RISKS
? Possible loss of control
? Lack of cash
? VQA designation
? Quality of the vines
? Yield of the vines
? Weather
OPPORTUNITIES
? Innovative financing
? Payment on machinery could cease
? Premium wine market growing
? Price for wine growing
? Pierre’s experience and expertise
? Future on site/Internet sales
? Low cost operation
The results could be better than those shown in Appendix I, since this analysis does not include any revenue from the farm for 2001 and 2002 or from the sale of lower grade grapes. We have also assumed that HWL will obtain the VQA designation and will therefore be able to command higher prices for its wine. If HWL does not obtain this designation, the results will be quite different. We did not take into account potential sales through home deliveries and the Internet, since we do not know whether this is legally feasible. Ventura will have a 25% interest in HWL at the outset, but this interest could increase to more than 50% if HWL is in default and the loan is converted. Pierre would then lose control over appointments to the Board, destroying his life-long dream of owning and operating a winery. However, our projections for 2005 show that, when fully operational, the business can generate sufficient cash to accumulate the amount required to reimburse the loan and buy back the shares in 2007.
The price set for the repurchase of the common shares is high. Ventura wants $500,000 for shares for which it will have paid $200,000, which means a $300,000 premium over seven years, i.e. $43,000 per year. However, it would be very difficult to find other, less expensive sources of capital. As the agreement is still at the drafting stage, it may be possible to negotiate better terms. In addition, the ...