if any, may be reduced if the price of food goes down, even though our percentage markup may remain constant. Certain of our sales are also on a fixed fee-per-case basis. Therefore, in an inflationary environment, our gross profit margins may be reduced. Our earnings may also be negatively impacted by product cost increases that we may not be able to pass on to our customers.

We rely on obtaining food products from large suppliers and selling food products to large customers. Accordingly, the loss of large suppliers or customers would reduce our revenue and profitability.

We sell a number of internationally known brands supplied to us by the manufacturers, such as Nestle, Cora, Mitsuki, Bonet, Bellissimo and Miller beer. We also derive a substantial portion of our sales from large customers including chain supermarkets, convenience stores and restaurants. We do not have distribution agreements with our suppliers nor do we have purchase agreements with our large customers. A material decrease in food products supplied by these large suppliers or a significant reduction in sales to our large customers would reduce our revenue and profitability.

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Our success will be dependent on our ability to integrate the operations of acquired businesses.

                We have grown primarily through acquisitions of other food service companies. Achieving the benefits of these acquisitions depends on the timely, efficient and successful execution of a number of post-acquisition events, including integrating the business of the acquired company into our purchasing programs, distribution network, marketing programs and reporting and information systems. We may not be able to successfully integrate the acquired company’s operations or personnel, or realize the anticipated benefits of the acquisition. Our ability to integrate acquisitions may be adversely affected by many factors, including the size of the business acquired and the allocation of our management resources among various integration efforts.

                Our results of operations also may be adversely affected by expenses incurred in making these acquisitions, by amortization of acquisition-related intangible assets and by additional depreciation expense attributable to acquired assets. The businesses we acquired may also have liabilities or adverse operating issues that are still unknown to us.

Approximately 76% of the revenue of our Grupo Sur Promociones operating unit was generated by one customer, the loss of which would significantly reduce our revenue.

                For the six months ended June 30, 2007, over 76% of Grupo Sur Promociones’ revenue (33% of our pro forma company-wide revenue) was generated by Procter & Gamble. The loss of Procter & Gamble would significantly reduce our revenue and our potential profitability.

We could be subject to significant and costly product liability claims.

                We could be subject to significant product liability claims if the food products we sell cause injury or illness. We have liability insurance with respect to product liability claims. This insurance may not continue to be available at a reasonable cost or at all, and may not be adequate to cover all product liability claims against us. At times we seek contractual indemnification from resellers of our product, but any such indemnification is limited. The costs associated with product liability claims and product recalls could significantly reduce our operating results.

Competition in our industry is intense and could increase our costs or reduce our revenue.

                The food service distribution industry is highly competitive. We compete with numerous smaller distributors and large warehouse-style low cost retailers for customer sales. Some of these distributors and retailers have substantially greater financial and other resources than we do. In order to compete, we may be required to increase our marketing budget, which could increase our costs, or reduce our prices, which could reduce our revenue.

Our operations and profitability may be adversely affected by economic conditions in Mexico.

                Our food service business is sensitive to Mexico’s national and regional economic conditions, and the demand for our food service products may be adversely affected by economic downturns in Mexico, a reduction of tourism in Mexico as well as inflation, regulation, taxation or political instability in Mexico.

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Currency fluctuations or the devaluation of the Peso could limit our ability to convert Pesos into U.S. Dollars and could subject us to foreign exchange losses, reducing our income and working capital.

A significant amount of our costs are U.S. Dollar-denominated, while our revenue is primarily Peso-denominated.  As a result, decreases in the value of the Peso against the U.S. Dollar could cause us to incur foreign exchange losses, which would reduce our income.  Severe devaluation or depreciation of the Peso may also result in governmental intervention, as has resulted in Argentina, or disruption of international foreign exchange markets.  This may limit our ability to transfer or convert Pesos into U.S. Dollars and other currencies.  The Mexican economy has suffered shortages in foreign exchange reserves in the past.  While the Mexican government does not currently restrict, and for more than ten years has not restricted, the right or ability of Mexican or foreign persons or entities to convert Pesos into U.S. Dollars or to transfer other currencies outside of Mexico, the Mexican government could institute restrictive exchange control policies in the future.  To the extent that the Mexican government institutes restrictive exchange control policies in the future, our ability to transfer or convert pesos into U.S. Dollars may be limited, which could reduce our working capital.

High inflation rates in Mexico may decrease demand for our food and food-related products while increasing our costs.

Mexico historically has experienced high levels of inflation, although the rates have been lower in recent years.  Nonetheless, Mexico’s current level of inflation remains higher than the annual inflation rates of its main trading partners.  High inflation rates can adversely affect our business and results of operations in the following ways:

•                  Inflation can reduce consumer purchasing power, thereby reducing consumer demand for our products;

•                  To the extent inflation exceeds our price increases, our prices and revenues will be reduced in “real” terms; and

•                  If the rate of Mexican inflation exceeds the rate of devaluation of the Peso against the U.S. Dollar, our U.S. Dollar-denominated sales will decrease in relative terms when stated in constant Mexican Pesos.

Because our common stock may in the future be classified as “penny stock,” trading may be limited, and the share price could decline.

        Because our common stock may in the future fall under the definition of “penny stock,” trading in the common stock, if any, may be limited because broker-dealers would be required to provide their customers with disclosure documents prior to allowing them to participate in transactions involving the common stock.  These disclosure requirements are burdensome to broker-dealers and may discourage them from allowing their customers to participate in transactions involving the common stock.

        “Penny stocks” are equity securities with a market price below $5.00 per share other than a security that is registered on a national exchange, included for quotation on the NASDAQ system or whose issuer has net tangible assets of more than $2,000,000 and has been in continuous operation for greater than three years.  Issuers who have been in operation for less than three years must have net tangible assets of at least $5,000,000.

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        Rules promulgated by the Securities and Exchange Commission under Section 15(g) of the Exchange Act require broker-dealers engaging in transactions in penny stocks, to first provide to their customers a series of disclosures and documents including:

•                  A standardized risk disclosure document identifying the risks inherent in investment in penny stocks;

•                  All compensation received by the broker-dealer in connection with the transaction;

•                  Current quotation prices and other relevant market data; and

•                  Monthly account statements reflecting the fair market value of the securities.

        These rules also require that a broker-dealer obtain financial and other information from a customer, determine that transactions in penny stocks are suitable for such customer and deliver a written statement to such customer setting forth the basis for this determination.

Our directors, executive officers and affiliates will continue to exert significant control over our future direction, which could reduce the sale value of our Company.

        Members of our Board of Directors and our executive officers, together with their affiliates, which includes York, own 56.3% of our outstanding common stock.  Accordingly, these stockholders, if they act together, will be able to control all matters requiring approval of our stockholders, including the election of directors and approval of significant corporate transactions.  This concentration of ownership, which could result in a continued concentration of representation on our Board of Directors, may delay, prevent or deter a change in control and could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of our assets.

Investors should not anticipate receiving cash dividends on our common stock.

        We have never declared or paid any cash dividends or distributions on our common stock and intend to retain future earnings, if any, to support our operations and to finance expansion.  Therefore, we do not anticipate paying any cash dividends on the common stock in the foreseeable future.

There is a reduced probability of a change of control or acquisition of us due to the possible issuance of additional preferred stock.  This reduced probability could deprive our investors of the opportunity to otherwise sell our stock in an acquisition of us by others.

                Our Articles of Incorporation authorize our Board of Directors to issue up to 5,000,000 shares of preferred stock, of which 1,875,000 shares of Series A Convertible Preferred Stock and 375,000 shares of Series B Convertible Preferred Stock, respectively, have been issued.  Our remaining preferred stock is issuable in one or more series and our Board of Directors has the power to fix the rights, preferences, privileges and restrictions thereof, including dividend rights, dividend rates, conversion rights, voting rights, terms of redemption, liquidation preferences and the number of shares constituting any series or designation of such series, without further vote or action by stockholders.  As a result of the existence of this “blank check” preferred stock, potential acquirers of our company may find it more difficult to, or be discouraged from, attempting to effect an acquisition transaction with, or a change of control of, our company, thereby possibly depriving holders of our securities of certain opportunities to sell or otherwise dispose of such securities at above-market prices pursuant to such transactions.

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FORWARD-LOOKING STATEMENTS

                This prospectus includes forward-looking statements.  We have based these forward-looking statements on our current expectations about future events.  These forward-looking statements are subject to risks, uncertainties and assumptions about us which are discussed in the Risk Factors section above and throughout this prospectus.  In light of these risks, uncertainties and assumptions, any forward-looking events discussed in this prospectus might not occur.

USE OF PROCEEDS

                We will not receive any proceeds from the sale of shares of our common stock being offered by the selling stockholders.  Any proceeds from the exercise of warrants will be added to our working capital.

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PRICE RANGE OF COMMON STOCK

        Our common stock has been quoted on the NASD’s Bulletin Board under the trading symbol “NCTW” since May 2006.  The high and low closing prices of our common stock for the periods indicated are set forth below.  These closing prices do not reflect retail mark-up, markdown or commissions.

 [Company to insert]

        As of November 2, 2007, we had approximately 650 stockholders of record.

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SELECTED FINANCIAL DATA

                The following selected financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited and unaudited financial statements and related notes included elsewhere in this prospectus.  This financial information for the years ended December 31, 2005 and 2006 is derived from our audited financial statements contained elsewhere herein.  The financial information for the six months ended June 30, 2006 and 2007 is derived from our unaudited financial statements contained elsewhere herein.

Statement of Operations Data

Balance Sheet Data

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

Cautionary Statement Regarding Forward-Looking Statements

                We and our representatives may from time to time make written or oral forward-looking statements, including statements included in or incorporated by reference into this prospectus and other filings made with the Securities and Exchange Commission. These forward-looking statements are based on management’s views and assumptions and involve risks, uncertainties and other important factors, some of which may be beyond our control, that could cause actual results to differ materially from those expressed or implied in the forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, in this Prospectus. Readers should carefully review the risks described in this and other documents that we may file from time to time with the Securities and Exchange Commission. The forward-looking statements speak only as of the date that they are made, however, we are obligated in certain circumstances to update or revise the disclosures in this prospectus in accordance with Federal securities laws.

Overview of the Business

We were incorporated in the State of Nevada (December 31, 2002 and until May 2006 we were a development stage company. In May we secured the distribution rights for Miller beer in Baja California, Mexico, and began distributing food products and beer in July 2006. We acquired four additional distribution companies operations, Piancone Group International, Inc. (PGII), Palermo Italian Food, LLC (Palermo), Eco Pac Distributing, LLC (Eco Pac) and Pasani, S.A. de C.V. (Pasani), expanding the Mexico operations, offering more than 2,000 food and food-related products to over 1,300 customers primarily in Mexico, the Baja California region of Mexico and Miami Florida.  Our customers include grocery stores, convenience stores, hotels, resorts, cafeterias, schools, industrial caterers and restaurants. We distribute a full line of frozen foods, such as meats, fully prepared entrees and desserts, and a full line of canned and dry goods, fresh meats and imported specialties. We also distribute a wide variety of food-related items such as disposable napkins, plates and cups, and have the exclusive right to distribute Miller beer in Baja California, Mexico.

                We believe that prompt and accurate delivery of orders, close contact with customers and the ability to provide a full array of products and services to assist customers in their food service operations are of primary importance in the marketing and distribution process. We offer daily delivery to certain customer locations and have the capability of delivering special orders on short notice. Through our 56 member sales force, we stay informed of the needs of our customers and acquaint them with new products and services. We also provide ancillary services to our customers relating to food service distribution such as providing product usage reports and other data, menu-planning advice, food safety training and assistance in inventory control.

                As of June 30, 2006 we had rented warehouse space and distribution  in San Diego, California, Miami, Florida, San Antonio, Texas and in Mexico; Mexico City, Tijuana, Monterrey, Cancun, Culiacan, Ciudad Juarez, Ensenada, Guadalajara, La Paz, Los Cabos and Puerto Penasco.

Results of Operations for the year ended December 31, 2006 compared to the year ended December 31, 2005 and Results of Operations for the six months ended June 31, 2007 compared to the six months ended June 31, 2006

Year ended December 31, 2006 as compared to year ended December 31, 2005

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                We generated revenues for the first time in the last half of 2006, $4,679,868 as compared to $1,400 for the year ended December 31, 2005. The increase was due to our acquisitions in 2006. Our pro forma revenue which includes projected operations had our company consolidated these revenues for twelve months indicates pro forma revenue of $16,180,000 for the year ended December 31, 2006 and $16,080,000 for the year ended December 31, 2005. We are anticipating higher revenues in 2007.

                Gross profit for the year ended December 31, 2006 was $701,271 (15%) of sales.  The pro forma gross profit $1,142,639 was also 15% of sales. We believe with additional companies in place that purchasing costs will improve resulting in higher gross profit percentages.

Six months ended June 30, 2007 as compared to six months ended June 30, 2006

                We were in the development stage until June 30, 2006, and as such the comparative numbers are not reflective of a company in business for those two years.

                We generated revenues of $12,926,000 compared to $389 for the six months ended June 30, 2007 and 2006, respectively.  The increase is due primarily to the increase in sales due to the acquisitions (approximately $6,000,000) and to sale of Miller beer, the distribution contract we acquired in May 2006 and the fact that we did not commence operations until July 1, 2006.

                Gross profit for the period ended June 30, 2007 was $2,183,000 (17%) of sales as compared to $146 of sales for the same period in 2006. In addition to increasing sales volumes we are also striving to increase the percentage of gross profit.

                The table below depicts sales and gross profit comparative data for the six months ended June 30, 2007 and 2006 and for the years ended December 31, 2006 and 2005:

                The table below depicts sales and gross profit comparative data Pro Forma for us including the acquisitions of PGII, Palermo and Pasani as if they were acquired at the beginning of 2005:

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General and Administrative Expenses

For the year ended December 31, 2006 and six months ended June 30, 2007

                Selling, general and administrative expenses were $2,455,561. Of this amount $634,000 were legal,  auditing and consulting costs associated with the acquisitions and start up of our distribution business, $265,000 were other valued added  taxes in Mexico and $565,000 of (non-cash) amortization of the Miller beer licensing agreement.

For the six months ended June 30, 2007 and 2006

                Selling, general and administrative expenses were $5,038,405 for the six months ended June 30, 2007 as compared to $265,000 for the same period 2006 and $2,455,561 for the year ended December 31, 2006.  The increase over the year ended December 31, 2006 ($2,582,000) is due to the increase in amortization of the Miller beer license of $360,000, legal and other professional fees associated with the private placements financing of $742,000, the opening of additional distribution warehouses in Puerto Penasco, Mexicali and Cabo San Lucas of $300,000 and by inclusion of six months of general and administrative expenses of PGII and Palermo that were acquired late in 2006 of $1,180,000. By combining corporate duties and sales efforts we seek to eliminate a substantial amount of overhead.

Loss from operations

                Loss from operations for the year ended December 31, 2006 was $1,754,290 compared to $13,993 for the year ended December 31, 2005.  Net loss for the year was $2,036,868 after interest expense of $289,580 and interest income of $7,003.

                Loss from operation for the six months ended June 30, 2007 was $2,855,000 as compared to net loss from operations of $265,408 for the year ended December 31, 2005.

                Net loss for the six months ended June 30, 2007 was $3,830,000 after interest expense of $980,163 and interest income of $6,052.

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Working Capital and Cash Flow

We utilized cash from operations of $1,884,281 for the year ended December 31, 2006 and $3,953,384 for the period ended June 30, 2007.

We had a cash balance of $476,376 at December 31, 2006 as compared to $14,254 at December 31, 2005. We have been able to raise capital  for operations and to acquire the Miller beer distribution license by obtaining loans in the amount of $2,076,000 and receiving subscription for stock in the amount of $2,335,000 during the year ended December 31, 2006.

                We had a cash balance of $842,385 at June 30, 2007 as compared to $476,376 at December 31, 2006.  We have been able to raise capital for operations, mainly by loans and stock issuances which resulted in acquisitions.

                We acquired assets, licensed marks and Pasani\Eco Pac for $6,754,000, financing with $6,000,000 in loans.  We issued stock for cash $7,287,000 which financed the pay down of debt and loss for the period.

                We expect to finance the capital needed with additional issuances of our securities. During the quarter ended June 30, 2007 we closed out the share offering placed by Brookstreet Securities Corporation.

                Subsequent to June 30, 2007 we obtained additional financing from York Capital in the amount of $15,000,000 in order to make additional acquisitions.

CASH FLOW STATEMENT SUMMARY

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BUSINESS

Overview

        We market and distribute more than 2,000 food and food-related products to over 2,300 customers throughout Mexico.  Our customers include grocery stores, convenience stores, hotels, resorts, cafeterias, schools, industrial caterers and restaurants.

        Since our April 2006 acquisition of the exclusive right to distribute Miller beer in Baja California, we have primarily grown through a series of acquisitions of food service companies. In October 2006 we acquired the assets of Piancone Food Group, Inc. which distributes food products primarily in Baja California. In November 2006 we acquired all of the outstanding common stock of Palermo Foods, LLC which distributes food products primarily in Miami, Florida, the east coast of Mexico and the Caribbean. In May 2007 we acquired all of the outstanding common stock of Pasani S.A. de C.V. and its affiliate Eco Pak Distributing, which distributes food products primarily in Mexico. In July 2007 we acquired all of the outstanding common stock of Grupo Sur Promociones which merchandises and promotes food products to over 240,000 retail food stores, primarily in Mexico.  In October 2007 we acquired all of the common stock of Comercial Targa, S.A., De C.V., a Mexican food distributor specializing in cheeses and other dairy products.

        We distribute a full line of frozen foods, such as meats, fully prepared entrees and desserts, and a full line of canned and dry goods, fresh meats and imported specialties.  We also distribute a wide variety of food-related items such as disposable napkins, plates and cups, and have the exclusive right to distribute Miller beer in Baja California. In addition to sales and distribution, we merchandise and promote food and beverage products in over 240,000 stores through Grupo Sur Promociones.

We believe that prompt and accurate delivery of orders, close contact with customers and the ability to provide a full array of products and services to assist customers in their food service operations throughout Mexico are of primary importance in the marketing and distribution process in Mexico.  We offer daily delivery to certain customer locations and have the capability of delivering special orders on short notice.  Through our 68 member sales force and 4,500 Grupo Sur Promociones contracted sales and merchandising force, we stay informed of the needs of our customers and acquaint them with new products and services.  We also provide ancillary services to our customers relating to food service distribution such as providing product usage reports and other data, menu-planning advice, food safety training and assistance in inventory control.

Industry Background

Mexico’s hotel, restaurant and institutional food service sector accounted for annual sales of approximately $46 billion in 2002, according to a 2003 report by the U.S. Department of Agriculture.  The food service distribution industry in Mexico is highly fragmented and relatively undeveloped.  There are more than 25,000 independent food service distribution companies in Mexico with estimated average annual revenues of approximately $1.5 million according to the 2003 USDA report.  Mexico’s hotel and restaurant businesses, especially in Baja California, are heavily dependent on tourism.  We believe that the majority of foreign tourists in Mexico are from the United States and generally prefer to purchase U.S. food products.  According to Mexico’s Secretary of Tourism in the 2003 USDA report, there were approximately 11,618 hotels and over 200,000 restaurants in Mexico in 2002.

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The food service industry in Mexico is served almost entirely by independent distributors.  While some hotels and restaurants import products directly, the number is relatively few and most foreign food products are imported through a distributor.  Due to the complex nature of importation and the large minimum order sizes imposed by food manufacturers, the intermediary role of the independent distributor is necessary for inventory warehousing and delivery.  Moreover, the roads and infrastructure of Mexico make U.S.-style, large-scale delivery and logistical methods difficult, necessitating more frequent deliveries using smaller delivery vehicles.  These unique logistical challenges may be an important barrier to entry for large “multi-supplier” U.S. food service distributors in the Mexican market.

Since there are no large, national food service distributors in Mexico, the industry is divided into three general categories:  (i) fast food distributors focused on international chains such as McDonald’s, Kentucky Fried Chicken, Domino’s Pizza and Burger King, (ii) specialized importers that serve middle and upper-tier markets and provide primarily foreign food products or products that are not widely available in Mexico and (iii) produce and basic dry goods distributors that distribute local products and widely-available foreign products.  Of these three categories, we believe specialized importers such as we add the most value and may have the potential for the highest profit margins.

We are primarily a specialized importer.  However, we believe that, over the next decade, Mexico will begin to see U.S.-style; “multi-supplier” companies enter this market.  Our goal is to become a leader in this market.  Due to the unique challenges in Mexico described above, major U.S. distributors such as Sysco, Inc. and U.S. Foodservice, Inc. may not choose to enter this market directly.  The primary competitive advantages of these companies are the economies of scale and large-scale logistical systems they have established.  We believe those systems may be difficult to implement in Mexico at this time.  Therefore, we believe that the larger distribution companies in Mexico may be companies using a distribution and sales system organically grown and operated in Mexico, such as ours.

Our Products

We distribute over 2,000 food and non-food products, including a five-year exclusive agreement with Miller Beer Company for the distribution of Miller beer in Baja California, non-binding distribution arrangements which we have with name brands including Nestle, Cora, Mitsuki, Bonet and Bellissimo.  and over 300 proprietary products that we offer under a variety of our own brand names. Our non-binding distribution arrangements are either oral or are evidenced solely by purchase orders and can be terminated at any time without notice.

Our products include:

•                  Beverages — bottled water, cocoa, coffee, drink mixes, juices, soda and tea.

•                  Baking Ingredients — artificial sweeteners, cake mixes, canned milk, chocolate, cornmeal, donut mixes, fillings, flour, nuts, pancake mixes, powdered milk and sugar.

•                  Condiments and Dressings — BBQ sauce, ketchup, cooking wine, hot sauce, mayonnaise, mustard, olives, pickles, relish, salad dressing and vinegar.

•                  Fresh Meats — chicken, deli meats, ham, hot dogs, lamb, pork and sausage.

•                  Frozen Foods — appetizers, French fries, bakery, chicken, desserts, duck, fruits, meat, pasta products, prepared foods, seafood, snacks, specialty items, turkey, vegetables, ice cream and onion rings.

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•                  Grocery Products — bread and rolls, canned fish, canned fruit, canned meats, canned vegetables, cereal, cookies, crackers, dessert mixes, dry beans, extracts and flavorings, jams, jellies, mints, oil, pasta, peanut butter, portion control, prepared foods, rice, seasonings, shortening, snacks, soup, soup bases, spices, syrups, tomato products and toppings.

•                  Refrigerated Foods — butter, cheese, dressings, eggs, grated cheese, imported cheese, margarine, milk, refrigerated beverages, salads, sour cream and yogurt.

•                  Specialty Foods — gourmet, imports and international cuisine.

•                  Disposables — cake boxes, cutlery, doilies, donut boxes, foam cups, foam-hinged containers, foam plates, food trays, napkins, paper bags, paper cups, paper plates, pizza boxes, placemats, plastic bags, plastic plates, straws, paper towels and wood ware.

•                  Candy — chocolates, hard candies and chewing gum.

•                  Equipment — ice cream freezers and small wares ordered in advance.

•                  Beer — the full line of Miller beers under an exclusive distribution agreement with the Miller Beer Company for Baja, California.

We purchase our products directly from manufacturers and through other distributors.

Our Customers

We have over 2,300 Mexican food service customers, divided into three major categories:

•                  Supermarket chains including Calimax, Gigante, Casa Ley, Costco and Smart & Final, Wal-Mart and Sam’s Club, Costco, all among the largest supermarket chains in Mexico, along with chain convenience stores including AM/PM, OXXO, EXTRA and 240,000 mom and pop grocery stores.

•                  Restaurant chains including TGI Friday’s, Applebee’s, Pizza Hut and Papa John’s.

•                  Traditional food service retailers including independent restaurants, hotels, resorts, schools and caterers.

Other Services

                Through Grupo Sur Promociones we merchandise and promote food products in over 240,000 retail food stores primarily in Mexico.  Our marketing and promotion services involve developing point of sale and related displays for specific food products within our customers’ stores and providing data collection and reporting services to them regarding their food product sales. We bill our services either to the retail food stores themselves or to the manufacturer of the food products who pay us to merchandise in the retail store on their behalf.  We service these retail food stores using over 4,500 employees provided to us by three other companies, which are owned by executive officers of our Grupo Sur Promociones subsidiary.  We do not employ these individuals ourselves, but, rather, we contract with the other three companies to provide their services to us on a contract basis.  These companies provide their employees’ services to us at their cost.

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Business Strategy

Our goal is to increase revenue through both internal growth and the acquisition of Mexican-based food distributors.  We believe that the food distribution market in Mexico may be ideal for consolidation because it is fragmented, offers economies of scale related to cost reduction and elimination of redundant services and allows for improvements in inventory and accounts receivable financing, which is often the most significant factor limiting the growth of small distributors in Mexico.

Specific benefits to consolidation in the food service distribution industry include:

•                  Economies of scale.  Distribution is most efficiently done at scale.  As distribution size increases, margins may improve, suppliers may become more willing to provide products at attractive prices, financing may become available and customers may increase order size and frequency.  Other economies may include accounting and other administrative expenses, direct purchase discounts, warehousing costs and importation fees.

•                  Simplified transport of goods.  Transportation represents a large percentage of the cost of a delivered food product, especially if it requires refrigeration.  By bundling many deliveries in one route or vehicle, the margins on individual deliveries may improve.

•                  Ability to order directly from manufacturers.  Manufacturers often have minimum order sizes for direct purchases.  Until these can be met, distributors often must order through other larger distributors and pay a premium to them.  Once direct purchase is an option, margins may improve.

•                  Regional and national accounts.  The ability to target regional and national account customers and name-brand suppliers that are too large for smaller distributors.

In addition to the purchase price and ease of integrating an acquisition, factors we consider in connection with an acquisition include:

•                  Whether the acquired company has the necessary personnel willing to stay on;

•                  The acquired company’s corporate culture; and

•                  The acquired company’s product mix and customer base.

We seek to standardize operating procedures across acquisitions as we become satisfied with the acquired company’s management and customer stability.

We believe acquisition candidates will continue to be available to us, although there can be no assurance that we will be able to acquire additional companies in the future.  Food service distributors in Mexico rely heavily on their principals and there is not an active or competitive market to purchase these companies.  Retiring company owners often terminate their operations as opposed to seeking a buyer.  Small distribution companies are under continual financial stress because they must internally finance nearly all of their inventory and receivables due to what we believe to be limited receivables financing and bank lending in Mexico.  For smaller distributors, the opportunity to have access to our inventory and resources and become a commissioned agent for us may also be attractive.

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Marketing and Distribution

We currently have 68 full time sales people and over 4,500 contract employees involved in our Grupo Sur Promociones sales and merchandising force.  Our sales people are responsible for maintaining close contact with customers, visiting them regularly, distributing price lists and introducing new products.  Our sales people regularly visits all hotels and restaurants in their territories in order to introduce our products and services to them.  In most cases they collect all payments for products directly from customers since checks are generally not sent through the mail in Mexico.  For larger, more institutional, clients our senior management often accompanies our sales people on marketing visits.

Our marketing efforts also include attendance at food shows to attract new customers and introduce new products.  We often invite interested buyers to a hotel or convention center and arrange for a representative from the manufacturer or supplier to present products to them.

We deliver our products using approximately 36 trucks, including both refrigerated and dry trucks, driven by approximately 50 drivers.  We support our sales and deliveries by maintaining warehouses in San Diego, Miami and San Antonio, and in the Mexican cities of Tijuana, Cancun, Culiacan, Ciudad Juarez, Ensenada, Mexico City, Guadalajara, Mexicali, La Paz, Monterey, Puerto Penasco and Cabo San Lucas.

Information Systems and Accounting

We currently manage the ordering, receiving, warehousing, inventory and delivery of products using several different accounting software programs acquired when we purchased some of our operating units. Our intent is to unify each of our operating units under one software system within the next 12 months. Our current software assists us in timely and accurate financial reporting by our subsidiaries to our corporate headquarters.  Software development and maintenance is managed on a centralized basis by our outsourced information technology staff.  The software has been enhanced to provide standardized product identifiers to facilitate leveraging our purchasing volume across our distribution network.  In the future, we intend to enhance our warehouse management system by using barcode scanning to track products within our distribution centers.  This technology is intended to enhance productivity by reducing errors in inventory put-away and selection.

Our software management system also tracks employee productivity to analyze warehouse efficiencies.  We are in the process of installing truck routing software to optimize the distribution routes traveled by our trucks in order to reduce excess mileage and improve the timeliness of customer deliveries.  For inbound freight, we implement a centralized inbound logistics system that optimizes consolidated deliveries from our suppliers.  We have also implemented an Internet-based ordering system that allows customers to have real-time access to product information, inventory levels and their purchasing histories.

Competition

We primarily compete with thousands of small family businesses that distribute supplies to the food service and retail industry in Mexico. To a lesser extent, we compete with warehouse style low cost retailers, such as Wal-Mart, that sell food products directly to restaurants and retailers. Most food distributors in Mexico specialize in one product category such as cheese, meat or canned goods.  There are no major U.S. or Mexico distributors that supply a full line of grocery and refrigerated products to the food service market in Mexico.

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                Unlike the foodservice distribution business in Mexico, there are only a handful of nationwide merchandising and promotion companies which compete with our Grupo Sur Promociones unit.  These competitors include MS Prom, Dinamere, A&P, MAP and Promerc.

                With respect to competitive factors among food distribution companies, we believe that prompt and regular delivery service, price and product availability are the three major competitive factors.  We believe our delivery services, prices and product availability are superior to most of our smaller competitors and that our ability to deliver products nationwide in Mexico is a competitive advantage.  Our chain retail competitors offer prices equal to ours but generally do not provide delivery services.

                Competitive factors in connection with Grupo Sur Promociones’ merchandising business  include the price of merchandising services, the quality of point of sale materials, geographical availability of merchandising services and the quality of information services available to customers.  We believe we have competitive advantages as a result of the size of the geographical area we service, the fact that we offer these services through 4,500 contract employees and to 240,000 customers throughout Mexico and what we perceive to be the high quality of our point of purchase materials and our information services.  We also believe that our pricing of merchandising services is competitive.

Employees

As of July 31, 2007, we had a total of 83 full-time employees and over 4,500 contract employees operating from our three U.S. facilities, and our 15 warehouses in Mexico.  None of our employees is subject to a collective bargaining agreement and we have not experienced any work stoppages.  We believe that our employee relations are good.

Facilities

We conduct our operations from our 12,000 square foot leased corporate headquarters in San Diego, California, which we also use as a receiving and importation warehouse.  We also have 17 additional warehouses and offices, located in Miami, San Antonio, Tijuana (2), Cancun, Culiacan, Ciudad Juarez, Ensenada, Mexico City (3), Guadalajara, Mexicali, La Paz, Monterey, Puerto Penasco and Cabo San Lucas.  Total rent expense for an aggregate of 18 warehouses and offices is currently $69,000 per month.  The terms of these leases run from one year to five years, aggregate 184,000 square feet and average $.37 per square foot of facilities leased.  Additional warehouse and other facilities are available to us if needed.

Legal Proceedings

We are not a party to any pending or threatened material legal proceedings.

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MANAGEMENT

Executive Officers and Directors

The names, ages and positions of our directors and executive officers are as follows:

The principal occupations for at least the past five years of each of our directors and executive officers are as follows:

       Sandro Piancone became our Chief Executive Officer in June 2006 when we acquired the Piancone Group International, a firm he founded and acted as its Chief Executive Officer since January 2001.  From January 2000 to February 2002, Mr. Piancone was also President and a director of E-Food Depot, USA, Inc.  From April 1998 to November 1999, he was vice president of sales and marketing for Roma Exporting, a food supplier to Mexico.  His duties there included securing new distributors throughout Mexico and implementing marketing programs for those distributors.  In 1991, he founded Tele-Chef Catering, which became one of San Diego’s largest catering companies and was merged with Mt. Etna Pizza Corp. in 1995.  From 1995 to 1998, Mr. Piancone was Vice President and a director of Mt. Etna.  From 1987 to 1991, he was the publisher of US Pizza News, the largest pizza trade newspaper in the United States.  Mr. Piancone is fluent in Spanish and Italian.

       Victor Petrone became our President in May 2006.  He was the President of International Food Specialists from 2004 until he joined us.  From 2001 to 2004, he oversaw the operations of the Specialty Market Division of Sysco Food Service Corporation.  From 1999 to 2001, he was employed by Roma Food Enterprises, Inc., a food service distributor, as General Manager of the Western United States and Mexico.  He is a graduate of the Wharton School of Business at the University of Pennsylvania.  Mr. Petrone is fluent in Spanish and Italian.

        William Lindberg has been our Chief Financial Officer since June 2006.  Mr. Lindberg began his accounting career with Arthur Anderson & Co. in 1958 in Los Angeles, and was later assigned to its offices in Montevideo, Uruguay, Buenos Aires, Argentina and Santiago, Chile, serving from 1961 to 1971.  Since 1988, he has been consulting for a variety of private and public companies, preparing financial statements for SEC filings and presentation to auditors.

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        Brian A. Zamudio has been the Executive Vice President, Secretary and Director of publicly-held Tonogold Resources, Inc. since May 2003 and the Executive Vice President and Chief Financial Officer of its affiliate, Prospect Uranium, Inc., since March 2005.  Mr. Zamudio was the Chief Operating Officer of Point Loma Partners, Inc. from 1999 to 2002.  He was the President of Daybreak Apparel LLC, an apparel manufacturer based in San Diego, California, from 1999 to 2004.  Prior professional experience includes acting as the Managing Partner of Big Rock Holdings, a real estate development company, from 1997 to 2002.  While at Big Rock, Mr. Zamudio was responsible for acquisitions and financing.  Prior to Big Rock, Mr. Zamudio worked in the mortgage securities department at Sentra Spelman, a brokerage firm based in San Diego, California.

                James E. Buckman joined York in January 2007 as Senior Consultant and has been Vice Chairman since May 2007.  He is responsible for oversight of York’s private investments, as well as assisting in York’s day-to-day operations.  From February 1992 to September 2006, Mr. Buckman worked at Cendant Corporation, or its predecessor, HFS Incorporated, as Executive Vice President and later Vice Chairman, General Counsel and a Director.  Previously, he was a Partner at Troutman Sanders LLP.  He has also served as Executive V.P., General Counsel and a Board Member for Days Inn Corp., Assistant General Counsel at Gable Industries, Inc. and an Associate at Dewey Ballantine LLP.  Mr. Buckman received his A.B. degree from Fordham University and his J.D. degree from Yale Law School.  He is a member of the Board of Directors of Wyndham Worldwide Corporation.

                Yehuda “Mitch” Wolf joined York in March 2006 as a Vice President.  From 2001 to 2006 he worked at Oaktree Capital Management where he was a member of the Mezzanine Finance group.  From 1998 to 2001 he worked at J.P. Morgan & Co in the Private Equity Placements, and Corporate Finance and Mergers and Acquisition groups.  Mr. Wolf received his B.S. Finance degree from Yeshiva University with Honors.

All directors hold office until the next annual meeting of our stockholders and until their successors have been duly elected and qualified.  Our officers are elected by and serve at the discretion of the Board of Directors.  None of our directors is independent and we do not have any committees of the Board of Directors.

Executive Compensation

               We do not have employment agreements with any of our executive officers.  We currently pay Mr. Piancone and Mr. Petrone annual salaries of $120,000 each.  No other executive officer receives an annual salary in excess of $100,000.  We do not have key person life insurance on the lives of any of our executive officers.

Director Compensation

                Our non-employee directors do not currently receive compensation for their services as directors although they are provided reimbursement for out-of-pocket expenses incurred in attending Board meetings.  We may pay cash and stock-based compensation to our directors in the future.

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Summary Compensation

                The following table sets forth information concerning the annual and long-term compensation for services rendered during the last two calendar years paid by us to our Chief Executive Officer.  No other executive officers received compensation in excess of $100,000 in 2005 or 2006.  Sandro Piancone and Victor Petrone are each currently paid $120,000 annually.

Equity Incentive Plan

        We intend to adopt an equity incentive plan, which we refer to as our Plan, which will provide for the grant of options intended to qualify as “incentive stock options” and “non-statutory stock options” within the meaning of Section 422 of the Internal Revenue Code of 1986 together with the grant of bonus stock and stock appreciation rights at the discretion of our Board of Directors.  Incentive stock options are issuable only to our eligible officers, directors and key employees.  Non-statutory stock options are issuable only to our non-employee directors and consultants.  We have not determined the aggregate maximum number of shares of common stock that may be issued under the Plan.  The Plan will be administered by our full Board of Directors.  Under the Plan, the Board will determine which individuals shall receive options, grants or stock appreciation rights, the time period during which the rights may be exercised, the number of shares of common stock that may be purchased under the rights and the option price.

                With respect to stock options, the per share exercise price of the common stock may not be less than the fair market value of the common stock on the date the option is granted.  No person who owns, directly or indirectly, at the time of the granting of an incentive stock option, more than 10% of the total combined voting power of all classes of our stock is eligible to receive incentive stock options under the Plan unless the option price is at least 110% of the fair market value of the common stock subject to the option on the date of grant.  The option price for non-statutory options will be established by the Board and may not be less than 100% of the fair market value of the common stock subject to the option on the date of grant.

                No options may be transferred by an optionee other than by will or the laws of descent and distribution, and during the lifetime of an optionee, the option may only be exercisable by the optionee.  Options may be exercised only if the option holder remains continuously associated with us from the date of grant to the date of exercise, unless extended under the Plan grant.  Options under the Plan must be granted within 10 years from the effective date of the Plan and the exercise date of an option cannot be later than 5 years from the date of grant.  Any options that expire unexercised or that terminate upon an optionee’s ceasing to be employed by us become available once again for issuance.  Shares issued upon exercise of an option rank equally with other shares then outstanding.

Liability and Indemnification of Officers and Directors

                Our Articles of Incorporation provide that liability of directors to us for monetary damages is eliminated to the full extent provided by Nevada law.  Under Nevada law, a director is not personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director except for liability (i) for any breach of the director’s duty of loyalty to us or our stockholders; (ii) for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law; (iii) for

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authorizing the unlawful payment of a dividend or other distribution on our capital stock or the unlawful purchases of our capital stock; (iv) a violation of Nevada law with respect to conflicts of interest by directors; or (v) for any transaction from which the director derived any improper personal benefit.

The effect of this provision in our Articles of Incorporation is to eliminate our rights and our stockholders’ rights (through stockholders’ derivative suits) to recover monetary damages from a director for breach of the fiduciary duty of care as a director (including any breach resulting from negligent or grossly negligent behavior) except in the situations described in clauses (i) through (v) above.  This provision does not limit or eliminate our rights or the rights of our security holders to seek non-monetary relief, such as an injunction or rescission, in the event of a breach of a director’s duty of care or any liability for violation of the federal securities laws.

                Insofar as indemnification for liabilities arising under the Act may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.

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SECURITY OWNERSHIP OF EXECUTIVE OFFICERS, DIRECTORS AND

BENEFICIAL OWNERS OF GREATER THAN 5% OF OUR COMMON STOCK

                As of the date of this prospectus, there are 83,616,707 shares of common stock outstanding.  The following table sets forth certain information regarding the beneficial ownership of the outstanding shares as of the date of this prospectus by (i) each person who is known by us to own beneficially more than 5% of our outstanding common stock; (ii) each of our executive officers and directors; and (iii) all of our executive officers and directors as a group.  Except as otherwise indicated, each such person has investment and voting power with respect to such shares, subject to community property laws where applicable.  The address of our executive officers and directors is in care of us, at 2355-A Paseo de las Americas, San Diego, California 92154.

(1)          Messrs. Buckman and Wolf are employees of JGD Management Corp., d/b/a York Capital Management, but not executive officers or directors.  JGD Management Corp. has been delegated certain management and administrative duties by each of York Seclect Unit Trust, York Credit Opportunities Fund, L.P. and York Select, L.P. Accordingly, JGD Management Corp may be deemed to have beneficial ownership over the shares of common stock being registered under this prospectus by York. James G. Dinan is the Chief Executive Officer and controlling stockholder of JGD.

(2)          Represents Series A and Series B Convertible Preferred Stock held by York collectively convertible into 45,000,000 shares of common stock.

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SELLING STOCKHOLDERS AND PLAN OF DISTRIBUTION

                We have outstanding 83,616,707 shares of common stock.  We are registering by this prospectus an aggregate of 27,910,150 shares of common stock, 45,000,000 shares of common stock convertible upon exercise of Series A and Series B Convertible Preferred Stock and 24,438,403 shares of common stock underlying common stock purchase warrants. The common stock being registered is comprised of (1) 27,910,150 shares sold at $.40 per share in a June 2007 private placement to 474 investors through Brookstreet Securities Corporation, and (2) 45,000,000 shares issuable upon conversion of Series A and Series B Convertible Preferred Stock at $.40 and $.178 per share (subject to standard and value-based anti-dilution protection), respectively, sold to York, and (3) common stock underlying (i) 5,649,500 warrants issued to employees of Brookstreet Securities Corporation, the placement agent of the June 2007 private placement, (ii) 1,600,000 warrants issued to a finder in connection with the sale of our Series A and Series B Convertible Preferred Stock to York, (iii) 950,270 warrants issued to CSFF Master Fund L.P. and Cordillera Fund, L.P. in connection with a $3.5 million debt financing advanced by them, and (iv) 2,211,000 warrants issued to other bridge lenders for a 2006 bridge loan we obtained from them.

                The following table sets forth the names of the selling stockholders and the number of shares of our common stock held by each selling stockholder or exercisable under the warrants. The warrants are all exercisable at a fixed price of $.40 per share. The selling stockholders listed below are offering for sale all shares listed following their names.  None of the selling stockholders is required to sell any of their shares at any time.

                The shares may be offered from time to time by the selling stockholders.  Since the selling stockholders may sell all or part of the shares of common stock offered in this prospectus, we cannot estimate the number of shares of our common stock that will be held by the selling stockholders upon termination of this offering.

                None of our selling stockholders are officers, directors or 10% or greater stockholders except York.  None of our selling stockholders currently are broker-dealers or affiliates of broker-dealers except Brookstreet Securities Corporation and certain of its employees.  None of the selling stockholders has or had any material relationship with us, except as indicated above with respect to the employees of Brookstreet and York, CSFF and Cordillera.  All warrants are exercisable at fixed prices of $.40 or $.178 per share.

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