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<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">SECURITIES AND EXCHANGE COMMISSION</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">WASHINGTON, D.C.&nbsp;20549<B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>____________________</B></P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">FORM 8-K</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">CURRENT REPORT</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">PURSUANT TO SECTION 13 OR 15(d) OF</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">THE SECURITIES EXCHANGE ACT OF 1934</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Date of Report (Date of earliest event reported):
November 1, 2012</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><U>Southern States Sign Company</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Exact name of small business issuer as
specified in its charter)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

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    <TD STYLE="width: 50%; font-size: 10pt; text-decoration: underline; text-align: center">Nevada</TD>
    <TD STYLE="width: 50%; font-size: 10pt; text-decoration: underline; text-align: center">26-3014345</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(State or other jurisdiction of incorporation
        or</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">organization)</P></TD>
    <TD STYLE="font-size: 10pt; text-align: center">(IRS Employer Identification No.)</TD></TR>
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    <TD STYLE="width: 100%">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Viale Bruno Buozzi 83, Rome, Italy</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Address of principal executive offices)</P></TD></TR>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

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    <TD STYLE="width: 100%; font-size: 10pt; text-decoration: underline; text-align: center">39.06.80692582</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-size: 10pt; text-align: center">(Issuer&rsquo;s telephone number)</TD></TR>
</TABLE>
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    <TD STYLE="width: 100%; font-size: 10pt; text-align: center">__________________________________</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-size: 10pt; text-align: center">(Former name or former address, if changed since last report)</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Check the appropriate box below if the
Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:</P>

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    <TD STYLE="width: 5%; font: 10pt Wingdings; text-align: justify">&uml;</TD>
    <TD STYLE="width: 95%; font-size: 10pt; text-align: justify">Written communications pursuant to Rule 425 under the Securities Act (17CFR 230.425)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-size: 10pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font: 10pt Wingdings; text-align: justify">&uml;</TD>
    <TD STYLE="font-size: 10pt; text-align: justify">Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-size: 10pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font: 10pt Wingdings; text-align: justify">&uml;</TD>
    <TD STYLE="font-size: 10pt; text-align: justify">Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-size: 10pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font: 10pt Wingdings; text-align: justify">&uml;</TD>
    <TD STYLE="font-size: 10pt; text-align: justify">Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">CURRENT REPORT ON FORM 8-K<BR>
<BR>
</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">SOUTHERN STATES SIGN COMPANY<BR>
<BR>
</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">TABLE OF CONTENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 14%; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 78%; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 8%; border-bottom: windowtext 1pt solid; text-align: center; vertical-align: bottom">Page</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: justify">Item 1.01</TD>
    <TD STYLE="text-align: justify">Entry into a Material Definitive Agreement</TD>
    <TD STYLE="text-align: center; vertical-align: bottom">1</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="text-align: justify">Item 2.01</TD>
    <TD STYLE="text-align: justify">Completion of Acquisition or Disposition of Assets</TD>
    <TD STYLE="text-align: center; vertical-align: bottom">1</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Acquisition</TD>
    <TD STYLE="text-align: center; vertical-align: bottom">1</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Business</TD>
    <TD STYLE="text-align: center; vertical-align: bottom">3</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Risk Factors</TD>
    <TD STYLE="text-align: center; vertical-align: bottom">9</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Management&rsquo;s Discussion and Analysis or Plan of Operation</TD>
    <TD STYLE="text-align: center; vertical-align: bottom">21</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Security Ownership of Certain Beneficial Owners and Management</TD>
    <TD STYLE="text-align: center; vertical-align: bottom">34</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Directors and Officers</TD>
    <TD STYLE="text-align: center; vertical-align: bottom">35</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Executive Compensation</TD>
    <TD STYLE="text-align: center; vertical-align: bottom">36</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="text-align: justify">Item 3.02</TD>
    <TD STYLE="text-align: justify">Unregistered Sales of Equity Securities</TD>
    <TD STYLE="text-align: center; vertical-align: bottom">39</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: justify">Item 5.01</TD>
    <TD STYLE="text-align: justify">Changes in Control of Registrant</TD>
    <TD STYLE="text-align: center; vertical-align: bottom">40</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="text-align: justify">Item 5.02</TD>
    <TD STYLE="text-align: justify">Departure of Directors or Certain Officers; Election of Directors; Appointments of Certain Officers</TD>
    <TD STYLE="text-align: center; vertical-align: bottom">40</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Compensatory Arrangements of Certain Officers</TD>
    <TD STYLE="text-align: center; vertical-align: bottom">40</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="text-align: justify">Item 5.03</TD>
    <TD STYLE="text-align: justify">Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year</TD>
    <TD STYLE="text-align: center; vertical-align: bottom">40</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: justify">Item 5.06</TD>
    <TD STYLE="text-align: justify">Change in Shell Company Status</TD>
    <TD STYLE="text-align: center; vertical-align: bottom">40</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="text-align: justify">Item 9.01</TD>
    <TD STYLE="text-align: justify">Financial Statements and Exhibits</TD>
    <TD STYLE="text-align: center; vertical-align: bottom">40</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE
AGREEMENT</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Acquisition</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On November 1, 2012,
Southern States Sign Company (&ldquo;SOST&rdquo; or the &ldquo;Company&rdquo;) entered into a Share Exchange Agreement (the &ldquo;Exchange
Agreement&rdquo;) by and among Conte Rosso &amp; Partners S.r.l., a limited liability company organized under the laws of Italy
(&ldquo;CR&amp;P&rdquo;) and the holders of all of the outstanding capital stock of CR&amp;P (each a &ldquo;CR&amp;P Shareholder&rdquo;
and collectively, the &ldquo;CR&amp;P Shareholders&rdquo;). Pursuant to the Exchange Agreement, the CR&amp;P Shareholders transferred
all of the issued and outstanding capital stock of CR&amp;P to us in exchange for 21,250,000 newly issued shares of our common
stock (the &ldquo;Share Exchange&rdquo;), resulting in CR&amp;P becoming a wholly owned subsidiary of our company.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">ITEM 2.01. COMPLETION OF ACQUISITION
OR DISPOSITION OF ASSETS</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Acquisition</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In accordance with
the Share Exchange dated November 1, 2012 we acquired all of the issued and outstanding shares of CR&amp;P, which resulted in a
parent-subsidiary relationship (the &ldquo;Acquisition&rdquo;). In exchange for all of the issued and outstanding shares of CR&amp;P,
the CR&amp;P Shareholders received 21,250,000 shares of our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Acquisition and
its related transactions were approved by the CR&amp;P Shareholders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">At the time of the
Share Exchange, neither we nor CR&amp;P had any options to purchase shares of capital stock outstanding or any warrants to purchase
shares of capital stock outstanding.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Prior to the Acquisition,
there were no material relationships between us and CR&amp;P, or any of their respective affiliates, directors or officers, or
any associates of their respective officers or directors, other than as disclosed in this Current Report on Form 8-K.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The shares of our common
stock issued to CR&amp;P Shareholders in connection with the Share Exchange were not registered under the Securities Act of 1933,
as amended (the &ldquo;Securities Act&rdquo;), but were made pursuant to Regulation S promulgated thereunder. Each CR&amp;P Shareholder
represented to us that he or she was a Non-US Person as defined in Regulation S. We did not engage in a distribution of this offering
in the United States. Each CR&amp;P Shareholder represented its intention to acquire the securities for investment only and not
with a view toward distribution. All CR&amp;P Shareholders were given adequate access to sufficient information about us to make
an informed investment decision. None of the securities were sold through an underwriter and accordingly, there were no underwriting
discounts or commissions involved.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">There were 17,873,563
shares of our common stock outstanding before giving effect to the transactions described in this Current Report on Form 8-K. Following
the closing of the Share Exchange, there were 39,123,563 shares of our common stock issued and outstanding, which include the following</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 55%; border-collapse: collapse; margin-left: 1.5in">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 29%; border-bottom: windowtext 1pt solid; text-align: justify">Shares</TD>
    <TD STYLE="width: 3%; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 68%; border-bottom: windowtext 1pt solid; text-align: justify">Held by:</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">21,250,000</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">CR&amp;P Shareholders as consideration pursuant to the Share Exchange</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">11,851,852</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Existing shareholders who are also CR&amp;P shareholders</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">6,021,711</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Other existing shareholders</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>General Changes Resulting from the
Acquisition</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Subsequent to the Share
Exchange, we intend to sell our interest in our prior billboard sign business and any assets that relate to that business to Mr.
David Ben Bassat in an Assignment of Assets Agreement. We intend to carry on the business of CR&amp;P as our primary line of business.
We have relocated our principal executive offices to Viale Bruno Buozzi 83, Rome, Italy and our telephone number is +39.06.80692582</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Accounting Treatment </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Share Exchange
is being accounted for as a reverse merger. Consequently, the assets and liabilities of CR&amp;P will be carried over at cost.
Our consolidated financial statements after completion of the Share Exchange will include the assets and liabilities of both companies,
our historical operations and the operations of CR&amp;P from November 1, 2012, the date at which the economic interest in the
assets and liabilities of CR&amp;P become those of SOST pursuant to the Share Exchange Agreement. Except as described herein, no
arrangements or understandings exist among present or former controlling stockholders with respect to the election of members of
our board of directors and, to our knowledge, no other arrangements exist that might result in a future change of control of the
Company. We will continue to be a &ldquo;small business issuer,&rdquo; as defined under the Securities Exchange Act of 1934, as
amended (the &ldquo;Exchange Act&rdquo;), following the Share Exchange.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">FORM 10 DISCLOSURE</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Item&nbsp;2.01(f) of
Form 8-K provides that if a registrant reporting a transaction under Item&nbsp;2.01 was a &ldquo;shell company&rdquo; (as such
term is defined in Rule 12b-2 under the Exchange Act), in connection with such transaction the registrant must disclose the information
that would be required if it were filing a general form for securities registration on Form 10. Since our operations after the
transaction will consist solely of Conte Rosso &amp; Partners S.r.l. operations, except where the context otherwise requires, the
following discussion of our business and operations, &ldquo;CR&amp;P,&rdquo; &ldquo;we,&rdquo; &ldquo;us,&rdquo; &ldquo;our&rdquo;
and the &ldquo;Company&rdquo; will mean or refer to Conte Rosso &amp; Partners S.r.l.&rsquo;s business and operations.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Forward-Looking Statements</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">This Current Report
on Form 8-K contains forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995. To the extent
that any statements made in this Current Report contain information that is not historical, these statements are essentially forward-looking.
Forward-looking statements can be identified by the use of words such as &ldquo;expects,&rdquo; &ldquo;plans,&rdquo; &ldquo;will,&rdquo;
&ldquo;may,&rdquo; &ldquo;anticipates,&rdquo; believes,&rdquo; &ldquo;should,&rdquo; &ldquo;intends,&rdquo; &ldquo;estimates,&rdquo;
and other words of similar meaning. These statements are subject to risks and uncertainties that cannot be predicted or quantified
and, consequently, actual results may differ materially from those expressed or implied by such forward-looking statements. Such
risks and uncertainties are outlined in &ldquo;Risk Factors&rdquo; and include, without limitation:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Our limited and unprofitable operating history;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">the ability to raise additional capital to finance our activities;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">legal and regulatory risks associated with the Acquisition;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">the future trading of our common stock;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">our ability to operate as a public company;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">general economic and business conditions;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">the volatility of our operating results and financial condition; and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">our ability to attract or retain qualified senior management personnel.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The foregoing factors
should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included
in this Current Report on Form 8-K.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Information regarding
market and industry statistics contained in this Current Report is included based on information available to us that we believe
is accurate. It is generally based on industry and other publications that are not produced for purposes of securities offerings
or economic analysis. We have not reviewed or included data from all sources, and cannot assure investors of the accuracy or completeness
of the data included in this Current Report. Forecasts and other forward-looking information obtained from these sources are subject
to the same qualifications and the additional uncertainties accompanying any estimates of future market size, revenue and market
acceptance of products and services. We do not undertake any obligation to publicly update any forward-looking statements. As a
result, investors should not place undue reliance on these forward-looking statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">BUSINESS</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Overview</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are a Company involved
in the hospitality business. We own and, develop hotels and spas in Italy. We do not operate our hotels directly, so we can be
classified as hospitality property investment specialists.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We particularly focus
on the ownership and development of boutique hotels, spas and resorts. We choose the investment opportunities on the basis of analysis
and forecasts in respect of:</P>

<P STYLE="font: 10pt Wingdings; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">location;</TD></TR></TABLE>

<P STYLE="font: 10pt Wingdings; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">profitability track record;</TD></TR></TABLE>

<P STYLE="font: 10pt Wingdings; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">competitors;</TD></TR></TABLE>

<P STYLE="font: 10pt Wingdings; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">development potential; and</TD></TR></TABLE>

<P STYLE="font: 10pt Wingdings; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">acquisition cost vis a vis foreseeable profitability.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">We expect our investment
in boutique hotels, spas and resorts to create:</P>

<P STYLE="font: 10pt Wingdings; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">capital growth over the medium term;</TD></TR></TABLE>

<P STYLE="font: 10pt Wingdings; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">income immediately;</TD></TR></TABLE>

<P STYLE="font: 10pt Wingdings; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">location diversification; and</TD></TR></TABLE>

<P STYLE="font: 10pt Wingdings; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">synergies and scale economies.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We operate our hotels
- with the exception of Ripa Hotel which is currently managed by the previous owner through a company named Ku-Hotels and the Splendid
Hotel currently managed by Alain Messegu&egrave; - by means of contractual agreements with a major Italian hotel manager company
called JSH Srl or JSH. Such persons with whom contractual arrangements provide for their management of our hotels are referred
to herein as &ldquo;Hotel Managers&rdquo;.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">JSH was founded in
2010 by four professionals in the hotel management sector, with collectively more than 80 years of experience in the business,
and as of today it manages 1,250 rooms in 14 major hotels in Italy.JSH is involved in the management business only and does not
invest in hotel properties.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The contractual agreements
in place with JSH basically envisage an annual rent composed of a guaranteed minimum rent plus a variable amount linked to the
gross operating profit.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The same contractual
scheme is applied to the managers of the Ripa Hotel and the Splendid Hotel.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Therefore, our revenues
are derived only from the rents we receive from the managers of our hotels. These rents are made of a fixed amount (the &ldquo;guaranteed
minimum rent&rdquo;) plus a variable amount related to the profitability of the hotel.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We intend to enter
into same kind of contractual agreements with JSH in relation to the future acquisitions of hotels in Italy and abroad.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We currently own 6
hotels and resorts in Padova, Italy, Rome, Italy and Ostuni Brindisi, Italy. Collectively, these properties feature approximately
520 hotel rooms and suites as well as restaurants, conference rooms, spas and golf courses. Our portfolio of hotel properties provides
us with a diverse geographic footprint across Italy.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our senior management
team has over 80 collective years of experience spanning multiple foreign jurisdictions. This team has established plans for growth
focusing on the core principles of providing authentic Italian hospitality and expansion into foreign markets in which we do not
have hotel properties.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We intend to develop
our presence in Italy and abroad with a target to own 3,000 rooms within the next 3 to 5 years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are currently in
advanced negotiations with respect to acquisitions in Rome, Bari and Florence in Italy, as well as in New York, and have started
searches for investment opportunities in Milan, Florence, Paris and London. We are also planning to invest in high-growth potential
countries such as Albania and some selected African countries.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition to the
items discussed above, we plan to continue to refresh our hotel room product, pursue third-party development partners for additional
hotel and restaurant concepts and renovate select facilities to improve our product offerings.</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Our Mission </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our mission is to invest
in upscale and luxury hotel properties in Italy and abroad where we can exploit at best our long term experience in providing authentic
Italian hospitality.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Through our Hotel Managers
we focus on customer satisfaction and delivering superior guest experiences by providing Italian inspired leisure experiences that
are designed to exceed customer expectations in a clean, safe, friendly and fun environment. Our mission is for each guest at our
hotel properties to feel as if they are an honored visitor to an Italian palazzo.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We believe our long-term
success will depend substantially upon increasing the quality, reach and scope of our operating portfolio, including new-build
developments, acquisitions and, where appropriate, asset sales. Recently we have completely renovated the Majestic Hotel in Padua
and the Ripa Hotel in Rome, and we are currently restoring Masseria Santo Scalone in Ostuni (Brindisi).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><B>Our Competitive Strengths
</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have significant
competitive strengths that support our goal of building a successful group of managed hotels.</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Top Rated Properties. We believe that our properties are well located and provide Italian hospitality
that our guests seek. Our properties have consistently received four and five star ratings, awards and accolades for service and
guest experience. Our property recognition and strength is key to our ability to drive preference for our hotels among our guests.</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Italian Platform with Compelling Growth Potential. Our existing Italian presence is distributed
among a populous urban center and vacation destinations in Italy. We believe that our existing hotels provide us with a strong
platform from which to selectively pursue new growth opportunities in markets where we are under-represented. Our management team
applies their experience, judgment and knowledge to identify potential expansion targets for us. The combination of our existing
Italian presence, experienced management team, established third-party relationships and significant access to capital provides
us with a strong foundation for future growth and long-term value creation.</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">High Quality Owned Hotels Located in Desirable Markets. As of June 30, 2012, we own and operate
a high quality portfolio of five owned properties. Our owned full service hotels are located in key markets in Italy, including
major business centers and leisure destinations with strong growth potential. One of our owned hotels operates under the name Radisson
which provides high name recognition and a strong position in local markets.</TD></TR></TABLE>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our Business Strategy</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our goal is to be a
leading hospitality property owner. In order to achieve this goal, we:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">(i)</TD><TD STYLE="text-align: justify">select the most appealing hotel properties in the boutique hotels, spas and resorts segment;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">(ii)</TD><TD STYLE="text-align: justify">undertake a full refurbishment and restoration process of these properties in order to achieve
the standards we have identified to better reflect our idea of authentic Italian hospitality; and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">(iii)</TD><TD STYLE="text-align: justify">put in place Hotel Managers who will ensure high occupancy at profitable daily rates.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: 0in">This understanding
and focus informs our strategies for improving the performance of our existing hotels and our potential expansion of our presence
in markets worldwide.</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Focus on improvement in the performance of existing hotels.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: 0in">We constantly
monitor the activities of our Hotel Managers through monthly audit reports and regular visits to the properties, in order to ensure
the constant highest level of service to our customers and the achievement of the commonly agreed profitability targets over time.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: 0in">A key component
of our strategy is for our Hotel Managers to maximize revenues and manage costs at existing hotel properties. Together we strive
to enhance revenues by focusing on increasing our share of hotel stays by our existing guests and increasing the number of new
guests we serve on a regular basis, with the ultimate goal of establishing and increasing guest loyalty to our properties. We manage
costs by setting performance goals for our hotel management teams that are tied to compensation, and granting our general managers
operational autonomy. We support these cost management efforts by assisting our general managers with tools and analytics provided
by our regional and corporate offices and by compensating our hotel management teams based on property performance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: 0in">Enhance Operational
Efficiency. We and our Hotel Managers strive to align our staffing levels and expenses with demand without compromising our commitment
to providing authentic hospitality and achieving high levels of guest satisfaction. During periods of declining demand for hospitality
products and services we adjust staffing, arrangements with third party service providers, vendor terms and arrangements and certain
standards in order to reduce costs without significantly impacting quality. As demand improves, we require our Hotel Managers to
remain focused on actively managing expenses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: 0in">We have finalised
a master - franchising agreement concerning the Majestic Hotel in Padova, with the Rezidor Group, controlled by Carlson Hotels
Worldwide, which runs the world top search web engine in the hospitality sector. The Rezidor Group manages over 1.050 hotels in
77 countries and it owns several brands such as Radisson, Hotel Missoni and Country Inns &amp; Suites by Carlson &amp; Park Inn.
The Radisson brand is among the best known brands in the international <I>hotellerie</I> business and, through the Carlson Hotels
Worldwide system, it manages the booking procedures of all the partner hotels including those belonging to our hotels. Radisson
provides booking and marketing services to JSH, in parallel with their own managing activity.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: 0in">With reference
to the Ripa Hotel in Rome, we have just finalised an agreement with Worldhotels, an independent European based hotel partner, which
manages the booking procedures of more than 250 hotels in the world.</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Expanding Our Presence in Attractive Markets</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: 0in">We intend
to acquire properties where we believe demand is strong or will strengthen to ensure high occupancy levels at appropriate daily
rates. Competition for good properties is strong but we believe that we can obtain opportunities because of our willingness to
accept the need for refurbishment or expansion or by working with existing interested parties without the need to drive standardised
branding.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: 0in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Properties</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following is an
overview of our existing properties as of November 1, 2012:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="border-collapse: collapse; width: 90%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; border-bottom: Black 1pt solid">Property</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: justify; border-bottom: Black 1pt solid">Date&nbsp;Acquired&nbsp;or<BR> Opened</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: justify; border-bottom: Black 1pt solid">Hotel <BR>Rooms</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: justify; border-bottom: Black 1pt solid">Suites</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: justify; border-bottom: Black 1pt solid">Conference<BR> Room<BR> Capacity</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-style: italic; text-align: left">Rome, Italy</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.15in; width: 46%">Ripa Hotel and Resort Spa</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 18%">May 2008</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; text-align: right">200</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; text-align: right">2</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">568</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-style: italic; text-align: left">Padova, Italy</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.15in">Galzignano Terme Golf and Resort S.r.l.</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.24in">Hotel Sporting</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">March_2009</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">93</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">19</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">125</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.24in">Hotel Splendid</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">March 2009</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">61</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">30</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.24in">Radisson Blu Hotel Majestic</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">March 2009</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">45</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">52</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">137</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.15in">Hotel Green Park*</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">March 2009</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">86</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">8</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-style: italic; text-align: left">Ostuni Brindisi, Italy</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.15in">Masseria Santo Scalone</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">May 2012</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">19</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">*This hotel is not currently
operating and will be soon transformed into a private apartments building.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Rome, Italy</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Ripa Hotel and
Resort Spa</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Ripa Hotel Resort
and Spa property commenced operations in 1973, and we bought it in May 2008. The Ripa Hotel is a 4-star property, consisting of
202 guest rooms and suites, located in the historic Trastevere district, on the West bank of the Tevere River. The hotel property
is characterized by modern minimalistic style, original interiors, unexpected colors, and the use of innovative materials. A variety
of architects contributed to different designs and styles in the hotel.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Hotel Ripa is a business-friendly
hotel, seeking to meet the needs of business travelers as well as tourists. The hotel has a business center as well as other amenities
for business travelers. Dining options at the hotel include a restaurant, a coffee shop/caf&eacute;, a bar/lounge as well as room
service. The hotel offers a complimentary hot and cold buffet breakfast each morning to our guests.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Rome attracts over
11 million tourist and business visitors each year and this hotel is an attractive high quality destination hotel for many of such
visitors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Padova, Italy</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>Galzignano Terme
Golf and Resort</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Galzignano Terme
Golf and Resort commenced operations in 1969and we bought it in March 2009<I>. </I>The resort is located at the foot of the Eugenean
Hills in the heart of the Veneto region in Italy. The hotel is located 10 km from Padua and approximately 40 km from Venice and
Verona. The resort consists of four properties covering more than 86 acres of land. The hotels within the property are the Hotel
Sporting, Hotel Splendid, Radisson Blue Hotel Majestic and Hotel Green Park. Hotel Green Park is currently closed and will be transformed
into an apartment building.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The properties have
two sports pools, six thermal pools with Jacuzzi pools and Kneipp therapy areas, six tennis courts and a Revital Center with fitness
and spa areas. There is a nine-hole golf course with a putting green, driving range and a Clubhouse on the property. Additionally,
there are three golf courses within 15 km of the hotel complex that offer discount prices to our guests. The hotel has a retail
area with shops that sell jewelry, magazines and souvenirs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We believe that our
Padova, Italy property attracts customers primarily from Germany, Austria and northern European countries and from major Italian
cities. Approximately 1 million people reside within 50 of the Padova, Italy property.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>Hotel Sporting</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Hotel Sporting
is a 4-star property, consisting of 112 guest rooms divided into standard, superior, comfort, junior suite and suite. The 19 suites
are each equipped with private terraces and balconies overlooking the Galzignano Terme property. Each guest room is non-smoking
and equipped with standard comforts and technology, such as satellite TV and internet connections. Hotel Sporting offers guests
access to all of the resort&rsquo;s amenities, including the pools, tennis courts, and golf facilities. The hotel also has meeting
facilities, a beauty parlor and a bar lounge.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>Hotel Splendid</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Hotel Splendid
is a 4-star property, consisting of 91 luxurious and uniquely furnished guest rooms, junior suites and suites. The top floors provide
guests a view of the entire resort complex and guests have access to all of the resort&rsquo;s amenities, including the pools,
tennis courts, and golf facilities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The hotel's restaurant
overlooks a garden through large, picture windows and offers a culinary mix featuring refined and creative Italian recipes, as
well as international and regional dishes. The wine selection represents all Italian regions, with particular attention to wines
which come from the Veneto and Euganean territory.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>Radisson Blu Hotel
Majestic</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Radisson Blu Hotel
Majestic is a 4-star property, consisting of 97 guest rooms with unique features such as rainfall showerheads and concierge service,
in addition to standard hotel amenities. The hotel restaurant, Naiades, specializes in modern interpretations of traditional Mediterranean
dishes. Meals are also served on a terrace with countryside views intended to promote relaxation for our guests.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>Hotel Green Park</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Hotel Green Park
is currently under renovation. This property will undergo complete restructuring and it will be transformed into a private apartments
building. We expect to start refurbishment in the first half of 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><B><I>Ostuni Brindisi,
Italy</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>Masseria Santo Scalone
</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Masseria Santo Scalone
is a fortified farm house built in the XVI century and located close to Ostuni (Brindisi &ndash; Apulia region). This complex is
composed of several houses around a central larger building and it is currently undergoing a major refurbishment which will transform
it into a five-star luxury resort with beauty farm and spa. An additional 24 rooms (to the already existing 19 rooms) will be built
within the next year together with a new conference room and a pool.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Marketing</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our marketing strategy
is planned together with our Hotel Managers, and it is designed to maintain and build value and awareness while meeting the specific
business needs of hotel operations. Building awareness and differentiating each of our properties is critical to increasing our
footprint in the global hospitality industry. We are focused on targeting the distinct guest segments that each of our properties
serves and supporting the needs of the hotels by thorough analysis and application of data and analytics.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Competition</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">There is intense competition
in all areas of the hospitality industry in which we operate. Competition exists for hotel guests and hotel property development.
Our principal competitors are other operators of full service hotels in Italy and around the world.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We compete for guests
based primarily on reputation, location, customer satisfaction, room rates, quality of service, amenities, quality of accommodations
and security.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The universe of hotels
and hospitality is large and there are other companies who have offerings similar to us. We believe that our, desirable property
locations, strong customer base and global development team will enable us to compete effectively.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Seasonality</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The hospitality industry
is seasonal in nature. The periods during which our hotel properties experience higher revenues vary from property to property,
depending principally upon location and the customer base served. Based upon historical results, our Rome property typically generates
the highest revenues in May, September and October and our Padova property generates the highest revenues in August, September
and April. We generally expect our revenues to be lower in the first quarter of each year than in each of the three subsequent
quarters.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Governmental Regulations</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our businesses are
subject to various laws and regulations. These laws and regulations include, but are not limited to, restrictions and conditions
concerning alcoholic beverages, food service, smoking, environmental matters, employees and employment practices, currency transactions,
taxation, zoning and building codes, and marketing and advertising. Such laws and regulations could change or could be interpreted
differently in the future, or new laws and regulations could be enacted. Material changes, new laws or regulations, or material
differences in interpretations by courts or governmental authorities could adversely affect our operating results.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Environmental Matters</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As property owners
we are subject to various laws and regulations. These laws and regulations include, but are not limited to, the need to obtain
consents from various regulatory authorities to build, develop, modify, expand or demolish existing structures, the requirement
to ensure compliance with health and safety regulations during any such building projects or the operation of properties and limitations
or controls on discharges to the atmosphere or waste or sewage disposal facilities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Employees</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of June 30, 2012,
we employed 5 full and part-time employees in our hospitality business, plus seven senior consultants (three of which are full
time).We believe that our relationship with our employees is satisfactory.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Hotel Managers
together employ approximately 60 full time employees plus approximately 250 are outsourcing employees who regularly work on our
properties.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Available Information</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For more information
about us, visit our web site at <U>www.italianboutiquehotels.com</U> (currently under construction). Our electronic filings with
the U.S. Securities and Exchange Commission (including all annual reports on Form 10-K, quarter reports on Form 10-Q, and current
reports on Form 8-K, and any amendments to these reports), including the exhibits, are available free of charge through our web
site as soon as reasonably practicable after we electronically file them with or furnish them to the U.S. Securities and Exchange
Commission.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>RISK FACTORS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>You should carefully
consider the risks described below, in conjunction with the other information and consolidated financial statements and related
notes included elsewhere in this Current Report on Form 8-K, before making an investment decision. You should pay particular attention
to the fact that we conduct our operations in Italy and are governed by a legal and regulatory environment that in some respects
differs significantly from the environment that prevails in other countries with which you may be familiar.</I></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Risks Related to the Hospitality Industry</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The hospitality industry is
cyclical and macroeconomic and other factors beyond our control can adversely affect and reduce demand for our hospitality products
and services.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The hospitality industry
is cyclical. For example, the last two completed business cycles in the hospitality industry, which we define as the period starting
with the first calendar year of negative revenue per available room (RevPAR) growth and ending with the last calendar year of positive
RevPAR growth, took place from 1991 to 2000 and 2001 to 2007. During the declining stages of these two business cycles, RevPAR
growth was negative for one calendar year (1991) and two calendar years (2001 and 2002), respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The declining stage
of the current business cycle in Western Europe began in the fourth quarter of 2008 and continued until the second quarter of 2010,
while it slightly increased in 2011 and the first 8 months of 2012. In particular, the average RevPAR in Western Europe upscale,
upper upscale and luxury hotels declined from 90,49 euros in 2007 to 86,91 euros in 2008, it continued to decrease in 2009 to 69,92
euros and started to recover in 2010 (76,98 euros), 2011 (81,64 euros) and first eight months of 2012 (87,13 euros). Macroeconomic
and other factors beyond our control can reduce demand for hospitality products and services, including demand for rooms at our
properties. These factors include:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">changes and volatility in general economic conditions, including the severity and duration of any
downturn in the U.S., Europe or global economy and financial markets;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">war, civil unrest (Cairo, Egypt), terrorist activities (such as the terrorist attacks in Jakarta,
Indonesia and Mumbai, India) or threats and heightened travel security measures instituted in response to these events;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">outbreaks of pandemic or contagious diseases, such as avian flu, severe acute respiratory syndrome
(SARS) and H1N1 (swine) flu;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">natural or man-made disasters, such as earthquakes, tsunamis, tornados, hurricanes, floods, oil
spills and nuclear incidents;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">changes in the desirability of particular locations or travel patterns of customers;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">decreased corporate budgets and spending and cancellations, deferrals or renegotiations of group
business (e.g., industry conventions);</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">low consumer confidence and high levels of unemployment;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">depressed housing prices;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">the financial condition of the airline, automotive and other transportation-related industries
and its impact on travel;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">decreased airline capacities and routes;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">travel-related accidents;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">oil prices and travel costs;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">statements, actions or interventions by governmental officials related to travel and corporate
travel-related activities, and the resulting negative public perception of such travel and activities;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

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<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">domestic and international political and geo-political conditions;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">cyclical over-building in the hotel industry; and</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

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<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">organized labor activities, which could cause a diversion of business from hotels involved in labor
negotiations and loss of group business.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">These factors can adversely
affect, and from time to time have adversely affected, individual properties, particular regions or our business as a whole. How
we manage any one or more of these factors, or any crisis, could limit or reduce demand, or the rates our properties are able to
charge for rooms or services, which could adversely affect our business, results of operations and financial condition.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">A worsening of global economic
conditions could cause our revenues and profitability to decline.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Consumer demand for
our products and services is closely linked to the performance of the general economy and is sensitive to business and personal
discretionary spending levels. Declines in consumer demand due to adverse general economic conditions, risks affecting or reducing
travel patterns, lower consumer confidence and high unemployment or adverse political conditions can lower the revenues and profitability
of our owned properties. Because RevPAR is a measure of achieved average daily rate (ADR) and occupancy, declines in ADR and occupancy
relating to declines in consumer demand will lower RevPAR.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">While our 2011 and
2010 results reflect an increase in ADR levels at our hotels compared to 2009, they have not increased at the same rate at which
they declined in 2009 compared to 2008, especially at Ripa Hotel Uncertainty regarding the rate and pace of further recovery and
the impact any such recovery may have on different regions of the world makes it difficult to predict further increases in RevPAR
levels. Additionally, if economic weakness were to return to any of these regions of the world, it could have an adverse impact
on our revenues and negatively affect our profitability.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are subject to the business,
financial and operating risks inherent to the hospitality industry, any of which could reduce our profits and limit our opportunities
for growth.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our business is subject
to a number of business, financial and operating risks inherent to the hospitality industry, including:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">changes in taxes and governmental regulations that influence or set wages, prices, interest rates
or construction and maintenance procedures and costs;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">the costs and administrative burdens associated with complying with applicable laws and regulations;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">the costs or desirability of complying with local practices and customs;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">the availability and cost of capital necessary for us and potential hotel owners to fund investments,
capital expenditures and service debt obligations;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">delays in or cancellations of planned or future development projects;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">foreign exchange rate fluctuations or restructurings;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">changes in operating costs, including, but not limited to, energy, food, workers&rsquo; compensation,
benefits, insurance and unanticipated costs resulting from force majeure events;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">significant increases in cost for healthcare coverage for employees and potential government regulation
in respect of health coverage;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">shortages of labor or labor disruptions;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

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<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">shortages of desirable locations for development; and</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">the ability of third-party internet travel intermediaries to attract and retain customers.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Any of these factors
could limit or reduce the prices we charge for our hospitality products or services, including the rates our properties charge
for rooms. These factors can also increase our costs or affect our ability to develop new properties or maintain and operate our
existing properties. As a result, any of these factors can reduce our profits and limit our opportunities for growth.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Risks Related to Our Hospitality Business</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Because we operate in a highly
competitive industry, our revenues, profits or market share could be harmed if we are unable to compete effectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The segments of the
hospitality industry in which we operate are subject to intense competition. Our principal competitors are other operators of full
service properties in Italy, including other major hospitality chains with well-established and recognized brands. We also compete
against smaller hotel chains and independent and local hotel owners and operators. If we are unable to compete successfully, our
revenues or profits may decline or our ability to maintain or increase our market share may be diminished.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">Competition
for Guests</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Competition for guests
is based primarily on reputation, location, customer satisfaction, room rates, quality of service, amenities and quality of accommodations.
Many of our competitors are larger than we are based on the number of properties or rooms they manage or based on the number of
geographic locations where they operate. Our competitors may also have greater financial and marketing resources than we do, which
could allow them to improve their properties and expand and improve their marketing efforts in ways that could affect our ability
to compete for guests effectively. In addition, industry consolidation may exacerbate these risks.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are exposed to the risks
resulting from significant investments in owned real estate, which could increase our costs, reduce our profits, and limit our
ability to respond to market conditions or restrict our growth strategy.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Real estate ownership
is subject to risks not applicable to managed, leased or franchised properties, including:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">governmental regulations relating to real estate ownership;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">real estate, insurance, zoning, tax, environmental and eminent domain laws;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">the ongoing need for owner funded capital improvements and expenditures to maintain or upgrade
properties;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">risks associated with mortgage debt, including the possibility of default, fluctuating interest
rate levels and the availability of replacement financing;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">fluctuations in real estate values or potential impairments in the value of our assets; and</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">the relative illiquidity of real estate compared to some other assets.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The negative impact
on profitability and cash flow generation from a decline in revenues is more pronounced in owned properties because we, as the
owner, bear the risk of their high fixed-cost structure. The need to maintain and renovate owned properties can present challenges,
especially when cash generated from operations has declined. The effectiveness of any cost-cutting efforts is limited by the fixed-cost
nature of our business. As a result, we may not be able to offset revenue reductions through cost cutting, which could further
reduce our margins. During times of economic distress, declining demand and declining earnings often result in declining asset
values.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We may seek to expand through
acquisitions of and investments in other businesses and properties, or through alliances; and we may also seek to divest some of
our properties and other assets, any of which may be unsuccessful or divert our management&rsquo;s attention.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 31.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 31.5pt">We intend to consider
strategic and complementary acquisitions of and investments in other businesses, properties, brands or other assets. In many cases,
we will be competing for these opportunities with third parties that may have substantially greater financial resources than we
do. Acquisitions or investments in businesses, properties, brands or assets, as well as these alliances, are subject to risks that
could affect our business, including risks related to:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 49.5pt; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 31.45pt"></TD><TD STYLE="width: 18.05pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">issuing shares of stock that could dilute the interests of our existing stockholders;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 49.5pt; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 31.45pt"></TD><TD STYLE="width: 18.05pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">spending cash and incurring debt;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 49.5pt; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 31.45pt"></TD><TD STYLE="width: 18.05pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">assuming contingent liabilities;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 49.5pt; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 31.45pt"></TD><TD STYLE="width: 18.05pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">contributing properties or related assets to hospitality ventures that could result in recognition
of losses; or</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 49.5pt; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 31.45pt"></TD><TD STYLE="width: 18.05pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">creating additional expenses.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 31.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 31.5pt">We cannot assure you
that we will be able to identify opportunities or complete transactions on commercially reasonable terms or at all, or that we
will actually realize any anticipated benefits from such acquisitions, investments or alliances. There may be high barriers to
entry in many key markets and scarcity of available development and investment opportunities. Similarly, we cannot assure you that
we will be able to obtain financing for acquisitions or investments on attractive terms or at all, or that the ability to obtain
financing will not be restricted by the terms of our revolving credit facility or other indebtedness we may incur.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The success of any
such acquisitions or investments will also depend, in part, on our ability to integrate the acquisition or investment with our
existing operations. We may experience difficulty with integrating acquired businesses, properties or other assets, including difficulties
relating to:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">coordinating sales, distribution and marketing functions;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">integrating technology information systems; and</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">preserving the important licensing, distribution, marketing, customer, labor and other relationships
of the acquired assets.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Divestment of some
of our properties or assets may yield returns below our investment criteria. In some circumstances, sales of properties or other
assets may result in losses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, any such
acquisitions, investments, dispositions or alliances could demand significant attention from our management that would otherwise
be available for our regular business operations, which could harm our business.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Timing, budgeting and other
risks could delay our efforts to develop, redevelop or renovate the properties that we own, or make these activities more expensive,
which could reduce our profits or impair our ability to compete effectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We must maintain and
renovate the properties that we own in order to remain competitive, maintain the value and brand standards of our hotels and comply
with applicable laws and regulations. We also may selectively undertake ground-up construction of properties which may span multiple
phases and often take years to complete. These efforts are subject to a number of risks, including:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">construction delays or cost overruns (including labor and materials) that may increase project
costs;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

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<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">obtaining zoning, occupancy and other required permits or authorizations;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">changes in economic conditions that may result in weakened or lack of demand or negative project
returns;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">governmental restrictions on the size or kind of development;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">force majeure events, including earthquakes, tornados, hurricanes, floods or tsunamis; and</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">design defects that could increase costs.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Developing new properties
typically involves lengthy development periods during which significant amounts of capital must be funded before the properties
can begin to operate. If the cost of funding these developments or renovations exceeds budgeted amounts, profits could be reduced.
Further, due to the lengthy development cycle, adverse economic conditions may alter or impede our development plans, thereby resulting
in incremental costs to us or potential impairment charges. Moreover, during the early stages of operations, charges related to
interest expense and depreciation may substantially detract from, or even outweigh, the profitability of certain new property investments.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Similarly, the timing
of capital improvements can affect property performance, including occupancy and average daily rate, particularly if we need to
close a significant number of rooms or other facilities, such as ballrooms, meeting spaces or restaurants. For example, we recently
completed broad-scope renovation projects at Majestic and Ripa while new restructuring projects are planned for Masseria in 2013.
Moreover, the investments that we make may fail to improve the performance of the properties in the manner that we expect.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If we are not able
to begin operating properties under development or renovation as scheduled, or if renovation investments adversely affect or fail
to improve performance, our ability to compete effectively could be diminished and our revenues could be reduced.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In any particular period, our
Hotel Managers may not be able to reduce expenses at the same rate that their revenues may decrease, which could have an adverse
effect on their net cash flows, margins and profits and, as a consequence, on their ability to pay us the variable part of the
annual rent and, in the worst situation, even the guaranteed minimum amount.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Many of the expenses
associated with managing and owning hotels are relatively fixed. These expenses include:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">personnel costs;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">interest;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">property taxes;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">insurance; and</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">utilities.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If our Hotel Managers
are unable to decrease these costs significantly or rapidly when demand for our hotels decreases, the decline in their revenues
could have a particularly adverse impact on their net cash flows and profits. This effect can be especially pronounced during periods
of economic contraction or slow economic growth, such as the recent economic recession. In such cases our Hotel Managers may not
be able to pay us the variable part of the annual rent and, in the worst situation, even the guaranteed minimum amount. <FONT STYLE="font-family: Times New Roman, Times, Serif"><SUP>
</SUP></FONT>To date this has never been the case with us, although most of our lease contracts are relatively recent.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If we are unable to establish
and maintain key distribution arrangements for our properties, the demand for our rooms and our revenues could fall.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Some of the rooms at
our hotels and resorts are booked through third-party internet travel intermediaries and online travel service providers. We also
engage third-party intermediaries, including travel agencies and meeting and event management companies, who collect fees by charging
our hotels and resorts a commission on room revenues. A failure by our distributors to attract or retain their customer bases could
lower demand for hotel rooms and, in turn, reduce our revenues.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If bookings by these
third-party intermediaries increase, these intermediaries may be able to obtain higher commissions or other significant contract
concessions from us, increasing the overall cost of these third-party distribution channels. Some of our distribution agreements
are not exclusive, have a short term, are terminable at will, or are subject to early termination provisions. The loss of distributors,
increased distribution costs, or the renewal of distribution agreements on significantly less favorable terms could adversely impact
our business.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If the volume of sales made
through third-party internet travel intermediaries increases significantly, consumer loyalty to our brand could decrease and our
revenues could fall.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We and our Hotel Managers
expect to derive most of our business from traditional channels of distribution and our website. However, consumers now use internet
travel intermediaries regularly. Some of these intermediaries are attempting to increase the importance of generic quality indicators
(such as &ldquo;four-star downtown hotel&rdquo;) at the expense of brand identification. These agencies hope that consumers will
eventually develop brand loyalties to their reservation system rather than to specific hotel brands. If the volume of sales made
through internet travel intermediaries increases significantly and consumers develop stronger loyalties to these intermediaries
rather than to our brand, our business and revenues could be harmed.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If we are not able to develop
new initiatives, including new brands, successfully, our business and profitability could be harmed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We and our Hotel Managers
often develop and launch new initiatives which can be a time-consuming and expensive process. For example, Ripa has recently launched
special offers and promotions as a 10% discount for a minimum stay of 3 nights, a &ldquo;children stay free&rdquo; campaign and
a 15% discount for bookings made with a five day advance. Galzignano hotels usually launch offers and promotions as well, such,
for example, discounts for longer stay periods and spa packages. We have invested capital and resources in owned real estate, property
development, brand development and brand promotion. If such initiatives are not well received by our guests they may not have the
intended effect.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><B>Italian labor laws
could impair our flexibility to restructure our business.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In Italy, employees
are protected by various laws which afford them consultation rights with respect to specific matters regarding their employers&rsquo;
business and operations, including the downsizing or closure of facilities and employee terminations. In particular: (i) Law no.
604/1966, regulates the individual dismissals; (ii) Law no. 223/1991, concerns the collective dismissal procedure; (iii) Law no.
428/1990 as amended by legislative decree no. 18/2001, provides for the information and consultation procedure in case of a transfer
of the undertaking or a part thereof and (iv) Legislative decree no. 25/2007, introduces a general right to information and consultation
for employees. These laws and the collective bargaining agreements to which we are subject could impair our flexibility if we need
to restructure our business.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Labor shortages could restrict
our ability to operate our properties or grow our business or result in increased labor costs that could reduce our profits.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our success depends
in large part on our Hotel Managers&rsquo; ability to attract, retain, train, manage and engage their employees. Our properties
are staffed 24 hours a day, seven days a week by hundreds of employees. If our Hotel Managers are unable to attract, retain, train
and engage skilled employees, their ability to manage and staff our properties adequately could be impaired, which could reduce
customer satisfaction. Staffing shortages could also hinder our ability to grow and expand our business. Because payroll costs
are a major component of the operating expenses at our properties, a shortage of skilled labor could also require higher wages
that would increase their labor costs, which could reduce our profits.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Negotiations of collective
bargaining agreements, attempts by labor organizations to organize additional groups of the employees of our Hotel Managers or
changes in labor laws could disrupt our operations, increase labor costs or interfere with the ability of our Hotel Managers to
focus on executing our business strategies.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Certain of our properties
are subject to collective bargaining agreements, similar agreements or regulations enforced by governmental authorities. If relationships
between our Hotel Managers and their employees, or the unions that represent them become adverse, the properties we own could experience
labor disruptions such as strikes, lockouts and public demonstrations. Labor disruptions, which are generally more likely when
collective bargaining agreements are being renegotiated, could harm the relationship between our Hotel Managers and their employees
or cause us to lose guests. Further, adverse publicity in the marketplace related to union messaging could further harm our reputation
and reduce customer demand for our services. Labor regulation could lead to higher wage and benefit costs, changes in work rules
that raise operating expenses and legal costs which may limit the ability of our Hotel Managers to take cost saving measures during
economic downturns.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Hotel Managers
may also become subject to additional collective bargaining agreements in the future. Potential changes in the regulatory scheme
could make it easier for unions to organize groups of their employees. If such changes take effect, more of the employees of our
Hotel Managers or other field personnel could be subject to increased organizational efforts, which could potentially lead to disruptions
or require more of our Hotel Managers&rsquo; time to address unionization issues. These or similar agreements, legislation or changes
in regulations could disrupt our operations, hinder our Hotel Managers&rsquo; abilities to cross-train and cross-promote their
employees due to prescribed work rules and job classifications, reduce our profitability, or interfere with the ability of our
Hotel Managers to focus on executing our business strategies.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The loss of our Hotel Managers
could significantly harm our business.</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-weight: normal; font-style: normal">&nbsp;</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-weight: normal; font-style: normal">We
do not operate our hotels directly, but through Hotel Managers</FONT> <FONT STYLE="font-weight: normal; font-style: normal">such
as JSH. We have entered into long term (usually 8+8 years) agreements with our Hotel Managers. However, we cannot guarantee that
they will remain with us at the end of the term of these agreements. Finding suitable replacements for our Hotel Managers</FONT>
<FONT STYLE="font-weight: normal; font-style: normal">could be difficult. Losing the services of one or more of these Hotel Managers</FONT>
<FONT STYLE="font-weight: normal; font-style: normal">could adversely affect our ability to execute our business strategies.</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-weight: normal; font-style: normal">&nbsp;</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-weight: normal; font-style: normal">Our
Hotel Managers recruit individuals to act as general managers of specific properties. Although these individuals are not our employees,
their performance is critical to the success of our hotels. The resignation of such a general manager may result in a disruption
to day-to-day operations of a hotel and a decline in profitability.</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The loss of our senior executives
could significantly harm our business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our ability to maintain
our competitive position is dependent to a large degree on the efforts and skills of our senior executives. We have entered into
employment letter agreements or consulting agreements with certain of our senior executives. However, we cannot guarantee that
these individuals will remain with us. Finding suitable replacements for senior executives could be difficult. Losing the services
of one or more of these senior executives could adversely affect our ability to execute our business strategies.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Because we derive a substantial
portion of our revenues from operations in Italy, the risks of doing business in one country could lower our revenues, increase
our costs, reduce our profits or disrupt our business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We currently own all
of our hotels and resorts in Italy. We expect that revenues from our Italian operations will continue to account for a substantial
portion of our total revenues.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As a result, we are
subject to the risks arising from doing business in one country, including:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">local economic disruption;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">local adverse environmental effects; or</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

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<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

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<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">exchange rate movements between the euro and the United States dollar.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">While these factors
and the impact of these factors are difficult to predict, any one or more of them could lower our revenues, increase our costs,
reduce our profits or disrupt our business.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our failure to comply with
applicable laws and regulations may increase our costs, reduce our profits or limit our growth.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our business, properties
and employees are subject to a variety of laws and regulations. Generally, these laws and regulations address our sales and marketing
efforts, our handling of privacy issues and customer data, our ability to obtain licenses for business operations such as sales
of food and liquor, immigration matters, environmental, health and safety, competition and trade laws, among other things.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The extensive environmental
requirements to which we are subject could increase our environmental costs and liabilities, reduce our profits or limit our ability
to run our business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our operations and
the properties we own and develop are subject to extensive environmental laws and regulations of the Italian government, including
requirements addressing:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">health and safety;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">the use, management and disposal of hazardous substances and wastes;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">discharges of waste materials into the environment, such as refuse or sewage; and</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">air emissions.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We could be subject
to liability under some of these laws for the costs of investigating or remediating hazardous substances or wastes on, under, or
in real property we currently or formerly manage, own or develop, or third-party sites where we sent hazardous substances or wastes
for disposal. We could be held liable under these laws regardless of whether we knew of, or were at fault in connection with, the
presence or release of any such hazardous or toxic substances or wastes. Some of these laws make each covered person responsible
for all of the costs involved, even if more than one person may have been responsible for the contamination. Furthermore, a person
who arranges for hazardous substances or wastes to be transported, disposed of or treated offsite, such as at disposal or treatment
facilities, may be liable for the costs of removal or remediation if those substances are released into the environment by third
parties at such disposal or treatment facilities. The presence or release of hazardous or toxic substances or wastes, or the failure
to properly clean up such materials, could cause us to incur significant costs, or jeopardize our ability to develop, use, sell
or rent real property we own or operate or to borrow using such property as collateral.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Other laws and regulations
require us to manage, abate or remove materials containing hazardous substances such as mold, lead or asbestos during demolitions,
renovations or remodelling at properties that we manage, own or develop or to obtain permits for certain of our equipment or operations.
The costs of such management, abatement, removal or permitting could be substantial. Complying with these laws and regulations,
or addressing violations arising under them, could increase our environmental costs and liabilities, reduce our profits or limit
our ability to run our business. Existing environmental laws and regulations may be revised or new laws and regulations related
to global climate change, air quality, or other environmental and health concerns may be adopted or become applicable to us. The
identification of new areas of contamination, a change in the extent or known scope of contamination or changes in cleanup requirements,
or the adoption of new requirements governing our operations could have a material adverse effect on our results or operations,
financial condition and business.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If the insurance that we carry
does not sufficiently cover damage or other potential losses or liabilities involving properties that we own, our profits could
be reduced.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We carry insurance
from solvent insurance carriers that we believe is adequate for foreseeable losses and with terms and conditions that are reasonable
and customary. Nevertheless, market forces beyond our control could limit the scope of the insurance coverage that we can obtain
or restrict our ability to buy insurance coverage at reasonable rates. In the event of a substantial loss, the insurance coverage
that we carry may not be sufficient to pay the full value of our financial obligations, our liabilities or the replacement cost
of any lost investment or property loss. Because certain types of losses are significantly uncertain, they can be uninsurable or
too expensive to insure. In some cases, these factors could result in certain losses being completely uninsured. As a result, we
could lose some or all of the capital we have invested in a property, as well as the anticipated future revenues and profits from
the property. If the insurance that we carry does not sufficiently cover damages or other losses or liabilities, our profits could
be adversely affected.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Adverse judgments or settlements
resulting from legal proceedings in which we may be involved in the normal course of our business could reduce our profits or limit
our ability to operate our business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In the normal course
of our business, we are often involved in various legal proceedings. The outcome of these proceedings cannot be predicted. If any
of these proceedings were to be determined adversely to us or a settlement involving a payment of a material sum of money were
to occur, there could be a material adverse effect on our financial condition and results of operations. Additionally, we could
become the subject of future claims by third parties, including guests who use our properties, our employees, our investors or
regulators. Any significant adverse judgments or settlements would reduce our profits and could limit our ability to operate our
business. Further, we may incur costs related to claims for which we have appropriate third party indemnity, but such third parties
fail to fulfil their contractual obligations.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Information technology system
failures, delays in the operation of our information technology systems or system enhancement failures could reduce our revenues
and profits and harm the reputation of our brands and our business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our success depends
on the efficient and uninterrupted operation of our information technology systems. We depend on information technology to run
our day-to-day operations, including, among others, hotel services and amenities such as guest check-in and check-out, housekeeping
and room service and systems for tracking and reporting our financial results and the financial results of our hotels.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our information technology
systems are vulnerable to damage or interruption from fire, floods, hurricanes, power loss, telecommunications failures, computer
viruses, break-ins and similar events. The occurrence of any of these natural disasters or unanticipated problems could cause interruptions
or delays in our business or loss of data, or render us unable to process daily services.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, if our
information technology systems are unable to provide the information communications capacity that we need, or if our information
technology systems suffer problems caused by installing system enhancements, we could experience similar failures or interruptions.
If our information technology systems fail and our redundant systems or disaster recovery plans are not adequate to address such
failures, or if our property and business interruption insurance does not sufficiently compensate us for any losses that we may
incur, our revenues and profits could be reduced and the reputation of our hotels and our business could be harmed.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Cyber risk and the failure
to maintain the integrity of internal or customer data could result in faulty business decisions, harm to our reputation or subject
us to costs, fines or lawsuits.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are required to
collect and retain large volumes of internal and customer data, including credit card numbers and other personally identifiable
information and our various information technology systems enter, process, summarize and report such data. We also maintain personally
identifiable information about our employees. The integrity and protection of our guests, employee and company data is critical
to our business. Our guests expect that we will adequately protect their personal information, and the regulations applicable to
security and privacy are increasingly demanding in Italy. We have developed and maintain controls to prevent, and we have a process
to identify and mitigate, the theft, loss, fraudulent or unlawful use of guest, employee or company data. We also have what we
believe to be adequate and collectible insurance in the event of the theft, loss, fraudulent or unlawful use of customer, employee
or company data. A penetrated or compromised data system or the intentional, inadvertent or negligent release or disclosure of
data could result in theft, loss, fraudulent or unlawful use of customer, employee or company data which could harm our reputation
or result in remedial and other costs, fines or lawsuits and which could be in excess of any available insurance that we have procured.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If we fail to stay current
with developments in technology necessary for our business, our operations could be harmed and our ability to compete effectively
could be diminished.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Sophisticated information
technology and other systems are instrumental for the hospitality industry, including systems used for our reservations, revenue
management, property management and our [loyalty program], as well as technology systems that we make available to our guests.
These information technology and other systems must be refined, updated, or replaced with more advanced systems on a regular basis.
Developing and maintaining these systems may require significant capital. If we are unable to replace or introduce information
technology and other systems as quickly as our competitors or within budgeted costs or schedules when these systems become outdated
or need replacing, or if we are unable to achieve the intended benefits of any new information technology or other systems, our
operations could be harmed and our ability to compete effectively could be diminished.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As a public company, we are
required to comply with the reporting obligations of the Exchange Act and Section 404 of the Sarbanes-Oxley Act of 2002. If we
fail to comply with the reporting obligations of the Exchange Act and Section 404 of the Sarbanes-Oxley Act or if we fail to maintain
adequate internal controls over financial reporting, our business, results of operations and financial condition could be materially
adversely affected.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As a public company,
we are required to comply with the periodic reporting obligations of the Exchange Act, including preparing annual reports and quarterly
reports. Our failure to prepare and disclose this information in a timely manner could subject us to penalties under U.S. federal
securities laws, expose us to lawsuits and restrict our ability to access financing. In addition, we are required under applicable
law and regulations to design and implement internal controls over financial reporting, and evaluate our existing internal controls
with respect to the standards adopted by the U.S. Public Company Accounting Oversight Board.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We cannot assure you
that we will not identify control deficiencies that may constitute significant deficiencies or material weaknesses in our internal
controls in the future. As a result, we may be required to implement further remedial measures and to design enhanced processes
and controls to address issues identified through future reviews. This could result in significant delays and costs to us and require
us to divert substantial resources, including management time, from other activities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If we do not fully
remediate the material weaknesses identified by management or fail to maintain the adequacy of our internal controls in the future,
we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting
in accordance with the Sarbanes-Oxley Act. Moreover, effective internal controls are necessary for us to produce reliable financial
reports and are important to help prevent fraud. As a result, any failure to satisfy the requirements of Section 404 on a timely
basis could result in the loss of investor confidence in the reliability of our financial statements, which in turn could harm
our business and negatively impact the trading price of our common stock.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Risks Related to Share Ownership and
Stockholder Matters</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our stock price is likely to
be volatile, and you may not be able to resell shares of your common stock at or above the price you paid.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The stock market in
general has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating
performance of the underlying businesses. Given that we are a relatively new public company, these fluctuations may be even more
pronounced in the trading market for our stock. In addition, in the past few years the financial services industry experienced
a period of significant disruption characterized by the bankruptcy, failure, collapse or sale of various financial institutions,
which led to increased volatility in securities prices and a significant level of intervention from the U.S. and other governments
in securities markets. These broad market and industry factors may seriously harm the market price of our common stock, regardless
of our actual operating performance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition to the
risks described in this section, several factors that could cause the price of our common stock in the public market to fluctuate
significantly include, among others, the following:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">quarterly variations in our operating results compared to market expectations;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

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<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

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<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">announcements of acquisitions of or investments in other businesses and properties or dispositions;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">announcements of new services or products or significant price reductions by us or our competitors;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">size of the public float;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">stock price performance of our competitors;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">fluctuations in stock market prices and volumes;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">default on our indebtedness or foreclosure of our properties;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">changes in senior management or key personnel;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">changes in financial estimates by securities analysts;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">negative earnings or other announcements by us or other hospitality companies;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">issuances or repurchases of equity or debt securities; and</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">global economic, legal and regulatory factors unrelated to our performance.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Volatility in the market
price of our common stock may prevent investors from being able to sell their common stock at or above the price at which you purchased
the stock. As a result, you may suffer a loss on your investment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Securities class action
litigation has often been instituted against companies following periods of volatility in the overall market and in the market
price of a company&rsquo;s securities. This litigation, if instituted against us, could result in substantial costs, reduce our
profits, divert our management&rsquo;s attention and resources and harm our business.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Because we do not expect to
pay dividends on our common stock for the foreseeable future, investors seeking cash dividends should not purchase our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We do not currently
intend to pay cash dividends on our common stock and do not anticipate paying any dividends at any time in the foreseeable future.
We currently intend to retain future earnings, if any, to finance the expansion of our business. As a result, we do not anticipate
paying any cash dividends on our common stock in the foreseeable future. Our payment of any future dividends will be at the discretion
of our Board of Directors after taking into account various factors, including but not limited to our financial condition, operating
results, cash needs, growth plans and the terms of any credit agreements that we may be a party to at the time. Accordingly, investors
must rely on sales of their own common stock after price appreciation, which may never occur, as the only way to realize gains
on their investment. Investors seeking cash dividends should not purchase the common stock.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If we fail to remain current
on our reporting requirements, we could be removed from the OTC Bulletin Board which would limit the ability of broker-dealers
to sell our securities and the ability of stockholders to sell their securities in the secondary market.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Companies trading on
the OTC Bulletin Board, such as us, must be reporting issuers under Section 12 of the Exchange Act, and must be current in their
reports under Section 13, in order to maintain price quotation privileges on the OTC Bulletin Board. More specifically, the Financial
Industry Regulatory Authority (&ldquo;FINRA&rdquo;) has enacted Rule 6530, which determines eligibility of issuers quoted on the
OTC Bulletin Board by requiring an issuer to be current in its filings with the Commission. Pursuant to Rule 6530(e), if we file
our reports late with the Commission three times our securities will be removed from the OTC Bulletin Board for failure to timely
file. As a result, the market liquidity for our securities could be severely adversely affected by limiting the ability of broker-dealers
to sell our securities and the ability of stockholders to sell their securities in the secondary market.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Because our common stock could
be deemed a low-priced &ldquo;Penny&rdquo; stock, it would be cumbersome for brokers and dealers to trade in our common stock,
making the market for our common stock less liquid and negatively affect the price of our stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We may be subject to
certain provisions of the Exchange Act, commonly referred to as the &ldquo;penny stock&rdquo; as defined in Rule 3a51-1. A penny
stock is generally defined to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions.
If our stock is deemed to be a penny stock, trading will be subject to additional sales practice requirements of broker-dealers.
These require a broker-dealer to:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Deliver to the customer, and obtain a written receipt for, a disclosure document;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Disclose certain price information about the stock;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Disclose the amount of compensation received by the broker-dealer or any associated person of the
broker-dealer;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Send monthly statements to customers with market and price information about the penny stock; and</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">In some circumstances, approve the purchaser&rsquo;s account under certain standards and deliver
written statements to the customer with information specified in the rules.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Consequently, penny
stock rules may restrict the ability or willingness of broker-dealers to trade and/or maintain a market in our common stock. Also,
prospective investors may not want to get involved with the additional administrative requirements, which may have a material adverse
effect on the trading of our shares.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">FINRA sales practice requirements
may also limit a stockholder&rsquo;s ability to buy and sell our stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition to the
&ldquo;penny stock&rdquo; rules described above, FINRA has adopted rules that require that in recommending an investment to a customer,
a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending
speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information
about the customer&rsquo;s financial status, tax status, investment objectives and other information. Under interpretations of
these rules, the FINRA believes that there is a high probability that speculative low priced securities will not be suitable for
at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy
our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">It may be difficult for stockholders
to enforce any judgment obtained in the United States against us, which may limit the remedies otherwise available to our stockholders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">All of our assets are
located outside of the United States. Moreover, a majority of our directors and officers are nationals or residents of Italy. All
or a substantial portion of the assets of these persons are located outside the United States. As a result, it may be difficult
for our stockholders to effect service of process within the United States upon these persons. In addition, there is uncertainty
as to whether the courts of Italy would recognize or enforce judgments of U.S. courts obtained against us or such officers and/or
directors predicated upon the civil liability provisions of the securities law of the United States or any state thereof, or be
competent to hear original actions brought in Italy against us or such persons predicated upon the securities laws of the United
States or any state thereof.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">There may not be sufficient
liquidity in the market for our securities in order for investors to sell their securities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">There is currently
only a limited public market for our common stock and there can be no assurance that an active trading market will ever develop
or be sustained in the future.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>FINANCIAL INFORMATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Management&rsquo;s Discussion and Analysis
or Plan of Operation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>The following discussion
of our financial condition and results of operations should be read in conjunction with our financial statements and the related
notes and other financial information appearing elsewhere in this Current Report on Form 8-K. In addition to historical financial
information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual
results could differ materially from those discussed in the forward-looking statements. Readers are also urged to carefully review
and consider the various disclosures made by us which attempt to advise interested parties of the factors which affect our business,
including without limitation, the disclosures made under &ldquo;Risk Factors.&rdquo; All amounts are set forth in euros.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following discussion
and analysis relates to the results of CR&amp;P and should be read in conjunction with the financial statements and the related
notes thereto and other financial information contained elsewhere in this Form 8-K. Please see our unaudited pro forma combined
financial information of SOST which is filed as Exhibit 99.1. For a discussion and analysis related to the results of SOST, please
see our Form 10-K for the fiscal year ended November 30, 2011 filed with the SEC on March 14, 2012 and Form 10-Q for the quarter
ended May 31, 2012 filed with the SEC on August 8, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Overview</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are a Company involved
in the hospitality business. We own and, develop hotels and spas in Italy. We do not operate our hotels directly so we can be classified
as property investment specialists.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We particularly focus
on the ownership and development of boutique hotels, spas and resorts. We choose the investment opportunities on the basis of analysis
and forecasts in respect of:</P>

<P STYLE="font: 10pt Wingdings; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">Location;</TD></TR></TABLE>

<P STYLE="font: 10pt Wingdings; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">profitability track record;</TD></TR></TABLE>

<P STYLE="font: 10pt Wingdings; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">competitors;</TD></TR></TABLE>

<P STYLE="font: 10pt Wingdings; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">development potential; and</TD></TR></TABLE>

<P STYLE="font: 10pt Wingdings; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">acquisition cost vis a vis foreseeable profitability.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We expect our investment
in boutique hotels, spas and resorts to create:</P>

<P STYLE="font: 10pt Wingdings; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">capital growth over the medium term;</TD></TR></TABLE>

<P STYLE="font: 10pt Wingdings; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">income immediately;</TD></TR></TABLE>

<P STYLE="font: 10pt Wingdings; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">location diversification; and</TD></TR></TABLE>

<P STYLE="font: 10pt Wingdings; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">synergies and scale economies.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We operate our hotels
- with the exception of Ripa Hotel which is currently managed by the previous owner through a company named Ku-Hotels and the Splendid
Hotel currently managed by Alain Messegu&egrave; - by means of contractual agreements with a major Italian hotel manager company
called JSH.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">JSH was founded in
2010 by four professionals in the hotel management sector, with collectively more than 80 years of experience in the business,
and as today it manages 1,250 rooms in 14 major hotels in Italy.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">JSH is involved in
the management business only, and does not invest in hotel properties.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The contractual agreements
in place with JSH basically envisage an annual rent composed of a guaranteed minimum rent plus a variable amount linked to the
Gross Operating Profit.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The same contractual
scheme is applied to the managers of the Ripa Hotel and the Splendid Hotel.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Therefore, our revenues
are deriving only from the rents we receive from the managers of our hotels. These rents are made of a guaranteed minimum rent
plus a variable amount related to the profitability of the hotel.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We intend to enter
into same kind of contractual agreements with JSH in relation to the future acquisitions of hotels in Italy and abroad. We currently
own 5 hotels and resorts in Padova, Italy, Rome, Italy and Ostuni (Brindisi), Italy. Collectively, these properties have approximately
520 hotel rooms and suites as well as restaurants, conference rooms, spas and golf courses. Our portfolio of hotel properties provides
us with a diverse geographic footprint across Italy.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our senior management
team has over 80 collective years of experience spanning multiple foreign jurisdictions. This team has established plans for growth
focusing on the core principles of providing authentic Italian hospitality and expansion into foreign markets in which we do not
have hotel properties.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We intend to develop
our presence in Italy and abroad with a target of owning 3,000 rooms within the next 3 to 5 years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are currently undergoing
advanced negotiations with respect to investments in Rome, Bari and Florence in Italy, as well as in New York, and have started
searches for investment opportunities in Milan, Florence, Paris and London. We are also planning to invest in high-growth potential
countries such as Albania and some selected African countries.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition to the
items discussed above, we plan to continue to refresh our hotel room product, pursue third-party development partners for additional
hotel and restaurant concepts and renovate select facilities to improve our product offerings.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Recent Developments and Events</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In September of 2012
(the <B>&ldquo;</B>Spin-Off Date<B>&rdquo;</B>), CR&amp;P disposed of its businesses related to renewable energy and real estate
to a sister company named Masoledo S.r.l. (<B>&ldquo;</B>Masoledo<B>&rdquo;</B>), while CR&amp;P acquired from the same company
the interest in Masseria Santo Scalone Hotel e Resort S.r.l. As a result of these dispositions and acquisitions, CR&amp;P today
has a receivable of approximately euro 8.6 million due from Masoledo (the <B>&ldquo;Receivable&rdquo;</B>). The terms and conditions
of the Receivable are set out in a deed entered into between CR&amp;P and Masoledo, pursuant to which Masoledo will repay the Receivable
at an annual interest rate of 6% of the Receivable. Masoledo will use the proceeds from any disposal to a third party of such renewable
energy or real estate related businesses to make payments on the principal and interest of the Receivable. Notwithstanding the
foregoing, Masoledo will repay the Receivable no later than 5 years form the Spin-Off Date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In October of 2012,
CR&amp;P entered into a preliminary agreement with JSH S.r.l. and its shareholders (&ldquo;JSH&rdquo;), pursuant to which, by the
end of 2012, CR&amp;P will acquire not less than a 15% stake in JSH, or an equivalent stake in the new sub-holding company to be
incorporated by JSH which will control the companies involved in the management of the CR&amp;P hotels.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Critical Accounting Policies and Estimates</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We believe the following
accounting policies and estimates are most critical to aid in understanding and evaluating our reported financial results.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><I>Cash and cash equivalents</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Cash and cash equivalents
comprise cash balances, cash on current accounts with banks, bank deposits and other highly liquid short-term investments with
original maturities of less than three months.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><I>Accounts receivable
and loans issued</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Receivables and loans
issued are stated at cost less an allowance for doubtful debts. Management quantifies this allowance based on current information
regarding the customers&rsquo; and borrowers&rsquo; ability to repay their obligations. Amounts previously written off which are
subsequently collected are recognized as income.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><I>Investment in associates
and other companies</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Investments in associates
are accounted for under the equity method.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Investments in other
companies are accounted for under the historical cost.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The impairment losses
are determined primarily on the basis of critical information concerning the issuer, if known and assessable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><I>Property, plant and
equipment</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Property, plant and
equipment are stated at acquisition cost less accumulated depreciation and adjustments for impairment losses. Property, plant and
equipment also includes assets under construction and plant and equipment awaiting installation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Subsequent expenditures
are capitalized only when they increase the future economic benefits embodied in an item of property, plant and equipment. All
other expenditures are recognized as expenses in the consolidated statement of income as incurred.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Capitalization ceases
when construction is interrupted for an extended period or when the asset is substantially complete.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Where funds are borrowed
specifically for the purpose of acquiring or constructing a qualifying asset, the amount of interest costs to be capitalized in
a period on that asset is the actual interest cost incurred on the borrowing during the period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Depreciation is charged
on a straight-line basis over the estimated remaining useful lives of the individual assets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Depreciation commences
from the time an asset is put into operation. Depreciation is not charged on assets to be disposed of or on land. The range of
the estimated useful lives is as follows:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">-</FONT></TD><TD STYLE="text-align: justify">Buildings and constructions: 33 years</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">-</FONT></TD><TD STYLE="text-align: justify">Machinery and equipment: 2 &ndash; 20 years</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">-</FONT></TD><TD STYLE="text-align: justify">Others: 5 years</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Real estate assets
are stated at historical cost. Expenditures for repairs and maintenance are expensed as incurred. Depreciation is computed using
the straight-line method. Buildings are depreciated over their estimated useful lives of approximately 33 years, with the rates
used for individual buildings being based on the property&rsquo;s age, overall physical condition, type of construction materials
and intended use.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Improvements to buildings
are depreciated over the shorter of the estimated useful life of the improvement or the remaining useful life of the building at
the time the improvement is completed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Real estate investments
and purchased intangibles subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset group may not be recoverable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Due to the recent date
of acquisition of most of the real estate investments and/or that they are the subject of ongoing building development and the
consequent inability to assess their longer term earning capacity, no impairment test has been performed to date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Assets to be disposed
of are separately presented on the balance sheet and reported at their historic cost since the expected realization value is greater.
These assets and the relevant liabilities are classified separately as held for sale in the consolidated balance sheet and are
no longer depreciated. An analysis of these assets and liabilities is presented separately in the relevant section of the notes
to the financial statements, included in this Form 8-K.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><I>Assets and liabilities
held for resale</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In connection with
the strategy of concentrating in the portfolio of hotel, power, and plantations investments, in the periods presented we entered
into various negotiations with potential purchasers to sell properties as detailed in the note n. 5 to the financial statements,
included in this Form 8-K. Most of these sales are concluded at the date of presentation of the interim financial statements ended
June 30, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have assessed that
the potential realizable (or realized) value of these assets at the market value are higher than the net asset carrying value and
accordingly no impairment has been provided for.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><I>Goodwill and Other
Intangible Assets</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Since the Company doesn&rsquo;t
have the technical and evaluation information to reassess the correct identification of the assets acquired and the liabilities
assumed, based on fair value, in application of purchase accounting to our acquisitions, tangible and identifiable intangible assets
and liabilities of the acquired entity are recorded at the acquisition cost. According to information held by our Management, the
acquisition cost of properties held by us does not differ significantly from the fair value at the date of the acquisition. Where
the investment in subsidiary is greater than the net asset value the excess is treated as goodwill arising on consolidation in
the balance sheet. Where the investment in subsidiary is smaller than the net asset value the difference is initially recognized
as a gain in the first consolidated income statement, then accounted as accumulated earning within equity of the following years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Goodwill and indefinite-life
intangible assets are not amortized, but are tested for impairment at least annually.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Due to the recent date
of acquisition of most of the real estate investments and/or that they are the subject of ongoing building development and the
consequent inability to assess their longer term earning capacity, no impairment test has been performed to date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><I>Leasing</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">All lease agreements
of the Company and our subsidiaries are accounted for as finance leases. The Company recognizes the asset and associated liability
on its balance sheet. Finance leases are capitalized at the beginning of the lease at the lower of the fair value of the leased
property and the present value of minimum lease payments. Each installment of the lease is apportioned between the liability and
finance charges so as to achieve an equal reduction in capital due for each payment made at constant rate on the remaining financial
balances.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><I>Derivative financial
instruments</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We use derivative financial
instruments principally for the management of exposure to variable interest rates on long-term financing. All derivative financial
instruments are classified as assets or liabilities and are accounted for at trade date. The Company measures all derivative financial
instruments based on fair values derived from market prices of the instruments. Changes in the fair value of a derivative that
is significant and that is designated and qualifies as a fair value hedge, along with the loss or gain on the hedged asset or liability,
are recorded in the income statement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Currently there is
only one derivative instrument hedging the risk of variable interest rates (an &ldquo;interest rate cap&rdquo;), the notional amount
of is &euro;4 million. This derivative instrument hedges the risk from change of interest rate on a mortgage loan facility with
&ldquo;bullet&rdquo; repayments originally of &euro; 8 million of which &euro; 6.6 million is outstanding and included on the consolidated
balance sheet as at December 31, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The change in fair
value of this derivative instrument over the period January 1, 2009 to December 31, 2011 is negligible and, therefore, no impact
has been reflected on the CR&amp;P consolidated income statements. At June 30, 2012, the Company has recorded in the six months
income statement the change in fair value of the derivative instrument mentioned above as loss of &euro; 27 thousands on the hedged
liability.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><I>Shareholders loans</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Shareholders loans
to us are all non-interest bearing. Italian law provides that the shareholders loans to a limited liability company (&quot;S.r.l.&quot;)
are not preferred and their repayment is subordinated to other categories of debt. As a result all shareholder loans are classified
as non-current liabilities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><I>Severance indemnity
fund</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">According to Italian
accounting principles reflecting local law and applicable employment contracts, certain post-employment benefits accrue during
the period of employment. Under U.S. GAAP, post-employment benefits are defined either as de fined contribution plans or defined
benefit plans.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In defined contribution
plans, the company's obligation is limited to the payment of contributions to the Government or to a fund. Defined benefit plans
are pension, insurance and healthcare programs which cover the company's obligation, even implicitly, to provide the benefits due
to former employees. The liabilities associated with defined benefit plans are determined on the basis of actuarial assumption
(discounting) and accrued in the financial statements over the employment period required to obtain the benefits.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The severance indemnity
fund required by Italian law is a liability similar to a defined benefit plan, which, however, according to Italian accounting
principles, is not subject to discounting. Given the small number of our employees any difference between the present provisions
in the financial statements prepared in accordance with Italian GAAP and discounted value of these benefits is considered to be
immaterial.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><I>Reserves</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Reserves are represented
by provisions of profits required by law, the Company statute and the decisions of directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><I>Revenue Recognition</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In order to recognize
revenue four basic criteria must be met:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">-</FONT></TD><TD STYLE="text-align: justify">existence of persuasive evidence that an arrangement exists;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">-</FONT></TD><TD STYLE="text-align: justify">delivery has occurred or services have been rendered;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">-</FONT></TD><TD STYLE="text-align: justify">the seller&rsquo;s price to the buyer is fixed and determinable; and</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">-</FONT></TD><TD STYLE="text-align: justify">collectability is reasonably assured.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our revenue recognition
policies are consistent with these criteria. The judgments involved in revenue recognition include understanding the terms of agreements
and determining the appropriate time to recognize revenue for each transaction based on such terms. Each transaction is evaluated
to determine: (i) at what point in time revenue is earned, (ii) whether contingencies exist that impact the timing of recognition
of revenue and (iii) how and when such contingencies will be resolved. The timing of revenue recognition could vary if different
judgments were made.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="color: black"><B>Results of
</B></FONT><B>Operations</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Six Month Period Ended June 30, 2012
compared to the Six Month Period Ended June 30, 2011</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">For the six months <BR>Ended<BR> June 30, 2012</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">For the six months <BR>ended<BR> June 30, 2011</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 58%">Revenues</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&euro;</TD><TD STYLE="width: 18%; text-align: right">3,003,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&euro;</TD><TD STYLE="width: 18%; text-align: right">1,517,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Operating costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(981,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,280,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Administrative and other costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(494,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2,635,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>EBITDA</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,528,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2,398,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Amortization and depreciation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,312,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,386,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Interest expenses</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(1,688,000</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(1,683,000</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Total Operating Loss</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,472,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(5,467,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Interest income</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(10,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Other income</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">-</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">2,563,000</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Loss from continuing operations before income taxes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,482,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2,903,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Income taxes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(76,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(77,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Net Loss</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&euro;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,559,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&euro;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2,980,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Revenues</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Revenues for the six
months ended June 30, 2012, increased approximately &euro;1,486,000, or 98%, compared to the six months ended June 30, 2011. This
increase is the result of an increase in the revenues of the subsidiaries Ripa and Terme di Galzignano.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Operating Costs</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Operating costs for
the six months ended June 30, 2012, decreased approximately &euro;299,000, or 23%, compared to the six months ended June 30, 2011.
This decrease is related to an efficiency gain widespread throughout the Group.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Administrative and Other Costs</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Administrative and
other costs for the six months ended June 30, 2012 and 2011 were approximately &euro;494,000 and &euro;2,635,000, respectively.
Such expenses consist primarily of salaries and personnel related expenses, occupancy expenses, sales travel, consulting costs
and other expenses. The decrease of approximately &euro;2,141,000 was due to the write-down of approximately &euro; 700,000 of
expenses for improvements on a building owned by the subsidiary Carciano Immobiliare under a purchase contract being finalized,
later withdrawn. There was also further write-downs of assets in other subsidiaries for a total amount of about &euro; 850,000.
The remainder of the decrease in this item is related to an efficiency gain widespread throughout the Group.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>EBITDA</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">EBITDA for the six
months ended June 30, 2012, increased by approximately &euro;3,926,000, or 164%, compared to the six months ended June 30, 2011.
EBITDA as a percentage of revenue for the six months ended June 30, 2012, increased by 107% compared to the six months ended June
30, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Amortization and Depreciation</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Amortization and depreciation
for the six months ended June 30, 2012 and 2011 were approximately &euro;1,312,000 and &euro;1,386,000, respectively. Such expenses
consist primarily of depreciation of properties, plant and equipment held by Conte Rosso &amp; Partners and the subsidiaries Ripa
Hotel &amp; Resort and Terme di Galzignano. The decrease of approximately &euro;74,000 was due to the completion of the amortization
of some assets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Interest Expense</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Interest expense for
the six months ended June 30, 2012 and 2011 was approximately &euro;1,688,000 and &euro;1,683,000, respectively. These costs are
substantially stable in the two interim periods compared.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><I>Interest Income</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Interest income or
loss for the six months ended June 30, 2012 and 2011 was approximately a loss of &euro;10,000 and a gain of &euro;1,000, respectively.
These incomes are substantially stable in the two interim periods compared.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Income Taxes</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Income taxes for the
six months ended June 30, 2012 and 2011 were approximately &euro;76,000 and &euro;77,000, respectively. <FONT STYLE="color: black">These
items are substantially stable in the two interim periods compared</FONT>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>For the year ended December 31, 2011
and the year ended December 31, 2010</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">For the year ended <BR>December 31, 2011</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">For the year ended <BR> December 31, 2010</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 58%">Revenues</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&euro;</TD><TD STYLE="width: 18%; text-align: right">11,976,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&euro;</TD><TD STYLE="width: 18%; text-align: right">4,338,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Operating costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3,281,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,550,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Administrative and other costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(6,951,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,476,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>EBITDA</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,744,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,312,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Amortization and depreciation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2,834,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,517,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Interest expenses</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(3,879,000</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(3,139,000</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Total Operating Loss</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(4,969,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3,344,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Interest income</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">18,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Other income</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">2,476,000</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(5,000</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Loss from continuing operations before income taxes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2,475,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3,344,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Income taxes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,187,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(181,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Net Loss</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&euro;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(3,662,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&euro;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(3,525,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 1in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Revenues</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Revenues for the year
ended December 31, 2011, increased approximately &euro;7,638,000, or 176%, compared to the year ended December 31, 2010. This increase
is mainly dependent on the following events:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">-</FONT></TD><TD STYLE="text-align: justify">Sale of two properties (located in Pisa and Todi, Italy) by the subsidiary Ripa Hotel &amp; Resort,
which generated revenues of more than &euro; 1,700,000;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">-</FONT></TD><TD STYLE="text-align: justify">Recognition of additional premium of &euro; 5,200,000 on the sale of the property of the subsidiary
Carciano Immobiliare &ndash; mentioned above - to a third party, based on the settlement agreement;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">-</FONT></TD><TD STYLE="text-align: justify">Impact of the consolidation of the subsidiary Terme di Galzignano for the first time in 2011 (approximately
&euro; 1,600,000) .</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Operating Costs</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="color: black">Operating
Costs for the year ended December 31, 2011, increased approximately &euro;1,731,000, or 112%, compared to the year ended December
31, 2010. </FONT>This increase is mainly dependent on the following events:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">-</FONT></TD><TD STYLE="text-align: justify">Start-up costs increase in the subsidiary Enital (approximately &euro; 500,000);</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">-</FONT></TD><TD STYLE="text-align: justify">Services costs increase in the subsidiary Carciano Immobiliare (approximately &euro;350,000);</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

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<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">-</FONT></TD><TD STYLE="text-align: justify">Impact of the consolidation of the subsidiary Terme di Galzignano for the first time in 2011 (approximately
&euro; 1,000,000).</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Administrative and Other Costs</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="color: black">Administrative
and other costs for the years ended December 31, 2011 and 2010 were approximately &euro;6,951,000 and &euro;1,476,000, respectively.
Such expenses consist primarily of salaries and personnel related expenses, occupancy expenses, sales travel, consulting costs
and other expenses. The increase of approximately &euro;5,475,000 </FONT>is mainly dependent on the following events:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">-</FONT></TD><TD STYLE="text-align: justify">the provision for 2011, accounted for &euro; 3,800,000, relating to the settlement agreement of
the preliminary contract of the property at Via Carciano, Rome, Italy held by the subsidiary Carciano Immobiliare (mentioned above)
and reflects a partial uncertainty in the determination of the additional revenue established in the agreement, given the fact
that the conditions for its payment are still pending;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">-</FONT></TD><TD STYLE="text-align: justify">Impairment of receivables in the subsidiaries CRP Immobiliare (approximately &euro;800,000) and
Investimenti Immobiliari (approximately &euro;300,000).</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>EBITDA</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">EBITDA for the year
ended December 31, 2011, increased by approximately &euro;432,000, or 33%, compared to the year ended December 31, 2010. EBITDA
as a percentage of revenue for the year ended December 31, 2011, decreased slightly by 15% compared to the year ended December
31, 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Amortization and Depreciation</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="color: black">Amortization
and depreciation for the years ended December 31, 2011 and 2010 were approximately &euro;2,834,000 and &euro;1,517,000, respectively.
Such expenses consist primarily of depreciation of properties, plant and equipment held by Conte Rosso &amp; Partners and the subsidiaries
Ripa Hotel &amp; Resort and Terme di Galzignano</FONT>. <FONT STYLE="color: black">The increase of approximately &euro;1,317,000
was basically due to the impact of the consolidation of the subsidiary Terme di Galzignano for the first time in 2011.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Interest Expense</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Interest expense for
the years ended December 31, 2011 and 2010 was approximately &euro;3,879,000 and &euro;3,139,000, respectively. The increase was
essentially due to the increase in outstanding current and non-current financial debts in 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><I>Interest Income</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Interest income for
the years ended December 31, 2011 and 2010 was approximately a gain of &euro;18,000 and a gain of &euro;5,000, respectively. These
items are substantially stable in the two interim periods compared.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Income Taxes</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Income taxes for the
years ended December 31, 2011 and 2010 were approximately &euro;1,187,000 and &euro;181,000, respectively. The increase of &euro;
1,006,000 is mainly due to the recognition of the additional premium in the subsidiary Carciano Immobiliare and the non-deductibility
of the related provision mentioned above.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>For the year ended December 31, 2010
and the year ended December 31, 2009</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">For the year ended <BR>December 31, 2010</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">For the year ended <BR>December 31, 2009</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 58%">Revenues</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&euro;</TD><TD STYLE="width: 18%; text-align: right">4,338,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&euro;</TD><TD STYLE="width: 18%; text-align: right">5,815,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Operating costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,550,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3,799,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Administrative and other costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,476,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2,694,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>EBITDA</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,312,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(678,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Amortization and depreciation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,517,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,660,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Interest expenses</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(3,139,000</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(3,232,000</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Total Operating Loss</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3,344,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(5,570,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Interest income</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">20,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Other income</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(5,000</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">261,000</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Loss from continuing operations before income taxes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3,344,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(5,290,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Income taxes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(181,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Net Loss</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&euro;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(3,525,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&euro;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(5,290,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 1in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Revenues</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Revenues for the year
ended December 31, 2010, decreased approximately &euro;1,477,000, or 25%, compared to the year ended December 31, 2009. This decrease
is mainly dependent on the recognition in 2009 of<FONT STYLE="color: black"> approximately &euro; 1,150,000 of other revenues charged
back to the hotel management company (a third party) to compensate for the improvements expenses related to the hotel building
owned by the subsidiary Ripa Hotel &amp; Resort.</FONT> The improvements activity was completed in 2009.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Operating Costs</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="color: black">Operating
costs for the year ended December 31, 2010, decreased approximately &euro;2,249,000, or 59%, compared to the year ended December
31, 2009. </FONT>This decrease is mainly dependent on the recognition in 2009 of<FONT STYLE="color: black"> approximately &euro;
1,850,000 of improvements expenses related to the hotel building owned by the subsidiary Ripa Hotel &amp; Resort, mentioned above.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Administrative and Other Costs</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="color: black">Administrative
and other costs for the years ended December 31, 2010 and 2009 were approximately &euro;1,476,000 and &euro;2,694,000, respectively.
Such expenses consist primarily of salaries and personnel related expenses, occupancy expenses, sales travel, consulting costs
and other expenses. The decrease of approximately &euro;1,218,000 </FONT>is mainly dependent on the following events for 2009:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">- the impairment in
the time sharing asset;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">- the impairment of
receivables in Conte Rosso &amp; Partners (approximately &euro; 100,000) and in the subsidiaries Preneste (approximately &euro;200,000),
Investimenti Immobiliari (approximately &euro;200,000).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>EBITDA</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">EBITDA for the year
ended December 31, 2010, increased by approximately &euro;1,990,000, or 294%, compared to the year ended December 31, 2009. Gross
profit as a percentage of revenue for the year ended December 31, 2010, increased by 19% compared to the year ended December 31,
2009.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Amortization and Depreciation</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Amortization and depreciation
for the years ended December 31, 2010 and 2009 were approximately &euro;1,517,000 and &euro;1,660,000, respectively. These costs
are substantially stable in the two interim periods compared.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Interest Expense</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Interest expense for
the years ended December 31, 2010 and 2009 was approximately &euro;3,139,000 and &euro;3,232,000, respectively. These costs are
substantially stable in the two interim periods compared.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><I>Interest Income</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Interest income or
loss for the years ended December 31, 2010 and 2009 was approximately a gain of &euro;5,000 and a gain of &euro;20,000, respectively.
These items are substantially stable in the two interim periods compared.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Income Taxes</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Income taxes for the
years ended December 31, 2010 and 2009 were approximately &euro;181,000 and &euro;1,000, respectively. The increase in income taxes
was due to the indeductibility of some costs in the consolidated subsidiaries for 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Liquidity <I>and</I> Capital Resources</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>For the six month period ended June
30, 2012 and 2011</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 1in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 1in">As of June 30, 2012,
we had cash and cash equivalents of approximately &euro;1,286,000, negative working capital of approximately &euro;22,076,000,
and an accumulated loss of approximately &euro;27,286,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Cash Flows from Operating Activities</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our operating activities
resulted in net cash provided in operations of approximately &euro;6,729,000 for the six months ended June 30, 2012, compared to
net cash provided in operations of approximately &euro;6,028,000 for the six months ended June 30, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The net cash provided
in operating activities for the six month period ended June 30, 2012 reflects a net loss of approximately &euro;1,559,000 offset
by depreciation and amortization of approximately &euro;1,312,000. Changes in assets and liabilities included an increase in real
estate held for resale of approximately &euro;5,935,000, an increase in trade receivables of approximately &euro;278,000, a decrease
in related party receivables of approximately &euro;403,000, a decrease in other receivables of approximately &euro;653,000, an
increase in advanced payments on purchases of property of approximately &euro;4,600,000, an increase in other assets of approximately
&euro;87,000, a decrease in trade payables of approximately &euro;2,779,000, a decrease in related party payables of approximately
&euro;350,000, an increase in other payables of approximately &euro;22,000, an increase in current income taxes of approximately
&euro;312,000 and a decrease in other liabilities of approximately &euro;102,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The net cash provided
in operating activities for the six month period ended June 30, 2011 reflects a net loss of approximately &euro;2,980,000 offset
by depreciation and amortization of approximately &euro;1,386,000. Changes in assets and liabilities included an increase in real
estate held for resale of approximately &euro;1,727,000, a decrease in trade receivables of approximately &euro;2,683,000, a decrease
in related party receivables of approximately &euro;65,000, a decrease in other receivables of approximately &euro;858,000, an
increase in advanced payments on purchases of property of approximately &euro;7,406,000, a decrease in other assets of approximately
&euro;170,000, an increase in trade payables of approximately &euro;4,307,000, a decrease in related party payables of approximately
&euro;555,000, a decrease in other payables of approximately &euro;866,000, a decrease in current income taxes of approximately
&euro;1,962,000 and a decrease in other liabilities of approximately &euro;2,015,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Cash Flows from Investing Activities</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The net cash used in
investing activities for the six month periods ended June 30, 2012 consist primarily of the cash inflow (approximately &euro; 1,400,000)
due to the sale of the building in Fregene and of the cash outflow (approximately &euro; 1,500,000) due to the real estate development
business of the subsidiary Aros.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The net cash used in
investing activities for the six month periods ended June 30, 2011 consist primarily of the cash outflow (approximately &euro;
25,500,000) for purchase of properties, plant and equipment basically due to the impact of the acquisition and the consolidation
of the subsidiary Terme di Galzignano for the first time in 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Cash Flows from Financing Activities</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Net cash provided by
financing activities for the six months ended June 30, 2012 and the six months ended June 30, 2011 was a loss of &euro;5,851,000
and &euro;19,896,000, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>For the year ended December 31, 2011
and the year ended December 31, 2010</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of December 31,
2011, we had cash and cash equivalents of approximately &euro;545,000, negative working capital of approximately &euro;25,908,000
and an accumulated deficit of approximately &euro;24,998,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Cash Flows from Operating Activities</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our operating activities
resulted in net cash provided in operations of approximately &euro;8,144,000 for the year ended December 31, 2011 compared to net
cash used in operations of approximately &euro;12,073,000 for the year ended December 31, 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The net cash provided
in operating activities for the year ended December 31, 2011 reflects a net loss of approximately &euro;3,662,000 offset by depreciation
and amortization of approximately &euro;2,834,000. Changes in assets and liabilities included an increase in real estate held for
resale of approximately &euro;1,727,000, a decrease in trade receivables of approximately &euro;8,682,000, an increase in related
party receivables of approximately &euro;1,318,000, a decrease in other receivables of approximately &euro;973,000, an increase
in advanced payments on purchases of property of approximately &euro;7,406,000, a decrease in other assets of approximately &euro;477,000,
a decrease in trade payables of approximately &euro;4,947,000, a decrease in related party payables of approximately &euro;813,000,
a decrease in other payables of approximately &euro;1,499,000, an increase in current income taxes of approximately &euro;210,000
and a decrease in other liabilities of approximately &euro;1,658,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The net cash provided
in operating activities for the year ended December 31, 2010 reflects a net loss of approximately &euro;3,525,000 offset by depreciation
and amortization of approximately &euro;1,517,000. Changes in assets and liabilities included a decrease in real estate held for
resale of approximately &euro;19,000, a decrease in trade receivables of approximately &euro;1,904,000, a decrease in related party
receivables of approximately &euro;1,025,000, an increase in other receivables of approximately &euro;1,461,000, an increase in
advanced payments on purchases of property of approximately &euro;2,825,000, an increase in other assets of approximately &euro;1,086,000,
a decrease in trade payables of approximately &euro;280,000, an increase in related party payables of approximately &euro;638,000,
an increase in other payables of approximately &euro;8,278,000, a decrease in current income taxes of approximately &euro;47,000
and an increase in other liabilities of approximately &euro;2,593,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Cash Flows from Investing Activities</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The net cash used in
investing activities for the year ended December 31, 2011 consist primarily of the cash outflow (approximately &euro; 26,200,000)
for purchase of properties, plant and equipment basically due to the impact of the acquisition and the consolidation of the subsidiary
Terme di Galzignano for the first time in 2011...</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The net cash used in
investing activities for the year ended December 31, 2010 consist primarily of the cash outflow (approximately &euro; 15,000,000)
for purchase of properties, plant and equipment basically due to the impact of the acquisition and consolidation of the subsidiary
Enital.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Cash Flows from Financing Activities</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Net cash provided by
financing activities for the year ended December 31, 2011 and the year ended December 31, 2010 was approximately &euro;20,724,000
and &euro;6,860,000, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>For the year ended December 31, 2010
and the year ended December 31, 2009</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of December 31,
2010, we had cash and cash equivalents of approximately &euro;430,000, negative working capital of approximately &euro;8,740,000
and an accumulated deficit of approximately &euro;5,095,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Cash Flows from Operating Activities</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our operating activities
resulted in net cash provided in operations of approximately &euro;12,073,000 for the year ended December 31, 2010 compared to
net cash used in operations of approximately negative &euro;6,539,000 for the year ended December 31, 2009.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The net cash provided
in operating activities for the year ended December 31, 2010 reflects a net loss of approximately &euro;3,525,000 offset by depreciation
and amortization of approximately &euro;1,517,000. Changes in assets and liabilities included a decrease in real estate held for
resale of approximately &euro;19,000, a decrease in trade receivables of approximately &euro;1,904,000, a decrease in related party
receivables of approximately &euro;1,025,000, an increase in other receivables of approximately &euro;1,461,000, an increase in
advanced payments on purchases of property of approximately &euro;2,825,000, an increase in other assets of approximately &euro;1,086,000,
a decrease in trade payables of approximately &euro;280,000, an increase in related party payables of approximately &euro;638,000,
an increase in other payables of approximately &euro;8,278,000, a decrease in current income taxes of approximately &euro;47,000
and an increase in other liabilities of approximately &euro;2,593,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The net cash provided
in operating activities for the year ended December 31, 2009 reflects a net loss of approximately &euro;5,290,000 offset by depreciation
and amortization of approximately &euro;1,660,000. Changes in assets and liabilities included a decrease in real estate held for
resale of approximately &euro;932,000, an increase in trade receivables of approximately &euro;5,789,000, an increase in other
receivables of approximately &euro;2,722,000, a decrease in advanced payments on purchases of property of approximately &euro;16,681,000,
an increase in other assets of approximately &euro;2,133,000, a decrease in trade payables of approximately &euro;7,214,000, an
increase in related party payables of approximately &euro;490,000, an increase in other payables of approximately &euro;1,459,000,
an increase in current income taxes of approximately &euro;858,000 and an increase in other liabilities of approximately &euro;6,847,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Cash Flows from Investing Activities</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The net cash used in
investing activities for the year ended December 31, 2009 consist primarily of the following items:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 80pt; text-align: justify; text-indent: -41pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 39pt"></TD><TD STYLE="width: 41pt">-</TD><TD STYLE="text-align: justify">the cash outflow (approximately &euro; 2,400,000) for purchase of the building at Via della Cannuccia,
Anzio (Rome, Italy) by the subsidiary Antonio;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 80pt; text-align: justify; text-indent: -41pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 39pt"></TD><TD STYLE="width: 41pt">-</TD><TD STYLE="text-align: justify">the cash outflow (approximately &euro; 1,500,000) for purchase of the company Intermedia Holding
S.p.A. (not consolidated);</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 80pt; text-align: justify; text-indent: -41pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 39pt"></TD><TD STYLE="width: 41pt">-</TD><TD STYLE="text-align: justify">the cash outflow (approximately &euro; 1,700,000) for the purchase of the assets related to the
real estate development business of the subsidiary Aros.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Cash Flows from Financing Activities</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Net cash provided by
financing activities for the year ended December 31, 2010 and the year ended December 31, 2009 was approximately &euro;6,860,000
and &euro;11,088,000, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Future Liquidity Needs</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have evaluated our
expected cash requirements over the next twelve months, which includes, but is not limited to, investments in additional sales
and marketing and product development resources, capital expenditures, and working capital requirements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We expect to require
additional financing in the future. The timing of our need for additional capital will depend in part on our future operating performance
in terms of revenue growth and the level of operating expenses maintained.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Off-Balance Sheet Arrangements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have no off-balance
sheet arrangements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>PROPERTIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="color: black">Our
principal executive offices are located at </FONT>Viale Bruno buozzi 83, in Rome, Italy. Currently, we own and occupy approximately
5,000 square feet of office space.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table
sets forth, as of November 1, 2012, the beneficial ownership of our common stock by each executive officer and director, by each
person known by us to beneficially owning more than 5% of the our common stock and by the executive officers and directors as a
group. Except as otherwise indicated, all shares are owned directly and the percentage shown is based on 17,873,563 shares of common
stock issued and outstanding on November 1, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 85%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.5in">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; text-align: justify; border-bottom: Black 1pt solid">Name&nbsp;and&nbsp;address&nbsp;of&nbsp;beneficial&nbsp;owner</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: right; border-bottom: Black 1pt solid">Amount&nbsp;of<BR> beneficial&nbsp;ownership</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: right; border-bottom: Black 1pt solid">Percent<BR> of&nbsp;class</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 60%; text-align: justify">Antonio Conte <BR>Via Cortina d&rsquo; ampezzo 221 <BR>Rome, Italy 00135</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 22%; text-align: right">10,667,667</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">59.7</TD><TD STYLE="width: 1%; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify">Maddalena Olivieri (wife of Antonio Conte) <BR>Via Cortina d&rsquo; ampezzo 221 <BR>Rome, Italy 00135</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,185,185</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6.6</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: justify">Total all executive officers and directors (one person)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">11,851,852</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">66.3</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: justify">Other 5% Shareholders</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: justify">Paolo Conte <BR>Via Partenope 2 <BR>Napoli, Italy</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,342,775</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7.5</TD><TD STYLE="text-align: left">%</TD></TR>
</TABLE>

<P STYLE="margin: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 85%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.5in">
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As used in this table,
&ldquo;beneficial ownership&rdquo; means the sole or shared power to vote, or to direct the voting of, a security, or the sole
or shared investment power with respect to a security (i.e., the power to dispose of, or to direct the disposition of, a security).
In addition, for purposes of this table, a person is deemed, as of any date, to have &ldquo;beneficial ownership&rdquo; of any
security that such person has the right to acquire within 60 days after such date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The persons named above
have full voting and investment power with respect to the shares indicated.&nbsp;&nbsp;Under the rules of the Securities and Exchange
Commission, a person (or group of persons) is deemed to be a &ldquo;beneficial owner&rdquo; of a security if he or she, directly
or indirectly, has or shares the power to vote or to direct the voting of such security, or the power to dispose of or to direct
the disposition of such security.&nbsp;&nbsp;Accordingly, more than one person may be deemed to be a beneficial owner of the same
security. A person is also deemed to be a beneficial owner of any security, which that person has the right to acquire within 60
days, such as options or warrants to purchase our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-style: normal">DIRECTORS
AND EXECUTIVE OFFICERS</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table
sets forth information regarding the members of our board of directors and our executive officers and other significant employees.
All of our officers and directors were appointed on the effective date of the Acquisition. All of our directors hold office until
the next annual meeting of stockholders and their successors are duly elected and qualified. Executive officers serve at the request
of the board of directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" ALIGN="CENTER" STYLE="font: 10pt Times New Roman, Times, Serif; width: 70%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48%; border-bottom: windowtext 1pt solid; font-weight: bold; text-align: justify">Name</TD>
    <TD STYLE="width: 2%; font-weight: bold; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 9%; border-bottom: windowtext 1pt solid; font-weight: bold; text-align: justify">Age</TD>
    <TD STYLE="width: 2%; font-weight: bold; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 39%; border-bottom: windowtext 1pt solid; font-weight: bold; text-align: justify">Position(s)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">Antonio Conte</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">47</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Chief Executive Officer and Director</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">Giuseppe Cagiati</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">51</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Chief Operating Officer</TD></TR>
<TR STYLE="vertical-align: top">
    <TD NOWRAP STYLE="text-align: justify">Domenico Ballo</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">50</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Secretary</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">Giovanni Marraffa</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">36</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">VP of Control</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">Giancarlo Lanna</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">54</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Chairman</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">Marco Milli</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">45</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Director</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">Charles Gargano</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">78</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Director</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">Dorothy Herman</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">59</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Director</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Set forth below is
a brief description of the background and business experience of our current executive officers and directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Antonio Conte</B> is the founder of CR&amp;P and has been
the President and Chief Executive Officer of CR&amp;P since 2006. Mr. Conte obtained a law degree from the University Federico
II of Naples, Italy. In 1991, Mr. Conte started trading and developing real estate properties in Italy. In the early 2000s, Mr.
Conte founded a cleaning and maintenance company that reached a total turnover of &euro; 15 million. Mr. Conte sold this company
in 2006.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Giuseppe Cagiati </B>joined CR&amp;P
in 2008 and serves as the Company&rsquo;s General Manager. Prior to joining CR&amp;P, Mr. Cagiati was Chief Technical Manager of
the Statuto Group, one of the largest Italian real estate market players, where he followed all the developing activities in central
and southern Italy.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Giovanni Marraffa</B><FONT STYLE="font-weight: normal">
has over ten years experience as financial controller in Italy and abroad. Mr. Marraffa has worked for Asea Brown Boveri, General
Motors and Cap Gemini, and Ernst &amp; Young in Italy.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Domenico Ballo </B><FONT STYLE="font-weight: normal">is
a professional Chartered Accountant based in Naples, and has been working as a consultant in tax and fiscal matters for CR&amp;P
for over 10 years.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Giancarlo Lanna </B>has practiced law since 1982. Mr. Lanna&rsquo;s
practice focuses primarily on the areas of business, employment and administrative law, for private clients, public institutions
and listed companies. Most recently, Mr. Lanna served as Chairman of Simest Spa, a financial institution for the development and
promotion of Italian enterprises abroad, from 2005 until 2012. During this period, Mr. Lanna also served as a member of the Board
of Governors for the Promotion of International Commercial Arbitration and Conciliation in the Mediterranean and Vice Chairman
of the Italy-China Foundation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Marco Milli </B>graduated with a
law degree from the University of Rome &ldquo;La Sapienza&rdquo; and has more than 15 years of academic experience as a
professor and visiting professor in various Italian and European universities. Mr. Milli currently runs his own practice in
Rome.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Charlie Gargano </B>served as Chairman and Chief Executive
Officer of the Empire State Development Corporation and Vice-Chairman of the Port Authority of New York and New Jersey from 1995
to 2007. He was appointed to these positions by Governor George Pataki. Mr. Gargano has spent more than 20 years in public service
at the Federal and State level, serving two presidents as well as the administration of Governor Pataki. He has an MBA and Bachelor's
in Civil Engineering from Farleigh Dickinson University, as well as a Master's degree in Civil Engineering from Manhattan College.
Mr. Gargano has also received four Honorary Doctorate Degrees and holds professional engineering licenses in New York, New Jersey,
Connecticut, Oklahoma and Vermont.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Dorothy Herman</B> <FONT STYLE="font: 10pt Times New Roman, Times, Serif">is
the Chief Executive Officer of Prudential Douglas Elliman, a real estate brokerage company, which is New York&rsquo;s
largest residential brokerage, with over 4,000 real estate professionals and 675 employees working in more than 70 offices.
Ms. Herman also controls a portfolio of real estate services, including commercial and retail leasing and sales
services, relocation and settling-in services, new development and consulting services, property management services, PDE
Title service and mortgage services as provided by DE Capital Mortgage. Ms. Herman began her real estate career in Long
Island where she purchased Prudential Long Island Realty in 1989. After turning DE Capital Mortgage into a major
brokerage operating in Long Island and the Hamptons, Ms. Herman purchased Douglas Elliman, one of Manhattan&rsquo;s largest
brokerage firms, with her partner Howard Lorber in 2003. Since 2003, Prudential Douglas Elliman has
become one of the largest and fastest-growing real estate firms in New York as well as South Florida.</FONT></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Directors</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">All directors hold
office for one-year terms until the election and qualification of their successors. Officers are elected by the board of directors
and serve at the discretion of the board.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">There are no family
relationships among our directors and executive officers.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Involvement in Certain Legal Proceedings</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">To the best of our
knowledge, during the past ten years, none of the following occurred with respect to a present or former director or executive
officer: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer
either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being
subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) being subject to any order,
judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily
enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities;
and (4) being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodities Futures Trading Commission
to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Committees of the Board</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Company currently
does not have nominating, compensation or audit committees or committees performing similar functions nor does our Company have
a written nominating, compensation or audit committee charter. Our directors believe that it is not necessary to have such committees,
at this time, because the functions of such committees can be adequately performed by the board of directors. It is our intention
to create nominating, compensation and audit committees by the end of the current year, given the development of our business operations
after the Acquisition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For the same reasons,
our Company currently does not have any defined policy or procedural requirements for shareholders to submit recommendations or
nominations for directors, but we will define a nominating policy soon after the completion of the Acquisition. The board of directors
believes that, given the stage of our development, a specific nominating policy would be premature and of little assistance until
our business operations develop to a more advanced level. Our Company does not currently have any specific or minimum criteria
for the election of nominees to the board of directors and we do not have any specific process or procedure for evaluating such
nominees. The board of directors will assess all candidates, whether submitted by management or shareholders, and make recommendations
for election or appointment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A shareholder who wishes
to communicate with our board of directors may do so by directing a written request addressed to our CEO and director, Antonio
Conte, at the address appearing on the first page of this Current Report on Form 8-K..</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-style: normal">&nbsp;</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-style: normal">EXECUTIVE
COMPENSATION</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Compensation Discussion and Analysis</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company presently
not does have employment agreements with its named executive officer and it has not established a system of executive compensation
or any fixed policies regarding compensation of executive officers. The Company has not paid any cash and/or stock compensation
to its named executive officers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Chief Executive
Officer holds substantial ownership in the Company and is motivated by a strong entrepreneurial interest in developing our operations
and potential revenue base to the best of his ability.&nbsp;&nbsp;As our business and operations expand and mature, we expect to
develop a formal system of compensation designed to attract, retain and motivate talented executives.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Summary Compensation Table</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company has made
no compensation payments to any directors or officers.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Narrative Disclosure to the Summary
Compensation Table</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our named executive
officers do not currently receive any compensation from the Company for their service as officers of the Company.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Outstanding Equity Awards at Fiscal
Year-end Table</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company has made
no equity awards to any executive officer.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Narrative Disclosure to the Director
Compensation Table</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our directors do not
currently receive any compensation from the Company for their service as members of the Board of Directors of the Company.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Securities Authorized for Issuance
Under Equity Compensation Plans</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">To date, we have not
adopted a stock option plan or other equity compensation plan and have not issued any stock, options, or other securities as compensation.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Stock Option Grants</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have not granted
any stock options to our executive officers or directors since our inception.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Disclosure of Commission Position
of Indemnification for Securities Act Liabilities</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In accordance with
the provisions in our articles of incorporation, we will indemnify an officer, director, or former officer or director, to the
full extent permitted by law.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Insofar as indemnification
for liabilities arising under the Securities 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 Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.&nbsp;&nbsp;In the event that
a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by a director,
officer or controlling person of us in the successful defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel
the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-style: normal">&nbsp;</FONT></P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-style: normal">CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Antonio Conte is a
shareholder in and a director of both the Company and CR&amp;P and received further 10,625,000 shares of common stock issued by
the Company in exchange for his interest in CR&amp;P. As detailed above Mr. Conte&rsquo;s wife, Maddalena Olivieri, and his brother,
Mr. Paolo Conte, beneficially own common stock of the Company before the new shares of common stock were issued as part of the
Share Exchange Agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Except as detailed
above with the exception of the Acquisition and the agreements discussed herein, none of our directors or executive officers, nor
any proposed nominee for election as a director, nor any person who beneficially owns, directly or indirectly, shares carrying
more than 5% of the voting rights attached to all of our outstanding shares, nor any members of the immediate family (including
spouse, parents, children, siblings, and in-laws) of any of the foregoing persons has any material interest, direct or indirect,
in any transaction over the last two years or in any presently proposed transaction which, in either case, has or will materially
affect us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>LEGAL PROCEEDINGS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company is not
party to any legal proceedings or disputes at the time of this Current Report on Form 8-K.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">MARKET PRICE OF AND DIVIDENDS ON THE
REGISTRAN&rsquo;S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our common stock is
currently quoted on the OTC Bulletin Board (&ldquo;OTCBB&rdquo;), which is sponsored by FINRA. The OTCBB is a network of security
dealers who buy and sell stock. The dealers are connected by a computer network that provides information on current &ldquo;bids&rdquo;
and &ldquo;asks&rdquo;, as well as volume information. As of the date of the Acquisition, our shares were quoted on the OTCBB under
the symbol &ldquo;SOST.OB.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table
sets forth the range of high and low bid quotations for our common stock for each of the periods indicated as reported by the OTCBB.
These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent
actual transactions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="border-collapse: collapse; width: 50%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify; border-bottom: Black 1pt solid">Fiscal Year Ending December 31, 2011</TD><TD STYLE="padding-bottom: 1pt; border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 50%; text-align: justify; border-bottom: Black 1pt solid">Quarter Ended</TD><TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="width: 22%; border-bottom: Black 1pt solid; text-align: left">High $</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="width: 22%; border-bottom: Black 1pt solid; text-align: left">Low $</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: justify"></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">N/A</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">N/A</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify"></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">N/A</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">N/A</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: justify"></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">N/A</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">N/A</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify"></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">N/A</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">N/A</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="border-collapse: collapse; width: 50%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify; padding-bottom: 1pt; border-bottom: Black 1pt solid">Fiscal Year Ending December 31, 2010</TD><TD STYLE="padding-bottom: 1pt; border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 50%; text-align: justify; border-bottom: Black 1pt solid">Quarter Ended</TD><TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="width: 22%; border-bottom: Black 1pt solid; text-align: left">High $</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="width: 22%; border-bottom: Black 1pt solid; text-align: left">Low $</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: justify"></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">N/A</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">N/A</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify"></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">N/A</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">N/A</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: justify"></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">N/A</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">N/A</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify"></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">N/A</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">N/A</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Transfer Agent</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-weight: normal">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-weight: normal">Our
transfer agent is Empire Stock Transfer Inc., located at 7251 West Lake Mead Boulevard, Suite 300 Las Vegas, NV 89128-8351.&nbsp;&nbsp;Phone:
(702)-974-1444.</FONT></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">RECENT SALES OF UNREGISTERED SECURITIES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Reference is made to
the disclosure set forth under Item 3.02 of this Current Report, which disclosure is incorporated by reference into this section.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">DESCRIPTION OF REGISTRANT&rsquo;S
SECURITIES TO BE REGISTERED</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have 90,000,000
common shares with a par value of $0.001 per share of common stock authorized, of which 39,123,563<B>&nbsp;</B>shares were outstanding
after the events description in Item 1.01 above.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Common Stock</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Holders of common stock
have the right to cast one vote for each share of stock in his or her own name on the books of the corporation, whether represented
in person or by proxy, on all matters submitted to a vote of holders of common stock, including the election of directors.&nbsp;&nbsp;There
is no right to cumulative voting in the election of directors.&nbsp;&nbsp;Except where a greater requirement is provided by statute
or by the Articles of Incorporation, or by the Bylaws, the presence, in person or by proxy duly authorized, of the holder or holders
of a majority of the outstanding shares of the our common voting stock shall constitute a quorum for the transaction of business.
The vote by the holders of a majority of such outstanding shares is also required to effect certain fundamental corporate changes
such as liquidation, merger or amendment of the Company&rsquo;s Articles of Incorporation.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Dividends</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">There are no restrictions
in our articles of incorporation or bylaws that restrict us from declaring dividends.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have not declared
any dividends, and we do not plan to declare any dividends in the foreseeable future.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Pre-emptive Rights</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Holders of common stock
are not entitled to pre-emptive or subscription or conversion rights, and there are no redemption or sinking fund provisions applicable
to our common stock. All outstanding shares of common stock are, and the shares of common stock offered hereby will be when issued,
fully paid and non-assessable.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Share Purchase Warrants</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have not issued
and do not have outstanding any warrants to purchase shares of our common stock.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Options</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have not issued
and do not have outstanding any options to purchase shares of our common stock.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Convertible Securities</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have not issued
and do not have outstanding any securities convertible into shares of our common stock or any rights convertible or exchangeable
into shares of our common stock.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Preferred Stock</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have 10,000,000
shares of preferred stock authorized with a par value of $0.001 per share, of which no<B>&nbsp;</B>shares are outstanding as of
June 30, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>INDEMNIFICATION OF DIRECTORS AND OFFICERS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Certificate of
Incorporation allows us to indemnify our present and former officers and directors and other personnel against liabilities and
expenses arising from their service to the full extent permitted by Delaware law. The persons indemnified include our (i) present
or former directors or officers, (ii) any person who while serving in any of the capacities referred to in clause (i) who served
at our request as a director, officer, partner, proprietor, trustee, employee, agent or similar functionary of another foreign
or domestic corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, and (iii) any person nominated
or designated by (or pursuant to authority granted by) our board of directors or any committee thereof to serve in any of the capacities
referred to in clauses (i) or (ii).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Reference is made to
the disclosure set forth under Item 9.01 of this Current Report on Form 8-K, which disclosure is incorporated by reference into
this section.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>FINANCIAL STATEMENTS AND EXHIBITS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Reference is made to
the disclosure set forth under Item 9.01 of this Current Report of Form 8-K, which disclosure is incorporated by reference into
this section.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">ITEM 3.02. UNREGISTERED SALES OF EQUITY
SECURITIES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In connection with
the Acquisition, the previous shareholders of CR&amp;P received 21,250,000 shares of our common stock. All of the shares of our
common stock which were issued to the former shareholders of CR&amp;P as of the effective date of the Acquisition were done so
in reliance on the exemption from registration afforded by Regulation S of the Securities Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">SOST issued and sold
978,092 shares of its common stock in a private placement to an accredited investor for an aggregate purchase price of $1,305,827
(the &ldquo;Private Placement&rdquo;). CR&amp;P intends to use the proceeds from the Private Placement for the repayment of indebtedness,
expansion of its business, potential acquisitions and general corporate purposes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Commencing on May 10,
2012, SOST has issued an aggregate of 875,000 shares of its common stock to an accredited investor in exchange for services rendered
in connection with the Share Exchange.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">ITEM 5.01. CHANGES IN CONTROL OF REGISTRANT</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Reference is made to
the disclosure set forth under Item 2.01 of this Current Report on Form 8-K, which disclosure is incorporated herein by reference.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">ITEM 5.02. DEPARTURE OF DIRECTORS
OR PRINCIPAL OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF PRINCIPAL OFFICERS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Pursuant to the terms
of the Share Exchange, our new directors and officers are as set forth herein. Reference is made to the disclosure set forth under
Item 2.01 of this Current Report on Form 8-K, which disclosure is incorporated herein by reference. Pursuant to the terms of the
Share Exchange, Antonio Conte who prior to the Acquisition was the director of CR&amp;P, Ginacarlo Lanna, Marco Milli, Charles
Gargano and Dorothy Herman, were appointed as our directors. Pursuant to the terms of the Share Exchange, Antonio Conte, Giuseppe
Cagiati, Domenico Ballo, Giovanni Marraffa, were appointed as officers of our Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On November 6, 2012,
Filippo Fucile resigned as Principal Financial Officer. There was no known disagreement with Mr. Fucile regarding, our operations,
policies, or practices.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For certain biographical
and other information regarding the newly appointed officers and directors, see the disclosure under Item 2.01 of this Current
Report on Form 8-K, which disclosure is incorporated herein by reference.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">ITEM 5.03. AMENDMENT TO ARTICLES OF
INCORPORATION OR BYLAWS; CHANGE IN FISCAL YEAR</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Prior to the Share
Exchange, the Company&rsquo;s fiscal year end was November 30, and the fiscal year end of CR&amp;P was December 31.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Accordingly, and following
the interpretive guidelines of the Commission, the Company has elected to formally change its fiscal year end to match its accounting
predecessor&rsquo;s fiscal year end. On November 1, 2012, the Board of Directors of the Company acted by unanimous written consent
to change the Company&rsquo;s fiscal year end from November 30 to December 31. As a result of the interpretive guidelines of the
Commission mentioned above, no transition report is required in connection with such change in fiscal year end. Accordingly, the
Company intends to file a quarterly report on Form 10-Q for the period ended September 30, 2012.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">ITEM 5.06. CHANGE IN SHELL COMPANY
STATUS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Following the consummation
of the Share Exchange described in Item 2.01 of this Current Report on Form 8-K, we believe that we are not a shell corporation
as that term is defined in Rule 405 of the Securities Act and Rule 12b-2 of the Exchange Act.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">ITEM 9.01. FINANCIAL STATEMENTS AND
EXHIBITS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-weight: normal">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-weight: normal">(a) <I>Financial
Statements of Business Acquired.</I></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Filed herewith are:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Audited financial statements of CR&amp;P as of and for the fiscal years ended December 31, 2011, 2010 and 2009.</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 1in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Unaudited condensed financial statements of CR&amp;P as of June 30, 2012 and for the six months ended June 30, 2012 and 2011.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.25in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">(b) <I>Pro Forma Financial Information.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">Filed herewith is unaudited pro
forma combined financial information of CR&amp;P and Southern States Sign Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">(d) <I><U>Exhibits</U></I>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The exhibits listed
in the following Exhibit Index are filed as part of this Current Report on Form 8-K.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 14%; border-bottom: windowtext 1pt solid; font-weight: bold; text-align: justify">Exhibit No.</TD>
    <TD STYLE="width: 1%; font-weight: bold; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 85%; border-bottom: windowtext 1pt solid; font-weight: bold; text-align: justify">Description</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">2.1</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Share Exchange Agreement, dated as of November 1, 2012, by and among Conte Rosso &amp; Partners S.r.l. and Southern States Sign Company and the Shareholders of Conte Rosso &amp; Partners S.r.l.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">3.1</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Articles of Incorporation (1)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">3.2</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">By-Laws (1)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">99.1</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Audited financial statements of CR&amp;P for the period ended December 31, 2011, 2010 and 2009, unaudited consolidated financial statements of CR&amp;P as of June 30, 2012 for the six months ended June 30, 2012 and 2011, and unaudited Pro-Forma Combined Financial Information of CR&amp;P and Southern States Sign Company.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(1)</TD><TD>Incorporated by reference to Form S-1 filed with the SEC on January 25, 2011.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">SIGNATURES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: justify">Southern States Sign Company</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48%; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 4%; text-align: justify">By:</TD>
    <TD STYLE="width: 48%; text-align: justify; border-bottom: Black 1pt solid">/s/ Antonio Conte</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: justify">Antonio Conte</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: justify">Chief Executive Officer</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">Dated:</TD>
    <TD COLSPAN="2" STYLE="text-align: justify">November 7, 2012</TD></TR>
</TABLE>
<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>&nbsp;</I></B></P>



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{"company-data": {"conformed-name": "SOUTHERN STATES SIGN Co", "cik": "0001510130", "assigned-sic": "7389", "irs-number": "000000000", "state-of-incorporation": "NV", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "333-171842", "film-number": "121186056"}, "business-address": {"street1": "7231 S. EASTERN AVE, SUITE B-127", "city": "LAS VEGAS", "state": "NV", "zip": "89119", "phone": "702-496-5888"}, "mail-address": {"street1": "7231 S. EASTERN AVE, SUITE B-127", "city": "LAS VEGAS", "state": "NV", "zip": "89119"}}
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
November 1, 2012
Southern States Sign Company
(Exact name of small business issuer as
specified in its charter)
Nevada
26-3014345
(State or other jurisdiction of incorporation
        or
organization)
(IRS Employer Identification No.)
Viale Bruno Buozzi 83, Rome, Italy
(Address of principal executive offices)
39.06.80692582
(Issuer's telephone number)
__________________________________
(Former name or former address, if changed since last report)
Check the appropriate box below if the
Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨
Written communications pursuant to Rule 425 under the Securities Act (17CFR 230.425)
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
CURRENT REPORT ON FORM 8-K
SOUTHERN STATES SIGN COMPANY
TABLE OF CONTENTS
Page
Item 1.01
Entry into a Material Definitive Agreement
1
Item 2.01
Completion of Acquisition or Disposition of Assets
1
Acquisition
1
Business
3
Risk Factors
9
Management's Discussion and Analysis or Plan of Operation
21
Security Ownership of Certain Beneficial Owners and Management
34
Directors and Officers
35
Executive Compensation
36
Item 3.02
Unregistered Sales of Equity Securities
39
Item 5.01
Changes in Control of Registrant
40
Item 5.02
Departure of Directors or Certain Officers; Election of Directors; Appointments of Certain Officers
40
Compensatory Arrangements of Certain Officers
40
Item 5.03
Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year
40
Item 5.06
Change in Shell Company Status
40
Item 9.01
Financial Statements and Exhibits
40
ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE
AGREEMENT
The Acquisition
On November 1, 2012,
Southern States Sign Company ("SOST" or the "Company") entered into a Share Exchange Agreement (the "Exchange
Agreement") by and among Conte Rosso & Partners S.r.l., a limited liability company organized under the laws of Italy
("CR&P") and the holders of all of the outstanding capital stock of CR&P (each a "CR&P Shareholder"
and collectively, the "CR&P Shareholders"). Pursuant to the Exchange Agreement, the CR&P Shareholders transferred
all of the issued and outstanding capital stock of CR&P to us in exchange for 21,250,000 newly issued shares of our common
stock (the "Share Exchange"), resulting in CR&P becoming a wholly owned subsidiary of our company.
ITEM 2.01. COMPLETION OF ACQUISITION
OR DISPOSITION OF ASSETS
Acquisition
In accordance with
the Share Exchange dated November 1, 2012 we acquired all of the issued and outstanding shares of CR&P, which resulted in a
parent-subsidiary relationship (the "Acquisition"). In exchange for all of the issued and outstanding shares of CR&P,
the CR&P Shareholders received 21,250,000 shares of our common stock.
The Acquisition and
its related transactions were approved by the CR&P Shareholders.
At the time of the
Share Exchange, neither we nor CR&P had any options to purchase shares of capital stock outstanding or any warrants to purchase
shares of capital stock outstanding.
Prior to the Acquisition,
there were no material relationships between us and CR&P, or any of their respective affiliates, directors or officers, or
any associates of their respective officers or directors, other than as disclosed in this Current Report on Form 8-K.
The shares of our common
stock issued to CR&P Shareholders in connection with the Share Exchange were not registered under the Securities Act of 1933,
as amended (the "Securities Act"), but were made pursuant to Regulation S promulgated thereunder. Each CR&P Shareholder
represented to us that he or she was a Non-US Person as defined in Regulation S. We did not engage in a distribution of this offering
in the United States. Each CR&P Shareholder represented its intention to acquire the securities for investment only and not
with a view toward distribution. All CR&P Shareholders were given adequate access to sufficient information about us to make
an informed investment decision. None of the securities were sold through an underwriter and accordingly, there were no underwriting
discounts or commissions involved.
There were 17,873,563
shares of our common stock outstanding before giving effect to the transactions described in this Current Report on Form 8-K. Following
the closing of the Share Exchange, there were 39,123,563 shares of our common stock issued and outstanding, which include the following
Shares
Held by:
21,250,000
CR&P Shareholders as consideration pursuant to the Share Exchange
11,851,852
Existing shareholders who are also CR&P shareholders
6,021,711
Other existing shareholders
General Changes Resulting from the
Acquisition
Subsequent to the Share
Exchange, we intend to sell our interest in our prior billboard sign business and any assets that relate to that business to Mr.
David Ben Bassat in an Assignment of Assets Agreement. We intend to carry on the business of CR&P as our primary line of business.
We have relocated our principal executive offices to Viale Bruno Buozzi 83, Rome, Italy and our telephone number is +39.06.80692582
1
Accounting Treatment
The Share Exchange
is being accounted for as a reverse merger. Consequently, the assets and liabilities of CR&P will be carried over at cost.
Our consolidated financial statements after completion of the Share Exchange will include the assets and liabilities of both companies,
our historical operations and the operations of CR&P from November 1, 2012, the date at which the economic interest in the
assets and liabilities of CR&P become those of SOST pursuant to the Share Exchange Agreement. Except as described herein, no
arrangements or understandings exist among present or former controlling stockholders with respect to the election of members of
our board of directors and, to our knowledge, no other arrangements exist that might result in a future change of control of the
Company. We will continue to be a "small business issuer," as defined under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), following the Share Exchange.
FORM 10 DISCLOSURE
Item 2.01(f) of
Form 8-K provides that if a registrant reporting a transaction under Item 2.01 was a "shell company" (as such
term is defined in Rule 12b-2 under the Exchange Act), in connection with such transaction the registrant must disclose the information
that would be required if it were filing a general form for securities registration on Form 10. Since our operations after the
transaction will consist solely of Conte Rosso & Partners S.r.l. operations, except where the context otherwise requires, the
following discussion of our business and operations, "CR&P," "we," "us," "our"
and the "Company" will mean or refer to Conte Rosso & Partners S.r.l.'s business and operations.
Forward-Looking Statements
This Current Report
on Form 8-K contains forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995. To the extent
that any statements made in this Current Report contain information that is not historical, these statements are essentially forward-looking.
Forward-looking statements can be identified by the use of words such as "expects," "plans," "will,"
"may," "anticipates," believes," "should," "intends," "estimates,"
and other words of similar meaning. These statements are subject to risks and uncertainties that cannot be predicted or quantified
and, consequently, actual results may differ materially from those expressed or implied by such forward-looking statements. Such
risks and uncertainties are outlined in "Risk Factors" and include, without limitation:
·
Our limited and unprofitable operating history;
·
the ability to raise additional capital to finance our activities;
·
legal and regulatory risks associated with the Acquisition;
·
the future trading of our common stock;
·
our ability to operate as a public company;
·
general economic and business conditions;
·
the volatility of our operating results and financial condition; and
·
our ability to attract or retain qualified senior management personnel.
The foregoing factors
should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included
in this Current Report on Form 8-K.
Information regarding
market and industry statistics contained in this Current Report is included based on information available to us that we believe
is accurate. It is generally based on industry and other publications that are not produced for purposes of securities offerings
or economic analysis. We have not reviewed or included data from all sources, and cannot assure investors of the accuracy or completeness
of the data included in this Current Report. Forecasts and other forward-looking information obtained from these sources are subject
to the same qualifications and the additional uncertainties accompanying any estimates of future market size, revenue and market
acceptance of products and services. We do not undertake any obligation to publicly update any forward-looking statements. As a
result, investors should not place undue reliance on these forward-looking statements.
2
BUSINESS
Overview
We are a Company involved
in the hospitality business. We own and, develop hotels and spas in Italy. We do not operate our hotels directly, so we can be
classified as hospitality property investment specialists.
We particularly focus
on the ownership and development of boutique hotels, spas and resorts. We choose the investment opportunities on the basis of analysis
and forecasts in respect of:
§
location;
§
profitability track record;
§
competitors;
§
development potential; and
§
acquisition cost vis a vis foreseeable profitability.
We expect our investment
in boutique hotels, spas and resorts to create:
§
capital growth over the medium term;
§
income immediately;
§
location diversification; and
§
synergies and scale economies.
We operate our hotels
- with the exception of Ripa Hotel which is currently managed by the previous owner through a company named Ku-Hotels and the Splendid
Hotel currently managed by Alain Messeguè - by means of contractual agreements with a major Italian hotel manager company
called JSH Srl or JSH. Such persons with whom contractual arrangements provide for their management of our hotels are referred
to herein as "Hotel Managers".
JSH was founded in
2010 by four professionals in the hotel management sector, with collectively more than 80 years of experience in the business,
and as of today it manages 1,250 rooms in 14 major hotels in Italy.JSH is involved in the management business only and does not
invest in hotel properties.
The contractual agreements
in place with JSH basically envisage an annual rent composed of a guaranteed minimum rent plus a variable amount linked to the
gross operating profit.
The same contractual
scheme is applied to the managers of the Ripa Hotel and the Splendid Hotel.
Therefore, our revenues
are derived only from the rents we receive from the managers of our hotels. These rents are made of a fixed amount (the "guaranteed
minimum rent") plus a variable amount related to the profitability of the hotel.
We intend to enter
into same kind of contractual agreements with JSH in relation to the future acquisitions of hotels in Italy and abroad.
We currently own 6
hotels and resorts in Padova, Italy, Rome, Italy and Ostuni Brindisi, Italy. Collectively, these properties feature approximately
520 hotel rooms and suites as well as restaurants, conference rooms, spas and golf courses. Our portfolio of hotel properties provides
us with a diverse geographic footprint across Italy.
3
Our senior management
team has over 80 collective years of experience spanning multiple foreign jurisdictions. This team has established plans for growth
focusing on the core principles of providing authentic Italian hospitality and expansion into foreign markets in which we do not
have hotel properties.
We intend to develop
our presence in Italy and abroad with a target to own 3,000 rooms within the next 3 to 5 years.
We are currently in
advanced negotiations with respect to acquisitions in Rome, Bari and Florence in Italy, as well as in New York, and have started
searches for investment opportunities in Milan, Florence, Paris and London. We are also planning to invest in high-growth potential
countries such as Albania and some selected African countries.
In addition to the
items discussed above, we plan to continue to refresh our hotel room product, pursue third-party development partners for additional
hotel and restaurant concepts and renovate select facilities to improve our product offerings.
Our Mission
Our mission is to invest
in upscale and luxury hotel properties in Italy and abroad where we can exploit at best our long term experience in providing authentic
Italian hospitality.
Through our Hotel Managers
we focus on customer satisfaction and delivering superior guest experiences by providing Italian inspired leisure experiences that
are designed to exceed customer expectations in a clean, safe, friendly and fun environment. Our mission is for each guest at our
hotel properties to feel as if they are an honored visitor to an Italian palazzo.
We believe our long-term
success will depend substantially upon increasing the quality, reach and scope of our operating portfolio, including new-build
developments, acquisitions and, where appropriate, asset sales. Recently we have completely renovated the Majestic Hotel in Padua
and the Ripa Hotel in Rome, and we are currently restoring Masseria Santo Scalone in Ostuni (Brindisi).
Our Competitive Strengths
We have significant
competitive strengths that support our goal of building a successful group of managed hotels.
·
Top Rated Properties. We believe that our properties are well located and provide Italian hospitality
that our guests seek. Our properties have consistently received four and five star ratings, awards and accolades for service and
guest experience. Our property recognition and strength is key to our ability to drive preference for our hotels among our guests.
·
Italian Platform with Compelling Growth Potential. Our existing Italian presence is distributed
among a populous urban center and vacation destinations in Italy. We believe that our existing hotels provide us with a strong
platform from which to selectively pursue new growth opportunities in markets where we are under-represented. Our management team
applies their experience, judgment and knowledge to identify potential expansion targets for us. The combination of our existing
Italian presence, experienced management team, established third-party relationships and significant access to capital provides
us with a strong foundation for future growth and long-term value creation.
·
High Quality Owned Hotels Located in Desirable Markets. As of June 30, 2012, we own and operate
a high quality portfolio of five owned properties. Our owned full service hotels are located in key markets in Italy, including
major business centers and leisure destinations with strong growth potential. One of our owned hotels operates under the name Radisson
which provides high name recognition and a strong position in local markets.
4
Our Business Strategy
Our goal is to be a
leading hospitality property owner. In order to achieve this goal, we:
(i)
select the most appealing hotel properties in the boutique hotels, spas and resorts segment;
(ii)
undertake a full refurbishment and restoration process of these properties in order to achieve
the standards we have identified to better reflect our idea of authentic Italian hospitality; and
(iii)
put in place Hotel Managers who will ensure high occupancy at profitable daily rates.
This understanding
and focus informs our strategies for improving the performance of our existing hotels and our potential expansion of our presence
in markets worldwide.
·
Focus on improvement in the performance of existing hotels.
We constantly
monitor the activities of our Hotel Managers through monthly audit reports and regular visits to the properties, in order to ensure
the constant highest level of service to our customers and the achievement of the commonly agreed profitability targets over time.
A key component
of our strategy is for our Hotel Managers to maximize revenues and manage costs at existing hotel properties. Together we strive
to enhance revenues by focusing on increasing our share of hotel stays by our existing guests and increasing the number of new
guests we serve on a regular basis, with the ultimate goal of establishing and increasing guest loyalty to our properties. We manage
costs by setting performance goals for our hotel management teams that are tied to compensation, and granting our general managers
operational autonomy. We support these cost management efforts by assisting our general managers with tools and analytics provided
by our regional and corporate offices and by compensating our hotel management teams based on property performance.
Enhance Operational
Efficiency. We and our Hotel Managers strive to align our staffing levels and expenses with demand without compromising our commitment
to providing authentic hospitality and achieving high levels of guest satisfaction. During periods of declining demand for hospitality
products and services we adjust staffing, arrangements with third party service providers, vendor terms and arrangements and certain
standards in order to reduce costs without significantly impacting quality. As demand improves, we require our Hotel Managers to
remain focused on actively managing expenses.
We have finalised
a master - franchising agreement concerning the Majestic Hotel in Padova, with the Rezidor Group, controlled by Carlson Hotels
Worldwide, which runs the world top search web engine in the hospitality sector. The Rezidor Group manages over 1.050 hotels in
77 countries and it owns several brands such as Radisson, Hotel Missoni and Country Inns & Suites by Carlson & Park Inn.
The Radisson brand is among the best known brands in the international
hotellerie
business and, through the Carlson Hotels
Worldwide system, it manages the booking procedures of all the partner hotels including those belonging to our hotels. Radisson
provides booking and marketing services to JSH, in parallel with their own managing activity.
With reference
to the Ripa Hotel in Rome, we have just finalised an agreement with Worldhotels, an independent European based hotel partner, which
manages the booking procedures of more than 250 hotels in the world.
·
Expanding Our Presence in Attractive Markets
We intend
to acquire properties where we believe demand is strong or will strengthen to ensure high occupancy levels at appropriate daily
rates. Competition for good properties is strong but we believe that we can obtain opportunities because of our willingness to
accept the need for refurbishment or expansion or by working with existing interested parties without the need to drive standardised
branding.
5
Properties
The following is an
overview of our existing properties as of November 1, 2012:
Property
Date Acquired or
Opened
Hotel
Rooms
Suites
Conference
Room
Capacity
Rome, Italy
Ripa Hotel and Resort Spa
May 2008
200
2
568
Padova, Italy
Galzignano Terme Golf and Resort S.r.l.
Hotel Sporting
March_2009
93
19
125
Hotel Splendid
March 2009
61
30
—
Radisson Blu Hotel Majestic
March 2009
45
52
137
Hotel Green Park*
March 2009
86
8
—
Ostuni Brindisi, Italy
Masseria Santo Scalone
May 2012
19
—
*This hotel is not currently
operating and will be soon transformed into a private apartments building.
Rome, Italy
Ripa Hotel and
Resort Spa
Our Ripa Hotel Resort
and Spa property commenced operations in 1973, and we bought it in May 2008. The Ripa Hotel is a 4-star property, consisting of
202 guest rooms and suites, located in the historic Trastevere district, on the West bank of the Tevere River. The hotel property
is characterized by modern minimalistic style, original interiors, unexpected colors, and the use of innovative materials. A variety
of architects contributed to different designs and styles in the hotel.
Hotel Ripa is a business-friendly
hotel, seeking to meet the needs of business travelers as well as tourists. The hotel has a business center as well as other amenities
for business travelers. Dining options at the hotel include a restaurant, a coffee shop/café, a bar/lounge as well as room
service. The hotel offers a complimentary hot and cold buffet breakfast each morning to our guests.
Rome attracts over
11 million tourist and business visitors each year and this hotel is an attractive high quality destination hotel for many of such
visitors.
Padova, Italy
Galzignano Terme
Golf and Resort
Our Galzignano Terme
Golf and Resort commenced operations in 1969and we bought it in March 2009
.
The resort is located at the foot of the Eugenean
Hills in the heart of the Veneto region in Italy. The hotel is located 10 km from Padua and approximately 40 km from Venice and
Verona. The resort consists of four properties covering more than 86 acres of land. The hotels within the property are the Hotel
Sporting, Hotel Splendid, Radisson Blue Hotel Majestic and Hotel Green Park. Hotel Green Park is currently closed and will be transformed
into an apartment building.
The properties have
two sports pools, six thermal pools with Jacuzzi pools and Kneipp therapy areas, six tennis courts and a Revital Center with fitness
and spa areas. There is a nine-hole golf course with a putting green, driving range and a Clubhouse on the property. Additionally,
there are three golf courses within 15 km of the hotel complex that offer discount prices to our guests. The hotel has a retail
area with shops that sell jewelry, magazines and souvenirs.
6
We believe that our
Padova, Italy property attracts customers primarily from Germany, Austria and northern European countries and from major Italian
cities. Approximately 1 million people reside within 50 of the Padova, Italy property.
Hotel Sporting
The Hotel Sporting
is a 4-star property, consisting of 112 guest rooms divided into standard, superior, comfort, junior suite and suite. The 19 suites
are each equipped with private terraces and balconies overlooking the Galzignano Terme property. Each guest room is non-smoking
and equipped with standard comforts and technology, such as satellite TV and internet connections. Hotel Sporting offers guests
access to all of the resort's amenities, including the pools, tennis courts, and golf facilities. The hotel also has meeting
facilities, a beauty parlor and a bar lounge.
Hotel Splendid
The Hotel Splendid
is a 4-star property, consisting of 91 luxurious and uniquely furnished guest rooms, junior suites and suites. The top floors provide
guests a view of the entire resort complex and guests have access to all of the resort's amenities, including the pools,
tennis courts, and golf facilities.
The hotel's restaurant
overlooks a garden through large, picture windows and offers a culinary mix featuring refined and creative Italian recipes, as
well as international and regional dishes. The wine selection represents all Italian regions, with particular attention to wines
which come from the Veneto and Euganean territory.
Radisson Blu Hotel
Majestic
The Radisson Blu Hotel
Majestic is a 4-star property, consisting of 97 guest rooms with unique features such as rainfall showerheads and concierge service,
in addition to standard hotel amenities. The hotel restaurant, Naiades, specializes in modern interpretations of traditional Mediterranean
dishes. Meals are also served on a terrace with countryside views intended to promote relaxation for our guests.
Hotel Green Park
The Hotel Green Park
is currently under renovation. This property will undergo complete restructuring and it will be transformed into a private apartments
building. We expect to start refurbishment in the first half of 2013.
Ostuni Brindisi,
Italy
Masseria Santo Scalone
Masseria Santo Scalone
is a fortified farm house built in the XVI century and located close to Ostuni (Brindisi – Apulia region). This complex is
composed of several houses around a central larger building and it is currently undergoing a major refurbishment which will transform
it into a five-star luxury resort with beauty farm and spa. An additional 24 rooms (to the already existing 19 rooms) will be built
within the next year together with a new conference room and a pool.
Marketing
Our marketing strategy
is planned together with our Hotel Managers, and it is designed to maintain and build value and awareness while meeting the specific
business needs of hotel operations. Building awareness and differentiating each of our properties is critical to increasing our
footprint in the global hospitality industry. We are focused on targeting the distinct guest segments that each of our properties
serves and supporting the needs of the hotels by thorough analysis and application of data and analytics.
7
Competition
There is intense competition
in all areas of the hospitality industry in which we operate. Competition exists for hotel guests and hotel property development.
Our principal competitors are other operators of full service hotels in Italy and around the world.
We compete for guests
based primarily on reputation, location, customer satisfaction, room rates, quality of service, amenities, quality of accommodations
and security.
The universe of hotels
and hospitality is large and there are other companies who have offerings similar to us. We believe that our, desirable property
locations, strong customer base and global development team will enable us to compete effectively.
Seasonality
The hospitality industry
is seasonal in nature. The periods during which our hotel properties experience higher revenues vary from property to property,
depending principally upon location and the customer base served. Based upon historical results, our Rome property typically generates
the highest revenues in May, September and October and our Padova property generates the highest revenues in August, September
and April. We generally expect our revenues to be lower in the first quarter of each year than in each of the three subsequent
quarters.
Governmental Regulations
Our businesses are
subject to various laws and regulations. These laws and regulations include, but are not limited to, restrictions and conditions
concerning alcoholic beverages, food service, smoking, environmental matters, employees and employment practices, currency transactions,
taxation, zoning and building codes, and marketing and advertising. Such laws and regulations could change or could be interpreted
differently in the future, or new laws and regulations could be enacted. Material changes, new laws or regulations, or material
differences in interpretations by courts or governmental authorities could adversely affect our operating results.
Environmental Matters
As property owners
we are subject to various laws and regulations. These laws and regulations include, but are not limited to, the need to obtain
consents from various regulatory authorities to build, develop, modify, expand or demolish existing structures, the requirement
to ensure compliance with health and safety regulations during any such building projects or the operation of properties and limitations
or controls on discharges to the atmosphere or waste or sewage disposal facilities.
Employees
As of June 30, 2012,
we employed 5 full and part-time employees in our hospitality business, plus seven senior consultants (three of which are full
time).We believe that our relationship with our employees is satisfactory.
Our Hotel Managers
together employ approximately 60 full time employees plus approximately 250 are outsourcing employees who regularly work on our
properties.
Available Information
For more information
about us, visit our web site at
www.italianboutiquehotels.com
(currently under construction). Our electronic filings with
the U.S. Securities and Exchange Commission (including all annual reports on Form 10-K, quarter reports on Form 10-Q, and current
reports on Form 8-K, and any amendments to these reports), including the exhibits, are available free of charge through our web
site as soon as reasonably practicable after we electronically file them with or furnish them to the U.S. Securities and Exchange
Commission.
8
RISK FACTORS
You should carefully
consider the risks described below, in conjunction with the other information and consolidated financial statements and related
notes included elsewhere in this Current Report on Form 8-K, before making an investment decision. You should pay particular attention
to the fact that we conduct our operations in Italy and are governed by a legal and regulatory environment that in some respects
differs significantly from the environment that prevails in other countries with which you may be familiar.
Risks Related to the Hospitality Industry
The hospitality industry is
cyclical and macroeconomic and other factors beyond our control can adversely affect and reduce demand for our hospitality products
and services.
The hospitality industry
is cyclical. For example, the last two completed business cycles in the hospitality industry, which we define as the period starting
with the first calendar year of negative revenue per available room (RevPAR) growth and ending with the last calendar year of positive
RevPAR growth, took place from 1991 to 2000 and 2001 to 2007. During the declining stages of these two business cycles, RevPAR
growth was negative for one calendar year (1991) and two calendar years (2001 and 2002), respectively.
The declining stage
of the current business cycle in Western Europe began in the fourth quarter of 2008 and continued until the second quarter of 2010,
while it slightly increased in 2011 and the first 8 months of 2012. In particular, the average RevPAR in Western Europe upscale,
upper upscale and luxury hotels declined from 90,49 euros in 2007 to 86,91 euros in 2008, it continued to decrease in 2009 to 69,92
euros and started to recover in 2010 (76,98 euros), 2011 (81,64 euros) and first eight months of 2012 (87,13 euros). Macroeconomic
and other factors beyond our control can reduce demand for hospitality products and services, including demand for rooms at our
properties. These factors include:
·
changes and volatility in general economic conditions, including the severity and duration of any
downturn in the U.S., Europe or global economy and financial markets;
·
war, civil unrest (Cairo, Egypt), terrorist activities (such as the terrorist attacks in Jakarta,
Indonesia and Mumbai, India) or threats and heightened travel security measures instituted in response to these events;
·
outbreaks of pandemic or contagious diseases, such as avian flu, severe acute respiratory syndrome
(SARS) and H1N1 (swine) flu;
·
natural or man-made disasters, such as earthquakes, tsunamis, tornados, hurricanes, floods, oil
spills and nuclear incidents;
·
changes in the desirability of particular locations or travel patterns of customers;
·
decreased corporate budgets and spending and cancellations, deferrals or renegotiations of group
business (e.g., industry conventions);
·
low consumer confidence and high levels of unemployment;
·
depressed housing prices;
·
the financial condition of the airline, automotive and other transportation-related industries
and its impact on travel;
·
decreased airline capacities and routes;
·
travel-related accidents;
·
oil prices and travel costs;
·
statements, actions or interventions by governmental officials related to travel and corporate
travel-related activities, and the resulting negative public perception of such travel and activities;
9
·
domestic and international political and geo-political conditions;
·
cyclical over-building in the hotel industry; and
·
organized labor activities, which could cause a diversion of business from hotels involved in labor
negotiations and loss of group business.
These factors can adversely
affect, and from time to time have adversely affected, individual properties, particular regions or our business as a whole. How
we manage any one or more of these factors, or any crisis, could limit or reduce demand, or the rates our properties are able to
charge for rooms or services, which could adversely affect our business, results of operations and financial condition.
A worsening of global economic
conditions could cause our revenues and profitability to decline.
Consumer demand for
our products and services is closely linked to the performance of the general economy and is sensitive to business and personal
discretionary spending levels. Declines in consumer demand due to adverse general economic conditions, risks affecting or reducing
travel patterns, lower consumer confidence and high unemployment or adverse political conditions can lower the revenues and profitability
of our owned properties. Because RevPAR is a measure of achieved average daily rate (ADR) and occupancy, declines in ADR and occupancy
relating to declines in consumer demand will lower RevPAR.
While our 2011 and
2010 results reflect an increase in ADR levels at our hotels compared to 2009, they have not increased at the same rate at which
they declined in 2009 compared to 2008, especially at Ripa Hotel Uncertainty regarding the rate and pace of further recovery and
the impact any such recovery may have on different regions of the world makes it difficult to predict further increases in RevPAR
levels. Additionally, if economic weakness were to return to any of these regions of the world, it could have an adverse impact
on our revenues and negatively affect our profitability.
We are subject to the business,
financial and operating risks inherent to the hospitality industry, any of which could reduce our profits and limit our opportunities
for growth.
Our business is subject
to a number of business, financial and operating risks inherent to the hospitality industry, including:
·
changes in taxes and governmental regulations that influence or set wages, prices, interest rates
or construction and maintenance procedures and costs;
·
the costs and administrative burdens associated with complying with applicable laws and regulations;
·
the costs or desirability of complying with local practices and customs;
·
the availability and cost of capital necessary for us and potential hotel owners to fund investments,
capital expenditures and service debt obligations;
·
delays in or cancellations of planned or future development projects;
·
foreign exchange rate fluctuations or restructurings;
·
changes in operating costs, including, but not limited to, energy, food, workers' compensation,
benefits, insurance and unanticipated costs resulting from force majeure events;
·
significant increases in cost for healthcare coverage for employees and potential government regulation
in respect of health coverage;
·
shortages of labor or labor disruptions;
10
·
shortages of desirable locations for development; and
·
the ability of third-party internet travel intermediaries to attract and retain customers.
Any of these factors
could limit or reduce the prices we charge for our hospitality products or services, including the rates our properties charge
for rooms. These factors can also increase our costs or affect our ability to develop new properties or maintain and operate our
existing properties. As a result, any of these factors can reduce our profits and limit our opportunities for growth.
Risks Related to Our Hospitality Business
Because we operate in a highly
competitive industry, our revenues, profits or market share could be harmed if we are unable to compete effectively.
The segments of the
hospitality industry in which we operate are subject to intense competition. Our principal competitors are other operators of full
service properties in Italy, including other major hospitality chains with well-established and recognized brands. We also compete
against smaller hotel chains and independent and local hotel owners and operators. If we are unable to compete successfully, our
revenues or profits may decline or our ability to maintain or increase our market share may be diminished.
Competition
for Guests
Competition for guests
is based primarily on reputation, location, customer satisfaction, room rates, quality of service, amenities and quality of accommodations.
Many of our competitors are larger than we are based on the number of properties or rooms they manage or based on the number of
geographic locations where they operate. Our competitors may also have greater financial and marketing resources than we do, which
could allow them to improve their properties and expand and improve their marketing efforts in ways that could affect our ability
to compete for guests effectively. In addition, industry consolidation may exacerbate these risks.
We are exposed to the risks
resulting from significant investments in owned real estate, which could increase our costs, reduce our profits, and limit our
ability to respond to market conditions or restrict our growth strategy.
Real estate ownership
is subject to risks not applicable to managed, leased or franchised properties, including:
·
governmental regulations relating to real estate ownership;
·
real estate, insurance, zoning, tax, environmental and eminent domain laws;
·
the ongoing need for owner funded capital improvements and expenditures to maintain or upgrade
properties;
·
risks associated with mortgage debt, including the possibility of default, fluctuating interest
rate levels and the availability of replacement financing;
·
fluctuations in real estate values or potential impairments in the value of our assets; and
·
the relative illiquidity of real estate compared to some other assets.
The negative impact
on profitability and cash flow generation from a decline in revenues is more pronounced in owned properties because we, as the
owner, bear the risk of their high fixed-cost structure. The need to maintain and renovate owned properties can present challenges,
especially when cash generated from operations has declined. The effectiveness of any cost-cutting efforts is limited by the fixed-cost
nature of our business. As a result, we may not be able to offset revenue reductions through cost cutting, which could further
reduce our margins. During times of economic distress, declining demand and declining earnings often result in declining asset
values.
11
We may seek to expand through
acquisitions of and investments in other businesses and properties, or through alliances; and we may also seek to divest some of
our properties and other assets, any of which may be unsuccessful or divert our management's attention.
We intend to consider
strategic and complementary acquisitions of and investments in other businesses, properties, brands or other assets. In many cases,
we will be competing for these opportunities with third parties that may have substantially greater financial resources than we
do. Acquisitions or investments in businesses, properties, brands or assets, as well as these alliances, are subject to risks that
could affect our business, including risks related to:
·
issuing shares of stock that could dilute the interests of our existing stockholders;
·
spending cash and incurring debt;
·
assuming contingent liabilities;
·
contributing properties or related assets to hospitality ventures that could result in recognition
of losses; or
·
creating additional expenses.
We cannot assure you
that we will be able to identify opportunities or complete transactions on commercially reasonable terms or at all, or that we
will actually realize any anticipated benefits from such acquisitions, investments or alliances. There may be high barriers to
entry in many key markets and scarcity of available development and investment opportunities. Similarly, we cannot assure you that
we will be able to obtain financing for acquisitions or investments on attractive terms or at all, or that the ability to obtain
financing will not be restricted by the terms of our revolving credit facility or other indebtedness we may incur.
The success of any
such acquisitions or investments will also depend, in part, on our ability to integrate the acquisition or investment with our
existing operations. We may experience difficulty with integrating acquired businesses, properties or other assets, including difficulties
relating to:
·
coordinating sales, distribution and marketing functions;
·
integrating technology information systems; and
·
preserving the important licensing, distribution, marketing, customer, labor and other relationships
of the acquired assets.
Divestment of some
of our properties or assets may yield returns below our investment criteria. In some circumstances, sales of properties or other
assets may result in losses.
In addition, any such
acquisitions, investments, dispositions or alliances could demand significant attention from our management that would otherwise
be available for our regular business operations, which could harm our business.
Timing, budgeting and other
risks could delay our efforts to develop, redevelop or renovate the properties that we own, or make these activities more expensive,
which could reduce our profits or impair our ability to compete effectively.
We must maintain and
renovate the properties that we own in order to remain competitive, maintain the value and brand standards of our hotels and comply
with applicable laws and regulations. We also may selectively undertake ground-up construction of properties which may span multiple
phases and often take years to complete. These efforts are subject to a number of risks, including:
·
construction delays or cost overruns (including labor and materials) that may increase project
costs;
12
·
obtaining zoning, occupancy and other required permits or authorizations;
·
changes in economic conditions that may result in weakened or lack of demand or negative project
returns;
·
governmental restrictions on the size or kind of development;
·
force majeure events, including earthquakes, tornados, hurricanes, floods or tsunamis; and
·
design defects that could increase costs.
Developing new properties
typically involves lengthy development periods during which significant amounts of capital must be funded before the properties
can begin to operate. If the cost of funding these developments or renovations exceeds budgeted amounts, profits could be reduced.
Further, due to the lengthy development cycle, adverse economic conditions may alter or impede our development plans, thereby resulting
in incremental costs to us or potential impairment charges. Moreover, during the early stages of operations, charges related to
interest expense and depreciation may substantially detract from, or even outweigh, the profitability of certain new property investments.
Similarly, the timing
of capital improvements can affect property performance, including occupancy and average daily rate, particularly if we need to
close a significant number of rooms or other facilities, such as ballrooms, meeting spaces or restaurants. For example, we recently
completed broad-scope renovation projects at Majestic and Ripa while new restructuring projects are planned for Masseria in 2013.
Moreover, the investments that we make may fail to improve the performance of the properties in the manner that we expect.
If we are not able
to begin operating properties under development or renovation as scheduled, or if renovation investments adversely affect or fail
to improve performance, our ability to compete effectively could be diminished and our revenues could be reduced.
In any particular period, our
Hotel Managers may not be able to reduce expenses at the same rate that their revenues may decrease, which could have an adverse
effect on their net cash flows, margins and profits and, as a consequence, on their ability to pay us the variable part of the
annual rent and, in the worst situation, even the guaranteed minimum amount.
Many of the expenses
associated with managing and owning hotels are relatively fixed. These expenses include:
·
personnel costs;
·
interest;
·
property taxes;
·
insurance; and
·
utilities.
If our Hotel Managers
are unable to decrease these costs significantly or rapidly when demand for our hotels decreases, the decline in their revenues
could have a particularly adverse impact on their net cash flows and profits. This effect can be especially pronounced during periods
of economic contraction or slow economic growth, such as the recent economic recession. In such cases our Hotel Managers may not
be able to pay us the variable part of the annual rent and, in the worst situation, even the guaranteed minimum amount.
To date this has never been the case with us, although most of our lease contracts are relatively recent.
13
If we are unable to establish
and maintain key distribution arrangements for our properties, the demand for our rooms and our revenues could fall.
Some of the rooms at
our hotels and resorts are booked through third-party internet travel intermediaries and online travel service providers. We also
engage third-party intermediaries, including travel agencies and meeting and event management companies, who collect fees by charging
our hotels and resorts a commission on room revenues. A failure by our distributors to attract or retain their customer bases could
lower demand for hotel rooms and, in turn, reduce our revenues.
If bookings by these
third-party intermediaries increase, these intermediaries may be able to obtain higher commissions or other significant contract
concessions from us, increasing the overall cost of these third-party distribution channels. Some of our distribution agreements
are not exclusive, have a short term, are terminable at will, or are subject to early termination provisions. The loss of distributors,
increased distribution costs, or the renewal of distribution agreements on significantly less favorable terms could adversely impact
our business.
If the volume of sales made
through third-party internet travel intermediaries increases significantly, consumer loyalty to our brand could decrease and our
revenues could fall.
We and our Hotel Managers
expect to derive most of our business from traditional channels of distribution and our website. However, consumers now use internet
travel intermediaries regularly. Some of these intermediaries are attempting to increase the importance of generic quality indicators
(such as "four-star downtown hotel") at the expense of brand identification. These agencies hope that consumers will
eventually develop brand loyalties to their reservation system rather than to specific hotel brands. If the volume of sales made
through internet travel intermediaries increases significantly and consumers develop stronger loyalties to these intermediaries
rather than to our brand, our business and revenues could be harmed.
If we are not able to develop
new initiatives, including new brands, successfully, our business and profitability could be harmed.
We and our Hotel Managers
often develop and launch new initiatives which can be a time-consuming and expensive process. For example, Ripa has recently launched
special offers and promotions as a 10% discount for a minimum stay of 3 nights, a "children stay free" campaign and
a 15% discount for bookings made with a five day advance. Galzignano hotels usually launch offers and promotions as well, such,
for example, discounts for longer stay periods and spa packages. We have invested capital and resources in owned real estate, property
development, brand development and brand promotion. If such initiatives are not well received by our guests they may not have the
intended effect.
Italian labor laws
could impair our flexibility to restructure our business.
In Italy, employees
are protected by various laws which afford them consultation rights with respect to specific matters regarding their employers'
business and operations, including the downsizing or closure of facilities and employee terminations. In particular: (i) Law no.
604/1966, regulates the individual dismissals; (ii) Law no. 223/1991, concerns the collective dismissal procedure; (iii) Law no.
428/1990 as amended by legislative decree no. 18/2001, provides for the information and consultation procedure in case of a transfer
of the undertaking or a part thereof and (iv) Legislative decree no. 25/2007, introduces a general right to information and consultation
for employees. These laws and the collective bargaining agreements to which we are subject could impair our flexibility if we need
to restructure our business.
Labor shortages could restrict
our ability to operate our properties or grow our business or result in increased labor costs that could reduce our profits.
Our success depends
in large part on our Hotel Managers' ability to attract, retain, train, manage and engage their employees. Our properties
are staffed 24 hours a day, seven days a week by hundreds of employees. If our Hotel Managers are unable to attract, retain, train
and engage skilled employees, their ability to manage and staff our properties adequately could be impaired, which could reduce
customer satisfaction. Staffing shortages could also hinder our ability to grow and expand our business. Because payroll costs
are a major component of the operating expenses at our properties, a shortage of skilled labor could also require higher wages
that would increase their labor costs, which could reduce our profits.
14
Negotiations of collective
bargaining agreements, attempts by labor organizations to organize additional groups of the employees of our Hotel Managers or
changes in labor laws could disrupt our operations, increase labor costs or interfere with the ability of our Hotel Managers to
focus on executing our business strategies.
Certain of our properties
are subject to collective bargaining agreements, similar agreements or regulations enforced by governmental authorities. If relationships
between our Hotel Managers and their employees, or the unions that represent them become adverse, the properties we own could experience
labor disruptions such as strikes, lockouts and public demonstrations. Labor disruptions, which are generally more likely when
collective bargaining agreements are being renegotiated, could harm the relationship between our Hotel Managers and their employees
or cause us to lose guests. Further, adverse publicity in the marketplace related to union messaging could further harm our reputation
and reduce customer demand for our services. Labor regulation could lead to higher wage and benefit costs, changes in work rules
that raise operating expenses and legal costs which may limit the ability of our Hotel Managers to take cost saving measures during
economic downturns.
Our Hotel Managers
may also become subject to additional collective bargaining agreements in the future. Potential changes in the regulatory scheme
could make it easier for unions to organize groups of their employees. If such changes take effect, more of the employees of our
Hotel Managers or other field personnel could be subject to increased organizational efforts, which could potentially lead to disruptions
or require more of our Hotel Managers' time to address unionization issues. These or similar agreements, legislation or changes
in regulations could disrupt our operations, hinder our Hotel Managers' abilities to cross-train and cross-promote their
employees due to prescribed work rules and job classifications, reduce our profitability, or interfere with the ability of our
Hotel Managers to focus on executing our business strategies.
The loss of our Hotel Managers
could significantly harm our business.
We
do not operate our hotels directly, but through Hotel Managers
such
as JSH. We have entered into long term (usually 8+8 years) agreements with our Hotel Managers. However, we cannot guarantee that
they will remain with us at the end of the term of these agreements. Finding suitable replacements for our Hotel Managers
could be difficult. Losing the services of one or more of these Hotel Managers
could adversely affect our ability to execute our business strategies.
Our
Hotel Managers recruit individuals to act as general managers of specific properties. Although these individuals are not our employees,
their performance is critical to the success of our hotels. The resignation of such a general manager may result in a disruption
to day-to-day operations of a hotel and a decline in profitability.
The loss of our senior executives
could significantly harm our business.
Our ability to maintain
our competitive position is dependent to a large degree on the efforts and skills of our senior executives. We have entered into
employment letter agreements or consulting agreements with certain of our senior executives. However, we cannot guarantee that
these individuals will remain with us. Finding suitable replacements for senior executives could be difficult. Losing the services
of one or more of these senior executives could adversely affect our ability to execute our business strategies.
Because we derive a substantial
portion of our revenues from operations in Italy, the risks of doing business in one country could lower our revenues, increase
our costs, reduce our profits or disrupt our business.
We currently own all
of our hotels and resorts in Italy. We expect that revenues from our Italian operations will continue to account for a substantial
portion of our total revenues.
As a result, we are
subject to the risks arising from doing business in one country, including:
·
local economic disruption;
·
local adverse environmental effects; or
15
·
exchange rate movements between the euro and the United States dollar.
While these factors
and the impact of these factors are difficult to predict, any one or more of them could lower our revenues, increase our costs,
reduce our profits or disrupt our business.
Our failure to comply with
applicable laws and regulations may increase our costs, reduce our profits or limit our growth.
Our business, properties
and employees are subject to a variety of laws and regulations. Generally, these laws and regulations address our sales and marketing
efforts, our handling of privacy issues and customer data, our ability to obtain licenses for business operations such as sales
of food and liquor, immigration matters, environmental, health and safety, competition and trade laws, among other things.
The extensive environmental
requirements to which we are subject could increase our environmental costs and liabilities, reduce our profits or limit our ability
to run our business.
Our operations and
the properties we own and develop are subject to extensive environmental laws and regulations of the Italian government, including
requirements addressing:
·
health and safety;
·
the use, management and disposal of hazardous substances and wastes;
·
discharges of waste materials into the environment, such as refuse or sewage; and
·
air emissions.
We could be subject
to liability under some of these laws for the costs of investigating or remediating hazardous substances or wastes on, under, or
in real property we currently or formerly manage, own or develop, or third-party sites where we sent hazardous substances or wastes
for disposal. We could be held liable under these laws regardless of whether we knew of, or were at fault in connection with, the
presence or release of any such hazardous or toxic substances or wastes. Some of these laws make each covered person responsible
for all of the costs involved, even if more than one person may have been responsible for the contamination. Furthermore, a person
who arranges for hazardous substances or wastes to be transported, disposed of or treated offsite, such as at disposal or treatment
facilities, may be liable for the costs of removal or remediation if those substances are released into the environment by third
parties at such disposal or treatment facilities. The presence or release of hazardous or toxic substances or wastes, or the failure
to properly clean up such materials, could cause us to incur significant costs, or jeopardize our ability to develop, use, sell
or rent real property we own or operate or to borrow using such property as collateral.
Other laws and regulations
require us to manage, abate or remove materials containing hazardous substances such as mold, lead or asbestos during demolitions,
renovations or remodelling at properties that we manage, own or develop or to obtain permits for certain of our equipment or operations.
The costs of such management, abatement, removal or permitting could be substantial. Complying with these laws and regulations,
or addressing violations arising under them, could increase our environmental costs and liabilities, reduce our profits or limit
our ability to run our business. Existing environmental laws and regulations may be revised or new laws and regulations related
to global climate change, air quality, or other environmental and health concerns may be adopted or become applicable to us. The
identification of new areas of contamination, a change in the extent or known scope of contamination or changes in cleanup requirements,
or the adoption of new requirements governing our operations could have a material adverse effect on our results or operations,
financial condition and business.
16
If the insurance that we carry
does not sufficiently cover damage or other potential losses or liabilities involving properties that we own, our profits could
be reduced.
We carry insurance
from solvent insurance carriers that we believe is adequate for foreseeable losses and with terms and conditions that are reasonable
and customary. Nevertheless, market forces beyond our control could limit the scope of the insurance coverage that we can obtain
or restrict our ability to buy insurance coverage at reasonable rates. In the event of a substantial loss, the insurance coverage
that we carry may not be sufficient to pay the full value of our financial obligations, our liabilities or the replacement cost
of any lost investment or property loss. Because certain types of losses are significantly uncertain, they can be uninsurable or
too expensive to insure. In some cases, these factors could result in certain losses being completely uninsured. As a result, we
could lose some or all of the capital we have invested in a property, as well as the anticipated future revenues and profits from
the property. If the insurance that we carry does not sufficiently cover damages or other losses or liabilities, our profits could
be adversely affected.
Adverse judgments or settlements
resulting from legal proceedings in which we may be involved in the normal course of our business could reduce our profits or limit
our ability to operate our business.
In the normal course
of our business, we are often involved in various legal proceedings. The outcome of these proceedings cannot be predicted. If any
of these proceedings were to be determined adversely to us or a settlement involving a payment of a material sum of money were
to occur, there could be a material adverse effect on our financial condition and results of operations. Additionally, we could
become the subject of future claims by third parties, including guests who use our properties, our employees, our investors or
regulators. Any significant adverse judgments or settlements would reduce our profits and could limit our ability to operate our
business. Further, we may incur costs related to claims for which we have appropriate third party indemnity, but such third parties
fail to fulfil their contractual obligations.
Information technology system
failures, delays in the operation of our information technology systems or system enhancement failures could reduce our revenues
and profits and harm the reputation of our brands and our business.
Our success depends
on the efficient and uninterrupted operation of our information technology systems. We depend on information technology to run
our day-to-day operations, including, among others, hotel services and amenities such as guest check-in and check-out, housekeeping
and room service and systems for tracking and reporting our financial results and the financial results of our hotels.
Our information technology
systems are vulnerable to damage or interruption from fire, floods, hurricanes, power loss, telecommunications failures, computer
viruses, break-ins and similar events. The occurrence of any of these natural disasters or unanticipated problems could cause interruptions
or delays in our business or loss of data, or render us unable to process daily services.
In addition, if our
information technology systems are unable to provide the information communications capacity that we need, or if our information
technology systems suffer problems caused by installing system enhancements, we could experience similar failures or interruptions.
If our information technology systems fail and our redundant systems or disaster recovery plans are not adequate to address such
failures, or if our property and business interruption insurance does not sufficiently compensate us for any losses that we may
incur, our revenues and profits could be reduced and the reputation of our hotels and our business could be harmed.
Cyber risk and the failure
to maintain the integrity of internal or customer data could result in faulty business decisions, harm to our reputation or subject
us to costs, fines or lawsuits.
We are required to
collect and retain large volumes of internal and customer data, including credit card numbers and other personally identifiable
information and our various information technology systems enter, process, summarize and report such data. We also maintain personally
identifiable information about our employees. The integrity and protection of our guests, employee and company data is critical
to our business. Our guests expect that we will adequately protect their personal information, and the regulations applicable to
security and privacy are increasingly demanding in Italy. We have developed and maintain controls to prevent, and we have a process
to identify and mitigate, the theft, loss, fraudulent or unlawful use of guest, employee or company data. We also have what we
believe to be adequate and collectible insurance in the event of the theft, loss, fraudulent or unlawful use of customer, employee
or company data. A penetrated or compromised data system or the intentional, inadvertent or negligent release or disclosure of
data could result in theft, loss, fraudulent or unlawful use of customer, employee or company data which could harm our reputation
or result in remedial and other costs, fines or lawsuits and which could be in excess of any available insurance that we have procured.
17
If we fail to stay current
with developments in technology necessary for our business, our operations could be harmed and our ability to compete effectively
could be diminished.
Sophisticated information
technology and other systems are instrumental for the hospitality industry, including systems used for our reservations, revenue
management, property management and our [loyalty program], as well as technology systems that we make available to our guests.
These information technology and other systems must be refined, updated, or replaced with more advanced systems on a regular basis.
Developing and maintaining these systems may require significant capital. If we are unable to replace or introduce information
technology and other systems as quickly as our competitors or within budgeted costs or schedules when these systems become outdated
or need replacing, or if we are unable to achieve the intended benefits of any new information technology or other systems, our
operations could be harmed and our ability to compete effectively could be diminished.
As a public company, we are
required to comply with the reporting obligations of the Exchange Act and Section 404 of the Sarbanes-Oxley Act of 2002. If we
fail to comply with the reporting obligations of the Exchange Act and Section 404 of the Sarbanes-Oxley Act or if we fail to maintain
adequate internal controls over financial reporting, our business, results of operations and financial condition could be materially
adversely affected.
As a public company,
we are required to comply with the periodic reporting obligations of the Exchange Act, including preparing annual reports and quarterly
reports. Our failure to prepare and disclose this information in a timely manner could subject us to penalties under U.S. federal
securities laws, expose us to lawsuits and restrict our ability to access financing. In addition, we are required under applicable
law and regulations to design and implement internal controls over financial reporting, and evaluate our existing internal controls
with respect to the standards adopted by the U.S. Public Company Accounting Oversight Board.
We cannot assure you
that we will not identify control deficiencies that may constitute significant deficiencies or material weaknesses in our internal
controls in the future. As a result, we may be required to implement further remedial measures and to design enhanced processes
and controls to address issues identified through future reviews. This could result in significant delays and costs to us and require
us to divert substantial resources, including management time, from other activities.
If we do not fully
remediate the material weaknesses identified by management or fail to maintain the adequacy of our internal controls in the future,
we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting
in accordance with the Sarbanes-Oxley Act. Moreover, effective internal controls are necessary for us to produce reliable financial
reports and are important to help prevent fraud. As a result, any failure to satisfy the requirements of Section 404 on a timely
basis could result in the loss of investor confidence in the reliability of our financial statements, which in turn could harm
our business and negatively impact the trading price of our common stock.
Risks Related to Share Ownership and
Stockholder Matters
Our stock price is likely to
be volatile, and you may not be able to resell shares of your common stock at or above the price you paid.
The stock market in
general has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating
performance of the underlying businesses. Given that we are a relatively new public company, these fluctuations may be even more
pronounced in the trading market for our stock. In addition, in the past few years the financial services industry experienced
a period of significant disruption characterized by the bankruptcy, failure, collapse or sale of various financial institutions,
which led to increased volatility in securities prices and a significant level of intervention from the U.S. and other governments
in securities markets. These broad market and industry factors may seriously harm the market price of our common stock, regardless
of our actual operating performance.
In addition to the
risks described in this section, several factors that could cause the price of our common stock in the public market to fluctuate
significantly include, among others, the following:
·
quarterly variations in our operating results compared to market expectations;
18
·
announcements of acquisitions of or investments in other businesses and properties or dispositions;
·
announcements of new services or products or significant price reductions by us or our competitors;
·
size of the public float;
·
stock price performance of our competitors;
·
fluctuations in stock market prices and volumes;
·
default on our indebtedness or foreclosure of our properties;
·
changes in senior management or key personnel;
·
changes in financial estimates by securities analysts;
·
negative earnings or other announcements by us or other hospitality companies;
·
issuances or repurchases of equity or debt securities; and
·
global economic, legal and regulatory factors unrelated to our performance.
Volatility in the market
price of our common stock may prevent investors from being able to sell their common stock at or above the price at which you purchased
the stock. As a result, you may suffer a loss on your investment.
Securities class action
litigation has often been instituted against companies following periods of volatility in the overall market and in the market
price of a company's securities. This litigation, if instituted against us, could result in substantial costs, reduce our
profits, divert our management's attention and resources and harm our business.
Because we do not expect to
pay dividends on our common stock for the foreseeable future, investors seeking cash dividends should not purchase our common stock.
We do not currently
intend to pay cash dividends on our common stock and do not anticipate paying any dividends at any time in the foreseeable future.
We currently intend to retain future earnings, if any, to finance the expansion of our business. As a result, we do not anticipate
paying any cash dividends on our common stock in the foreseeable future. Our payment of any future dividends will be at the discretion
of our Board of Directors after taking into account various factors, including but not limited to our financial condition, operating
results, cash needs, growth plans and the terms of any credit agreements that we may be a party to at the time. Accordingly, investors
must rely on sales of their own common stock after price appreciation, which may never occur, as the only way to realize gains
on their investment. Investors seeking cash dividends should not purchase the common stock.
If we fail to remain current
on our reporting requirements, we could be removed from the OTC Bulletin Board which would limit the ability of broker-dealers
to sell our securities and the ability of stockholders to sell their securities in the secondary market.
Companies trading on
the OTC Bulletin Board, such as us, must be reporting issuers under Section 12 of the Exchange Act, and must be current in their
reports under Section 13, in order to maintain price quotation privileges on the OTC Bulletin Board. More specifically, the Financial
Industry Regulatory Authority ("FINRA") has enacted Rule 6530, which determines eligibility of issuers quoted on the
OTC Bulletin Board by requiring an issuer to be current in its filings with the Commission. Pursuant to Rule 6530(e), if we file
our reports late with the Commission three times our securities will be removed from the OTC Bulletin Board for failure to timely
file. As a result, the market liquidity for our securities could be severely adversely affected by limiting the ability of broker-dealers
to sell our securities and the ability of stockholders to sell their securities in the secondary market.
19
Because our common stock could
be deemed a low-priced "Penny" stock, it would be cumbersome for brokers and dealers to trade in our common stock,
making the market for our common stock less liquid and negatively affect the price of our stock.
We may be subject to
certain provisions of the Exchange Act, commonly referred to as the "penny stock" as defined in Rule 3a51-1. A penny
stock is generally defined to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions.
If our stock is deemed to be a penny stock, trading will be subject to additional sales practice requirements of broker-dealers.
These require a broker-dealer to:
·
Deliver to the customer, and obtain a written receipt for, a disclosure document;
·
Disclose certain price information about the stock;
·
Disclose the amount of compensation received by the broker-dealer or any associated person of the
broker-dealer;
·
Send monthly statements to customers with market and price information about the penny stock; and
·
In some circumstances, approve the purchaser's account under certain standards and deliver
written statements to the customer with information specified in the rules.
Consequently, penny
stock rules may restrict the ability or willingness of broker-dealers to trade and/or maintain a market in our common stock. Also,
prospective investors may not want to get involved with the additional administrative requirements, which may have a material adverse
effect on the trading of our shares.
FINRA sales practice requirements
may also limit a stockholder's ability to buy and sell our stock.
In addition to the
"penny stock" rules described above, FINRA has adopted rules that require that in recommending an investment to a customer,
a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending
speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information
about the customer's financial status, tax status, investment objectives and other information. Under interpretations of
these rules, the FINRA believes that there is a high probability that speculative low priced securities will not be suitable for
at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy
our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.
It may be difficult for stockholders
to enforce any judgment obtained in the United States against us, which may limit the remedies otherwise available to our stockholders.
All of our assets are
located outside of the United States. Moreover, a majority of our directors and officers are nationals or residents of Italy. All
or a substantial portion of the assets of these persons are located outside the United States. As a result, it may be difficult
for our stockholders to effect service of process within the United States upon these persons. In addition, there is uncertainty
as to whether the courts of Italy would recognize or enforce judgments of U.S. courts obtained against us or such officers and/or
directors predicated upon the civil liability provisions of the securities law of the United States or any state thereof, or be
competent to hear original actions brought in Italy against us or such persons predicated upon the securities laws of the United
States or any state thereof.
There may not be sufficient
liquidity in the market for our securities in order for investors to sell their securities.
There is currently
only a limited public market for our common stock and there can be no assurance that an active trading market will ever develop
or be sustained in the future.
20
FINANCIAL INFORMATION
Management's Discussion and Analysis
or Plan of Operation
The following discussion
of our financial condition and results of operations should be read in conjunction with our financial statements and the related
notes and other financial information appearing elsewhere in this Current Report on Form 8-K. In addition to historical financial
information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual
results could differ materially from those discussed in the forward-looking statements. Readers are also urged to carefully review
and consider the various disclosures made by us which attempt to advise interested parties of the factors which affect our business,
including without limitation, the disclosures made under "Risk Factors." All amounts are set forth in euros.
The following discussion
and analysis relates to the results of CR&P and should be read in conjunction with the financial statements and the related
notes thereto and other financial information contained elsewhere in this Form 8-K. Please see our unaudited pro forma combined
financial information of SOST which is filed as Exhibit 99.1. For a discussion and analysis related to the results of SOST, please
see our Form 10-K for the fiscal year ended November 30, 2011 filed with the SEC on March 14, 2012 and Form 10-Q for the quarter
ended May 31, 2012 filed with the SEC on August 8, 2012.
Overview
We are a Company involved
in the hospitality business. We own and, develop hotels and spas in Italy. We do not operate our hotels directly so we can be classified
as property investment specialists.
We particularly focus
on the ownership and development of boutique hotels, spas and resorts. We choose the investment opportunities on the basis of analysis
and forecasts in respect of:
§
Location;
§
profitability track record;
§
competitors;
§
development potential; and
§
acquisition cost vis a vis foreseeable profitability.
We expect our investment
in boutique hotels, spas and resorts to create:
§
capital growth over the medium term;
§
income immediately;
§
location diversification; and
§
synergies and scale economies.
We operate our hotels
- with the exception of Ripa Hotel which is currently managed by the previous owner through a company named Ku-Hotels and the Splendid
Hotel currently managed by Alain Messeguè - by means of contractual agreements with a major Italian hotel manager company
called JSH.
JSH was founded in
2010 by four professionals in the hotel management sector, with collectively more than 80 years of experience in the business,
and as today it manages 1,250 rooms in 14 major hotels in Italy.
JSH is involved in
the management business only, and does not invest in hotel properties.
21
The contractual agreements
in place with JSH basically envisage an annual rent composed of a guaranteed minimum rent plus a variable amount linked to the
Gross Operating Profit.
The same contractual
scheme is applied to the managers of the Ripa Hotel and the Splendid Hotel.
Therefore, our revenues
are deriving only from the rents we receive from the managers of our hotels. These rents are made of a guaranteed minimum rent
plus a variable amount related to the profitability of the hotel.
We intend to enter
into same kind of contractual agreements with JSH in relation to the future acquisitions of hotels in Italy and abroad. We currently
own 5 hotels and resorts in Padova, Italy, Rome, Italy and Ostuni (Brindisi), Italy. Collectively, these properties have approximately
520 hotel rooms and suites as well as restaurants, conference rooms, spas and golf courses. Our portfolio of hotel properties provides
us with a diverse geographic footprint across Italy.
Our senior management
team has over 80 collective years of experience spanning multiple foreign jurisdictions. This team has established plans for growth
focusing on the core principles of providing authentic Italian hospitality and expansion into foreign markets in which we do not
have hotel properties.
We intend to develop
our presence in Italy and abroad with a target of owning 3,000 rooms within the next 3 to 5 years.
We are currently undergoing
advanced negotiations with respect to investments in Rome, Bari and Florence in Italy, as well as in New York, and have started
searches for investment opportunities in Milan, Florence, Paris and London. We are also planning to invest in high-growth potential
countries such as Albania and some selected African countries.
In addition to the
items discussed above, we plan to continue to refresh our hotel room product, pursue third-party development partners for additional
hotel and restaurant concepts and renovate select facilities to improve our product offerings.
Recent Developments and Events
In September of 2012
(the
"
Spin-Off Date
"
), CR&P disposed of its businesses related to renewable energy and real estate
to a sister company named Masoledo S.r.l. (
"
Masoledo
"
), while CR&P acquired from the same company
the interest in Masseria Santo Scalone Hotel e Resort S.r.l. As a result of these dispositions and acquisitions, CR&P today
has a receivable of approximately euro 8.6 million due from Masoledo (the
"Receivable"
). The terms and conditions
of the Receivable are set out in a deed entered into between CR&P and Masoledo, pursuant to which Masoledo will repay the Receivable
at an annual interest rate of 6% of the Receivable. Masoledo will use the proceeds from any disposal to a third party of such renewable
energy or real estate related businesses to make payments on the principal and interest of the Receivable. Notwithstanding the
foregoing, Masoledo will repay the Receivable no later than 5 years form the Spin-Off Date.
In October of 2012,
CR&P entered into a preliminary agreement with JSH S.r.l. and its shareholders ("JSH"), pursuant to which, by the
end of 2012, CR&P will acquire not less than a 15% stake in JSH, or an equivalent stake in the new sub-holding company to be
incorporated by JSH which will control the companies involved in the management of the CR&P hotels.
Critical Accounting Policies and Estimates
We believe the following
accounting policies and estimates are most critical to aid in understanding and evaluating our reported financial results.
Cash and cash equivalents
Cash and cash equivalents
comprise cash balances, cash on current accounts with banks, bank deposits and other highly liquid short-term investments with
original maturities of less than three months.
22
Accounts receivable
and loans issued
Receivables and loans
issued are stated at cost less an allowance for doubtful debts. Management quantifies this allowance based on current information
regarding the customers' and borrowers' ability to repay their obligations. Amounts previously written off which are
subsequently collected are recognized as income.
Investment in associates
and other companies
Investments in associates
are accounted for under the equity method.
Investments in other
companies are accounted for under the historical cost.
The impairment losses
are determined primarily on the basis of critical information concerning the issuer, if known and assessable.
Property, plant and
equipment
Property, plant and
equipment are stated at acquisition cost less accumulated depreciation and adjustments for impairment losses. Property, plant and
equipment also includes assets under construction and plant and equipment awaiting installation.
Subsequent expenditures
are capitalized only when they increase the future economic benefits embodied in an item of property, plant and equipment. All
other expenditures are recognized as expenses in the consolidated statement of income as incurred.
Capitalization ceases
when construction is interrupted for an extended period or when the asset is substantially complete.
Where funds are borrowed
specifically for the purpose of acquiring or constructing a qualifying asset, the amount of interest costs to be capitalized in
a period on that asset is the actual interest cost incurred on the borrowing during the period.
Depreciation is charged
on a straight-line basis over the estimated remaining useful lives of the individual assets.
Depreciation commences
from the time an asset is put into operation. Depreciation is not charged on assets to be disposed of or on land. The range of
the estimated useful lives is as follows:
-
Buildings and constructions: 33 years
-
Machinery and equipment: 2 – 20 years
-
Others: 5 years
Real estate assets
are stated at historical cost. Expenditures for repairs and maintenance are expensed as incurred. Depreciation is computed using
the straight-line method. Buildings are depreciated over their estimated useful lives of approximately 33 years, with the rates
used for individual buildings being based on the property's age, overall physical condition, type of construction materials
and intended use.
Improvements to buildings
are depreciated over the shorter of the estimated useful life of the improvement or the remaining useful life of the building at
the time the improvement is completed.
23
Real estate investments
and purchased intangibles subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset group may not be recoverable.
Due to the recent date
of acquisition of most of the real estate investments and/or that they are the subject of ongoing building development and the
consequent inability to assess their longer term earning capacity, no impairment test has been performed to date.
Assets to be disposed
of are separately presented on the balance sheet and reported at their historic cost since the expected realization value is greater.
These assets and the relevant liabilities are classified separately as held for sale in the consolidated balance sheet and are
no longer depreciated. An analysis of these assets and liabilities is presented separately in the relevant section of the notes
to the financial statements, included in this Form 8-K.
Assets and liabilities
held for resale
In connection with
the strategy of concentrating in the portfolio of hotel, power, and plantations investments, in the periods presented we entered
into various negotiations with potential purchasers to sell properties as detailed in the note n. 5 to the financial statements,
included in this Form 8-K. Most of these sales are concluded at the date of presentation of the interim financial statements ended
June 30, 2012.
We have assessed that
the potential realizable (or realized) value of these assets at the market value are higher than the net asset carrying value and
accordingly no impairment has been provided for.
Goodwill and Other
Intangible Assets
Since the Company doesn't
have the technical and evaluation information to reassess the correct identification of the assets acquired and the liabilities
assumed, based on fair value, in application of purchase accounting to our acquisitions, tangible and identifiable intangible assets
and liabilities of the acquired entity are recorded at the acquisition cost. According to information held by our Management, the
acquisition cost of properties held by us does not differ significantly from the fair value at the date of the acquisition. Where
the investment in subsidiary is greater than the net asset value the excess is treated as goodwill arising on consolidation in
the balance sheet. Where the investment in subsidiary is smaller than the net asset value the difference is initially recognized
as a gain in the first consolidated income statement, then accounted as accumulated earning within equity of the following years.
Goodwill and indefinite-life
intangible assets are not amortized, but are tested for impairment at least annually.
Due to the recent date
of acquisition of most of the real estate investments and/or that they are the subject of ongoing building development and the
consequent inability to assess their longer term earning capacity, no impairment test has been performed to date.
Leasing
All lease agreements
of the Company and our subsidiaries are accounted for as finance leases. The Company recognizes the asset and associated liability
on its balance sheet. Finance leases are capitalized at the beginning of the lease at the lower of the fair value of the leased
property and the present value of minimum lease payments. Each installment of the lease is apportioned between the liability and
finance charges so as to achieve an equal reduction in capital due for each payment made at constant rate on the remaining financial
balances.
Derivative financial
instruments
We use derivative financial
instruments principally for the management of exposure to variable interest rates on long-term financing. All derivative financial
instruments are classified as assets or liabilities and are accounted for at trade date. The Company measures all derivative financial
instruments based on fair values derived from market prices of the instruments. Changes in the fair value of a derivative that
is significant and that is designated and qualifies as a fair value hedge, along with the loss or gain on the hedged asset or liability,
are recorded in the income statement.
24
Currently there is
only one derivative instrument hedging the risk of variable interest rates (an "interest rate cap"), the notional amount
of is €4 million. This derivative instrument hedges the risk from change of interest rate on a mortgage loan facility with
"bullet" repayments originally of € 8 million of which € 6.6 million is outstanding and included on the consolidated
balance sheet as at December 31, 2011.
The change in fair
value of this derivative instrument over the period January 1, 2009 to December 31, 2011 is negligible and, therefore, no impact
has been reflected on the CR&P consolidated income statements. At June 30, 2012, the Company has recorded in the six months
income statement the change in fair value of the derivative instrument mentioned above as loss of € 27 thousands on the hedged
liability.
Shareholders loans
Shareholders loans
to us are all non-interest bearing. Italian law provides that the shareholders loans to a limited liability company ("S.r.l.")
are not preferred and their repayment is subordinated to other categories of debt. As a result all shareholder loans are classified
as non-current liabilities.
Severance indemnity
fund
According to Italian
accounting principles reflecting local law and applicable employment contracts, certain post-employment benefits accrue during
the period of employment. Under U.S. GAAP, post-employment benefits are defined either as de fined contribution plans or defined
benefit plans.
In defined contribution
plans, the company's obligation is limited to the payment of contributions to the Government or to a fund. Defined benefit plans
are pension, insurance and healthcare programs which cover the company's obligation, even implicitly, to provide the benefits due
to former employees. The liabilities associated with defined benefit plans are determined on the basis of actuarial assumption
(discounting) and accrued in the financial statements over the employment period required to obtain the benefits.
The severance indemnity
fund required by Italian law is a liability similar to a defined benefit plan, which, however, according to Italian accounting
principles, is not subject to discounting. Given the small number of our employees any difference between the present provisions
in the financial statements prepared in accordance with Italian GAAP and discounted value of these benefits is considered to be
immaterial.
Reserves
Reserves are represented
by provisions of profits required by law, the Company statute and the decisions of directors.
Revenue Recognition
In order to recognize
revenue four basic criteria must be met:
-
existence of persuasive evidence that an arrangement exists;
-
delivery has occurred or services have been rendered;
-
the seller's price to the buyer is fixed and determinable; and
-
collectability is reasonably assured.
Our revenue recognition
policies are consistent with these criteria. The judgments involved in revenue recognition include understanding the terms of agreements
and determining the appropriate time to recognize revenue for each transaction based on such terms. Each transaction is evaluated
to determine: (i) at what point in time revenue is earned, (ii) whether contingencies exist that impact the timing of recognition
of revenue and (iii) how and when such contingencies will be resolved. The timing of revenue recognition could vary if different
judgments were made.
25
Results of
Operations
Six Month Period Ended June 30, 2012
compared to the Six Month Period Ended June 30, 2011
For the six months
Ended
June 30, 2012
For the six months
ended
June 30, 2011
Revenues
€
3,003,000
€
1,517,000
Operating costs
(981,000
)
(1,280,000
)
Administrative and other costs
(494,000
)
(2,635,000
)
EBITDA
1,528,000
(2,398,000
)
Amortization and depreciation
(1,312,000
)
(1,386,000
)
Interest expenses
(1,688,000
)
(1,683,000
)
Total Operating Loss
(1,472,000
)
(5,467,000
)
Interest income
(10,000
)
1,000
Other income
-
2,563,000
Loss from continuing operations before income taxes
(1,482,000
)
(2,903,000
)
Income taxes
(76,000
)
(77,000
)
Net Loss
€
(1,559,000
)
€
(2,980,000
)
Revenues
Revenues for the six
months ended June 30, 2012, increased approximately €1,486,000, or 98%, compared to the six months ended June 30, 2011. This
increase is the result of an increase in the revenues of the subsidiaries Ripa and Terme di Galzignano.
Operating Costs
Operating costs for
the six months ended June 30, 2012, decreased approximately €299,000, or 23%, compared to the six months ended June 30, 2011.
This decrease is related to an efficiency gain widespread throughout the Group.
Administrative and Other Costs
Administrative and
other costs for the six months ended June 30, 2012 and 2011 were approximately €494,000 and €2,635,000, respectively.
Such expenses consist primarily of salaries and personnel related expenses, occupancy expenses, sales travel, consulting costs
and other expenses. The decrease of approximately €2,141,000 was due to the write-down of approximately € 700,000 of
expenses for improvements on a building owned by the subsidiary Carciano Immobiliare under a purchase contract being finalized,
later withdrawn. There was also further write-downs of assets in other subsidiaries for a total amount of about € 850,000.
The remainder of the decrease in this item is related to an efficiency gain widespread throughout the Group.
26
EBITDA
EBITDA for the six
months ended June 30, 2012, increased by approximately €3,926,000, or 164%, compared to the six months ended June 30, 2011.
EBITDA as a percentage of revenue for the six months ended June 30, 2012, increased by 107% compared to the six months ended June
30, 2011.
Amortization and Depreciation
Amortization and depreciation
for the six months ended June 30, 2012 and 2011 were approximately €1,312,000 and €1,386,000, respectively. Such expenses
consist primarily of depreciation of properties, plant and equipment held by Conte Rosso & Partners and the subsidiaries Ripa
Hotel & Resort and Terme di Galzignano. The decrease of approximately €74,000 was due to the completion of the amortization
of some assets.
Interest Expense
Interest expense for
the six months ended June 30, 2012 and 2011 was approximately €1,688,000 and €1,683,000, respectively. These costs are
substantially stable in the two interim periods compared.
Interest Income
Interest income or
loss for the six months ended June 30, 2012 and 2011 was approximately a loss of €10,000 and a gain of €1,000, respectively.
These incomes are substantially stable in the two interim periods compared.
Income Taxes
Income taxes for the
six months ended June 30, 2012 and 2011 were approximately €76,000 and €77,000, respectively.
These
items are substantially stable in the two interim periods compared
.
27
For the year ended December 31, 2011
and the year ended December 31, 2010
For the year ended
December 31, 2011
For the year ended
December 31, 2010
Revenues
€
11,976,000
€
4,338,000
Operating costs
(3,281,000
)
(1,550,000
)
Administrative and other costs
(6,951,000
)
(1,476,000
)
EBITDA
1,744,000
1,312,000
Amortization and depreciation
(2,834,000
)
(1,517,000
)
Interest expenses
(3,879,000
)
(3,139,000
)
Total Operating Loss
(4,969,000
)
(3,344,000
)
Interest income
18,000
5,000
Other income
2,476,000
(5,000
)
Loss from continuing operations before income taxes
(2,475,000
)
(3,344,000
)
Income taxes
(1,187,000
)
(181,000
)
Net Loss
€
(3,662,000
)
€
(3,525,000
)
Revenues
Revenues for the year
ended December 31, 2011, increased approximately €7,638,000, or 176%, compared to the year ended December 31, 2010. This increase
is mainly dependent on the following events:
-
Sale of two properties (located in Pisa and Todi, Italy) by the subsidiary Ripa Hotel & Resort,
which generated revenues of more than € 1,700,000;
-
Recognition of additional premium of € 5,200,000 on the sale of the property of the subsidiary
Carciano Immobiliare – mentioned above - to a third party, based on the settlement agreement;
-
Impact of the consolidation of the subsidiary Terme di Galzignano for the first time in 2011 (approximately
€ 1,600,000) .
Operating Costs
Operating
Costs for the year ended December 31, 2011, increased approximately €1,731,000, or 112%, compared to the year ended December
31, 2010.
This increase is mainly dependent on the following events:
-
Start-up costs increase in the subsidiary Enital (approximately € 500,000);
-
Services costs increase in the subsidiary Carciano Immobiliare (approximately €350,000);
28
-
Impact of the consolidation of the subsidiary Terme di Galzignano for the first time in 2011 (approximately
€ 1,000,000).
Administrative and Other Costs
Administrative
and other costs for the years ended December 31, 2011 and 2010 were approximately €6,951,000 and €1,476,000, respectively.
Such expenses consist primarily of salaries and personnel related expenses, occupancy expenses, sales travel, consulting costs
and other expenses. The increase of approximately €5,475,000
is mainly dependent on the following events:
-
the provision for 2011, accounted for € 3,800,000, relating to the settlement agreement of
the preliminary contract of the property at Via Carciano, Rome, Italy held by the subsidiary Carciano Immobiliare (mentioned above)
and reflects a partial uncertainty in the determination of the additional revenue established in the agreement, given the fact
that the conditions for its payment are still pending;
-
Impairment of receivables in the subsidiaries CRP Immobiliare (approximately €800,000) and
Investimenti Immobiliari (approximately €300,000).
EBITDA
EBITDA for the year
ended December 31, 2011, increased by approximately €432,000, or 33%, compared to the year ended December 31, 2010. EBITDA
as a percentage of revenue for the year ended December 31, 2011, decreased slightly by 15% compared to the year ended December
31, 2010.
Amortization and Depreciation
Amortization
and depreciation for the years ended December 31, 2011 and 2010 were approximately €2,834,000 and €1,517,000, respectively.
Such expenses consist primarily of depreciation of properties, plant and equipment held by Conte Rosso & Partners and the subsidiaries
Ripa Hotel & Resort and Terme di Galzignano
.
The increase of approximately €1,317,000
was basically due to the impact of the consolidation of the subsidiary Terme di Galzignano for the first time in 2011.
Interest Expense
Interest expense for
the years ended December 31, 2011 and 2010 was approximately €3,879,000 and €3,139,000, respectively. The increase was
essentially due to the increase in outstanding current and non-current financial debts in 2011.
Interest Income
Interest income for
the years ended December 31, 2011 and 2010 was approximately a gain of €18,000 and a gain of €5,000, respectively. These
items are substantially stable in the two interim periods compared.
Income Taxes
Income taxes for the
years ended December 31, 2011 and 2010 were approximately €1,187,000 and €181,000, respectively. The increase of €
1,006,000 is mainly due to the recognition of the additional premium in the subsidiary Carciano Immobiliare and the non-deductibility
of the related provision mentioned above.
29
For the year ended December 31, 2010
and the year ended December 31, 2009
For the year ended
December 31, 2010
For the year ended
December 31, 2009
Revenues
€
4,338,000
€
5,815,000
Operating costs
(1,550,000
)
(3,799,000
)
Administrative and other costs
(1,476,000
)
(2,694,000
)
EBITDA
1,312,000
(678,000
)
Amortization and depreciation
(1,517,000
)
(1,660,000
)
Interest expenses
(3,139,000
)
(3,232,000
)
Total Operating Loss
(3,344,000
)
(5,570,000
)
Interest income
5,000
20,000
Other income
(5,000
)
261,000
Loss from continuing operations before income taxes
(3,344,000
)
(5,290,000
)
Income taxes
(181,000
)
(1,000
)
Net Loss
€
(3,525,000
)
€
(5,290,000
)
Revenues
Revenues for the year
ended December 31, 2010, decreased approximately €1,477,000, or 25%, compared to the year ended December 31, 2009. This decrease
is mainly dependent on the recognition in 2009 of
approximately € 1,150,000 of other revenues charged
back to the hotel management company (a third party) to compensate for the improvements expenses related to the hotel building
owned by the subsidiary Ripa Hotel & Resort.
The improvements activity was completed in 2009.
Operating Costs
Operating
costs for the year ended December 31, 2010, decreased approximately €2,249,000, or 59%, compared to the year ended December
31, 2009.
This decrease is mainly dependent on the recognition in 2009 of
approximately €
1,850,000 of improvements expenses related to the hotel building owned by the subsidiary Ripa Hotel & Resort, mentioned above.
Administrative and Other Costs
Administrative
and other costs for the years ended December 31, 2010 and 2009 were approximately €1,476,000 and €2,694,000, respectively.
Such expenses consist primarily of salaries and personnel related expenses, occupancy expenses, sales travel, consulting costs
and other expenses. The decrease of approximately €1,218,000
is mainly dependent on the following events for 2009:
- the impairment in
the time sharing asset;
30
- the impairment of
receivables in Conte Rosso & Partners (approximately € 100,000) and in the subsidiaries Preneste (approximately €200,000),
Investimenti Immobiliari (approximately €200,000).
EBITDA
EBITDA for the year
ended December 31, 2010, increased by approximately €1,990,000, or 294%, compared to the year ended December 31, 2009. Gross
profit as a percentage of revenue for the year ended December 31, 2010, increased by 19% compared to the year ended December 31,
2009.
Amortization and Depreciation
Amortization and depreciation
for the years ended December 31, 2010 and 2009 were approximately €1,517,000 and €1,660,000, respectively. These costs
are substantially stable in the two interim periods compared.
Interest Expense
Interest expense for
the years ended December 31, 2010 and 2009 was approximately €3,139,000 and €3,232,000, respectively. These costs are
substantially stable in the two interim periods compared.
Interest Income
Interest income or
loss for the years ended December 31, 2010 and 2009 was approximately a gain of €5,000 and a gain of €20,000, respectively.
These items are substantially stable in the two interim periods compared.
Income Taxes
Income taxes for the
years ended December 31, 2010 and 2009 were approximately €181,000 and €1,000, respectively. The increase in income taxes
was due to the indeductibility of some costs in the consolidated subsidiaries for 2010.
Liquidity
and
Capital Resources
For the six month period ended June
30, 2012 and 2011
As of June 30, 2012,
we had cash and cash equivalents of approximately €1,286,000, negative working capital of approximately €22,076,000,
and an accumulated loss of approximately €27,286,000.
Cash Flows from Operating Activities
Our operating activities
resulted in net cash provided in operations of approximately €6,729,000 for the six months ended June 30, 2012, compared to
net cash provided in operations of approximately €6,028,000 for the six months ended June 30, 2011.
The net cash provided
in operating activities for the six month period ended June 30, 2012 reflects a net loss of approximately €1,559,000 offset
by depreciation and amortization of approximately €1,312,000. Changes in assets and liabilities included an increase in real
estate held for resale of approximately €5,935,000, an increase in trade receivables of approximately €278,000, a decrease
in related party receivables of approximately €403,000, a decrease in other receivables of approximately €653,000, an
increase in advanced payments on purchases of property of approximately €4,600,000, an increase in other assets of approximately
€87,000, a decrease in trade payables of approximately €2,779,000, a decrease in related party payables of approximately
€350,000, an increase in other payables of approximately €22,000, an increase in current income taxes of approximately
€312,000 and a decrease in other liabilities of approximately €102,000.
31
The net cash provided
in operating activities for the six month period ended June 30, 2011 reflects a net loss of approximately €2,980,000 offset
by depreciation and amortization of approximately €1,386,000. Changes in assets and liabilities included an increase in real
estate held for resale of approximately €1,727,000, a decrease in trade receivables of approximately €2,683,000, a decrease
in related party receivables of approximately €65,000, a decrease in other receivables of approximately €858,000, an
increase in advanced payments on purchases of property of approximately €7,406,000, a decrease in other assets of approximately
€170,000, an increase in trade payables of approximately €4,307,000, a decrease in related party payables of approximately
€555,000, a decrease in other payables of approximately €866,000, a decrease in current income taxes of approximately
€1,962,000 and a decrease in other liabilities of approximately €2,015,000.
Cash Flows from Investing Activities
The net cash used in
investing activities for the six month periods ended June 30, 2012 consist primarily of the cash inflow (approximately € 1,400,000)
due to the sale of the building in Fregene and of the cash outflow (approximately € 1,500,000) due to the real estate development
business of the subsidiary Aros.
The net cash used in
investing activities for the six month periods ended June 30, 2011 consist primarily of the cash outflow (approximately €
25,500,000) for purchase of properties, plant and equipment basically due to the impact of the acquisition and the consolidation
of the subsidiary Terme di Galzignano for the first time in 2011.
Cash Flows from Financing Activities
Net cash provided by
financing activities for the six months ended June 30, 2012 and the six months ended June 30, 2011 was a loss of €5,851,000
and €19,896,000, respectively.
For the year ended December 31, 2011
and the year ended December 31, 2010
As of December 31,
2011, we had cash and cash equivalents of approximately €545,000, negative working capital of approximately €25,908,000
and an accumulated deficit of approximately €24,998,000.
Cash Flows from Operating Activities
Our operating activities
resulted in net cash provided in operations of approximately €8,144,000 for the year ended December 31, 2011 compared to net
cash used in operations of approximately €12,073,000 for the year ended December 31, 2010.
The net cash provided
in operating activities for the year ended December 31, 2011 reflects a net loss of approximately €3,662,000 offset by depreciation
and amortization of approximately €2,834,000. Changes in assets and liabilities included an increase in real estate held for
resale of approximately €1,727,000, a decrease in trade receivables of approximately €8,682,000, an increase in related
party receivables of approximately €1,318,000, a decrease in other receivables of approximately €973,000, an increase
in advanced payments on purchases of property of approximately €7,406,000, a decrease in other assets of approximately €477,000,
a decrease in trade payables of approximately €4,947,000, a decrease in related party payables of approximately €813,000,
a decrease in other payables of approximately €1,499,000, an increase in current income taxes of approximately €210,000
and a decrease in other liabilities of approximately €1,658,000.
The net cash provided
in operating activities for the year ended December 31, 2010 reflects a net loss of approximately €3,525,000 offset by depreciation
and amortization of approximately €1,517,000. Changes in assets and liabilities included a decrease in real estate held for
resale of approximately €19,000, a decrease in trade receivables of approximately €1,904,000, a decrease in related party
receivables of approximately €1,025,000, an increase in other receivables of approximately €1,461,000, an increase in
advanced payments on purchases of property of approximately €2,825,000, an increase in other assets of approximately €1,086,000,
a decrease in trade payables of approximately €280,000, an increase in related party payables of approximately €638,000,
an increase in other payables of approximately €8,278,000, a decrease in current income taxes of approximately €47,000
and an increase in other liabilities of approximately €2,593,000.
Cash Flows from Investing Activities
The net cash used in
investing activities for the year ended December 31, 2011 consist primarily of the cash outflow (approximately € 26,200,000)
for purchase of properties, plant and equipment basically due to the impact of the acquisition and the consolidation of the subsidiary
Terme di Galzignano for the first time in 2011...
32
The net cash used in
investing activities for the year ended December 31, 2010 consist primarily of the cash outflow (approximately € 15,000,000)
for purchase of properties, plant and equipment basically due to the impact of the acquisition and consolidation of the subsidiary
Enital.
Cash Flows from Financing Activities
Net cash provided by
financing activities for the year ended December 31, 2011 and the year ended December 31, 2010 was approximately €20,724,000
and €6,860,000, respectively.
For the year ended December 31, 2010
and the year ended December 31, 2009
As of December 31,
2010, we had cash and cash equivalents of approximately €430,000, negative working capital of approximately €8,740,000
and an accumulated deficit of approximately €5,095,000.
Cash Flows from Operating Activities
Our operating activities
resulted in net cash provided in operations of approximately €12,073,000 for the year ended December 31, 2010 compared to
net cash used in operations of approximately negative €6,539,000 for the year ended December 31, 2009.
The net cash provided
in operating activities for the year ended December 31, 2010 reflects a net loss of approximately €3,525,000 offset by depreciation
and amortization of approximately €1,517,000. Changes in assets and liabilities included a decrease in real estate held for
resale of approximately €19,000, a decrease in trade receivables of approximately €1,904,000, a decrease in related party
receivables of approximately €1,025,000, an increase in other receivables of approximately €1,461,000, an increase in
advanced payments on purchases of property of approximately €2,825,000, an increase in other assets of approximately €1,086,000,
a decrease in trade payables of approximately €280,000, an increase in related party payables of approximately €638,000,
an increase in other payables of approximately €8,278,000, a decrease in current income taxes of approximately €47,000
and an increase in other liabilities of approximately €2,593,000.
The net cash provided
in operating activities for the year ended December 31, 2009 reflects a net loss of approximately €5,290,000 offset by depreciation
and amortization of approximately €1,660,000. Changes in assets and liabilities included a decrease in real estate held for
resale of approximately €932,000, an increase in trade receivables of approximately €5,789,000, an increase in other
receivables of approximately €2,722,000, a decrease in advanced payments on purchases of property of approximately €16,681,000,
an increase in other assets of approximately €2,133,000, a decrease in trade payables of approximately €7,214,000, an
increase in related party payables of approximately €490,000, an increase in other payables of approximately €1,459,000,
an increase in current income taxes of approximately €858,000 and an increase in other liabilities of approximately €6,847,000.
Cash Flows from Investing Activities
The net cash used in
investing activities for the year ended December 31, 2009 consist primarily of the following items:
-
the cash outflow (approximately € 2,400,000) for purchase of the building at Via della Cannuccia,
Anzio (Rome, Italy) by the subsidiary Antonio;
-
the cash outflow (approximately € 1,500,000) for purchase of the company Intermedia Holding
S.p.A. (not consolidated);
-
the cash outflow (approximately € 1,700,000) for the purchase of the assets related to the
real estate development business of the subsidiary Aros.
Cash Flows from Financing Activities
Net cash provided by
financing activities for the year ended December 31, 2010 and the year ended December 31, 2009 was approximately €6,860,000
and €11,088,000, respectively.
33
Future Liquidity Needs
We have evaluated our
expected cash requirements over the next twelve months, which includes, but is not limited to, investments in additional sales
and marketing and product development resources, capital expenditures, and working capital requirements.
We expect to require
additional financing in the future. The timing of our need for additional capital will depend in part on our future operating performance
in terms of revenue growth and the level of operating expenses maintained.
Off-Balance Sheet Arrangements
We have no off-balance
sheet arrangements.
PROPERTIES
Our
principal executive offices are located at
Viale Bruno buozzi 83, in Rome, Italy. Currently, we own and occupy approximately
5,000 square feet of office space.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table
sets forth, as of November 1, 2012, the beneficial ownership of our common stock by each executive officer and director, by each
person known by us to beneficially owning more than 5% of the our common stock and by the executive officers and directors as a
group. Except as otherwise indicated, all shares are owned directly and the percentage shown is based on 17,873,563 shares of common
stock issued and outstanding on November 1, 2012.
Name and address of beneficial owner
Amount of
beneficial ownership
Percent
of class
Antonio Conte
Via Cortina d' ampezzo 221
Rome, Italy 00135
10,667,667
59.7
%
Maddalena Olivieri (wife of Antonio Conte)
Via Cortina d' ampezzo 221
Rome, Italy 00135
1,185,185
6.6
%
Total all executive officers and directors (one person)
11,851,852
66.3
%
Other 5% Shareholders
Paolo Conte
Via Partenope 2
Napoli, Italy
1,342,775
7.5
%
As used in this table,
"beneficial ownership" means the sole or shared power to vote, or to direct the voting of, a security, or the sole
or shared investment power with respect to a security (i.e., the power to dispose of, or to direct the disposition of, a security).
In addition, for purposes of this table, a person is deemed, as of any date, to have "beneficial ownership" of any
security that such person has the right to acquire within 60 days after such date.
The persons named above
have full voting and investment power with respect to the shares indicated.  Under the rules of the Securities and Exchange
Commission, a person (or group of persons) is deemed to be a "beneficial owner" of a security if he or she, directly
or indirectly, has or shares the power to vote or to direct the voting of such security, or the power to dispose of or to direct
the disposition of such security.  Accordingly, more than one person may be deemed to be a beneficial owner of the same
security. A person is also deemed to be a beneficial owner of any security, which that person has the right to acquire within 60
days, such as options or warrants to purchase our common stock.
34
DIRECTORS
AND EXECUTIVE OFFICERS
The following table
sets forth information regarding the members of our board of directors and our executive officers and other significant employees.
All of our officers and directors were appointed on the effective date of the Acquisition. All of our directors hold office until
the next annual meeting of stockholders and their successors are duly elected and qualified. Executive officers serve at the request
of the board of directors.
Name
Age
Position(s)
Antonio Conte
47
Chief Executive Officer and Director
Giuseppe Cagiati
51
Chief Operating Officer
Domenico Ballo
50
Secretary
Giovanni Marraffa
36
VP of Control
Giancarlo Lanna
54
Chairman
Marco Milli
45
Director
Charles Gargano
78
Director
Dorothy Herman
59
Director
Set forth below is
a brief description of the background and business experience of our current executive officers and directors.
Antonio Conte
is the founder of CR&P and has been
the President and Chief Executive Officer of CR&P since 2006. Mr. Conte obtained a law degree from the University Federico
II of Naples, Italy. In 1991, Mr. Conte started trading and developing real estate properties in Italy. In the early 2000s, Mr.
Conte founded a cleaning and maintenance company that reached a total turnover of € 15 million. Mr. Conte sold this company
in 2006.
Giuseppe Cagiati
joined CR&P
in 2008 and serves as the Company's General Manager. Prior to joining CR&P, Mr. Cagiati was Chief Technical Manager of
the Statuto Group, one of the largest Italian real estate market players, where he followed all the developing activities in central
and southern Italy.
Giovanni Marraffa
has over ten years experience as financial controller in Italy and abroad. Mr. Marraffa has worked for Asea Brown Boveri, General
Motors and Cap Gemini, and Ernst & Young in Italy.
Domenico Ballo
is
a professional Chartered Accountant based in Naples, and has been working as a consultant in tax and fiscal matters for CR&P
for over 10 years.
Giancarlo Lanna
has practiced law since 1982. Mr. Lanna's
practice focuses primarily on the areas of business, employment and administrative law, for private clients, public institutions
and listed companies. Most recently, Mr. Lanna served as Chairman of Simest Spa, a financial institution for the development and
promotion of Italian enterprises abroad, from 2005 until 2012. During this period, Mr. Lanna also served as a member of the Board
of Governors for the Promotion of International Commercial Arbitration and Conciliation in the Mediterranean and Vice Chairman
of the Italy-China Foundation.
Marco Milli
graduated with a
law degree from the University of Rome "La Sapienza" and has more than 15 years of academic experience as a
professor and visiting professor in various Italian and European universities. Mr. Milli currently runs his own practice in
Rome.
Charlie Gargano
served as Chairman and Chief Executive
Officer of the Empire State Development Corporation and Vice-Chairman of the Port Authority of New York and New Jersey from 1995
to 2007. He was appointed to these positions by Governor George Pataki. Mr. Gargano has spent more than 20 years in public service
at the Federal and State level, serving two presidents as well as the administration of Governor Pataki. He has an MBA and Bachelor's
in Civil Engineering from Farleigh Dickinson University, as well as a Master's degree in Civil Engineering from Manhattan College.
Mr. Gargano has also received four Honorary Doctorate Degrees and holds professional engineering licenses in New York, New Jersey,
Connecticut, Oklahoma and Vermont.
Dorothy Herman
is
the Chief Executive Officer of Prudential Douglas Elliman, a real estate brokerage company, which is New York's
largest residential brokerage, with over 4,000 real estate professionals and 675 employees working in more than 70 offices.
Ms. Herman also controls a portfolio of real estate services, including commercial and retail leasing and sales
services, relocation and settling-in services, new development and consulting services, property management services, PDE
Title service and mortgage services as provided by DE Capital Mortgage. Ms. Herman began her real estate career in Long
Island where she purchased Prudential Long Island Realty in 1989. After turning DE Capital Mortgage into a major
brokerage operating in Long Island and the Hamptons, Ms. Herman purchased Douglas Elliman, one of Manhattan's largest
brokerage firms, with her partner Howard Lorber in 2003. Since 2003, Prudential Douglas Elliman has
become one of the largest and fastest-growing real estate firms in New York as well as South Florida.
Directors
All directors hold
office for one-year terms until the election and qualification of their successors. Officers are elected by the board of directors
and serve at the discretion of the board.
There are no family
relationships among our directors and executive officers.
35
Involvement in Certain Legal Proceedings
To the best of our
knowledge, during the past ten years, none of the following occurred with respect to a present or former director or executive
officer: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer
either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being
subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) being subject to any order,
judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily
enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities;
and (4) being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodities Futures Trading Commission
to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.
Committees of the Board
Our Company currently
does not have nominating, compensation or audit committees or committees performing similar functions nor does our Company have
a written nominating, compensation or audit committee charter. Our directors believe that it is not necessary to have such committees,
at this time, because the functions of such committees can be adequately performed by the board of directors. It is our intention
to create nominating, compensation and audit committees by the end of the current year, given the development of our business operations
after the Acquisition.
For the same reasons,
our Company currently does not have any defined policy or procedural requirements for shareholders to submit recommendations or
nominations for directors, but we will define a nominating policy soon after the completion of the Acquisition. The board of directors
believes that, given the stage of our development, a specific nominating policy would be premature and of little assistance until
our business operations develop to a more advanced level. Our Company does not currently have any specific or minimum criteria
for the election of nominees to the board of directors and we do not have any specific process or procedure for evaluating such
nominees. The board of directors will assess all candidates, whether submitted by management or shareholders, and make recommendations
for election or appointment.
A shareholder who wishes
to communicate with our board of directors may do so by directing a written request addressed to our CEO and director, Antonio
Conte, at the address appearing on the first page of this Current Report on Form 8-K..
EXECUTIVE
COMPENSATION
Compensation Discussion and Analysis
The Company presently
not does have employment agreements with its named executive officer and it has not established a system of executive compensation
or any fixed policies regarding compensation of executive officers. The Company has not paid any cash and/or stock compensation
to its named executive officers.
Our Chief Executive
Officer holds substantial ownership in the Company and is motivated by a strong entrepreneurial interest in developing our operations
and potential revenue base to the best of his ability.  As our business and operations expand and mature, we expect to
develop a formal system of compensation designed to attract, retain and motivate talented executives.
Summary Compensation Table
The Company has made
no compensation payments to any directors or officers.
Narrative Disclosure to the Summary
Compensation Table
Our named executive
officers do not currently receive any compensation from the Company for their service as officers of the Company.
Outstanding Equity Awards at Fiscal
Year-end Table
The Company has made
no equity awards to any executive officer.
36
Narrative Disclosure to the Director
Compensation Table
Our directors do not
currently receive any compensation from the Company for their service as members of the Board of Directors of the Company.
Securities Authorized for Issuance
Under Equity Compensation Plans
To date, we have not
adopted a stock option plan or other equity compensation plan and have not issued any stock, options, or other securities as compensation.
Stock Option Grants
We have not granted
any stock options to our executive officers or directors since our inception.
Disclosure of Commission Position
of Indemnification for Securities Act Liabilities
In accordance with
the provisions in our articles of incorporation, we will indemnify an officer, director, or former officer or director, to the
full extent permitted by law.
Insofar as indemnification
for liabilities arising under the Securities 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 Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.  In the event that
a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by a director,
officer or controlling person of us in the successful defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel
the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
Antonio Conte is a
shareholder in and a director of both the Company and CR&P and received further 10,625,000 shares of common stock issued by
the Company in exchange for his interest in CR&P. As detailed above Mr. Conte's wife, Maddalena Olivieri, and his brother,
Mr. Paolo Conte, beneficially own common stock of the Company before the new shares of common stock were issued as part of the
Share Exchange Agreement.
Except as detailed
above with the exception of the Acquisition and the agreements discussed herein, none of our directors or executive officers, nor
any proposed nominee for election as a director, nor any person who beneficially owns, directly or indirectly, shares carrying
more than 5% of the voting rights attached to all of our outstanding shares, nor any members of the immediate family (including
spouse, parents, children, siblings, and in-laws) of any of the foregoing persons has any material interest, direct or indirect,
in any transaction over the last two years or in any presently proposed transaction which, in either case, has or will materially
affect us.
LEGAL PROCEEDINGS
The Company is not
party to any legal proceedings or disputes at the time of this Current Report on Form 8-K.
MARKET PRICE OF AND DIVIDENDS ON THE
REGISTRAN'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock is
currently quoted on the OTC Bulletin Board ("OTCBB"), which is sponsored by FINRA. The OTCBB is a network of security
dealers who buy and sell stock. The dealers are connected by a computer network that provides information on current "bids"
and "asks", as well as volume information. As of the date of the Acquisition, our shares were quoted on the OTCBB under
the symbol "SOST.OB."
37
The following table
sets forth the range of high and low bid quotations for our common stock for each of the periods indicated as reported by the OTCBB.
These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent
actual transactions.
Fiscal Year Ending December 31, 2011
Quarter Ended
High $
Low $
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Fiscal Year Ending December 31, 2010
Quarter Ended
High $
Low $
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Transfer Agent
Our
transfer agent is Empire Stock Transfer Inc., located at 7251 West Lake Mead Boulevard, Suite 300 Las Vegas, NV 89128-8351.  Phone:
(702)-974-1444.
RECENT SALES OF UNREGISTERED SECURITIES
Reference is made to
the disclosure set forth under Item 3.02 of this Current Report, which disclosure is incorporated by reference into this section.
DESCRIPTION OF REGISTRANT'S
SECURITIES TO BE REGISTERED
We have 90,000,000
common shares with a par value of $0.001 per share of common stock authorized, of which 39,123,563
shares were outstanding
after the events description in Item 1.01 above.
Common Stock
Holders of common stock
have the right to cast one vote for each share of stock in his or her own name on the books of the corporation, whether represented
in person or by proxy, on all matters submitted to a vote of holders of common stock, including the election of directors.  There
is no right to cumulative voting in the election of directors.  Except where a greater requirement is provided by statute
or by the Articles of Incorporation, or by the Bylaws, the presence, in person or by proxy duly authorized, of the holder or holders
of a majority of the outstanding shares of the our common voting stock shall constitute a quorum for the transaction of business.
The vote by the holders of a majority of such outstanding shares is also required to effect certain fundamental corporate changes
such as liquidation, merger or amendment of the Company's Articles of Incorporation.
Dividends
There are no restrictions
in our articles of incorporation or bylaws that restrict us from declaring dividends.
We have not declared
any dividends, and we do not plan to declare any dividends in the foreseeable future.
38
Pre-emptive Rights
Holders of common stock
are not entitled to pre-emptive or subscription or conversion rights, and there are no redemption or sinking fund provisions applicable
to our common stock. All outstanding shares of common stock are, and the shares of common stock offered hereby will be when issued,
fully paid and non-assessable.
Share Purchase Warrants
We have not issued
and do not have outstanding any warrants to purchase shares of our common stock.
Options
We have not issued
and do not have outstanding any options to purchase shares of our common stock.
Convertible Securities
We have not issued
and do not have outstanding any securities convertible into shares of our common stock or any rights convertible or exchangeable
into shares of our common stock.
Preferred Stock
We have 10,000,000
shares of preferred stock authorized with a par value of $0.001 per share, of which no
shares are outstanding as of
June 30, 2012.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our Certificate of
Incorporation allows us to indemnify our present and former officers and directors and other personnel against liabilities and
expenses arising from their service to the full extent permitted by Delaware law. The persons indemnified include our (i) present
or former directors or officers, (ii) any person who while serving in any of the capacities referred to in clause (i) who served
at our request as a director, officer, partner, proprietor, trustee, employee, agent or similar functionary of another foreign
or domestic corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, and (iii) any person nominated
or designated by (or pursuant to authority granted by) our board of directors or any committee thereof to serve in any of the capacities
referred to in clauses (i) or (ii).
FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
Reference is made to
the disclosure set forth under Item 9.01 of this Current Report on Form 8-K, which disclosure is incorporated by reference into
this section.
FINANCIAL STATEMENTS AND EXHIBITS
Reference is made to
the disclosure set forth under Item 9.01 of this Current Report of Form 8-K, which disclosure is incorporated by reference into
this section.
ITEM 3.02. UNREGISTERED SALES OF EQUITY
SECURITIES
In connection with
the Acquisition, the previous shareholders of CR&P received 21,250,000 shares of our common stock. All of the shares of our
common stock which were issued to the former shareholders of CR&P as of the effective date of the Acquisition were done so
in reliance on the exemption from registration afforded by Regulation S of the Securities Act.
SOST issued and sold
978,092 shares of its common stock in a private placement to an accredited investor for an aggregate purchase price of $1,305,827
(the "Private Placement"). CR&P intends to use the proceeds from the Private Placement for the repayment of indebtedness,
expansion of its business, potential acquisitions and general corporate purposes.
39
Commencing on May 10,
2012, SOST has issued an aggregate of 875,000 shares of its common stock to an accredited investor in exchange for services rendered
in connection with the Share Exchange.
ITEM 5.01. CHANGES IN CONTROL OF REGISTRANT
Reference is made to
the disclosure set forth under Item 2.01 of this Current Report on Form 8-K, which disclosure is incorporated herein by reference.
ITEM 5.02. DEPARTURE OF DIRECTORS
OR PRINCIPAL OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF PRINCIPAL OFFICERS
Pursuant to the terms
of the Share Exchange, our new directors and officers are as set forth herein. Reference is made to the disclosure set forth under
Item 2.01 of this Current Report on Form 8-K, which disclosure is incorporated herein by reference. Pursuant to the terms of the
Share Exchange, Antonio Conte who prior to the Acquisition was the director of CR&P, Ginacarlo Lanna, Marco Milli, Charles
Gargano and Dorothy Herman, were appointed as our directors. Pursuant to the terms of the Share Exchange, Antonio Conte, Giuseppe
Cagiati, Domenico Ballo, Giovanni Marraffa, were appointed as officers of our Company.
On November 6, 2012,
Filippo Fucile resigned as Principal Financial Officer. There was no known disagreement with Mr. Fucile regarding, our operations,
policies, or practices.
For certain biographical
and other information regarding the newly appointed officers and directors, see the disclosure under Item 2.01 of this Current
Report on Form 8-K, which disclosure is incorporated herein by reference.
ITEM 5.03. AMENDMENT TO ARTICLES OF
INCORPORATION OR BYLAWS; CHANGE IN FISCAL YEAR
Prior to the Share
Exchange, the Company's fiscal year end was November 30, and the fiscal year end of CR&P was December 31.
Accordingly, and following
the interpretive guidelines of the Commission, the Company has elected to formally change its fiscal year end to match its accounting
predecessor's fiscal year end. On November 1, 2012, the Board of Directors of the Company acted by unanimous written consent
to change the Company's fiscal year end from November 30 to December 31. As a result of the interpretive guidelines of the
Commission mentioned above, no transition report is required in connection with such change in fiscal year end. Accordingly, the
Company intends to file a quarterly report on Form 10-Q for the period ended September 30, 2012.
ITEM 5.06. CHANGE IN SHELL COMPANY
STATUS
Following the consummation
of the Share Exchange described in Item 2.01 of this Current Report on Form 8-K, we believe that we are not a shell corporation
as that term is defined in Rule 405 of the Securities Act and Rule 12b-2 of the Exchange Act.
ITEM 9.01. FINANCIAL STATEMENTS AND
EXHIBITS
(a)
Financial
Statements of Business Acquired.
Filed herewith are:
·
Audited financial statements of CR&P as of and for the fiscal years ended December 31, 2011, 2010 and 2009.
·
Unaudited condensed financial statements of CR&P as of June 30, 2012 and for the six months ended June 30, 2012 and 2011.
40
(b)
Pro Forma Financial Information.
Filed herewith is unaudited pro
forma combined financial information of CR&P and Southern States Sign Company.
(d)
Exhibits
.
The exhibits listed
in the following Exhibit Index are filed as part of this Current Report on Form 8-K.
Exhibit No.
Description
2.1
Share Exchange Agreement, dated as of November 1, 2012, by and among Conte Rosso & Partners S.r.l. and Southern States Sign Company and the Shareholders of Conte Rosso & Partners S.r.l.
3.1
Articles of Incorporation (1)
3.2
By-Laws (1)
99.1
Audited financial statements of CR&P for the period ended December 31, 2011, 2010 and 2009, unaudited consolidated financial statements of CR&P as of June 30, 2012 for the six months ended June 30, 2012 and 2011, and unaudited Pro-Forma Combined Financial Information of CR&P and Southern States Sign Company.
(1)
Incorporated by reference to Form S-1 filed with the SEC on January 25, 2011.
41
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Southern States Sign Company
By:
/s/ Antonio Conte
Antonio Conte
Chief Executive Officer
Dated:
November 7, 2012
42