3. Acquisitions

Russian Alcohol Acquisition

On February 4, 2011, pursuant to the agreement dated November 9, 2009, with Kylemore International Invest Corporation (“Kylemore”), an indirect minority stockholder of the Russian Alcohol Group (“Russian Alcohol”), the Company paid $5 million as a final settlement related to Russian Alcohol acquisition.

Whitehall Group Acquisition

On February 7, 2011, the Company entered into a definitive Share Sale and Purchase Agreement and registration rights agreement, in accordance with the terms that were agreed by the parties on November 29, 2010. Pursuant to these agreements, among other things and upon the terms and subject to the conditions contained therein, we received 20% of the economic and 51% of the voting interest in the Whitehall Group (“Whitehall”) previously not owned by us, as well as the global intellectual property rights for the Kauffman Vodka brand. In exchange we paid total consideration of $93.2 million including $17.5 million for the intellectual property rights for the Kauffman Vodka brand.

The Company recorded contingent consideration representing the fair value of a right given to Mark Kauffman as a share price indemnity until the registration date. The fair value of this contingent consideration was recorded at $1.7 million as of the acquisition date on provisional basis. This consideration was settled in March 2011 through a payment by the Company of $0.7 million in cash and the issuance of 938,501 additional shares to Mark Kauffman.

As a result of this transaction, the Company acquired full voting and economic control over Whitehall Group and changed the accounting treatment for its interest in Whitehall from the equity method of accounting to consolidation beginning on February 7, 2011.

Whitehall is one of the leading importers and distributors of premium wines and spirits in Russia. We believe that this acquisition will give the Company a significant base for further expansion and gaining expected synergies of the combined operations of the Company and Whitehall in the import market in Russia. The goodwill arising out of Whitehall acquisition is attributable to the ability that Whitehall provides us to develop into the leading importer of spirits in the Russian market.

Details of the fair value of consideration transferred are presented in the following table:


Cash	$	69,109
Common stock		22,101
Contingent consideration		1,976

Total Fair value of consideration transferred		93,186
Less: value of intellectual property rights to Kauffman Vodka brand		(17,473	)

Total consideration paid for the remaining shares in Whitehall	$	75,713

The fair value of the net assets acquired in connection with Whitehall acquisition as of the acquisition date is:


	Whitehall
ASSETS

Cash and cash equivalents		16,190
Accounts receivable		51,263
Inventories		30,700
Taxes		577
Prepaid expenses and other current assets		12,916
Property, plant and equipment		869
Intangibles assets		8,723
Equity method investments in affiliates		17,871

Total Assets	$	139,109

LIABILITIES

Trade accounts payable		38,887
Bank loans and overdraft facilities		27,835
Taxes		4,325
Deferred income taxes		13
Other accrued liabilities		12,811

Total Liabilities	$	83,871

Net identifiable assets and liabilities	$	55,238

The amount of goodwill recognized at the acquisition date was calculated as follows:


Fair value of previously held interest	$	250,156
Consideration paid for the remaining shares in Whitehall		75,713
Less: Net identifiable assets and liabilities		(55,238	)

Goodwill on acquisition	$	270,631

The Company recognized a one-time gain on remeasurement of previously held equity interest in the amount of $7.9 million based on a discounted cash flow model with the following assumptions: (i) discount rate of 11.13%, (ii) terminal value growth rate of 3.5%, (iii) control premium of 10%. We estimated the growth rates in projecting cash flows based on a detailed five year plan.

The following table sets forth the unaudited pro forma results of operations of the Company for the years ended December 31, 2011 and 2010. The unaudited pro forma results of operations give effect to the Company’s acquisitions as if they occurred on January 1, 2011 and 2010. The unaudited pro forma results of operations are presented after giving effect to certain adjustments for depreciation, amortization of deferred financing costs, interest expense on the acquisition financing, and related income tax effects. The unaudited pro forma results of operations are based upon currently available information and certain assumptions that the Company believes are reasonable under the circumstances. The unaudited pro forma results of operations do not purport to present what the Company’s results of operations would actually have been if the aforementioned transactions had in fact occurred on such date or at the beginning of the period indicated, nor do they project the Company’s financial position or results of operations at any future date or for any future period.


	Year ended December 31,
	2011			2010
	(unaudited, restated, See Note 2)			(unaudited, restated, See Note 2)
Net sales	$	836,061		$	887,938
Net income		(1,323,667	)		(120,254	)

Net income per share data:
Basic earnings per share of common stock	$	(18.34	)	$	(1.72	)
Diluted earnings per share of common stock	$	(18.34	)	$	(1.72	)

The net sales and net income of Whitehall for the period since the acquisition date on February 7, 2011 until December 31, 2011 amounts to $154.6 million and $9.0 million respectively.

Kauffman Vodka is one of the leading super-premium vodkas in Russia with a strong presence in top-end restaurants, hotels and among key customers. The brand is also exported to high-end customers in over 25 countries The purchase price of intellectual property rights for the Kauffman Vodka brand was treated as a separate element of this transaction and its fair value was allocated based on discounted cash flow model with the following assumptions: (i) discount rate of 11.13%, (ii) terminal value growth rate of 3.0%. We estimated the growth rates in projecting cash flows based on a detailed five year plan. This was treated as a purchase of an intangible asset with an indefinite useful life. The Company considers the Kauffman Vodka brand to have a longstanding market-leader or high brand recognition within the top premium high price market segment in Russia. The Company has a long-term strategy associated to this brand and believes that Kauffmann Vodka has a significant value to the Company’s continuing operations in the top premium segment, and as such is an important factor in attracting and retaining customers. Based on the Company’s development strategy with respect to the usage of Kauffman Vodka brand it was concluded that the Company would not plan to discontinue this brand in the foreseeable future. Given the above, we have determined that the Kauffmann Vodka brand will generate cash flows for an indefinite period of time; therefore, we have concluded that the useful life of this brand is indefinite.