SRFF
Comments – 8.11.10


FORM
10-K





x ANNUAL REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGEACT OF 1934





For the
fiscal year ended April 30, 2010





o TRANSITION REPORT UNDER
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGEACT OF 1934





For the
transition period from __________ to __________





Commission
File Number 33-55254-10





Drinks
Americas Holdings, Ltd.


(Exact
name of small business issuer as specified in its charter)





Delaware
            87-0438825(State
      or other jurisdiction of
            (I.R.S.
      Employerincorporation
      or organization)
            Identification
      No.)





372
Danbury Road


Wilton,
CT 06897


(Address
of principal executive offices)





(203)
762-7000


(Issuer's
telephone number)





Securities
registered under Section 12(b) of the Exchange Act: (none)





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


Stock,
$0.001 par value per share





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yeso  No x





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yeso  No x





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





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yeso  No o





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  ̈





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):





Large
      accelerated filer o
            Accelerated
      filer oNon-accelerated
      filer o
            Smaller
      reporting company x





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





The
aggregate market value held by non-affiliates of the registrant based on
the July 31, 2010 closing price was
approximately $2,393,931. The
registrant had 359,172,755 shares of common stock outstanding at July 31,2010.




As of
July 31,2010, there
were 359,172,755
shares of Common Stock, par value $0.001
per share, outstanding.





1





DRINKS
AMERICAS HOLDINGS, LTD.





FORM
10-K





Table of
Contents





PART
      IItem
      1.
                Business
                4Item
      1A.
                Risk
      Factors
                13Item
      1B.
                Unresolved
      Staff Comments
                19Item
      2.
                Properties
                20Item
      3.
                Legal
      Proceedings
                20Item
      4.
                (Removed
      and Reserved)
                21PART
      IIItem
      5.
                Market
      for Registrant's Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
                21Item
      6.
                Selected  Financial
      Data
                28Item
      7.
                Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
                29Item
      7A.
                Quantitative
      and Qualitative Disclosures About Market Risk
                34Item
      8.
                Financial
      Statements and Supplementary Data
                34Item
      9.
                Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
                34Item
      9A.
                Controls
      and Procedures
                34Item
      9B.
                Other
      Information
                35PART
      IIIItem
      10.
                Directors,
      Executive Officers, and Corporate Governance
                35Item
      11.
                Executive
      Compensation
                40Item
      12.
                Security
      Ownership of Certain Beneficial Owners and Management and Related
      Shareholder Matters
                43Item
      13.
                Certain
      Relationships and Related Transactions, and Director
      Independence
                47Item
      14.
                Principal
      Accountant Fees and Services
                49PART
      IVItem
      15.
                Exhibits,
      Financial Statement Schedules
                49SIGNATURES
                54


2


Explanatory
Note





Unless
otherwise indicated or the context otherwise requires, all references below in
this annual report on Form 10-K (“Report”) to the “Company”, “us”, “our” and
“we” refer to (i) Drinks Americas Holdings, Ltd. (ii) our 100% owned Delaware
subsidiary, Drinks Americas, Inc., (iii) our 100% owned Delaware limited
liability company, Maxmillian Mixers, LLC, (iv) our 90% owned New York limited
liability company, Drinks Global Imports, LLC,  (v) our 100% owned New
York Limited Liability Company, DT Drinks, LLC and (vi) our 90% owned
Connecticut subsidiary, Olifant U.S.A, Inc. (which we acquired on January 15,
2009).





Cautionary
Notice Regarding Forward Looking Statements





Our
disclosure and analysis in this Report contain forward-looking statements.
Certain of the matters discussed concerning our operations, cash flows,
financial position, economic performance and financial condition, including, in
particular, future sales, product demand, competition and the effect of economic
conditions include forward-looking statements within the meaning of section 27A
of the Securities Act of 1933, referred to herein as the Securities Act, and
Section 21E of the Securities Exchange Act of 1934, referred to herein as the
“Exchange Act”.





Statements
that are predictive in nature, that depend upon or refer to future events or
conditions or that include words such as “expects,” “anticipates,” “intends,”
“plans,” “believes,” “estimates” and similar expressions are forward-looking
statements. Although we believe that these statements are based upon reasonable
assumptions, including projections of orders, sales, operating margins,
earnings, cash flow, research and development costs, working capital, capital
expenditures, distribution channels, profitability, new products, adequacy of
funds from operations and other projections, and statements expressing general
optimism about future operating results, and non-historical information, they
are subject to several risks and uncertainties, and therefore, we can give no
assurance that these statements will be achieved.





Readers
are cautioned that our forward-looking statements are not guarantees of future
performance and the actual results or developments may differ materially from
the expectations expressed in the forward-looking statements.





As for
the forward-looking statements that relate to future financial results and other
projections, actual results will be different due to the inherent uncertainty of
estimates, forecasts and projections and may be better or worse than projected.
Given these uncertainties, you should not place any reliance on these
forward-looking statements. These forward-looking statements also represent our
estimates and assumptions only as of the date that they were made. We expressly
disclaim a duty to provide updates to these forward-looking statements, and the
estimates and assumptions associated with them, after the date of this filing to
reflect events or changes in circumstances or changes in expectations or the
occurrence of anticipated events





We
undertake no obligation to publicly update any forward-looking statement,
whether as a result of new information, future events or otherwise. You are
advised, however, to consult any additional disclosures we make in our Form
10-K, Forms 10-Q and Forms 8-K reports to the SEC. Also note that we provide a
cautionary discussion of risk and uncertainties under the caption "Risk Factors"
in this report. These are factors that we think could cause our actual results
to differ materially from expected results. Other factors besides those listed
here could also adversely affect us. This discussion is provided as permitted by
the Private Securities Litigation Reform Act of 1995.


3





PART
1





ITEM
1.  BUSINESS





HISTORY OF
COMPANY





On June
9, 2004, Drinks Americas, Inc. (“DA”) entered into an Agreement and Plan of
Share Exchange with Gourmet Group, Inc. (“Gourmet Group”) and the shareholders
of DA.  Prior to entering into this share exchange, Gourmet Group was
a company pursuing the acquisition of various operating businesses since our
sale of Jardine Foods, Inc., our previous operating entity, in May
2002.


As of
March 9, 2005, we, as Gourmet Group, issued an aggregate of 42,963,792 shares of
our common stock (or 87.28% of the outstanding common stock on a fully-diluted
basis) to DA's shareholders, an additional 1,800,000 total shares of our common
stock (or 3.66%) to two advisors to DA and a total of 400,000 shares of our
common stock (or 0.8%) to the four members of Maxmillian Mixers, LLC, a Delaware
limited liability company affiliated with DA ("Mixers") in exchange for all of
DA's outstanding common shares and DA’s business. Immediately prior to issuing
such shares, Gourmet Group (which had previously been a Nevada corporation), by
way of merger merged with and into a newly formed Delaware corporation, thereby
becoming a Delaware corporation. Gourmet Group changed its name to Drinks
Americas Holdings, Ltd., effectively reverse split its outstanding shares
one-for-ten, and authorized up to 1,000,000 shares of "blank check" preferred
stock in its new certificate of incorporation. In return for such issuances of
shares, we, as Gourmet Group, received all of the outstanding shares of capital
stock of DA and all of the membership interests in Mixers. Thus, DA and Mixers
became our wholly-owned subsidiaries and the business of those subsidiaries
constitutes substantially all of our operations at that time. Prior to the share
exchange transaction described above, Maxmillian Partners, LLC ("Partners")
owned approximately 99% of the outstanding capital stock of DA and immediately
after the share exchange became our majority shareholder. Subsequently, Partners
distributed its shares pro rata to its 21 members as part of a plan of
liquidation. For financial accounting purposes, this share exchange has been
recognized as a reverse merger, and accordingly we changed our fiscal year end
from June 30 to DA's year end of April 30th, and all of our historical financial
statements prior to the share exchange are those of DA.


Based in
Wilton, Connecticut, we were founded in 2002 by an experienced team of beverage,
entertainment, retail and consumer product industry professionals, led by J.
Patrick Kenny, a former executive at Joseph E. Seagram & Sons. We
specialize in the marketing and distribution of premium alcoholic and
nonalcoholic beverages with an emphasis on utilizing and leveraging associations
with icon entertainers and celebrities.





We
develop, produce (primarily through contracts with independent contractors
called co-packers), market and/or distribute alcoholic and non-alcoholic
beverages for sale primarily in the continental United States and have recently
expanded our distribution network to certain international and duty free
markets. For the majority of our products we own the trademarks or have
developed the formula for a product that we distribute. In other cases we only
have the right to distribute the products and have been granted licenses of the
trademark to allow us to do so.





We own
certain of our products jointly with celebrities, or their affiliates. We refer
to all of the products we distribute as “our products”.





Over the
past 12 months we have acquired and developed additional brands and distributed
existing products, and reallocated marketing support for certain of these
brands. Our production capacity is primarily through third party independent
contract packers known as “co-packers”. The expansion of our business has been
negatively affected by insufficient working capital. As a result, we have
regularly made judgments as to inventory levels in general and whether to
maintain inventory for any particular product based on available working
capital, rather than maintaining the optimum levels required to grow our
business. We have tried to focus on the most efficient growth opportunities. We
will continue to carefully manage our working capital and focus on brand and
business opportunities that we believe offer the most strategic sense and most
efficient return on investment.


4





Our
strategy is to take advantage of icon celebrity brands and the strategic
relationships our management team has developed throughout their careers. We
distribute our products through established distributors, virtually all of which
are well known to our management team from prior business dealings with them in
the beverage industry. We have expanded the number of distributors we do
business with in certain markets where we believe it is appropriate. We have
entered into a importing and distribution deal with Mexcor International Wine
and Spirits ("Mexcor").  Mexcor is and will continue to be a master
distributor to our national network of wine, spirits and beverage distributors.
Mexcor purchases our products from us for resale. Our products are produced by
independent co-packers, typically, pursuant to our specifications. Our
management's relationships with manufacturers, distillers, development/research
companies, bottling concerns and certain customers provide the foundation
through which we expect to grow our business in the future.





We have
assembled, and will attempt to continue to assemble, our premium brands, on a
“low cost” basis. We believe acquisition of mid-sized brands and single
trademark companies can be accomplished at extremely efficient “price multiples”
in relation to their existing volume. We are willing to develop these brands
with their original owners on a cooperative economic basis and share with them
marketing, production, distribution contacts and other relationships and the
sophistication of our management team. We believe that the “skill-set” of our
management team is a primary asset in the development of our acquired brands and
trademarks. We have acquired products or trademarks from, or entered into
ventures with, partners such as Olifant USA, Willie Nelson, Dr. Dre and
Interscope Geffen A&M, Trump Org., Wynn Starr Flavors, Inc., Old Whiskey
River, LLC, DAS Communications, Rheingold Beer and Marvin Traub Associates.
Several of the brands that we have acquired have the strategic advantage of
association with “icon” entertainers that provide us efficient promotion and
marketing opportunities. Other brands we have acquired such as Olifant have come
with distribution intact and critical volume for sales. We believe the public
relations impact of our association with these icons and the resulting media
opportunities cuts across electronic, social media and print media formats and
delivers an exponential impact in building brand awareness and consumer
excitement.





We
believe that our organizational approach will also minimize the need to invest
heavily in fixed assets or factories. Our strategic relationship with Mexcor
International Wine and Spirits will allow us to operate with modest overhead and
substantially reduce our need for capital on an ongoing basis.





Our major
alcoholic beverages are:







·
            Olifant Vodka, which is
      manufactured at the Wenneker Distillery in Holland where it has been
      manufactured since 1841, and was rated by theNew York
      Timesas the second
      best Vodka in the world;·
            Old Whiskey River Bourbon (R), an
      award winning small batch 6 year old bourbon (sometimes referred to as
      "Old Whiskey River ");


·
            Trump Super Premium Vodka, also
      produced in Holland, a product developed by master distiller Jacques de
      Lat which was awarded a Four Star Highly Recommended Rating from Paul
      Pacult in a respected spirits journal and received a “90-95”, “Superb
      Highly Recommended” rating from the respectedWine
      Enthusiast Magazinein its March 2008 Buying Guide
issue;






·
            Aguila Tequila, a 100% tequiliana
      weber blue agave reposado tequila (sometimes referred to as "Aguila");
      and


·
            Damiana, a Mexican liqueur, which
      the Company sells through Mexcor, is made from the Damiana root and at
      times given in Mexican culture as a wedding gift because of its perceived
      aphrodisiac characteristics.







5


·
            In August
      2010, we plan to release Rheingold Beer for distribution in the United
      States.We willinitiallyconcentrate
      on marketing and distribution in the northeast,predominatelyinNew
      York City and the surrounding tri-stateareaof New
      York, New Jersey and
      Connecticut.





Our
Company is a Delaware corporation, our principal place of business is located at
372 Danbury Road, Suite 163, Wilton, Connecticut 06897 and our telephone number
is (203) 762-7000.





STRATEGY





Our
long-term business strategy is to expand the sales
and distribution of our celebrity and icon alcoholic and non-alcoholic beverage
portfolio and to add branded beverage products from the largest and most
profitable beverage categories. Our business model and our recent entry into a
strategic relationship with Mexcor International Wine and Spirits, Inc.
(“Mexcor”), as described below, takes into account the limited working
capital available for expansion of our business by leveraging Mexcor's
infrastructure and sales support with our brands and to combine that with the
impact celebrities have in generating public relations and consumer awareness
for our brands across all media platforms at comparatively low cost and
investment. Additionally, and
separately from our relationship with Mexcor,we plan to
release Rheingold Beer for distribution initially focusingin the Metro
New York market andeventuallythroughout
the United States.
 Key
elements of our business strategy include: using our partnership with Mexcor to
keep our overhead costs low and support our margins, creating consumer awareness
and demand for our brands utilizing our icon brand strategy and the demonstrated
ability of celebrities to generate public relations and promotional brand
marketing activity at low cost; promoting our relationships within the
entertainment industry, such as but not limited to, Interscope Records, and
Willie Nelson as well as additional entertainers introduced to us through the
relationships we have developed with Interscope Geffen A&M, of Universal
Music Group; capitalizing on our distribution relationships with key
distributors and having Mexcor selling to a network of national distributors and
retail contacts.
 
 On
February 11, 2010, the Company signed an agreement with Mexcor International
Wine and Spirits, Inc., an importer and distributor for hundreds of high quality
brands nationally and internationally. Mexcor has agreed to manage the sourcing,
production, importing and distribution of our portfolio of brands nationally.
Our Company will continue to focus its efforts on its core business of marketing
and building a portfolio of iconic brands as well as developing, coordinating
and executing marketing and promotional strategies for its icon brands. We
anticipate that the agreement with Mexcor will rapidly and over time drive
additional royalty revenues and has already led to the substantial reduction
of  our overhead costs.


Specifically,
under the terms of the Mexcor agreement, the parties have agreed to a 15-year
term. Additionally, the Company has agreed to issue the principal of the
business 12 million shares of Company common stock in exchange for consulting
services. Mexcor is eligible to receive financial incentives provided the
parties deliver and attain certain minimum performance
requirements.  Mexcor has agreed to deliver additional new brands to
the Company’s brand portfolio, which the parties plan to jointly acquire,
develop and market. The agreement with Mexcor has already led to the substantial
reduction of our overhead costs. Additionally, we anticipate that the
agreement with Mexcor will rapidly, and over time, drive additional royalty
revenues.


Since we
were founded in 2002, the implementation of our business plan has been
negatively effected by the limited amount of working capital available to us and
most recently the downturn in the banking and lending industry. Our working
capital position improved as a result of our June 2009 Debt Financing and
October 2008 Warrant Re-Pricing. We will continue to carefully manage our
working capital and focus on our celebrity and icon brand strategy relying on
public relations and strategically leveraging our marketing and production
partners’ resources and notoriety in order to implement our growth strategy
while also focusing on our current brand portfolio.




Beginning
with the second quarter of fiscal 2010, we significantly reduced our overhead
expenses through decreased administrative support staff and decreased marketing
expenditures. The resulting lower payroll and payroll related and travel
expenses realized in the second half of fiscl 2010 will continue to be realized
into fiscall 2011 and beyond as we continue to refine and restructure our
operating business model. Selling general and administrative expenses for the
first half of fiscal 2010 total approximately $3,210,000 and for the second half
of fiscal 2010 totaled approximately $664,000 a $2,546,000
reduction.


6


ALCOHOLIC
BEVERAGE DISTRIBUTION





We have a
key strategic relationship with Mexcor International Wine and Spirits and both
through them and independently for certain brands a network of approximately 50
alcohol beverage distributors covering substantially all of the states within
the United States. Our distributors buy our products from Mexcor and from Drinks
for resale.


The
Company has complete national coverage through this network available for its
products.





BEER,
WINE AND SPIRITS INDUSTRY OVERVIEW





The
United States beverage alcohol market consists of three distinct
segments:





Beer, wine and distilled spirits. Distilled spirits
consist of three primary categories: white goods, whiskey and specialties. White
goods, consisting of vodka, rum, gin and tequila, represent the largest
category. Vodka is the largest product within the distilled spirits and accounts for 30% of industry
volume. As reported by the Distilled Spirits Council, 2009 Industry Review held
in New York on February 2, 2010,despite the recessionary
economy, the distilled spirits industry chartered its tenth consecutive
year of growth in 2009, with a 2.6% average annual growth rate over the past 10
years.Spirits volumes grew 1.4% in 2009,
while Spirits revenue grew 66% over the past decade with a 5.2%, 10-year average
annual growth rate. Spirits volume market share increased in 2009 to 30.2% from
29.7% in 2008; however, spirits revenue market share decreased in 2009 to 32.9%
down from 33.1% in 2008. The predominate reason for the decline is because value
brands volume share accounted for 40.6%, premiumbrands volume share accounted
for36.4%,while high-end and super brands
combined for the balance at 23%.
  Vodka
represented 24% of industry revenue at $4.6 billion, and category revenue is up
$75 million. Vodka value volume is up 10.7%; premiumvolume is up5.0%,and high-end and super volumes
are down 2.3% and 5.8%, respectively. Rum revenuesincreasedby 0.8% to 2.2 billion. Tequila
revenuesincreasedby $48.5 million. Whiskey, which
includes Bourbon, Blends, Canadian, Scotch & Irish,andcomprises 28% of industry revenues at
$5.3 billion,saw a slight 0.7% decline in
overall volume. In summary, slow growth rates are consistent with past
recessions industry experience and increased volume share positionstheindustry for growth whentheeconomy
recovers.


Significant
consolidation in the global spirits industry has produced five primary large
competitors: Diageo, Allied Domecq, Pernod Ricard, Brown-Forman and Bacardi
& Company, Ltd.




The overall
beer category’s growth slowed in 2009 most likely due to the faltering economy
which may have bolstered the lower-price beer segments.  Overall the
U. S. beer industry has experienced decreased consumer consumption in 2009.
According to the industry-funded Beer Institute, beer shipment volumes fell 2.1%
during the first 11 months of 2009, and according to market research firm
IBIS World, beer producers revenues declined 2.7% in 2009. Despite the
above, one segment of the beer industry that has resisted the recession is craft
breweries, increasingly popular for flavorful beers made in smaller batches.
According to data from the Nielsen Co., craftbreweriessales rose 12.4% in 2009. As customers
look for more flavor, diversity and choice,the Company believes its
Rheingold Beer product launch fits comfortably into this industry
segment.


PRODUCTS,
ACQUISTIONS AND ALLIANCES




CELEBRITY
AND ICON BASED BRANDS




We are
executing a “celebrity and icon” based brand strategy, which we believe will
enhance consumer acceptance, lower ongoing marketing costs and strengthen our
access to distribution channels. We have entered into several ventures with
icon entertainers. Our business model leverages consumer identification with
these iconic personalities, leveraging social media platforms to quickly and
effectively communicating a brand message. We believe the public relations
impact of our association with these icons and the resulting media opportunities
cuts across electronic and print media formats and delivers an exponential
impact in building brand awareness and consumer excitement.


7


ALCOHOLIC
BEVERAGE PRODUCTS





The
alcoholic products distributed by us are Olifant Vodka, Trump Super Premium
Vodka, Trump flavored vodka, Old Whiskey River Bourbon, Aguila Tequila, and
Leyrat Cognac and Rheingold Beer.





On
January 15, 2009, the Company acquired 90% of the capital stock of Olifant
U.S.A, Inc. (“Olifant”). Olifant has the worldwide distribution rights (other
than Europe) to Olifant Vodka and Olifant Gin which are both produced in
Holland. Olifant Vodka, made purely from hand selected Dutch grains, is triple
distilled in small batches in the distillery’s original copper potstills and
aged for a smooth refreshing finish that is world class.  It is an
award-winning spirit with great quality and taste at a price point that is
economically attractive in today’s retail environment.
 
 In
February 2008, we entered into a joint venture with Grammy Award-winning
producer and artist, Dr. Dre. The Company and Dr. Dre have formed the joint
venture to identify, develop, and market premium alcoholic beverages. The deal
is under the umbrella of the agreement between the Company and Interscope Geffen
A&M Records.




In
December 2002, we purchased 25% interest in Old Whiskey River Distilling
Company, LLC which owns or licenses the related trademarks and trade names
associated with the Old Whiskey River products. We hold the exclusive worldwide
distribution rights, through December 31, 2017, subject to an indefinite number
of five-year renewals, for Old Whiskey River Bourbon which is marketed in
association with Willie Nelson, a renowned country western entertainer. Our
distribution agreement is subject to certain minimum sales requirements. Old
Whiskey River Bourbon has been featured on The Food Channel's Emeril Live as well as Celebrity Food Finds and
other television programs. This line of products is available nationally at the
Texas Roadhouse Restaurant chain as well as other outlets with specific Willie
Nelson promotions. Old Whiskey River is a featured item at Specs chain of liquor
stores in Texas. We have developed a marketing plan that focuses on Florida,
North Carolina and South Carolina and Texas where Willie Nelsons’ brand image is
high and bourbon consumption is significant. The Company is currently promoting
Old Whiskey River Red Bandanas and providing autographed guitars for
promotion.





We own a
55% interest in the trademark for Aguila Tequila, a premium 100% Blue Agave
Tequila, produced by El Viejito distillery in Mexico, which is marketed with its
icon label, the North American Eagle. We have the exclusive distribution rights
for this product throughout the world except for Mexico. We began distributing
this product in November 2003.  We have expanded the selections of
Aguila from one sku of Repasado to Silver, Repasado and Anejo selections with
distinctive bottle designs for each price selection.





In fiscal
year 2005, we entered into a U.S. distribution contract giving us the exclusive
sales and marketing rights to Damiana, a Hispanic liquor for the United States
market. In 2010 we assigned this agreement to Mexcor in exchange for receipt of
an ongoing royalty per case. Since assignment of that contract to Mexcor we have
sold approximately 4,000 cases of Damiana. In the United States, Damiana is sold
on a national basis in approximately 40 states.  We have introduced
point of sale marketing material aimed at expanding consumer brand awareness for
Damiana.





In
October 2005, we acquired ownership of a long-term license for (188 years) for
the Rheingold trademark and other assets related to the Rheingold brand. We
believe Rheingold has a significant brand identity and awareness level within
the Metro New York and east coast markets. We believe this brand has the
potential to be an integral component of our Metro New York distribution base.
We plan to produce this product at Lion Brewery Wilkes Barre,
Pennsylvania and distribute the brand with Beehive, Phoenix New York, and
the Metro New York Heineken Distributor as well as among other
distributors.


8


In
November 2005, we signed a license agreement with Trump Mark, LLC to utilize the
name “Trump” until November 15, 2013, in connection with super premium vodka.
The formula for this product was developed by master distiller Jacq DeLac. Bruni
Glass, Italy, designed a proprietary bottle for Trump Super Premium Vodka and
Milton Glaser designed a bottle decoration. The product was unveiled at the 2006
Wine and Spirits Wholesalers convention. We launched Trump Super Premium Vodka
on October 28, 2006 in the metro New York market. We subsequently expanded
distribution to 46 states. The product has been sold through several key
distributors including Phoenix Distribution. Trump Super Premium Vodka
was awarded a Four Star Highly Recommended Rating from Paul Pacult in a
respected spirits journal and received a “90-95”, “Superb Highly Recommended”
rating from the respected Wine Enthusiast Magazine in its March 2008 Buying
Guide issue; Trump Flavored Vodka, which we began selling in February 2008, are
crafted at the Wanders Distillery in Holland, is comprised of Trump Premium
Citron, Grape, Orange, and Raspberry, distilled with all natural fruit flavors
combined with the award-winning Trump Super Premium Vodka with Trump Grape Vodka
receiving Best in Show Platinum Medal at the prestigious World Spirits and
Beverage Competition  in Geneva, Switzerland.





FLAVORS,
RESEARCH AND DEVELOPMENT RELATIONSHIP





We have a
requirements contract with Wynn Starr Flavors, Inc. ("Wynn Starr"), a leading
supplier of flavors and similar product components through which, with certain
exceptions, we are required to acquire the flavors we require for our products.
Wynn Starr performs research and development for us with respect to the flavors
we need for new and/or proposed products. Wynn Starr became a DA shareholder by
investing $250,000 in DA in 2002, and, under its agreement with us, has provided
research and development services for us thereby lessening the expenses we would
otherwise incur. The relationship has been essential to us, and provides a
significant research resource at relatively low cost, e.g. developing drinks for
targeted markets. We expect that certain of our new products will utilize
patents developed and licensed by Wynn Starr. Wynn Starr has also assisted us in
evaluating the product quality of various brands which we have considered
acquiring and/or distributing. Our incremental product development expenses to
date have not been material.





CELEBRITY
MARKETING RESOURCES





We intend
to continue to utilize our access to icon celebrity-based product endorsers,
through the contacts of our management and various advisors, to further promote
the branded identity of certain of the beverages we will develop or
acquire.




We have
entered into agreements with DAS Communications, Ltd. and Shep Gordon of Alive
Enterprises. Both David Sonenberg, who controls DAS Communications, Ltd., and
Shep Gordon are our shareholders. We have also entered into a joint venture (50%
each) with Interscope Geffen A&M, of Universal Music Group, to commercialize
and market jointly owned alcoholic and non alcoholic beverage products in
collaboration with artists under contract with Interscope Geffen A&M. Our
relationship with Shep Gordon has resulted in agreements with country music
“icon” Willie Nelson and access to various culinary icons and introductions to
other promotional resources.  Although   our agreement
with Mr. Gordon, which we entered into in December 2002, terminated in June 2009
we believe he will continue to be an advisor to us.




TRADEMARK
DEVELOPMENT RESOURCES





In March 2002, we entered into a consulting agreement
with Marvin Traub, former Chief Executive Officer of the Bloomingdales'
department store chain, and an expert in trademark development. While Mr. Traub’sconsulting
agreement ended effective April 30, 2010, Mr. Traub continues to serve on our
Board of Directors and provides ongoing advice and marketing expertise to
us.


MARKETING,
SALES AND DISTRIBUTION





MARKETING





Our
marketing plan is based upon our strategy of icon branding. We successfully
launched Trump Super Premium Vodka by using the public relations activity across
numerous media platforms to generate a high level of brand awareness and
consumer interest. This model has also been used for Old Whiskey River Bourbon
and Paul Newman’s Sparkling Fruit Beverages and now for our Olifant Vodka. Our
marketing and pricing policies and programs take into consideration competitors'
prices and our perception of what a consumer is willing to pay for the
particular brand and product in the retail environment. Our goal is to
competitively price our products with the other comparable premium brands and
provide a higher quality product at the selected price points. We believe our
Icon strategy supports category premium pricing.


9


Our
marketing for our alcoholic brands focuses on building brand recognition with
our distributors with the goal of a regional and, if demand warrants, a national
roll-out of most of our products, focusing on population centers. Our marketing
of our non-alcoholic brands has been focused on building the brands recognition
initially in the New York metropolitan area at the retail level and generally
developing market profile through promotion tasting at retail distribution
locations. Our marketing plan contemplates expanding distribution to the east
and west coast regions, focusing on population centers.





SALES





Our
products are sold predominantly under our agreement with Mexcor in the
continental United States primarily in the beverage sections of liquor stores,
grocery stores, drug stores, convenience stores, delicatessens, sandwich shops
and supermarkets. In return, Mexcor pays us a royalty. Many of our beverage
products are sold nationally and our distribution model, depending on the
product, includes several national and regional chains, for example, our
products have been sold at Ralphs in California, and Walgreen's, ABC Liquor,
Albertsons and various other retail chains. Old Whiskey River is sold nationally
at Texas Roadhouse and at Specs in Texas. We
plan to sell Rheingold Beer directly through our distributor
network.
  DISTRIBUTION




On February 11, 2010, the Company signed an agreement
with Mexcor, Inc., an importer and distributor for hundreds of high quality
brands nationally and internationally. Mexcor has agreed to manage the sourcing,
importing and distribution of our portfolio of brands nationally. Our Company
will continue to focus its efforts on its core business of marketing and
building a portfolio of iconic brands as well as developing, coordinating and
executing marketing and promotional strategies for its icon brands. We
anticipate that the agreement with Mexcor will rapidly drive additional royalty
revenues and substantially reduce our overhead costs. Rheingold Beerwill
be sold directly by Drinks Americas to a network of beer wholesalers andis
excluded from our agreement with
Mexcor.


Under the
terms of the agreement, the parties have agreed to a 15-year term. Additionally,
the Company has agreed to issue the principal of the business 12 million shares
of Company common stock in exchange for consulting services. Mexcor is
eligible to receive financial incentives provided the parties deliver and attain
certain minimum performance requirements.  Mexcor has agreed to
deliver additional new brands to the Company’s brand portfolio, which the
companies plan to jointly acquire, develop and market.




We sell
the majority of our products through our distribution network, and we currently
have relationships with approximately 50 independent distributors throughout
North America. Through Mexcor, our distribution partner pursuant to our
agreement with Mexcor described above, our policy is to grant our distributors
rights to sell particular brands within a defined territory. Our distributors
buy our products from us for resale. We believe that substantially all of our
distributors also carry beverage products of our competitors. Our agreements
with our distributors vary; we have entered into written agreements with a
number of our top distributors for varying terms; most of our other distribution
relationships are oral (based solely on purchase orders) and are terminable by
either party at will.


10


We
generally require our independent distributors to place purchase orders for our
products at least 14 days in advance of requested shipping dates. To the extent
we have product available in inventory, we will fulfill other purchase orders
when and as received. We and our distributors typically contract with
independent companies to have product shipped from our contract packers to
independent warehouses, and then on to our distributors. Distributors then sell
and deliver our products either to sub-distributors or directly to retail
outlets, and such distributors or sub-distributors stock the retailers' shelves
with our products. We recognize revenue upon shipment to our distributors and
customers of our products, net of anticipated discounts and
allowances.


PRODUCTION





CONTRACT
PACKING ARRANGEMENTS





We currently use independent contract
packers known as “co-packers” to prepare, bottle and package our products.
Currently, our primary contract packers are, Wenneker Distilleries  in
Holland, Francis Abecassis in Cognac France, Heaven Hill Distilleries in
Kentucky, Cold Spring Brewing Company in Minnesota, Tequila El Viejito S.A.
in Guadalajara, Mexico, and Damiana S.A. Mexico. We have an option to acquire WV
Wanders production facility in Holland. WV Wandershas producedTrump Super Premium Vodka and Trump
Flavors. In the event our relationship with any of our co-packers is terminated,
we believe we could replace the co-packer with another of comparable quality;
however, in such, case our business would be disrupted until a replacement
co-packer was identified and commenced production.


We
continually review our contract packing needs in light of regulatory compliance
and logistical requirements and may add or change co-packers based on those
needs. We rely on and believe our co-packers comply with applicable
environmental laws.





As is
customary in the contract packing industry, we are expected to arrange for our
contract packing needs sufficiently in advance of anticipated requirements.
Accordingly, it is our business practice to require our independent distributors
to place their purchase orders for our products at least 14 days in advance of
shipping. Other than minimum case volume requirements per production run, we do
not have any minimum production requirements.





RAW
MATERIALS





Substantially
all of the raw materials used in the preparation, bottling and packaging of our
products are purchased by us or by our contract packers in accordance with our
specifications. Typically, we rely on our contract packers to secure raw
materials that are not unique to us. The raw materials used in the preparation
and packaging of our products consist primarily of spirits, flavorings,
concentrate, glass, labels, caps and packaging. These raw materials are
purchased from suppliers selected by us or in concert with our co-packers or by
the respective supplier companies. Bottle production for Trump Super Premium
Vodka and Trump flavored vodka transferred to China at the end of fiscal
2008. We consider World Enterprises Sino, Ltd, which now supplies the bottles for Trump Super Premium Vodka, to
be significant suppliers of raw materials because they supply specialty
products. We believe that through ourMexcor
Agreementand our ownbeer brewing
resourceswe
haveadequate sources of raw materials, which are available
from multiple suppliers.





QUALITY
CONTROL





We
attempt to use quality ingredients for our products. We seek to ensure that all
of our products satisfy our quality standards. Contract packers are selected and
monitored by our Chief Operating Officer in an effort to assure adherence to our
production procedures and quality standards. Samples of our products from each
production run undertaken by each of our contract packers are analyzed and
categorized in a reference library.





For every
run of product, our contract packers undertake extensive on-line testing of
product quality and packaging. For our non-alcoholic products this includes
testing levels of sweetness, carbonation, taste, product integrity, packaging
and various regulatory cross checks. Similar product testing is done on our
wines and spirits. For each product, the contract packer must transmit all
quality control test results to us upon request. We believe that working in
concert with our internal management, the food scientist resources Wynn Starr
Flavors, and the in-house quality control mechanisms of our winery and
distillery partners assure that our standards are at least equal to those
established in the industry.


11


Testing
at each of our co-packers generally includes microbiological checks and other
tests to ensure the production facilities for our products meet the standards
and specifications of our quality assurance program. We believe the production
facilities inspection programs are at least equal to industry standards. We
request that water quality be monitored during production and at scheduled
testing times to ensure compliance with applicable government regulatory
requirements. Flavors are sourced from only qualified manufacturers. We are
committed to an on-going program of product improvement with a view toward
ensuring high quality of our products.





We
believe we select only those suppliers that use only quality components. We have
a full-time senior executive who oversees all production processes with respect
to product distilling. We also inspect packaging suppliers' production
facilities and monitor their product quality.





GOVERNMENT
REGULATION





The
production and marketing of our licensed and proprietary alcoholic and non
alcoholic beverages are subject to the rules and regulations of various Federal,
provincial, state and local health agencies, including in particular the U.S.
Food and Drug Administration (“FDA”) and the U.S. Alcohol and Tobacco Tax and
Trade Bureau (“TTB”). The FDA and TTB also regulate labeling of our products.
From time to time, we may receive notification of various technical labeling or
ingredient reviews with respect to our products. We believe that we have a
compliance program in place to ensure compliance with production, marketing and
labeling regulations on a going-forward basis. There are no regulatory
notifications or actions currently outstanding.





TRADEMARKS,
FLAVOR CONCENTRATE TRADE SECRETS AND PATENTS





We own a
number of trademarks, including, in the United States, “Drinks Americas” (TM),
“Olifant” (TM), “Cohete” (TM), “Swiss T”(TM), “Screaming Monkey” (TM) and
“Aguila” (TM), Casa BoMargo (TM). Trademarks have been filed and pending with no
opposition for Drinks Americas (TM), “Monte Verde”(TM) and “Corcovado”(TM). In
addition, we have trademark protection in the United States for a number of
other trademarks for slogans and product designs, including “The Rooster Has
Landed”(R), “Party Harder”(TM), Success Distilled (TM) and The World's Finest
Super Premium Vodka (TM).





We also
own, indirectly as a member of a limited liability company, an interest in the
"Old Whiskey River" trademark. We also license the Rheingold trademark. We also
have a license from Trump Mark, LLC to use the Trump trademark in the marketing
and sale of Trump Super Premium Vodka and Trump flavors.





In
November 2005, we entered into an eight-year license agreement for sales of
Trump Super Premium Vodka. Under the agreement the Company is required to pay
royalties on sales of the licensed product. The agreement requires minimal
royalty payments through November 2012 which if not paid could result in
termination of the license.  We are currently in default under the
terms of its license agreement with Trump Marks LLC. The licensor has the
right to terminate the license, but at present has not formally asserted that
right. We are under a non documented arrangement with the licensor who continues
to sell the product. The Company and the licensor are currently in discussion to
amend the agreement under mutually beneficial terms.





Under our
license agreement for Old Whiskey River, we are obligated to pay royalties of
between $10.00 and $33.00 per case, depending on the size of the bottle. Our
Rheingold license requires us to pay the licensor $3.00 per barrel for domestic
sales and $10.33 for foreign sales. Under our license agreement for Damaina
Liqueur we are obligated to pay $3.00 per case thereafter. Under our
license agreement with Aguila Tequila we are obligated to pay $3.00 per
case.





Under our
joint ventures agreement with Dr. Dre and Interscope
Records, which includes our Leyrat Cognac, we are obligated to
pay a percentage of gross profits, less certain direct selling
expenses.


12


We
consider our trademarks, patent and trade secrets to be of considerable value
and importance to our business. No successful challenges to our registered
trademarks have arisen and we have no reason to believe that any such challenges
will arise in the future.





COMPETITION





The
beverage industry is highly competitive. We compete with other beverage
companies, most of which have significantly more sales, significantly more
resources and which have been in business for much longer than we have. We
compete with national and regional beverage producers and "private label"
suppliers. Some of our alcohol competitors are Diageo, Pernod Ricard,
Brown-Forman, Castle Brands, Allied Biomes and Bacardi & Company, Ltd. On
the non-alcoholic front, some of our direct competitors include Cadbury
Schweppes (which produces Snapple and Mystic among other brands) Camper,
Boylands and Hansens. We believe it is a costly and difficult for large
companies to create new brands. As a result, we believe opportunities exist for
smaller companies to develop high-quality, high-margin brands, which can grow to
be very attractive acquisition candidates for the larger companies.





EMPLOYEES





We have
four full-time employees and two independent contractors working for us. No
employee is represented by a labor union. The independent contractors have
executed contracts with us.


ITEM
1A. RISK FACTORS





An
investment in our common stock involves a high degree of risk. You should
carefully consider the risks described below as well as other information
provided to you in this prospectus, including information in the section of this
document entitled “Forward Looking Statements.” The risks and uncertainties
described below are not the only ones facing us. Additional risks and
uncertainties not presently known to us or that we currently believe are
immaterial may also impair our business operations. If any of the following
risks actually occur, our business, financial condition or results of operations
could be materially adversely affected, the value of our common stock could
decline, and you may lose all or part of your investment.





Risks
Related to our Business





WE ARE A
DEVELOPING COMPANY AND OUR PROSPECTS MUST BE CONSIDERED IN LIGHT OF OUR SHORT
OPERATING HISTORY AND SHORTAGE OF WORKING CAPITAL





We are a
developing company with a very short operating history, having been incorporated
in September 2002. Our prospects must be considered in light of the risks,
expenses and difficulties frequently encountered by developing companies,
including dealing with a shortage of necessary funds in the very competitive
marketplace in which the alcoholic and non-alcoholic beverage business is
carried on, as well as the many risks commonly anticipated or experienced by
mature companies. Our ability to operate as a going concern and to achieve
profitable operations will be dependent on such factors as the success of our
business model and marketing strategy, market penetration of existing products,
competition, future brand additions, continued development of distribution
relationships and the availability of financing. No assurance can be given that
we will be able successfully to develop our business under the foregoing
conditions.





WE RELY
HEAVILY ON OUR INDEPENDENT DISTRIBUTORS, AND THIS COULD AFFECT OUR ABILITY TO
EFFICIENTLY AND PROFITABLY DISTRIBUTE AND MARKET OUR PRODUCTS, AND MAINTAIN OUR
EXISTING MARKETS AND EXPAND OUR BUSINESS INTO OTHER GEOGRAPHIC
MARKETS.





Our
ability to establish a market for our brands and products in new geographic
distribution areas, as well as maintain and expand our existing markets, is
dependent on our ability to establish and maintain successful relationships with
reliable independent distributors strategically positioned to serve those areas.
Many of our larger distributors sell and distribute competing products,
including non-alcoholic and alcoholic beverages, and our products may represent
a small portion of their business. To the extent that our distributors are
distracted from selling our products or do not expend sufficient efforts in
managing and selling our products, our sales will be adversely affected. Our
ability to maintain our distribution network and attract additional distributors
will depend on a number of factors, many of which are outside our control. Some
of these factors include: (i) the level of demand for our brands and products in
a particular distribution area; (ii) our ability to price our products at levels
competitive with those offered by competing products; and (iii) our ability to
deliver products in the quantity and at the time requested by
distributors.


13


There can
be no assurance that we will be able to meet all or any of these factors in any
of our current or prospective geographic areas of distribution. Further,
shortage of adequate working capital may make it impossible for us to do so. Our
inability to achieve any of these factors in a geographic distribution area will
have a material adverse effect on our relationships with our distributors in
that particular geographic area, thus limiting our ability to maintain and
expand our market, which will likely adversely effect our revenues and financial
results.





WE
GENERALLY DO NOT HAVE LONG-TERM AGREEMENTS WITH OUR DISTRIBUTORS, AND WE EXPEND
SIGNIFICANT TIME AND MAY NEED TO INCUR SIGNIFICANT EXPENSE IN ATTRACTING AND
MAINTAINING KEY DISTRIBUTORS.





Our
marketing and sales strategy presently, and in the future, will rely on the
performance of our independent distributors and our ability to attract
additional distributors. We have entered into written agreements with certain of
our distributors for varying terms and duration; however, most of our
distribution relationships are informal (based solely on purchase orders) and
are terminable by either party at will. We currently do not have, nor do we
anticipate in the future that we will be able to establish, long-term
contractual commitments from many of our distributors. In addition, despite the
terms of the written agreements with certain of our significant distributors, we
have no assurance as to the level of performance under those agreements, or that
those agreements will not be terminated. There is also no assurance that we will
be able to maintain our current distribution relationships or establish and
maintain successful relationships with distributors in new geographic
distribution areas. Moreover, there is the additional possibility that we will
have to incur significant expenses to attract and maintain key distributors in
one or more of our geographic distribution areas in order to profitably exploit
our geographic markets. We may not have sufficient working capital to allow us
to do so.





BECAUSE
OUR DISTRIBUTORS ARE NOT REQUIRED TO PLACE MINIMUM ORDERS WITH US, WE NEED TO
CAREFULLY MANAGE OUR INVENTORY LEVELS, AND IT IS DIFFICULT TO PREDICT THE TIMING
AND AMOUNT OF OUR SALES.





Our
independent distributors are not required to place minimum monthly, quarterly or
annual orders for our products. In order to reduce their inventory costs, our
independent distributors maintain low levels of inventory which, depending on
the product and the distributor, range from 15 to 45 days of typical sales
volume in the distribution area. We believe that our independent distributors
endeavor to order products from us in such quantities, at such times, as will
allow them to satisfy the demand for our products in the distribution area.
Accordingly, there is no assurance as to the timing or quantity of purchases by
any of our independent distributors or that any of our distributors will
continue to purchase products from us in the same frequencies and volumes as
they may have done in the past. Our goal is to maintain inventory levels for
each of our products sufficient to satisfy anticipated purchase orders for our
products from our distributors, which is difficult to estimate. This places
burdens on our working capital which has been limited since we began operations.
As a result, we have not consistently been able to maintain sufficient inventory
levels and may not be able to do so in the future.





As is
customary in the contract packing industry for small companies, we are expected
to arrange for the production of our products sufficiently in advance of
anticipated requirements. To the extent demand for our products exceeds
available inventory and the capacities available under our contract packing
arrangements, or orders are not submitted on a timely basis, we will be unable
to fulfill distributor orders on a timely basis. Conversely, we may produce more
products than warranted by actual demand, resulting in higher storage costs and
the potential risk of inventory spoilage. Our failure to accurately predict and
manage our contract packaging requirements may impair relationships with our
independent distributors, which, in turn, would likely have a material adverse
effect on our ability to maintain relationships with those
distributors.


14


THE
BANKRUPTCY, CESSATION OF OPERATIONS, OR DECLINE IN BUSINESS OF A SIGNIFICANT
DISTRIBUTOR COULD ADVERSELY AFFECT OUR REVENUES, AND COULD RESULT IN INCREASED
COSTS IN OBTAINING A REPLACEMENT.





If any of
our primary distributors were to stop selling our products or decrease the
number of cases purchased, our revenues and financial results could be adversely
affected. There can be no assurance that, in the future, we will be successful
in finding new or replacement distributors if any of our existing significant
distributors discontinue our brands, cease operations, file for bankruptcy or
terminate their relationship with us.  AH
Wanders NV has historically been the producer of Trump Vodka in Holland for
Drinks Americas. In the first calendar quarter of 2010 Wanders who manufactures
a number of products in Holland, entered bankruptcy proceedings in Holland and
is in recievership.There
is sufficient inventory in the United States to meet the current rate of sales
and there are a number of Distilleries currently bidding for the business. The
recipe for Trump Vodka remains with Drinks as does access to Trump glass
bottles. The closure of Wanders is not expected to impact Drinks Trump
business.


WE HAVE
NOT SATISFIED CERTAIN OF OUR COMMITMENTS UNDER DISTRIBUTION AGREEMENTS, WHICH
ENTITLE US TO DISTRIBUTE CERTAIN OF OUR PRODUCTS. IF ANY OF THESE AGREEMENTS
WERE CANCELLED IT WOULD HAVE A MATERIAL ADVERSE EFFECT ON OUR
BUSINESS.





Our
rights to distribute certain of our products are generally governed by
distribution agreements which contain minimum sales targets and other
requirements some of which we have not satisfied to date. Therefore virtually
all of our distribution contracts can be cancelled. We rely on our relationships
with the parties who have granted us distribution rights rather than contractual
protection. Cancellation of one or more of our distribution contracts would have
a material adverse effect on our business.





WE NEED
TO EFFECTIVELY MANAGE OUR GROWTH AND THE EXECUTION OF OUR BUSINESS PLAN. ANY
FAILURE TO DO SO WOULD NEGATIVELY IMPACT OUR RESULTS.





To manage
operations effectively, we must improve our operational, financial and other
management processes and systems. We have a small staff and our success also
depends on our ability to maintain high levels of employee efficiency, to manage
our costs in general and administrative expense in particular, and otherwise to
efficiently execute our business plan. We need to cost-efficiently add new
brands and products, develop and expand our distribution channels, and
efficiently implement our business strategies. There are no assurances that we
will be able to effectively and efficiently manage our growth. Any inability to
do so could increase our expenses and negatively impact the results of our
operations.





OUR
INDEPENDENT AUDITORS’ REPORT INCLUDES AN EMPHASIS OF MATTER PARAGRAPH STATING
THAT THERE IS A SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING
CONCERN.





Because
we have incurred significant losses from operations since inception, our auditor
included in its report for the years ended April 30, 2010 and 2009, an
emphasis of matter paragraph in its independent auditors’ report stating that
there is a substantial doubt about our ability to continue as a going concern.
If we continue to generate significant losses we may not be able to continue as
a going concern.





THE LOSS
OF KEY PERSONNEL WOULD DIRECTLY AFFECT OUR EFFICIENCY AND ECONOMIC
RESULTS.





We are
dependent upon the creative skills and leadership of our founder, J. Patrick
Kenny, who serves as our President and Chief Executive Officer and upon the
management, financial and operational skills of Jason Lazo, our Chief Operating
Officer. The loss of the services of either Mr. Kenny, or Mr. Lazo could have a
material adverse affect on our business and operations, including our ability to
develop and execute a long-term, profitable business plan. Due to inadequate
working capital, we have often not paid agreed upon compensation to our
employees and independent contractors.  We expect to timely pay our
employees and independent contractors in the future; however, if we fail to do
so, there can be no assurance they will continue to render services to
us.





Our
management team consists of several key executives and we also rely on several
key distribution, marketing and financial personnel who provide services to
us as independent contractors. In order to manage and operate our business
successfully in the future, it will be necessary to further strengthen our
management team. The hiring of any additional executives will increase our
compensation expense. We may not have sufficient working capital to be able to
do so.


15


OUR
STRATEGY REQUIRES US TO DEVELOP AND MAINTAIN RELATIONSHIPS WITH OTHER
FIRMS.





Our
strategy depends on various relationships with other firms for product
development, research facilities, distilling facilities, bottling, distribution
and low-cost marketing. Because of these relationships, we do not expect to
invest heavily in fixed assets or factories. Of particular importance to us is
our relationship with independent producers who manufacture our products,
typically, pursuant to our specifications. We do not have our own production
capacity and rely on independent contractors to produce our products. We will
need to maintain and develop relationships with additional manufactures as we
add products to our product mix. It is vital to our success that our producers
deliver high quality products to us with favorable pricing terms. There can be
no assurance, however, that we will be able to develop and maintain
relationships which provide us the services and facilities we require. If we
fail to develop and maintain such relationships, we may be forced to change our
strategy, which could have a material adverse effect on the results of our
operations. Further, if our relationship with a producer of any of our products
is terminated, it is likely our business will be disrupted until a replacement
producer is identified and production commences.





OUR
BUSINESS AND FINANCIAL RESULTS DEPEND ON MAINTAINING A CONSISTENT AND
COST-EFFECTIVE SUPPLY OF RAW MATERIALS.





Raw
materials for our products include concentrate, glass, labels, flavoring, caps
and packaging materials. Currently, we purchase our flavor concentrate from two
flavor concentrate suppliers. We believe that we have adequate sources of raw
materials, which are available from multiple suppliers, and that in general we
maintain good supplier relationships. The price of our concentrates is
determined through negotiation with our flavor houses, and may be subject to
change. Prices for the remaining raw materials are generally determined by the
market, and may change at any time. Increases in prices for any of these raw
materials could have a material adverse impact on our ability to achieve
profitability. If we are unable to continue to find adequate suppliers for our
raw materials on economic terms acceptable to us, it will adversely affect our
results of operations.





WE MAY
NOT BE ABLE TO ACQUIRE AND SUCCESSFULLY INTEGRATE ADDITIONAL PRODUCTS IN THE
FUTURE.





We have
grown our business primarily through acquisitions of brands and, if we have the
working capital necessary to do so, we expect to acquire additional brands in
the future. There can be no assurance that we will be able to acquire additional
products or assimilate all of the products we do acquire into our business or
product mix. Acquisitions can be accompanied by risks such as potential exposure
to unknown liabilities relating to the acquired product or business. We have
entered into, and may continue to enter into, joint ventures, which may also
carry risks of liability to third parties.





OUR
INABILITY TO PROTECT OUR TRADEMARKS, PATENT AND TRADE SECRETS MAY PREVENT US
FROM SUCCESSFULLY MARKETING OUR PRODUCTS AND COMPETING EFFECTIVELY.





Failure
to protect our intellectual property could harm our brand and our reputation,
and adversely affect our ability to compete effectively. Further, enforcing or
defending our intellectual property rights, including our trademarks, patents,
copyrights and trade secrets, could result in the expenditure of significant
financial and managerial resources. We regard our intellectual property,
particularly our trademarks and trade secrets to be of considerable value and
importance to our business and our success. We rely on a combination of
trademark, patent, and trade secrecy laws, and contractual provisions to protect
our intellectual property rights. There can be no assurance that the steps taken
by us to protect these proprietary rights will be adequate or that third parties
will not infringe or misappropriate our trademarks, trade secrets (including our
flavor concentrate trade secrets) or similar proprietary rights. In addition,
there can be no assurance that other parties will not assert infringement claims
against us, and we may have to pursue litigation against other parties to assert
our rights. Any such claim or litigation could be costly and we may lack the
resources required to defend against such claims. In addition, any event that
would jeopardize our proprietary rights or any claims of infringement by third
parties could have a material adverse affect on our ability to market or sell
our brands, and profitably exploit our products.


16


WE HAVE
LIMITED WORKING CAPITAL AND WILL NEED ADDITIONAL FINANCING IN THE
FUTURE.





Our
working capital needs in the future will depend upon factors such as market
acceptance of our existing products and of any new products we launch, the
success of our independent distributors and our production, marketing and sales
costs. None of these factors can be predicted with certainty.





We have
sustained substantial operating losses since our organization. We will need
additional debt or equity financing in the future to fully implement our
business plan. We may not be able to obtain any additional financing on
acceptable terms or at all. As a result, we may not have adequate working
capital to implement future expansions, maintain sufficient levels of inventory,
and maintain our current levels of operation or to pursue strategic
acquisitions. Our failure to obtain sufficient financing would likely result in
the delay or abandonment of some or all of our development plans, any one of
which would likely harm our business and the value of our common
stock.





CERTAIN
OF OUR PRODUCTS ARE CLOSELY IDENTIFIED WITH CELEBRITIES AND OUR BRAND
RECOGNITION IS SIGNIFICANTLY AFFECTED BY THEIR SUCCESS IN THEIR
PROFESSION.





Certain
of our products, including products for which we have acquired distribution
rights, adopt the name of a single personality or celebrity, or are associated
with a single personality or celebrity, such as Willie Nelson, Donald
Trump, and Dr. Dre. Therefore, any reduction of notoriety or any damage to the
reputation of any such personality will correspondingly damage the associated
product and could have a material adverse effect on the results of our
operations.





Risks
Relating to our Industry





WE
COMPETE IN AN INDUSTRY THAT IS BRAND-CONSCIOUS, SO BRAND NAME RECOGNITION AND
ACCEPTANCE OF OUR PRODUCTS ARE CRITICAL TO OUR SUCCESS.





Our
business is substantially dependent upon awareness and market acceptance of our
products and brands by our targeted consumers. In addition, our business depends
on acceptance by our independent distributors of our brands as beverage brands
that have the potential to provide incremental sales growth rather than reduce
distributors' existing beverage sales. Although we believe that we have made
progress towards establishing market recognition for certain of our brands in
both the alcoholic and non alcoholic beverage industry, it is too early in the
product life cycle of these brands to determine whether our products and brands
will achieve and maintain satisfactory levels of acceptance by independent
distributors and retail consumers.





COMPETITION
FROM TRADITIONAL ALCOHOLIC AND NON-ALCOHOLIC BEVERAGE MANUFACTURERS MAY
ADVERSELY AFFECT OUR DISTRIBUTION RELATIONSHIPS AND MAY HINDER DEVELOPMENT OF
OUR EXISTING MARKETS, AS WELL AS PREVENT US FROM EXPANDING OUR
MARKETS.





The
beverage industry is highly competitive. We compete with other beverage
companies, most of which have significantly more sales and significantly more
resources, giving them significant advantages in gaining consumer acceptance for
their products, access to shelf space in retail outlets and marketing focus by
our distributors, all of whom also distribute other beverage brands. Our
products compete with all beverages, most of which are marketed by companies
with greater financial resources than what we have. Some of these competitors
are or will likely in the future, place severe pressure on our independent
distributors not to carry competitive alternative brands such as ours. We also
compete with regional beverage producers and "private label" suppliers. Some of
our alcoholic competitors are Diageo, Pernod Ricard, Castle Brands, Brown-Furman
and Bacardi & Company, Ltd. Some of our direct competitors in the
alternative beverage industry include Cadbury Schweppes (Snapple, Stewart,
Nantucket Nectar, Mystic), Thomas Kemper, Boylans and Hansens. Competitor
consolidations, market place competition, particularly among branded beverage
products, and competitive product and pricing pressures could impact our
earnings, market share and volume growth. If, due to such pressure or other
competitive phenomena, we are unable to sufficiently maintain or develop our
distribution channels, or develop alternative distribution channels, we may be
unable to achieve our financial targets. As a means of maintaining and expanding
our distribution network, we intend to expand the market for our products, and
introduce additional brands. However, we will require financing to do so. There
can be no assurance that we will be able to secure additional financing or that
other companies will not be more successful in this regard over the long term.
Competition, particularly from companies with greater financial and marketing
resources than those available to us, could have a material adverse effect on
our existing markets, as well as our ability to expand the market for our
products.


17


WE
COMPETE IN AN INDUSTRY CHARACTERIZED BY RAPID CHANGES IN CONSUMER PREFERENCES,
SO OUR ABILITY TO CONTINUE DEVELOPING NEW PRODUCTS TO SATISFY OUR CONSUMERS'
CHANGING PREFERENCES WILL DETERMINE OUR LONG-TERM SUCCESS.





Our
current market distribution and penetration is limited as compared with the
potential market and so our initial views as to customer acceptance of a
particular brand can be erroneous, and there can be no assurance that true
market acceptance will ultimately be achieved. In addition, customer preferences
are also affected by factors other than taste, such as the recent media focus on
obesity in youth. If we do not adjust to respond to these and other changes in
customer preferences, our sales may be adversely affected.





A DECLINE
IN THE CONSUMPTION OF ALCOHOL COULD ADVERSELY AFFECT OUR BUSINESS.





There
have been periods in American history during which alcohol consumption declined
substantially. A decline in alcohol consumption could occur in the future due to
a variety of factors including: (i) a general decline in economic conditions,
(ii) increased concern about health consequences and concerns about drinking and
driving, (iii) a trend toward other beverages such as juices and water, (iv)
increased activity of anti-alcohol consumer groups, and (v) increases in
federal, state or foreign excise taxes. A decline in the consumption of alcohol
would likely negatively affect our business.





WE COULD
BE EXPOSED TO PRODUCT LIABILITY CLAIMS FOR PERSONAL INJURY OR POSSIBLY
DEATH.





Although
we have product liability insurance in amounts we believe are adequate, we
cannot assure you that the coverage will be sufficient to cover any or all
product liability claims. To the extent our product liability coverage is
insufficient; a product liability claim would likely have a material adverse
affect upon our financial condition. In addition, any product liability claim
successfully brought against us may materially damage the reputation of our
products; thus adversely affecting our ability to continue to market and sell
that or other products.





OUR
BUSINESS IS SUBJECT TO MANY REGULATIONS AND NONCOMPLIANCE IS
COSTLY.





The
production, marketing and sale of our alcoholic and non alcoholic beverages,
including contents, labels, caps and containers, are subject to the rules and
regulations of various federal, state and local health agencies. If a regulatory
authority finds that a current or future product or production run is not in
compliance with any of these regulations, we may be fined, or production may be
stopped, thus adversely affecting our financial conditions and operations.
Similarly, any adverse publicity associated with any noncompliance may damage
our reputation and our ability to successfully market our products. Furthermore,
rules and regulations are subject to change from time to time and while we
monitor developments in this area, the fact that we have limited staff makes it
difficult for us to keep up to date and we have no way of anticipating whether
changes in these rules and regulations will impact our business adversely.
Additional or revised regulatory requirements, whether regarding labeling, the
environment, taxes or otherwise, could have a material adverse effect on our
financial condition and results of operations.





THE
CURRENT INTERNATIONAL CONFLICTS, AND TERRORISM EVENTS ALL OR INDIVIDUALLY MAY
HAVE AN ADVERSE IMPACT ON OUR SALES AND EARNINGS, AND OUR SHIPPING COSTS HAVE
INCREASED.





We cannot
predict the impact of the current economic climate in the United States, or the
current international situation, on current and future consumer demand for and
sales of our products. In addition, recent volatility in the global oil markets
has resulted in rising fuel and freight prices, which many shipping companies
are passing on to their customers. Our shipping costs have increased, and these
costs may continue to increase. Due to the price sensitivity of our products, we
do not anticipate that we will be able to pass these increased costs on to our
customers.


18


Risks
Related to our Common Stock





BECAUSE
OUR COMMON STOCK IS CONSIDERED A "PENNY STOCK," A SHAREHOLDER MAY HAVE
DIFFICULTY SELLING SHARES IN THE SECONDARY TRADING MARKET.





Our
common stock is subject to certain rules and regulations relating to "penny
stock" (generally defined as any equity security that has a price less than
$5.00 per share, subject to certain exemptions). Broker-dealers who sell penny
stocks are subject to certain "sales practice requirements" for sales in certain
nonexempt transactions (i.e., sales to persons other than established customers
and institutional "accredited investors"), including requiring delivery of a
risk disclosure document relating to the penny stock market and monthly
statements disclosing recent price information for the penny stocks held in the
account, and certain other restrictions. For as long as our common stock is
subject to the rules on penny stocks, the market liquidity for such securities
could be significantly limited. This lack of liquidity may also make it more
difficult for us to raise capital in the future through sales of equity in the
public or private markets.





THE PRICE
OF OUR COMMON STOCK MAY BE VOLATILE, AND A SHAREHOLDER'S INVESTMENT IN OUR
COMMON STOCK COULD SUFFER A DECLINE IN VALUE.





There
could be significant volatility in the volume and market price of our common
stock, and this volatility may continue in the future. Our common stock is
listed on the over-the-counter Bulletin Board and there is a greater chance for
market volatility for securities that trade on the OTC Bulletin Board as opposed
to a national exchange or quotation system. This volatility may be caused by a
variety of factors, including the lack of readily available quotations, the
absence of consistent administrative supervision of "bid" and "ask" quotations
and generally lower trading volume. In addition, factors such as quarterly
variations in our operating results, changes in financial estimates by
securities analysts or our failure to meet our or their projected financial and
operating results, litigation involving us, general trends relating to the
beverage industry, actions by governmental agencies, national economic and stock
market considerations as well as other events and circumstances beyond our
control could have a significant impact on the future market price of our common
stock and the relative volatility of such market price.




A LARGE
NUMBER OF SHARES OF COMMON STOCK WILL BE ELIGIBLE FOR FUTURE SALE AND MAY
DEPRESS OUR STOCK PRICE.




Our shares
that are eligible for future sale may have an adverse effect on the price of our
stock. As of July 31, 2010, there were approximately 359,172,755 shares of
our common stock outstanding. In connection with December 2007 private
placement, we  issued 5,000,000 shares of common stock, 11,000 shares
of our Series A Preferred Stock, which is convertible into 31,428,571 shares of
our common stock and warrants to acquire 600,000 shares of our common stock. A
significant percent of these sharesmay
becomeeligible to be
traded.  Sales of substantial amounts of common stock, or a perception
that such sales could occur, and the existence of options or warrants to
purchase shares of common stock at prices that may be below the then current
market price of the common stock, could adversely affect the market price of our
common stock and could impair our ability to raise capital through the sale of
our equity securities.




YOUR
OWNERSHIP INTEREST, VOTING POWER AND THE MARKET PRICE OF OUR COMMON STOCK MAY
DECREASE BECAUSE WE HAVE ISSUED, AND MAY CONTINUE TO ISSUE, A SUBSTANTIAL NUMBER
OF SECURITIES CONVERTIBLE OR EXERCISABLE INTO OUR COMMON STOCK.




We have issued common stock, warrants, options and
convertible notes to purchase our common stock to satisfy our obligations and
fund our operations and reward our employees. In the future we may issue
additionalshares of common stock, options, warrants, preferred stock or
other securities exercisable for or convertible into our common stock to raise
money for our continued operations. We continue to seek additional investors. If
additional sales of equity occur, your ownership interest and voting power in us
will be diluted and the market price of our common stock may
decrease.





ITEM
1B. UNRESOLVED STAFF COMMENTS





Not
applicable.


19


ITEM
2. PROPERTIES





We lease
2,739 square feet of office in Wilton, Connecticut under an operating sublease
which will expire September 30, 2011, with base annual rent payments of
approximately $36,000 through September 30, 2011.  Under our lease, we
are also responsible for our pro rata share of real estate tax
increases. We believe our leased premise is  suitable and
adequate for our use and adequately covered by insurance.





ITEM
3. LEGAL PROCEEDINGS




In June
2009, Richard Shiekman, a former employee of the Company, filed an application
for prejudgment remedy against the Company and our Chief Executive Officer in
Superior Court of Connecticut, Judicial District of Fairfield (Docket Number CV
09 4028895 S). The plaintiff seeks $127,250 of unpaid wages and commissions and,
$1,500 for reimbursement of expenses. The maximum exposure to the Company and
our CEO is approximately $260,000 for double damages plus attorneys’ fees and
costs. The Company believes that the claims made by the plaintiff are false and
plans to vigorously defend this suit.  In addition, the Company plans
to commence a countersuit for damage and theft of services.  As of
November 30, 2009, we pledged 10,325,000 shares of Company common stock in lieu
of a prejudgment remedy that the Plaintiff had sought against the Company and
its Chief Executive Officer. In 2009, as a matter of public record the former
employee was arrested and charged with alleged theft of Company property. Mr.
Shiekman has filed suit in court and the Company intends to vigorously defend
against this claim.


In October 2009, James Sokol, a former
salesperson for the Company, filed suit against the Company and its Chief
Executive Officer in the Superior Court for the Judicial District of Fairfield
(Docket Number CV 09 5027925 S) claiming unpaid compensation of $256,000. 
The maximum exposure to the Company and our CEOwas approximately $520,000
for double damages plus attorney's fees and costs.  The Company
believedthat the claims made by the
plaintiffwere false and  vigorously
defendedthis suit.  As
of November 30, 2009, we pledged 15,000,000 shares of Company common
stock in lieu of a prejudgment remedy that the Plaintiff had sought against the
Company and its Chief Executive
Officer.




On July
12, 2010, the Company and Mr. Sokol reached a settlement of the suit pursuant to
which Mr. Sokol withdrew the suit on July 16, 2010 and thereafter returned the
15,000,000 shares of the Company common stock to the
Company.




In February
2009, Vetrerie Bruni S.p.A (“Bruni”),the company that has the patent
to the Trump Vodka bottle design,filed a complaint against us in
the U.S. District Court, Southern District of New York for alleged breach of
contract and sought $225,000 for alleged past due invoices and royalties. The
Company filed a counterclaim. In October 2009, the case was settled, whereby we
agreed to pay Bruni $150,000 in settlement of all claims. The settlement amount
was to be paid in monthly installments of $12,500 beginning February 15, 2010.
This settlement resulted in the reduction of the Company’s annual glass royalty
obligation and a settlement of the outstanding balance the Company owed Bruni.
In conjunction with the legal settlement, the Company has accrued
$150,000, payable in installments over 12 months from February 2010 forward
which if paid in full by August 2010 reverts to the amount of $120,000 in
satisfaction of the outstanding balance. As of April 30, 2010, the
outstanding unpaid balance was $125,000. Additionally, the annual royalty
going forward has been lowered by as much as 75% depending on utilization
levels. The Company has made timely payments through July 2010 to satisfy the
settlement and plans to continue to do so.


20


In June 2009, Liquor
Group Wholesale, Inc. (“Liquor Group”) a company which provided distribution
services for us in several states filed a claim for damages against us in Duval
County Florida for alleged damages including breach of contract and is
seeking  damages. It is the Company’s opinion that the claim
arose out of our termination of the agreements we had with them for their
nonperformance, failure of the plaintiff to accurately report sales to the
Company and their withholding of information required by the
agreements. The Company filed a counterclaim of $500,000 for damages
against Liquor Group and has denied their claimed breach of contract claim
previously made against it.  The Company contends that it is owed money by
Liquor Group under the agreements. There is currently pending an arbitration
before the American Arbitration Association involving the dispute between Liquor
Group and Drinks Americas. A final arbitration hearingwasbeen scheduled for June 22, 2010,
in Jacksonville, Florida. Liquor Group Wholesale, Inc. and/or Liquor Group
Holdings, LLC sought arbitration on a breach of contract claim asserting damages
in excess of $1,100,000. The claim was filed against Drinks Americas Holding
Limited, not Drink Americas, Inc., the contracting party. Drinks America, Inc.
has counter claimed against the initial Liquor Group claimants, and has included
several other Liquor Group entities because of the considerable confusion Liquor
Group has created through the use of multiple entities with the same or
virtually identical names. The counterclaim is for $500,000 and includes claims
concerning breach of contract, civil conspiracy, fraudulent concealment and
civil theft.Liquor
Group has been authorized to conduct certain limited discovery concerning Drinks
Americas’ civil conspiracy, fraudulent concealment and civil theft claims and
the parties were scheduled to exchange witness lists on April 23rd and
exhibit lists on May 14th and to file prehearing briefs on June 8th. The arbitration was suspended by the
Arbitrator due to Liquor Group’s failure to pay all appropriate fees or deposits
by May 24, 2010. The Arbitrator gave an extension of time until June 10, 2010
for all fees and deposits to be paid, which deadline Liquor Group again missed.
The Company has duly paid all fees and deposits and is fully prepared to go
forward with the arbitration. TheArbitrator extended
the deadline again for the Liquor Group to complete its filing and payment of
past due fees to July 30tha deadline
which the Liquor Group then missed again. Liquor Group has since notified theArbitrator that
until such date is resetit does not
intend to make payment.




In
December 2009, Niche Media, Inc., an advertising vendor, filed suit against the
Company in the Connecticut Superior Court for the Judicial District of
Stamford/Norwalk (Docket Number FST-CV09-6002627-S) claiming unpaid invoices for
the approximate amount of $300,000.  The Company believes that it has
defenses to this action and is attempting to reach a resolution.




Socius CG
II, Ltd., (“Socius”), a creditor of the Company due to the purchase of various
claims from various creditors of the Company, filed a complaint against the
Company for breach of contract to recover on the claims against the Company on
June 18, 2010 in the Supreme Court of the State of New York. On July 29, 2010,
we entered into a settlement agreement with Socius pursuant to which we agreed
to issue 38,800,000 shares of our common stock in exchange for satisfaction of
the claim for $334,006. This settlement agreement required court approval before
the issuance of such stock because it involved the payment of the settlement in
the form of the Company’s common stock in reliance upon the Section 3(a)(10)
exemption from the registration requirements of Section 5 of the Securities Act
of 1933, as amended. On July 30, 2010, a Notice of Motion for Court Order
Approving Stipulation for Settlement of Claims was submitted to the court, which
moved for an order to enforce the terms of our proposed settlement with Socius.
The court ultimately approved the settlement agreement and the issuance of the
38,800,000 shares to Socius as exempt from registration pursuant to the Section
3(a)(10) registration exemption.




Other
than the items discussed above, we believe that the Company is currently
not subject to litigation, which, in the opinion of our management, is likely to
have a material adverse effect on us.




ITEM
4. (REMOVED AND RESERVED).




ITEM
5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASERS OF EQUITY SERCURITIES AND SMALL ISSUER PURCHASE OF EQUITY
SECURITIES




MARKET
INFORMATION





Our
common stock was authorized to trade on June 2, 2005 on the over-the-counter
market with quotations available on the OTC Electronic Bulletin Board under the
symbol "DKAM" on the Over-the-Counter Bulletin Board Electronic Quotation System
maintained by the National Association of Securities Dealers, Inc. Trading
commenced on June 3, 2005. Prior to June 3, 2005, there was no public trading
market for our Common Stock.





The
following table sets forth the range of high and low bid quotations of our
common stock for the periods indicated. The information contained in the table
was obtained from Bloomberg Financial Services. The prices represent
inter-dealer quotations, which do not include retail markups, markdowns or
commissions, and may not represent actual transactions.




Year Ending, April 30, 2009
                  
                  High
                  
                  
                  LowFirst
      Quarter, July 31, 2008
                  
                  $
                  0.31
                  
                  
                  $
                  0.22Second
      Quarter, October 31, 2008
                  
                  $
                  0.35
                  
                  
                  $
                  0.21Third
      Quarter, January 31, 2009
                  
                  $
                  0.26
                  
                  
                  $
                  0.15Fourth
      Quarter, April 30, 2009
                  
                  $
                  0.26
                  
                  
                  $
                  0.14





21





Year Ending, April 30, 2010
                  
                  High
                  
                  
                  LowFirst
      Quarter, July 31, 2009
                  
                  $
                  0.20
                  
                  
                  $
                  0.12Second
      Quarter, October 31, 2009
                  
                  $
                  0.16
                  
                  
                  $
                  0.04Third
      Quarter, January 31, 2010
                  
                  $
                  0.05
                  
                  
                  $
                  0.01Fourth
      Quarter, April 30, 2010
                  
                  $
                  0.04
                  
                  
                  $
                  0.0105
  Year
      ending April 30, 2011First
      Quarter, July 31, 2009
                  
                  $
                  0.015
                  
                  
                  $
                  0.006





HOLDERS





As of July
31, 2010, there were approximately 359,172,755 shares of our common stock
outstanding, which were held of record by approximately660 stockholders, not including persons
or entities that hold the stock in nominee or "street" name through various
brokerage firms.Further,
as of July 31, 2010,there
were five stockholders of record of our Preferred
Stock.


DIVIDENDS




The
payment of dividends, if any, is to be within the discretion of our Board of
Directors. We presently intend to retain all earnings, if any, for use in our
business operations and accordingly, the Board of Directors does not anticipate
declaring any dividends in the near future. In addition, the terms of our Series
A Preferred Stock limit our ability to pay cash dividends to our
stockholders.   Dividends, if any, will be contingent upon our
revenues and earnings, capital requirements and financial
condition.




Holders
of our Series B Preferred Stock are entitled to receive dividends which will
accrue in shares of Series B Preferred Stock on an annual basis at a rate equal
to 10% per annum from the issuance date.  Accrued dividends will be
payable upon redemption of the Series B Preferred Stock.




SECURITIES
AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS




On April
13, 2010, the Company filed a registration statement on Form S-8 and
registered  30,000,000 shares issuable under the 2010 Stock Incentive
Plan (the “2010 Plan”).  Subsequent to April 30, 2010, the Company has
issued a total of 5,547,717 shares of Company common stock under the plan as
compensation for legal and marketing services at a fair value of
$50,346 and 24,452,283 shares remain available for future issuance under
the 2010 Plan.
  On November
6, 2009, the Company filed a registration statement on Form S-8 and
registered  20,000,000 shares issuable under the 2009 Stock Incentive
Plan (the “2009 Plan”).The Company has issued a
total of 13,597,353 shares of Company common stock under the plan as
compensation for legal and marketing services as of April 30, 2009 at a fair
value of $ 316,450 which vested immediately upon grant. Additionally, 5,740,092
were issued subsequent to year end as compensation for legal and marketing
services at a fair value of $ 65,667 and 662,555 shares remain available for
future issuance under the 2009 Plan.
  In January
2009, the Company’s shareholders approved the 2008 Stock Incentive Plan (the
“2008 Plan”) which provides for awards of incentives of non-qualified stock
options, stock, restricted stock and stock appreciation rights for its officers,
employees, consultants and directors in order to attract and retain such
individuals and to enable them to participate in the long-term success and
growth of the Company. Under the 2008 Plan, 10,000,000 common shares were
reserved for distribution, of which 9,275,000 have been issued and 725,000
remain available for future issuance. Of this amount,450,000 shares issued to
employees were subsequently canceled when the employees terminated their service
with the Company. Stock options granted under the Plan are granted with an
exercise price at or above the fair market value of the underlying common stock
at the date of grant, generally vest over a four year period and expire 5 years
after the grant date.


22





On
November 9, 2009, the Company granted 3,500,000 shares under the 2008 Plan at
fair value of $132,000 to several consultants, which vested immediately upon
grant, as compensation for legal and marketing services.





On March
12, 2009, the Company granted an aggregate of 5,775,000 options
under its 2008 Stock Incentive Plan to various employees, the
directors of the Company, and to two consultants to the
Company.  The exercise price of the options granted to
employees,directors,and one of the
consultants was at the market value (other than those issued to our CEO
which was at a 10% premium to the market value) of the underlying common
stock at the date of grant. The exercise price of the options granted to the
other consultant, $0.35, was above the fair market value of the underlying
common stock at the date of grant. The value of the options on the date of grant
was calculated using the Black-Scholes formula with the
following assumptions: risk free rate-2%, expected life of options –5
years, expected stock volatility -67%, expected dividend yield -0%. The
Company issued an aggregate of 4,175,000 options to purchase shares of its
common stock to its employees including 2,500,000 to its CEO, 500,000 to its COO
and 300,000 to its former CFO.
  Theseoptions granted to
employees of the Company vest over a four year period and expire five years
after the grant date. The cost of the options, $375,750, is expected to be
recognized over the four year vesting period of the non-vested
options.  The options awarded to the directors of the Company
(1,000,000) and the consultants (600,000) at fair value of $129,000 vested
immediately on the grant date.




The fair value of each option  award is
estimated on the date of grant using the Black-Scholes option pricing model and
is affected by assumptions regarding a number of highly complex and subjective
variables  including expected volatility, risk-free interest rate,
expected dividends and expected term. Expected volatility is based on the
historic volatility of the Company’s stock over the expected life of the option.
The expected term and vesting of the option represents the estimated period of
time until the exercise and is based on management’s estimates, giving
considerationto the contractual term, vesting schedules and expectations
of future employee behavior. The risk-free interest rate is based on the U.S .
Treasury yield curve in effect at the time of grant for the expected term of the
option. The Company has not paid dividends in the past and does not plan to pay
any dividends in the near future. SFAS 123R, “Share Based Payment,” also
requires the Company to estimate forfeitures at the time of grant and revise
these estimates, if necessary, in subsequent period if actual forfeitures differ
from those estimates. The Company estimates forfeitures of future experience
while considering its historical experience.





A summary
of the options outstanding under the Plan as of April 30, 2010 and 2009 is as
follows:





2010
                  
                  
                  2009Shares
                  
                  
                  Weighted
                    Average
                    Exercise
                    Price
                  
                  
                  Shares
                  
                  
                  Weighted
                    Average
                    Exercise
                    PriceOutstanding
      at beginning of period
                  
                  
                  5,775,000
                  
                  
                  $
                  0.18
                  
                  
                  
                  -0-
                  
                  
                  $
                  -Granted
                  
                  
                  17,097,353
                  
                  
                  
                  0.03
                  
                  
                  
                  5,775,000
                  
                  
                  
                  0.18Forfeited
                  
                  
                  (450,000
                  )
                  
                  
                  0.16
                  
                  
                  
                  -
                  
                  
                  
                  -Outstanding
      at end of period
                  
                  
                  22,422,353
                  
                  
                  $
                  0.06
                  
                  
                  
                  5,775,000
                  
                  
                  $
                  0.18Exercisable
      at end of period
                  
                  
                  19,628,603
                  
                  
                  $
                  0.05
                  
                  
                  
                  1,600,000
                  
                  
                  $
                  0.22Weighted
      average fair value of grants during the period
                  
                  
                  
                  
                  
                  $
                  0.03
                  
                  
                  
                  
                  
                  
                  $
                  0.09


23





The fair
value of options at date of grant was estimated using the Black-Scholes option
pricing model utilizing  the following weighted average
assumptions:





2010
                  
                  
                  
                  2009Risk-free
      rate
                  
                  
                  2.0
                  %
                  
                  
                  2.0
                  %Expected
      option life in years
                  
                  
                  5.0
                  
                  
                  
                  5.0Expected
      stock price volatility
                  
                  
                  67
                  %
                  
                  
                  67
                  %Expected
      dividend yield
                  
                  
                  0
                  %
                  
                  
                  0
                  %





Also on
March 12, 2009, the Company granted 1,175,000 shares of its common stock
under the Plan to several of its employees as consideration for past
services they have performed for the Company. The value of the stock on the date
of grant aggregated $188,000 which is  included in selling, general
and administrative expenses for the year ended April 30, 2009 and accrued
expense as of April 30, 2009 as none of these shares were issued as
of that date.  Of these, an aggregate of 750,000 shares were
issued in June 2009.





RECENT
SALE OF UNREGISTERED SECURITIES





Set forth
below are descriptions of all equity securities of the Company sold by us during
the fiscal year ending April 30, 2010 that were not registered under the
Securities Act of 1933, as amended, and have not previously been included in a
Quarterly Report on Form 10-Q or in a Current Report on Form
8-K.





On July
22, 2009, we issued 2,325,000 shares of our common stock as treasury shares and
pledged the shares in lieu of a prejudgment remedy that the Plaintiff had sought
against the Company and its Chief Executive Officer.  (See Note 16 -
Commitments and Contingencies).


In
October 2006, the Company borrowed $250,000 and issued a convertible promissory
note in like amount. The due date of the loan was originally extended by the
Company to October 2008 from October 2007 in accordance with the terms of the
original note agreement. On March 1, 2009 the note was amended to extend the due
date to October 18, 2009. As of March 1, 2009, the principal amount of the
amended note is $286,623, which includes the original $250,000 of principal plus
accrued and unpaid interest of 36,623 as of March 1, 2009. The amended note is
convertible into shares of our common stock at $0.35 per share, a decrease from
the $0.60 price under the original note but at a premium to the market price on
the date of the amended agreement, with certain anti-dilution provisions. The
note bears interest at 12% per annum which is payable quarterly. At the option
of the lender, interest can be paid in shares of Company common stock. Under the
terms of the amended note monthly principal payments of $20,000 were to commence
June 1, 2009 with the balance paid at maturity. As of September 2009 the
Company had not made any payments under the amended note and has reached an
informal agreement with the note-holder, to issue 50,000 shares of the Company’s
common stock for each week of nonpayment.





On August
4, 2009 and on September 29, 2009, the Company issued the note-holder 200,000
and 400,000 shares of its common stock, respectively,as payment of interest on the
note with values of $28,000 and $32,000, respectively. In addition, as
consideration for extending the note the Company issued the lender 286,623
shares of Company common stock which had a value of $42,992 on March 1,
2009.


On November
23, 2009, the Company issued 400,000 shares of common stock which had a value of
$12,000 in satisfaction of interest payable on the note described
above.As ofApril 30, 2010 and 2009,the unamortized balance of the
286,623 shares issued was $-0- and $30,710, respectively, which is included in Other Current
Assets on the accompanying
balance sheets.


24


On November 9, 2009, the
Company issued an unsecured $100,000 convertible note that matures on November
9, 2010. Interest accrues at a rate of 12.5% per annum and is payable quarterly.
At the option of the note holder, interest can be paid in either cash or shares
of Company common stock based on the convertible note’s $0.06 conversion
price. As additional consideration, the Company granted the note holder
250,000 shares of the Company’s common stock and agreed to register the shares
by January 8, 2010 or pay to the note holder as damages additional shares of the
Company’s common stock equal to 2.0% of the common shares issuable upon
conversion of the convertible note. The Company also granted the note
holder piggyback registration rights. On June
28, 2010, the
Company issued the note holder 133,333 shares of  common stock as
damages for failing to timely register the 250,000 common shares.As of
April 30, interest expense of $6,061 was accrued on the note and paid on June
30, 2010.On November 9, 2009, the Company issued the 250,000
shares valued at $10,000 which the Company deemed a loan origination fee. As
of April 30, 2010, $5,222 has been recorded as a deferred charge on the balance
sheet and $4,778 hasbeen amortized to interest
expense.




On November 9, 2009, an
investor purchased a $309,839 past due Company Note. On November 13, 2009, the
Company exchanged the past due Company Note for a new $447,500 Convertible
Promissory Note. The new convertible promissory note is convertible at the note
holder’s option using a conversion price based on the prevailing market prices.
As ofApril 30,
2010, the
Company issued the note holder a total of29,851,365shares of
Company common stock in satisfaction of conversions of noteprincipal
and interest expense of $7,928.





On
November 17, 2009, the Company issued a total of 12,003,720 shares of Company
common stock to certain officers and directors as a replacement for the shares
they pledged pursuant to a financing transaction (including 8,000,000 to our
CEO; 906,000 to our COO and an aggregate of 3,097,720 among our three
directors.
 
 On
November 17, 2009, the Company issued 23,000,000 shares of Company common stock,
to be held in treasury, as they are pledged in lieu of prejudgment remedies on
two litigation matters. (See Note 16. Commitments and Contingencies –
Litigation).
  On
November 18, 2009, the Company retained a business advisory consultant and
agreed to issue 2,000,000 shares of Company Common Stock in exchange for
consulting services, which shares the Company issued on March 10,
2010.
 
 On
December 10, 2009 we issued 15,664 shares of its common stock to a director
for reimbursement of expenses.
 
 On December
11, 2009 we issued 50,000 shares of common stock to an
employee as a bonus for services performed. The value of the
stock issued aggregated $8,000.
 
 On December
12, 2009 our CEO converted $10,000 of deferred compensation into 28,571shares
of common  stock at a price of $0.35 per share.
 
 On January 11, 2010,
pursuant to the previously noted financing transaction, the Company
issued  to those individuals who pledged their shares, 0.5 shares
of Company stock for each share pledged, which aggregated 6,001,860 shares
(including 4,000,000 to our CEO; 453,000 to our COO and an aggregate of
1,548,860 to our three directors). The 6,001,860 shares had an
approximate fair value of $240,074 on January 11, 2010, the issuance date,
which amount is recorded in common stock and additional paid in capital in the
accompanying balance sheetas
of April 30, 2010.
 
 On
February 11, 2010, in connection with the June 18, 2009 Drinks Debenture
financing by an investor, the investor submitted a Notice of Conversion, to
convert $108,375 of the outstanding balance of the Debenture in exchange for
8,500,000 shares of our common stock. (See Note
6 – Note Receivable).


25




On March
2, 2010, we issued 6,000,000 shares to our Chief Executive Officer and
President; 5,000,000 (aggregate value $100,000) was a partial payment against
the working capital loan he has provided to the Company and 1,000,000 (aggregate
value $20,000) was awarded by the Board of Directors as a stock bonus for his
accomplishments in the creation and launch of one of our premier
brands.





On March
2, 2010, we issued 36,150 shares of our common stock with an aggregate value of
$723 to a former employee in satisfaction of past due wages net of
advances.




On March 2, 2010, we granted 2,000,000 shares of our
common stock with an aggregate value of $40,000 under the 2009 Plan to a
consultant in exchange for marketing services. The shares vested immediately on
the date of grant.
  On March
4, 2010, we granted 2,000,000 shares of Company common stock under the 2009 Plan
to a financial consultant in satisfaction of payment for a $40,000 note
payable.


26





On March
10, 2010, we issued 2,000,000 shares of our common stock with an aggregate value
of $40,000 for investor relation services provided to us under the terms to a
management consulting agreement.





On March
10, 2010, we granted 3,000,000 shares of our common stock with an aggregate
value of $60,000 under the 2009 Plan to a consultant in exchange for marketing
and promotional services. The shares vested immediately on the date of
grant.




On March
11, 2010, in connection with the June 18, 2009 Drinks Debenture financing
by an investor, the investor submitted a Notice of Conversion, to convert
$100,000 of the outstanding balance of the Debenture in exchange
for 7,058,824 shares of our common stock.  (See Note 6 –
Note Receivable).
 
 On March
25, 2010, in connection with the June 18, 2009 Drinks Debenture financing by an
investor, the investor submitted a Notice of Conversion, to convert $120,000 of
the outstanding balance of the Debenture in exchange for 6,493,506 shares of our
common stock.  (See Note 6 – Note Receivable).
 
 On April
12, 2010, in connection with the June 18, 2009 Drinks Debenture financing by an
investor, the investor submitted a Notice of Conversion, to convert $125,000 of
the outstanding balance of the Debenture in exchange for 8,858,965 shares of our
common stock.  (See Note 6 – Note Receivable).
 
 On April
14, 2010, in connection with the June 18, 2009 Drinks Debenture financing by an
investor, the investor submitted a Notice of Conversion, to convert $121,625 of
the outstanding balance of the Debenture in exchange for 8,668,924 shares of our
common stock.  (See Note 6 – Note Receivable).
 
 On April
28 and 29, 2010, the Company issued 1,763,667 shares of common stock in
satisfaction of $264,550 of director fees, consulting fees and $130,000 of the
Chief Executive Officer’s past-due salary and 9,838,793 warrants in satisfaction
of $506,243 of director fees and consulting fees.


In
connection with the June 18, 2009 Drinks Debenture financing, (See Note 6 – Note
Receivable) we agreed to issue to the Placement Agent, warrants to acquire 5% of
the shares of our common stock which we would deliver in response to Share
Repayment Requests made by the Investor (described above in Note 6), at an
exercise price equal to the Market Price related to the shares delivered in
response to the Share Repayment Request (the "Placement Agent Warrants"). The
Placement Agent Warrants are exercisable for a five year period, will contain
cashless exercise provisions as well as anti-dilution provisions in the case of
stock splits and similar matters.
  In March
2010, the Company delivered to the Placement Agent, in aggregate, 4,674,126
Placement Agent Warrants as follows:
 
 ·
              effective
      February 24, 2010, a warrant to purchase 425,000 shares of Company common
      stock at an exercise price of
$0.01594;
 ·
              effective
      February 11, 2010, a warrant to purchase 2,000,000 shares of Company
      common stock at an exercise price of
  $0.001;
 ·
              effective
      January 15, 2010, a warrant to purchase 1,000,000 shares of Company common
      stock at an exercise price of
$0.00625;
 ·
              effective
      December 30, 2009, a warrant to purchase 681,818 shares of Company common
      stock at an exercise price of
$0.01375;
 ·
              effective
      August 28, 2009, a warrant to purchase 192,308 shares of Company common
      stock at an exercise price of
$0.065;
 ·
              effective
      June 19, 2009, a warrant to purchase 250,000 shares of Company common
      stock at an exercise price of $0.09375;
  and
 ·
              effective
      June 19, 2009, a warrant to purchase 125,000 shares of Company common
      stock at an exercise price of
$0.4375.
 
 The fair
value, in the aggregate, of the warrants determined using Black-Scholes
valuation model was determined to be $101,864 at the dates of grant and is
recorded as deferred financing costs a long-term asset on the balance sheet and
additional paid in capital. The warrants are being amortized over 5 years and as
of April 30, 2010, $10,172 has been expensed.


27





In
connection with the foregoing transactions, the Company relied upon the
exemption from securities registration afforded by Rule 506 of Regulation D as
promulgated by the SEC under the Securities Act and/or Section 4(2) of the
Securities Act. No advertising or general solicitation was employed in offering
the securities. The issuances were made to a limited number of persons, all of
whom were “accredited investors,” and transfer of the securities was restricted
in accordance with the requirements of the Securities Act.





PURCHASES
OF EQUITY SECURITIES BY THE ISSUED AND AFFILIATED PURCHASERS





None.




ITEM
6. SELECTED FINANCIAL DATA





Not
applicable.


28


ITEM
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS





The
following discussion and analysis of the consolidated financial condition and
results of operations should be read with "Selected Financial Data" and our
consolidated financial statements and related notes appearing elsewhere in this
report. This discussion and analysis contains forward-looking statements that
involve risks, uncertainties and assumptions. The actual results may differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including, but not limited to, those set forth under
"Risk Factors" and elsewhere in this report.





RESULTS
OF OPERATIONS





Year
ended April 30, 2010 compared to year ended April 30, 2009




Net
Sales: Net
sales were approximately $890,000 for the year ended April 30, 2010
compared to net sales of approximately $2,478,000 for the year ended April
30, 2009, a decrease of 64%. As we announced previously, our significant sales
decrease is predominantly
due to insufficient working capital.Although we expect that our
working capital position will benefit from our June 2009 sales of our
debentures, our August 2009 agreement relating to our Series B Preferred Stock
and our February 2010 Agreement with Mexcor, our business continued to be
effected by insufficient working capital. We will need to continue to manage
carefully our working capital and our business decisions will continue to be
influenced by our working capital requirements. Lack of liquidity continued to
negatively affect our business and curtail the execution of our business plan in
Fiscal 2010.
 Subsequent
customer orders and demand indicate, that with adequate working capital, our
recent distribution and importation agreement entered intoonFebruary
2010 with Mexcor, Inc., sales of our products have increased in the first
quarter of Fiscal 2011 and should continue toimprove.
  Trump
Super Premium Vodka sales aggregated $204,000,which
accounted for approximately 24% of total dollar sales for the year ended April
30, 2010. For the year ended April 30, 2009, Trump Super Premium Vodka sales
aggregated $1,100,000 which accounted for 44% of total dollar sales. The
Distilled Spirits Council calendar year 2009 Spirits Industry review reported
that high-end and super premium brand vodka volumes decreased 2.3% and 5.8%,
respectively which they attribute to the ongoing economic
recession.  Additionally, interruption of access to production
financing resulted in disruption of our inventory supply-chain. Finally, sales
of Trump for the year ended April 30, 2010 continued to be effected by issues
relatingtodistributors
affiliated with the Liquor Group, who represented us in several “controlled
states” and with whom we have an ongoing legal suitwith.We
have correctedthese
issuesthrough
the appointment of new replacement
distributors.
  Net
sales of Old Whiskey River Bourbon totaled $ 156,000 on 1,278 cases sold for the
year ended April 30, 2010 compared to net sales of $231,000 on 1,864 cases sold
for the year ended April 30, 2009. For Aquila Tequila, we did not record any
sales for fiscal year ended 2010, because due to the previously mentioned
insufficient working capital, we decided to allocate our limited resources to
the acquisition of inventory in other brands. Subsequently, through our
agreement with Mexcor, Inc. we have re-launched Aguila Tequila in fiscal 2011.
For the year ended April 30, 2009, we aggregated net sales of $74,600 on 895
cases sold. Net sales of our Damiana Liqueur aggregated $28,800 on approximately
214 cases sold for the year ended April 30, 2010 compared to net sales of
145,400 on 1,094 cases sold for the year ended April 30, 2009.  Net
sales of our premium imported wines totaled $17,000 on 796 cases sold for the
year ended April 30, 2010 compared to net sales of $269,000 on 2,769 cases sold
for the year ended April 30, 2009. The Company made the strategic decision to
discontinue selling  Newman’s Own products. The Company’s decision was
based on increased production costs coupled with its inability to sustain its
growth and have equity in the brand.  The contract ended in October
2009. Accordingly, the Company did not sell and recorded no sales of Newman’s
product for the year ended April 30, 2010. For the year ended April 30, 2009,
theCompany
had net sales of $443,990 on 53,265
cases.
  In
January 2009, the Company acquired a 90% interest in Olifant USA,
Inc.,
which has the worldwide rights (excluding Europe) to Olifant Vodka and
Gin.  Olifant Vodka and Gin is produced in Holland and is sold at an
economy price. Industry sales trends indicate as reported by the Distilled
Spirits Council for calendar 2009, that value brand vodka volume increased
10.7%.  Net sales of Olifant vodka amounted to approximately $390,000
or approximately 45% of total net sales for the fiscal year ended April 30,
2010. We believe,and
customer demand and sales indicate,that
with national distribution already in place, sales of Olifant vodka products
continue to be very successful in this economic environment. Net sales for
Leyrat Cognac were $4,500 on 30 cases sold for the year ended April 30, 2010
compared to $145,000 in revenue on 773 cases for fiscal 2009. The significant
decrease in Leyrat Cognac sales is attributable to management’s decision to
allocate its scarce working capital resources to other
brands.
  Gross
margin:  As
a result of the transition of our business model to Mexcor, Inc.,a
royalty based operation from a wholesale model, coupled with our working capital
shortfall and the discontinuance of Newman’s Own product line, we experienced a
curtailment in certain product supply inventories. Consequently, we wrote-off
the inventories of the discontinued brand and reduced to net realizable value
among our brands certain product offerings and components that were not
transitioned to Mexcor, Inc. which resulted inanegative
margin of approximately $399,000 (-44% of net sales) for the year ended April
30, 2010. The Company recorded a charge of approximately $744,000 for
discontinued and obsolete component inventories and a charge of approximately
$53,000 to adjust certain inventories to net realizable values. Gross margin for
the year ended April 30, 2009 was approximately $508,000 (21% of net sales). We
terminated the Cohete Rum brand and recorded a loss for the subsequent inventory
liquidation in
2009.


29




Selling,General andAdministrative
Expenses:Selling,
general and administrative expenses for the year ended April 30, 2010 of
$3,874,000 reflect a substantial reduction of 32% or $1,846,000 compared to
$5,720,000 for the year ended April 30, 2009.  The fiscal year 2010
decrease in selling, general and administrative expenses is predominately due to
our decision to reduce our operating expenses and thereby sustain our limited
working capital. The overhead reductions resulted in lower payroll and payroll
related and travel expenses. Additionally, our agreement with Mexcor, Inc.
resulted in our ability to transfer our field sales force and its
associated sales commission costs and travel expenses to Mexcor, Inc. as we set
about restructuring our business operating model in fiscal 2010. Marketing
expenses for the year ended April 30, 2010 included $567,000 of fees relating to
the Olifant Vodka Summer Concert Tour.
  Other Income
(expense):Interest expense totaled
approximately $1,443,000 for the year ended April 30, 2010 compared to
approximately $151,000 for the year ended April 30, 2009. The increase is
predominately due to our financing costs attributed to our June 2009 financing,
our August 2009 agreement relating to our Series B Preferred Stock, the
associated amortization of the deferred financing charges and the interest on
the Olifant purchase note and other debt financings including funds borrowed
from our CEO. For the year ended April 30, 2010, other income aggregated
approximately $128,000 compared to $319,000 for the year ended April 30,
2009,which
is the result of the Company’s settlement with RBCI Holdings, Inc. The Company
issued 350,000 shares of Company common stock with an aggregate value on the
settlement date of $91,000 in full consideration of a $500,000 note payable to
RBCI Holdings, Inc. Additionally, for the year ended April 30,
2009,  the Company recognized an impairment loss  on its
Rheingold license based on additional investment to eventually bring the product
to market.
  In
August 2010, the Companyplans
to launch theRheingold
beer in the tri-stateareaof
New York, New Jersey and Connecticut with futurerollouts
planned forPennsylvania,Michigan,
Florida and Massachusetts.
 
 Income Taxes: We have incurred substantial net losses from our
inception and as a result, have not incurred any income tax liabilities. Our
federal tax net operating loss carry-forward is approximately $34,000,000which wecan use to reduce taxable earnings in the future.
No
income tax benefits were recognized in fiscal 2010 and 2009 as we have provided
valuation reserves against the full amount of the future tax loss carry-forward
benefit. We will evaluate the reserve every reporting period and only recognize
the benefits when realization is reasonably
assured.
 
 IMPACT
OF INFLATION
 
 Although
management expects that our operations will be influenced by general economic
conditions we do not believe that inflation has had a material effect on our
results of operations.
 
 SEASONALITY
 
 As a
general rule, the second and third quarters of our fiscal year (August-January)
are the periods that we realize our greatest sales as a result of sales of
alcoholic beverages during the holiday season. During the fourth quarter of our
fiscal year (February-April) we generally realize our lowest sales volume as a
result of our distributors decreasing their inventory levels which typically
remain on hand after the holiday season. Given our lack of working capital, the
effects of seasonality on our sales have been lessened.
 
 FINANCIAL
LIQUIDITY AND CAPITAL RESOURCES
 Although
we expect that our working capital position will benefit from our June 2009
sales of our debentures, our August 2009 agreement relating to our Series B
Preferred Stock and our February 2010 Agreement with Mexcor, our business
continued to be effected by insufficient working capital. We will need to
continue to manage carefully our working capital and our business decisions will
continue to be influenced by our working capital requirements. Lack of liquidity
continued to negatively affect our business and curtail the execution of our
business plan in Fiscal 2010.
 
 Net
Cash Used in Operating Activities
 Net cash
used in operating activities for the years ended April 30, 2010 and 2009 was
approximately $588,000 and $630,000, respectively. We have to date funded our operations predominantly through
bank borrowings, loans from shareholders and investors and proceeds from the
sale of our common stock, preferred stock and warrants.
  Net
Cash From Investing Activities
 Net cash
used in investing activities for the year ended April 30, 2009 was approximately
$17,000primarily related to the acquisition of Olifant. There were
no investing activities for fiscal 2010.
  Net
Cash Provided by Financing Activities
 Net
cash provided by financing activities for the year ended April 30,
2010 was approximately $761,000 primarily related to the issuance of
preferred stock for approximately $138,000 and from proceeds of notes and debt
of approximately $623,000, net of repayments.  Net cash provided by financing activities during the
year ended April 30, 2009 was approximately $509,000 and was mostly comprised of
approximately $718,000 of proceeds from the issuance of common stock, proceeds
of approximately $220,000 from debt offset by approximately $332,000 due to the
decrease in the Company’s working capital facility and the associated loan
costs.
  Based on our current operating activities and plans, we
believe our existing financings will enable us to meet our anticipated cash
requirements for at least the next twelve months.
  For
the year ended April 30, 2010 we have significantly lowered our outstanding debt
by approximately $1,400,000 to $5,999,000 compared to $7,352,000 as of April 30,
2009. This decrease in our outstanding debt is attributable to a decrease in our
notes and loans payable by approximately $360,000; our repayment of $151,000 or
nearly 50% of the outstanding loan payable to our CEO; a reduction of our
outstanding payables approximately $546,000; a decrease in our accrued expenses
obligations to $156,000; and our payment of $200,000 of our long-term
debt.




30




On July
29, 2010, we entered into a settlement agreement with Socius CG II, Ltd.
(“Socius”) pursuant to which we agreed to issue 38,800,000 shares of our common
stock in exchange for satisfaction of the claim by Socius for $334,006. This
settlement agreement required court approval before the issuance of such stock
because it involved the payment of the settlement in the form of the Company’s
common stock in reliance upon the Section 3(a)(10) exemption from the
registration requirements of Section 5 of the Securities Act of 1933, as
amended. The court ultimately approved the settlement agreement and the issuance
of the 38,800,000 shares to Socius as exempt from registration pursuant to the
Section 3(a)(10) registration exemption.
  Additionally, in
August 2010, we have entered into agreements with certain of
our  employees, including our Chief Executive Officer, our Chief
Operations Officer and certain
members of our Board of Directors to satisfy accrued debt obligations
aggregating approximately $1,582,000 owed to them
for salary and consulting fees by issuing to them our Preferred Series C Stock
in exchange and satisfaction of those accrued
expenses.


31




OFF
BALANCE SHEET ARRANGEMENTS





Not
applicable.





CRITICAL
ACCOUNTING POLICIES





Our
significant accounting policies are more fully described in  to the
audited financial statements. The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenues and expenses, and the related
disclosures of contingent assets and liabilities. Actual results could differ
from those estimates under different assumptions or conditions. We believe that
the following critical accounting policies are subject to estimates and
judgments used in the preparation of the financial
statements.


REVENUE
RECOGNITION




The Company recognizes revenues when
title passes to the customer, which is generally when products are shipped. The
Company recognizes royalty revenue based on its license agreements with its
distributors which typically is the greater of either the guaranteed minimum
royalties payable under our licenseor a
royalty rate computed on the net sales of the distributor shipments to its
customers.





The
Company recognizes revenue dilution from items such as product returns,
inventory credits, discounts and other allowances in the period that such items
are first expected to occur. The Company does not offer its clients the
opportunity to return products for any reason other than manufacturing defects.
In addition, the Company does not offer incentives to its customers to either
acquire more products or maintain higher inventory levels of products than they
would in ordinary course of business. The Company assesses levels of inventory
maintained by its customers through communications with them. Furthermore, it is
the Company's policy to accrue for material post shipment obligations and
customer incentives in the period the related revenue is
recognized.





ACCOUNTS RECEIVABLE





Accounts
receivable are recorded at original invoice amount less an allowance for
uncollectible accounts that management believes will be adequate to absorb
estimated losses on existing balances. Management estimates the allowance based
on collectability of accounts receivable and prior bad debt experience. Accounts
receivable balances are written-off upon management's determination that such
accounts are uncollectible. Recoveries of accounts receivable previously written
off are recorded when received. Management believes that credit risks on
accounts receivable will not be material to the financial position of the
Company or results of operations at April 30, 2010 and 2009 the allowance
for doubtful accounts was $127,846
and $128,751, respectively.


32


INVENTORIES




Inventories
are valued at the lower of cost or market, using the first-in first-out cost
method. The Company assesses the valuation of its inventories and reduces the
carrying value of those inventories that are obsolete or in excess of the
Company’s forecasted usage to their estimated
net realizable value. The Company estimates the net realizable value of such
inventories based on analysis and assumptions including, but not limited to,
historical usage, expected future demand and market requirements. A change to
the carrying value of inventories is recorded to cost of goods
sold.




IMPAIRMENT
OF LONG-LIVED ASSETS




In accordance with ASC-360-10, Accounting for the
Impairment or Disposal of Long-lived Assets, we review long-lived assets for
impairment at least annually or whenever events or changes in circumstances
indicate the carrying amounts of such assets may not be recoverable. The
Company's policy is to record an impairment loss at each balance sheet date when
it is determined that the carrying amount may not be recoverable. Recoverability
of these assets is based on undiscounted future cash flows of the related asset.
For the year ended April 30, 2009, the
Company determined that based on estimated future cash flows, the carrying
amount of our Rheingold license rights exceeded its fair value by
$90,000,and accordingly,recognized an impairment loss.
For the year ended April 30, 2010, the Company concluded that there was no
impairment as the Company is actively investing and preparing for the launch of
Rheingold Beer in August 2010.




DEFERRED
CHARGES AND INTANGIBLE ASSETS




The costs of
intangible assets with determinable useful lives are amortized over their
respectful useful lives and reviewed for impairment when circumstances warrant.
Intangible assets that have an indefinite useful life are not amortized until
such useful life is determined to be no longer indefinite. Evaluation of the
remaining useful life of an intangible asset that is not being amortized must be
completed each reporting period to determine whether events and circumstances
continue to support an indefinite useful life. Indefinite-lived intangible
assets must be tested for impairment at least annually, or more frequently if
warranted. Intangible assets with finite lives are generally amortized on a
straight line bases over the estimated period benefited. The costs of trademarks
and product distribution rights are amortized over their related usefullives of between 15 to 40 years. We review our intangible assets for
events or changes in circumstances that may indicate that the carrying amount of
the assets may not be recoverable, in which case an impairment charge is
recognized currently.





Deferred
financing costs are amortized ratably over the life of the related debt. If debt
is retired early, the related unamortized deferred financing costs are written
off in the period debt is retired.





INCOME
TAXES




The
Company accounts for income taxes under the asset and liability method. Deferred
tax assets and liabilities are recognized for future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective
tax basis.  The effect on deferred tax assets and liabilities of
a change in tax laws is recognized in the results of operations in the
period the new laws are enacted.  A valuation allowance is
recorded to reduce the carrying amounts of deferred tax assets unless, it
is more likely than not, that such assets will be realized. The Company has
recognized no adjustment for uncertain tax provisions.





STOCK
BASED COMPENSATION




The
Company accounts for stock-based compensation in accordance with ASC-718-10
using the modified prospective approach. The Company recognizes in the statement
of operations the grant-date fair value of stock options and other equity based
compensation issued to employees and non-employees.


33


EARNINGS(LOSS)PER SHARE


The
Company computes earnings per share under the provisions of ASC 260-10-45,
Earnings per Share, whereby basic earnings per share is computed by dividing net
income (loss) attributable to all classes of common shareholders by the weighted
average number of shares of all classes of common stock outstanding during the
applicable period. Diluted earnings per share is determined in the same manner
as basic earnings per share except that the number of shares is increased to
assume exercise of potentially dilutive and contingently issuable shares using
the treasury stock method, unless the effect of such increase would be
anti-dilutive. For the
years ended April 30, 2010 and 2009, the diluted earnings per share amounts
equal basic earnings per share because the Company had net losses and the impact
of the assumed exercise of contingently issuable shares would have been
anti-dilutive.





ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK





Not
applicable.





ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA





Financial
Statements are listed in the Index to Financial Statements and filed and
included elsewhere herein as a part of this Annual Report on Form
10-K.





ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE





None





ITEM
9A. CONTROLS AND PROCEDURES





DISCLOSURES
CONTROLS AND PROCEDURES




We have
adopted and maintain disclosure controls and procedures (as such term is defined
in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") that are designed to provide reasonable assurance
that information required to be disclosed in our reports under the Exchange Act,
is recorded, processed, summarized and reported within the time periods required
under the SEC's rules and forms and that the information is gathered and
communicated to our management, including our Chief Executive Officer (Principal
Executive Officer) and Chief Financial Officer (Principal Financial
Officer), as appropriate, to allow for timely decisions regarding required
disclosure.
 
 Our Chief
Executive Officer and our Chief Financial Officer evaluated the
effectiveness of our disclosure controls and procedures as of April 30, 2010, as
defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Our management
recognizes that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving their objectives
and management necessarily applies its judgment in evaluating the cost-benefit
relationship of possible controls and procedures. Based on the evaluation of our
disclosure controls and procedures as of April 30, 2010, our Chief Executive
Officer, who also is our principal executive officer, and our Chief Financial
Officer, who is our principal financial officer, concluded that, as of such
date, our disclosure controls and procedures were effective to provide
reasonable assurance that information required to be declared by us in reports
that we file with or submit to the SEC is (1) recorded, processed, summarized,
and reported within the periods specified in the SEC’s rules and forms and (2)
accumulated and communicated to our management, including our Chief Executive
Officer, to allow timely decisions regarding required
disclosure.


34


MANAGEMENT’S
ANNUAL REPORT ON INTERNAL CONTROL OVER FINICAL REPORTING





Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act. Our internal control over financial reporting is
designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. Our internal control
over financial reporting includes those policies and procedures that are
intended to:





1.
            pertain to the maintenance of
      records that, in reasonable detail, accurately and fairly reflect the
      transactions and dispositions of our
  assets;





2.
            provide reasonable assurance that
      transactions are recorded as necessary to permit reparation of financial
      statements in accordance with generally accepted accounting principles,
      and that our receipts and expenditures are being made only in accordance
      with authorizations of our management and directors;
      and





3.
            provide reasonable assurance
      regarding prevention or timely detection of unauthorized acquisition, use,
      or disposition of our assets that could have a material effect on our
      financial statements.





Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.





Management's
assessment of the effectiveness of the small business issuer's internal control
over financial reporting is as of the year ended April 30, 2010. We believe that
internal control over financial reporting is effective. We have not identified
any, current material weaknesses considering the nature and extent of our
current operations and any risks or errors in financial reporting under current
operations.




This
annual report does not include an attestation report of the Company's registered
public accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by the Company's registered
public accounting firm pursuant to temporary rules of the SEC that permit the
Company to provide only management's report in this annual report.





There was no change in our internal
control over financial reporting that occurred during the fiscalyearended April 30, 2010, that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.





ITEM
9B. OTHER INFORMATION





None.




ITEM
10.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CORPORATE GOVERNANCE




Below are
the names and certain information regarding the Company’s executive officers and
directors.


35





Name
            
            Age
            
            Positions and OfficesJ.
      Patrick Kenny
            
            53
            
            President,
      Chief Executive Officer, Chief Financial Officer, Principal Accounting
      Officer, and Chairman of the Board of DirectorsJason
      Lazo
            
            43
            
            Chief
      Operating OfficerBruce
      Klein
            
            54
            
            DirectorMarvin
      Traub
            
            84
            
            DirectorFredrick
      Schulman
            
            57
            
            DirectorHubert
      Millet
            
            73
            
            DirectorJack
      Kleinert
            
            51
            
            Director





J.
Patrick Kenny has served as the Chairman and Chief Executive Officer of Drinks
Americas, Inc. (“DA”) since it was founded in September 2002 and as Chairman of
the Company since January 2009.  DA acquired control of the Company in
March 2005.  Mr. Kenny has been our President and Chief Executive
Officer, and a member of our Board of Directors, since March 2005. He is a
former Senior Vice President and General Manager of Joseph E. Seagram & Sons
("Seagram"), for which he held a variety of senior management positions over 22
years, with increasing levels of responsibility in Seagram's wine, wine cooler,
alcoholic and non-alcoholic beverage divisions. Mr. Kenny
assumed the responsibilities of the Company’s Principal Accounting Officer on
November 2, 2009.
  Mr. Kenny
managed Seagram's worldwide carbonated soft drink operations from 1992 through
March 2000. He held the title of Senior Vice President and General Manager when
he left Seagram in March 2000, prior to its sale to Vivendi Universal. In April
2000, he co-founded Sweet16 Intermedia, Inc., a trademark licensing and media
company which was sold to TEENTV Inc., a media company for chain retailers and
mall properties. He has also acted as adviser to several Fortune 500 beverage
marketing companies, and has participated in several beverage industry
transactions. Prior to joining Seagram, Mr. Kenny was employed in a range of
sales and sales management positions with Scott Paper Co. and then Coca Cola's
Wine Spectrum. Mr. Kenny initially attended West Point (U.S. Military Academy),
until an athletic injury required lengthy treatment. He later received a B.A. at
Georgetown University, and an M.A. at St. Johns University in New York. Mr.
Kenney’s knowledge and expertise in the Company’s industry, his history with the
Company, his management skills and other business experience and acumen led to
the Board’s conclusion that Mr. Kenny should serve as Chairman of our board of
directors.





Jason
Lazo has served as our Chief Operating Officer since March 2005 and the Chief
Operating Officer of DA since May, 2003. From December 1997 to May 2003, he
worked for Seagram as Director of Finance, during which he served in the Mixers
Group of Seagram working with Mr. Kenny. From January 1990 to December 1997, Mr.
Lazo worked at Kraft Foods as Manager of Business Analysis, with responsibility
for the Capri Sun and Kool-Aid Koolburst, and Ready to Drink Country Time &
Crystal Lite brands. He has also worked as a Kraft Foods Plant Controller,
managing the start-up of Capri Sun and Lender's Bagels. He has worked in
logistics and procurement for Kraft Foods central manufacturing organization and
in corporate finance for Entenmann's Bakeries, Inc. He received a B.S. in
Finance and an M.S. in Accounting from Long Island University.





Bruce K.
Klein has served as the Vice Chairman of the Board of DA since it was founded in
September 2002 and had been our Chairman of the Board from March 2005 to January
2009. Since February 1999, he has served as the Managing Partner of Victory
Partners LLC, a company created to fund private businesses in their early
stages. In the last five years Victory has funded six businesses in technology,
vitamins and internet services areas, of which three have became public
companies and three remain private. From 1992 to 1997 Mr. Klein was a registered
representative of the Equitable Companies, responsible for sales and services to
high income clients, acting as investment advisor and estate planner to an
exclusive client base. From 1986 to 1991, Mr. Klein served as President of
Transatlantic Exports Corp., where his duties included purchasing and exporting
of finished and contract goods throughout Europe and Africa. From 1980 through
1991, Mr. Klein owned several retail businesses in lumber, hardware home centers
and decorating. He received a B.S. in Finance and an M.BA in Marketing from
Farleigh Dickinson University. Mr. Klein’s history with the Company, his
management skills and other business experience and acumen led to the Board’s
conclusion that Mr. Klein should serve as a member of our board of
directors.


Marvin
Traub was an initial investor with Mr. Kenny in Maxmillian Partners, LLC, a
former affiliate of DA. He joined our Board of Directors in March 2005. From
1969 to 1991, he served as the President and Chairman of Bloomingdales. His
background is in marketing, retail, home furnishings and apparel. Mr. Traub
serves as President of his own marketing and consulting firm, Marvin Traub
Associates ("MTA"), which he founded in 1992. MTA is a unique consulting firm
with great expertise in global retailing, marketing and consumer goods products.
Prior to that, Mr. Traub served as Chairman of Finance Global Consulting, the
consulting arm of Finance, Inc., where he was Senior Advisor.


36


Mr. Traub
is the author of "Like No Other Store..." a combination autobiography and
history of Bloomingdale's and American retailing. It was first published in 1993
by Random House and has since gone through three printings, two hardback and one
paperback. In the summer of 2008, Mr. Traub’s second book, “Like No Other
Career...” a sequel to “Like No Other Store...” was published by Assouline and
launched worldwide in October 2008 in Paris. Mr. Traub's consulting clients
include American Express, Ralph Lauren, Jones New York, Saks Fifth Avenue,
Macy’s Department Stores, Nautica Europe, Lanvin-France, Coin-Italy, Men's
Health Magazine, Yue Sai Kan-China, Aishti-Lebonon, Quarter
206-Berlin,  the Time Warner Center at Columbus Circle in New York,
Oscar de la Renta, Harvey Nichols – Dubai, The Tata Group – India, Attica
Department Store – Athens and Bloomingdales - Dubai. Along with two partners,
Mr. Traub created TSM Capital in 2007, a partnership that invests in midsize,
upscale apparel and accessory brands. The first two investments were Matthew
Williamson and Rachel Roy. In the Spring 2008, Mr. Traub, with other investors,
acquired Ellen Tracy form Liz Claiborne and serves as Chairman of Ellen Tracy in
the new enterprise.





Mr. Traub
graduated from Harvard College Magna Cum Laude in 1947 and Harvard Business
School with Distinction in 1949. Mr. Traub was the recipient of The Gold Medal
of the National Retail Federation in 1991 as well as the Legion d’ Honeur and
Order of Merit from France and was awarded the Commendatore de la Republic by
Italy. Mr. Traub’s knowledge and expertise in marketing, his history with the
Company, his management skills and other business experience and acumen led to
the Board’s conclusion that Mr. Traub should serve as a member of our board of
directors.
 
 Fredrick
Schulman served as the Chairman and President of Gourmet Group, Inc. (our
predecessor) from September 2000 until March of 2005 and he has been a member of
our Board of Directors since March 2005. He has 25 years of experience in
corporate and commercial finance, venture capital, leveraged buy outs,
investment banking and corporate and commercial law. Mr. Schulman's career
includes key positions with RAS Securities in New York from 1994 to 1998 as
General Counsel and Investment Banker, eventually becoming Executive Vice
President and Director of Investment Banking. From 1999 to September 2001, he
was President of Morgan Kent Group, Inc, a venture capital firm based in New
York and Austin, Texas. Since September 2003, Mr. Schulman has served as
Chairman of Skyline Multimedia Entertainment, Inc., and, since September 2002,
he has served as President and Director of East Coast Venture Capital, Inc., a
specialized small business investment company and community development entity
based in New York. Since September 2006, Mr. Schulman also has served as
chairman of the board of directors of NewBank, a New York charted commercial
bank. Mr. Schulman’s knowledge and expertise in the industry, his history with
the Company, his management skills and other diverse business experience and
acumen led to the Board’s conclusion that Mr. Schulman should serve as a member
of our board of directors.





Hubert
Millet joined our Board of Directors in March 2007. Mr. Millet has over 40 years
experience in consumer products and has spent over 20 years in senior management
positions in the beverage industry. Since 2000, Mr. Millet has acted as an
international consultant to various clients in the beverage industry. From 1989
through 2000, Mr. Millet worked for The Seagram Company Ltd where he served as a
member of the Seagram Spirits & Wine Executive Council. From 1991 through
1997, he served as the President of Seagram Global Brands Division where he was
responsible for production and business development for Martell Cognacs, Mumm
and Perrier-Jouet Champagnex and Barton & Guestier wines, as well as scotch
whiskey operations (Chivas Brothers and Glenlivet). From 1989 through 2000 Mr.
Millet was the Chief Executive Officer and Chairman of Seagram's Mumm Martell
Group. Mr. Millet has previously served as Chairman of Barton & Guestier SA,
a member of the Board of Directors of Martell Cognac, a member of the Board of
Directors and Chief Executive Officer of G.H. Mumm, a member of the Board of
Directors and Chief Executive Officer of Perrier-Jouet, a member of the Board of
Directors of Tropicana Europe, and Chairman of the Board of Directors of Herve
Leger (Fashion Co.). From 1977 through 1989, Mr. Millet worked for Groupe
Cointreau where he served in various roles, including the Chief Executive
Officer of the Cointreau Group and as Cointreau's Finance & Development
Director. From 1970 through 1977, Mr. Millet worked for the British American
Tobacco Company, Cosmetics and Beauty Products Division, where he served in
various roles including as a Vice President responsible for finance and
development with respect to the divisions of European operation.





Mr.
Millet has also served as a member of the Board of Directors of Parfums Hermes
(1982-2007), a member of the Hermes Group Strategic Committee (1982-2001), and
serves as a member of the Board of Directors of Hermes USA, and a member of the
Board of Directors of The Savannah College of Art and Design.  Mr.
Millet was the French consul in Savannah, Georgia from 2001 to 2006. Millet has
been the recipient of various rewards, including Officier de la Legion
d'honneur, Officer dans l'Ordre National du Merite and Medaille Commemorative
d'Algerie. Mr. Millet’s knowledge and expertise in our industry, his management
skills and other diverse business experience, and his prior directorships led to
the Board’s conclusion that Mr. Millet should serve as a member of our board of
directors.


37


Jack
Kleinert joined our Board of Directors in April 2010. He is the CEO and
co-founder of Velocity Portfolio Group (VPG). Founded in 2003, VPG purchases
distressed consumer receivables and liquidates the receivables using its
nationwide legal network.  Prior to founding VPG, Mr. Kleinert ran his
own private investment group, JCK Investments.  For 15 years beginning
in 1982, Mr. Kleinert worked for Goldman Sachs. He was elected as a General
Partner of the firm in 1994 and retired as a Limited Partner at the end of 1997.
Mr. Kleinert is a graduate of Princeton University with a Bachelor of Science
degree in Chemical Engineering.  He resides in Franklin Lakes, NJ with
his wife and four children. Mr. Kleinert’s management skills and other diverse
business experience and acumen led to the Board’s conclusion that Mr. Kleinert
should serve as a member of our board of directors.


Save as
otherwise reported above, none of our directors hold directorships in other
reporting companies and registered investment companies at any time during the
past five years.




There are
no family relationships among our directors or officers.




INVOLVEMENT
IN CERTAIN LEGAL PROCEEDINGS




To our
knowledge, during the last ten years, none of our directors and executive
officers (including those of our subsidiaries) has:




·
            Had
      a 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.





·
            Been
      convicted in a criminal proceeding or been subject to a pending criminal
      proceeding, excluding traffic violations and other minor
      offenses.





·
            Been
      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
      involvement in any type of business, securities or banking
      activities.





·
            Been
      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.




·
            Been
      the subject to, or a party to, any sanction or order, not subsequently
      reverse, suspended or vacated, of any self-regulatory organization, any
      registered entity, or any equivalent exchange, association, entity or
      organization that has disciplinary authority over its members or persons
      associated with a member.





SECTION
16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE




Section
16(a) of the Securities Exchange Act of 1934, as amended, requires our
directors, executive officers and beneficial owners of more than 10% of our
common stock to file with the SEC reports of their holdings of and transactions
in our common stock. Based
solely upon our review of copies of such reports and representations from
reporting persons that were provided to us, Bruce Klein did not file a Form 5
with respect to our last fiscal year and we are unsure whether such form was
required to be filed


CODE
OF ETHICS




The
Company has adopted a written code of ethics that applies to the Company's
principal executive officer, principal financial officer, principal accounting
officer and any persons performing similar functions. The Company will provide a
copy of its code of ethics to any person without charge upon written request
addressed to 372 Danbury Road, Wilton, CT 06897.


38




CHANGES
IN NOMINATING PROCESS




There are
no material changes to the procedures by which security holders may recommend
nominees to our Board of Directors.




COMMITTEES
OF THE BOARD




Our
Board of Directors has established an Audit Committee and a Compensation
Committee.





AUDIT
COMMITTEE




Our Audit
Committee consists of Fredrick Schulman as Chairman and Marvin Traub. Our
Audit Committee is responsible for preparing reports, statements and charters
required by the federal securities laws, as well as:





·
            overseeing and monitoring the
      integrity of our consolidated financial statements, our compliance with
      legal and regulatory requirements as they relate to financial statements
      or accounting  matters, and our internal accounting and
      financial controls;





·
            preparing the report that SEC
      rules require be included in our annual proxy
      statement;





·
            overseeing and monitoring our
      independent registered public accounting firm's qualifications,
      independence and
performance;





·
            providing the Board with the
      results of our monitoring and  recommendations;
      and





·
            providing to the Board additional
      information and materials as it deems necessary to make the Board aware of
      significant financial  matters that require the attention of the
      Board.





The Board
has determined that all current members of the Audit Committee have the ability
to read and understand fundamental financial statements. The Board has also
determined that Fredrick Schulman qualifies as "Audit Committee financial
expert" as defined under Item 407 of Regulation S-K of the Securities Exchange
Act of 1934 (the "Exchange Act"). Mr. Schulman, in his capacity as Chairman and
Chief Executive Officer of Gourmet Group, Inc. (our predecessor company) for
over four years, directly supervised the financial staff of the Company and
coordinated the preparation of the Company's financial statements with its
outside auditors. Neither Mr. Schulman nor Mr. Traub would be viewed as an
independent member of the Audit Committee under the NASDAQ corporate governance
rules.




COMPENSATION
COMMITTEE




The
Compensation Committee consists of Bruce Klein as Chairman, Fredrick Schulman
and Marvin Traub. The Compensation Committee assists the Board in fulfilling its
oversight responsibilities relating to officer and director compensation and the
development and retention of senior management.





NOMINATING
COMMITTEE




The Board
does not have a standing nominating committee. The Company does not maintain a
policy for considering nominees.  Director nominees are recommended,
reviewed and approved by the entire Board. The Board believes that this
process is appropriate due to the relatively small number of directors on the
Board and the opportunity to benefit from a variety of opinions and perspectives
in determining director nominees by involving the full Board.





While the
Board is solely responsible for the selection and nomination of directors, the
Board may consider nominees recommended by Stockholders as it deems appropriate.
Stockholders who wish to recommend a nominee should send nominations to the
Company's Chief Executive Officer, J. Patrick Kenny, 372 Danbury Road, Wilton,
CT 06897, that include all information relating to such person that is required
to be disclosed in solicitations of proxies for the election of directors. The
recommendation must be accompanied by a written consent of the individual to
stand for election if nominated by the Board and to serve if elected by the
Stockholders.


39




ITEM
11. EXECUTIVE COMPENSATION





COMPENSATION
OF EXECUTIVE OFFICERS





The
following table shows for fiscal years ended April 30, 2010 and 2009,
respectively, certain compensation awarded or paid to, or earned by, the
following persons (collectively, the "Named Executive Officers"): J. Patrick
Kenny, our President, Chief Executive Officer and Principal Accounting Officer,
and Jason Lazo, our Chief Operating Officer, whose total compensation exceeded
$100,000 in 2010 and 2009.





SUMMARY
COMPENSATION TABLE




NAME
      AND
                                                                      PRINCIPAL
      POSITION
                                                                    FISCAL
                                                                      YEAR
                                                                    
                                                                    SALARY
                                                                      ($)
                                                                    
                                                                    
                                                                    BONUS
                                                                      ($)
                                                                    
                                                                    
                                                                    STOCK
                                                                      AWARDS
                                                                      ($)
                                                                    
                                                                    
                                                                    OPTION
                                                                      AWARDS
                                                                      ($)
                                                                    
                                                                    
                                                                    ALL OTHER
                                                                      COMPENSATION
                                                                      ($)
                                                                    
                                                                    
                                                                    TOTAL
                                                                      ($)J.
      Patrick Kenny
                                                                    2010
                                                                    
                                                                    $
                                                                    300,000
                                                                    
                                                                    
                                                                    
                                                                    0
                                                                    
                                                                    
                                                                    $
                                                                    180,000
                                                                    
                                                                    
                                                                    $
                                                                    56,250
                                                                    
                                                                    
                                                                    $
                                                                    45,667
                                                                    
                                                                    
                                                                    $
                                                                    581,917Chief
      Executive
                                                                    2009
                                                                    
                                                                    $
                                                                    300,000
                                                                    
                                                                    
                                                                    $
                                                                    —
                                                                    
                                                                    
                                                                    $
                                                                    —
                                                                    
                                                                    
                                                                    $
                                                                    7,551
                                                                    
                                                                    
                                                                    $
                                                                    6,959
                                                                    
                                                                    
                                                                    $
                                                                    314,510Officerand
      Chief
                                                                      Financial
      Officer(1)Jason
      Lazo
                                                                    2010
                                                                    
                                                                    175,000
                                                                    
                                                                    
                                                                    0
                                                                    
                                                                    
                                                                    18,149
                                                                    
                                                                    
                                                                    11,250
                                                                    
                                                                    
                                                                    0
                                                                    
                                                                    
                                                                    204,399Chief
      Operating
                                                                    2009
                                                                    
                                                                    
                                                                    175,000
                                                                    
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    40,000
                                                                    
                                                                    
                                                                    
                                                                    1,510
                                                                    
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    216,510Officer
      (2)





(1)
            Mr. Kenny has accrued
      substantial amounts of his salary(approximately $643,000) as of April 30,
      2010 and approximately $457,000 as of April 30, 2009 as well as providing
      the Company with approximately $155,000 in working capital, related party
      loans as of April 30, 2010 and $306,000 as of April 30, 2009 as reflected
      on our balance sheets.Stock Awards for
      the fiscal year ended 2010, represents a $20,000 bonus awarded by the
      Board to Mr. J. P. Kenny our CEO, for signing a distribution agreement
      with one of the Company’s celebrity icon’s and $160,000, represents the
      value of the 50% bonus shares issued January 11, 2009 for pledging shares
      associated with the St. George financing transaction. In fiscal 2009, Mr.
      Kenny converted $10,000 of compensation due him into
      28,571 shares of the Company’s common stock which amount is included
      in salary in the above table.  Option Awards represents the
      dollar value of expenses recognized for financial statement purposes with
      respect to 2009 Stock Incentive Plan options that have vested since date
      of grant. Stock Awards for fiscal year 2009, represent the dollar amount
      of expenses recognized for financial statement purposes for the fair value
      of incentive stock options issued under our  2008 Stock
      Incentive Plan (the” Plan”)  which was approved by our
      shareholders in January 2009 that provides incentive awards of
      non-qualified stock options, stock, restricted stock and stock
      appreciation rights for its officers, employees, consultants and directors
      in order to attract and retain such individuals and to enable
      them  to participate in the long-term success and growth of the
      Company. (See Note 13 – Stock Incentive Plans to our consolidated
      financial statements included in this Form 10-K.) For fiscal 2010, all
      other compensation is comprised of personal medical insurance premiums,
      $24,262; life insurance, $9,820 and an automobile allowance, $11,585. For
      fiscal 2009, all other compensation of $6,959 represents payments of
      personal major medical and life insurance
      premiums.










40


(2)
            Stock
      Awards for the fiscal year ended 2010, represents the value of the 50%
      bonus shares issued January 11, 2009 for pledging shares associated with
      the St. George financing transaction. Option Awards represents the dollar
      value of expenses recognized for financial statement purposes with respect
      to 2009 Stock Incentive Plan options that have vested since date of grant.
      Stock Awards for fiscal 2009, ($40,000) represents the issuance
      of 250,000 shares of our common stock to Mr. Lazo as a bonus
      for  services provided the Company at fair market value on the
      date of grant valued in accordance with FAS 123R at $0.16 per
      share.





INCENTIVE
PLANS





In
January 2009, the Company’s shareholders approved the 2008 Stock Incentive Plan
(the “Plan”) which provides for awards of incentives of non-qualified stock
options, stock, restricted stock and stock appreciation rights for its officers,
employees, consultants and directors in order to attract and retain such
individuals and to enable them  to participate in the long-term
success and growth of the Company. Stock options granted under the Plan are
granted with an exercise price at or above the fair market value of the
underlying common stock at the date of grant, generally vest over a four year
period and expire 5 years after the grant date.





Also on
March 12, 2009, the Company granted 1,175,000 shares of its common stock
under the Plan to several of  its employees as consideration for
past services they have performed for the Company. The stock awards vested
immediately upon grant. The stock we issued to our Named Executive Officers were
valued based on the market price of the shares on the Over-The-Counter Bulletin
Board on the date the shares were granted.


41


OUTSTANDING
EQUITY AWARDS AT FISCAL 2010





The
following table lists all outstanding equity awards held by each of the Named
Executive Officers as of April 30, 2010.




Equity Awards
                              
                              Stock AwardsEquity
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              Equity
                              
                              EquityIncentive
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              Incentive
                              
                              IncentiveNumber of
                              
                              
                              Number of
                              
                              
                              Plan Awards:
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              Plan Awards:
                              
                              Plan Awards:Unearned
                              
                              
                              Unearned
                              
                              
                              Number of
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              Market
                              
                              Number of
                              
                              Market Valuesecurities
                              
                              
                              securities
                              
                              
                              Securities
                              
                              
                              
                              
                              
                              
                              Number of
                              
                              
                              Value of
                              
                              Unearned
                              
                              Of UnearnedUnderlying
                              
                              
                              Underlying
                              
                              
                              Underlying
                              
                              
                              
                              
                              
                              
                              Shares or
                              
                              
                              Stock
                              
                              Shares, Units
                              
                              Shares, UnitsUnexercised
                              
                              
                              Unexercised
                              
                              
                              Unexercised
                              
                              
                              Option
                              
                              
                              
                              Units of Stock
                              
                              
                              that
                              
                              or Other
                              
                              or OtherOptions
                              
                              
                              Options
                              
                              
                              Unearned
                              
                              
                              Exercise
                              
                              Option
                              
                              That Have
                              
                              
                              Have Not
                              
                              Rights That
                              
                              Rights That(#)
                              
                              
                              (#)
                              
                              
                              Options
                              
                              
                              Price
                              
                              Expiration
                              
                              Not Vested
                              
                              
                              Vested
                              
                              Have Not
                              
                              Have NotNAME
                              
                              Exercisable (1)
                              
                              
                              Inextricable
                              
                              
                              (#)
                              
                              
                              ($)
                              
                              Date (2)
                              
                              (#)
                              
                              
                              ($)
                              
                              Vested (#)
                              
                              Vested ($)J.
      Patrick Kenny
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              2,500,000
                              
                              
                              
                              0.176
                              
                              03/11/14
                              
                              
                              -
                              
                              
                              
                              -
                              
                              1,875,000
                              
                              $
                              25,500Jason
      Lazo
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              500,000
                              
                              
                              
                              0.160
                              
                              03/11/14
                              
                              
                              -
                              
                              
                              
                              -
                              
                              375,000
                              
                              $
                              5,100





(1)
Options vest and become exercisable in four equal annual installments over the
course of four years.





(2) The
expiration date of each option occurs 5 years after the date of grant of each
option.




EMPLOYMENT
AGREEMENTS





We have
not entered into any employment agreements with our executive officers or other
employees to date. We may enter into employment agreements with them in the
future.




COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION




The
members of the Compensation Committee during the fiscal year ended 2010 were
Bruce Klein as Chairman, Fredrick Schulman and Marvin Traub. None of our members
of the Compensation Committee during the fiscal year ended 2100 served as an
officer or employee of the Company, was formerly an officer of the Company, or
had any relationship requiring disclosure required by Item 404 of Regulation
S-K.




42




DIRECTOR
COMPENSATION





The
following table represents a summary of the compensation paid to our directors
for their services on our board of directors during the fiscal year ended April 30,
2010. Except as listed below, there were no bonuses, other annual
compensation, restricted stock awards or stock options/SARs, or any other
compensation paid to the directors listed for their services as a director of
the Company. Except as disclosed in the table below,no
compensation was paid to our directors for their services as directors of the
Company for the fiscal year ended April 30, 2010.





Directors
Compensation for the Fiscal Year Ended April 30, 2010





Name
                      
                      Cash Fees
                        ($) (1)
                      
                      
                      Option
                        Awards
                        ($) (2)
                      
                      
                      Total
                        ($)Bruce
      Klein
                      
                      $
                      25,000
                      
                      
                      $
                      -
                      
                      
                      $
                      25,000Thomas
      Schwalm (Deceased)
                      
                      
                      25,000
                      
                      
                      
                      -
                      
                      
                      
                      25,000Marvin
      Traub
                      
                      
                      25,000
                      
                      
                      
                      -
                      
                      
                      
                      25,000Fredrick
      Schulman
                      
                      
                      25,000
                      
                      
                      
                      -
                      
                      
                      
                      25,000Hubert
      Millet
                      
                      
                      25,000
                      
                      
                      
                      -
                      
                      
                      
                      25,000Jack
      Kleinert (3)
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -





(1)
            Cash
      fees represent amounts earned but not paid in fiscal 2010 for services
      rendered as a director.


(2)
              Nooptionswereawardedto our
      directors as compensation for the fiscal year ended April 30, 2010. Thomas
      Schwalm passedin fiscal
      2010.


(3)
                Jack Kleinert was appointed
      to our Board of Directors effective April 26,
2010.


In fiscal
2010, our CEO earned interest of $38,231on loans he made to the
Company.In fiscal 2010, companies wholly owned
by Marvin Traub and Bruce Klein earned consulting fees of $100,000 and $84,550,
respectively, for work not related to serving on our board. In addition, in
fiscal 2010, we issued Fred Schulman 394,853shares of our common stock with an
aggregate value of $7,897 for legal services rendered to our Company (See
“Certain Relationships and Related Party
Transactions”).




ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATEDSHAREHOLDER MATTERS





SECURITIES
AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS




Please
refer to “Securities Authorized for Issuance Under Equity Compensation Plans”
under Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities.




43




SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS




The
following table sets forth, as ofJuly 31,2010, certain information
regarding the ownership of our voting securities by each stockholder known to
our management to be (i) the beneficial owner of more than 5% of our outstanding
common stock, (ii) our directors, (iii) our named executive officers, (v) two
additional employees of the Company whose received total compensation of greater
than $100,000 in fiscal 2009, and (iv) all executive officers and directors as a
group. We believe that, except as otherwise indicated, the beneficial owners of
the Common Stock listed below, based on information furnished by such owners,
have sole investment and voting power with respect to such shares. Percentage of
ownership is basedon359,172,755sharesof Common
Stock issued and outstanding at July 31,
2010, plus, as to the holder thereof only and no other person, the number
of shares of Common Stock which may be acquired on conversion of our preferred
stock or are subject to options, warrants and convertible debentures exercisable
or convertible within 60 days of July31, 2010, by that
person.





Number of Shares
                                                                                                                            of
                                                                                                                          
                                                                                                                          
                                                                                                                          Percentage ofCommon Stock
                                                                                                                          
                                                                                                                          
                                                                                                                          OutstandingName and Address of Beneficial Owner
                                                                                                                          
                                                                                                                          Beneficially Owned
                                                                                                                          
                                                                                                                          
                                                                                                                          SharesJ.
      Patrick Kenny
                                                                                                                          
                                                                                                                          
                                                                                                                          28,321,302
                                                                                                                          (1)
                                                                                                                          
                                                                                                                          
                                                                                                                          7.896
                                                                                                                          %30
      Old Wagon RoadWilton,
      CT 06877Bruce
      Klein
                                                                                                                          
                                                                                                                          
                                                                                                                          8.822,231
                                                                                                                          (2)
                                                                                                                          
                                                                                                                          
                                                                                                                          2.46
                                                                                                                          %123
      Elbert StreetRamsey,
      NJ 07446Jason
      Lazo
                                                                                                                          
                                                                                                                          
                                                                                                                          1,761,151
                                                                                                                          (3)
                                                                                                                          
                                                                                                                          
                                                                                                                          0.65
                                                                                                                          %144
      Wire Mill Rd.Stamford,
      CT 06903Marvin
      Traub
                                                                                                                          
                                                                                                                          
                                                                                                                          5,682,212
                                                                                                                          (4)
                                                                                                                          
                                                                                                                          
                                                                                                                          1.58
                                                                                                                          %535
      Fifth AvenueNew
      York, NY 10022Fredrick
      Schulman
                                                                                                                          
                                                                                                                          
                                                                                                                          3,287,831
                                                                                                                          (5)
                                                                                                                          
                                                                                                                          
                                                                                                                          0.92
                                                                                                                          %241
      Fifth Ave, Suite 302New
      York, NY 10016Hubert
      Millet
                                                                                                                          
                                                                                                                          
                                                                                                                          780,037
                                                                                                                          (6)
                                                                                                                          
                                                                                                                          
                                                                                                                          0.22
                                                                                                                          %102
      Queens Garden DrThousand
      Oaks, CA 91361Jack
      Kleinert
                                                                                                                          
                                                                                                                          
                                                                                                                          2,804,060
                                                                                                                          
                                                                                                                          
                                                                                                                          0.78
                                                                                                                          %c/o
      372 Danbury Road
                                                                                                                            Wilton,
      CT 06897All
      Directors, Officers, and Management as a group (7 persons)
                                                                                                                          
                                                                                                                          
                                                                                                                          51,458,824
                                                                                                                          
                                                                                                                          
                                                                                                                          14.33
                                                                                                                          %Enable
      Growth Partners, LP
                                                                                                                          
                                                                                                                          
                                                                                                                          25,320,534
                                                                                                                          (7)
                                                                                                                          
                                                                                                                          
                                                                                                                          7.05
                                                                                                                          %1
      Ferry Bldg Ste 255San
      Francisco, CA 94111TOTAL
                                                                                                                          
                                                                                                                          
                                                                                                                          359,172,755
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          100
                                                                                                                          %


44





(1)
Includes23,075,148 shares
owned by Kenny LLC I, and 2,000,000 shares owned by Kenny LLC II, entities
controlled by Mr. Kenny. and 625,000 stock options which have vested. Does not
include 5,423,103 shares owned by Brian Kenny, Mr. Kenny’s son; 136,150 shares
owned by Mr. Kenny’s daughter; and 191,263 shares owned by Mr. Kenny's brother;
as to which shares Mr. Kenny disclaims beneficial ownership; or options to
purchase 1,875,000 shares of our common stock which were granted to Mr.
Kennywhichwill not be exercisable within 60
days of  July 31, 2010.




(2)
Includes4,600,000 shares
owned by Peter Christian and Associates, LLC, and 1,500,633 shares owned by
Victory Partners, LLC, entities controlled by Mr. Klein; 55,556, shares owned by
Vigilant Investors, of which Mr. Klein is a partner, as well as 50% of 971,746
or 485,873 warrants to purchase our common stock. The balance of the warrants
will not be exercisable within 60 days of July 31, 2010.
Additionally,550,000 and 450,000 shares owned by Mr.
Klein’s wife and Mr. Klein’s two sons, respectively and fully vested options to
purchase 100,000 shares granted to Mr. Klein. Mr. Klein disclaims beneficial
ownership of the shares owned by his wife, his sons, and Vigilant
Investors.




(3) Includes 907,434 shares owned by
Lazo, LLC, an entity controlled by Mr. Lazo and 200,000 shares owned by Mr.
Lazo’s two daughters and 125,000 stock options which have vested. Does not
include non-vested options to purchase 375,000 shares of our common
stock which were granted to Mr. Lazo which will not be exercisable
within  60 days of  July 31, , 2010.




(4)
Includes fully vested options to purchase 100,000 shares, 50% of6,923,555or 3,461,778 warrants to purchase our
common stock. The balance of the warrants will not be exercisable within 60 days
of July 31, 2010.Does not include 22,222 shares owned by Mr. Traub's son, as to
which shares Mr. Traub disclaims beneficial
ownership.




(5) Includes 219,970 shares owned by
Mr. Schulman's wife, Lois Shapiro, to which shares Mr. Schulman disclaims
beneficial ownership, fully vested options to purchase 600,000 shares and 50% of
971,746 or 485,873 warrants to purchase our common stock. The balance of the
warrants will not be exercisable within 60 days of July 31,
2010.


45


(6)
Includes fully vested options to purchase 100,000 shares and 50% of 971,746 or
485,873 warrants to purchaseour common stock. The balance of the
warrants will not be exercisable within 60 days of July 31,
2010.




(7)
Includes 12,000,000 shares of our common stock and 1,834,853 shares purchasable
on conversion of convertible preferred stock. Does not include an additional
16,778,204 shares purchasable upon conversion of convertible preferred stock due
to provisions of the Certificate of Designation with respect to our Series A
Preferred Stock, which generally prevent conversion of the preferred stock if
conversion would result in beneficial ownership by the holder of greater than
9.99% of our shares.




EQUITY
COMPENSATION PLAN INFORMATION




On April
13, 2010, the Company filed a registration statement on Form S-8 and
registered 30,000,000 shares issuable under the 2010
Plan.Subsequent to April 30,2010, the Company has issued a total of5,547,717shares of Company common stock under
the 2010 Plan as compensation for legal and marketing servicesat a fair value of
$50,346and 24,452,283sharesremain available for future
issuanceunder the
2010 Plan.




On November
6, 2009, the Company filed a registration statement on Form S-8 and
registered  20,000,000 shares issuable under the 2009Stock IncentivePlan(the “2009 Plan”)The Company has issued a
total of13,597,353shares of Company common stock
under the 2009 Plan as compensation for legal and marketing services as of April
30,2009at a fair value of $ 316,450 which
vested immediately upon grant. Additionally,5,740,092 were issued subsequent to
year endas compensation
for legal and marketing services at a fair value of $ 65,667 and662,555sharesremain available for futureissuance under the 2009
Plan.




In January
2009, the Company’s shareholders approved the 2008 Stock Incentive Plan (the
“2008 Plan”) which provides for awards of incentives of non-qualified stock
options, stock, restricted stock and stock appreciation rights for its officers,
employees, consultants and directors in order to attract and retain such
individuals and to enable them to participate in the long-term success and
growth of the Company. Under the 2008 Plan, 10,000,000 common shares were
reserved for distribution, of which 9,275,000 have been issued and 725,000
remain available for future issuance.Of this amount 450,000 of shares issued
to employees were subsequently canceled when the employees terminated their
service with the Company.Stock options granted under the Plan
are granted with an exercise price at or above the fair market value of the
underlying common stock at the date of grant, generally vest over a four year
period and expire 5 years after the grant
date.




On November 9, 2009, the Company
granted 3,500,000 shares under the 2008 Plan at fair value of $132,000 to
several consultants, which vested immediately upon grant, as compensation for
legal and marketing services.





Subject
to the terms of the Plan, the plan administrator, which may be the Company's
Board of Directors, shall determine the provisions, terms, and conditions of
each award including, but not limited to, the vesting schedules, repurchase
provisions, rights of first refusal, forfeiture provisions, form of payment
(cash, shares, or other consideration) upon settlement, payment contingencies,
performance criteria for vesting and other matters.


46


On March
12, 2009, the Company granted an aggregate of 5,775,000 options
under the Plan to various employees, the directors of the Company, and
to two consultants to the Company.  The exercise price of the
options granted to employees, directors and one of the consultants was at
the fair market value of the underlying common stock at the date of grant (other
than those issued to our CEO which was at a 10% premium to the market value).
The exercise price of the options granted to the other consultant, $0.35, was
above the fair market value of the underlying common stock at the date of
grant.





The
Company issued an aggregate of 4,175,000 options to purchase shares of its
common stock to its employees including 2,500,000 to its CEO, 500,000 to its COO
and 300,000 to its CFO.  The options granted to employees of
the Company vest over a four year period and expire five years after the grant
date.   The options awarded to the directors (1,000,000) of the
Company and the consultants (600,000) vested immediately upon grant. Also on
March 12, 2009, the Company granted 1,175,000 shares of its common stock
under the Plan to several of its employees as consideration for past
services they have performed for the Company.




A summary
of the options outstanding under our Plans as of April 30, 2010 and 2009 is as
follows:





2010
                
                
                2009Shares
                
                
                Weighted
                  Average
                  Exercise
                  Price
                
                
                Shares
                
                
                Weighted
                  Average
                  Exercise
                  PriceOutstanding
      at beginning of period
                
                
                5,775,000
                
                
                $
                0.18
                
                
                
                -0-
                
                
                $
                -Granted
                
                
                17,097,353
                
                
                
                0.03
                
                
                
                5,775,000
                
                
                
                0.18Forfeited
                
                
                (450,000
                )
                
                
                0.16
                
                
                
                -
                
                
                
                -Outstanding
      at end of period
                
                
                22,422,353
                
                
                $
                0.06
                
                
                
                5,775,000
                
                
                $
                0.18Exercisable
      at end of period
                
                
                19,628,603
                
                
                $
                0.05
                
                
                
                1,600,000
                
                
                $
                0.22Weighted
      average fair value of grants during the period
                
                
                
                
                
                $
                0.03
                
                
                
                
                
                
                $
                0.09





CHANGES
IN CONTROL




There are
no arrangements known to the Company, including any pledge by any person of
securities of the Company, the operation of which may at a subsequent date
result in a change in control of the Company.




ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE




TRANSACTIONS
WITH RELATED PERSONS




Related
parties can include any of our directors or executive officers, certain of our
stockholders and their immediate family members. A conflict of interest occurs
when an individual’s private interest interferes, or appears to interfere, in
any way with the interests of the company as a whole. Our code of ethics
requires all directors, officers and employees who may have a potential or
apparent conflict of interest to immediately notify his/her supervisor, who is
responsible for consulting with the Chief Executive Officer or Chair of the
Governance Committee of the Board of Directors, as appropriate. The Board of
Directors has adopted rules for what activities constitute conflicts of interest
and potential conflicts of interests, as well as procedures for determining
whether a relationship or transaction constitutes a conflict of interest. The
current version of these rules and procedures are set forth in our Code of
Ethics.
 
 Set forth
below are descriptions of transactions with related persons for the fiscal year
ended April 30, 2010:




Consulting
and Marketing Fees




For each of
the years ended April 30, 2010 and 2009, the Company incurred fees for services
rendered related to sales and marketing payable to a limited liability company
which was controlled by Bruce Klein, a member of the Company’s board of
directors, and previous chairman of the board. As of April 30, 2010 and 2009
unpaid fees owed to the director’s firm, aggregated $91,000 and $174,550,
respectively.On April 28, 2010, in accordance with
an agreement made in October 2009 with the Board of Directors by the CEO to
settle the outstanding amount due of $84,550, the Company issued 563,667 shares
of its common stock in satisfaction of consulting
fees.


47


In fiscal
2003 we entered into a consulting agreement with a company wholly owned by
Marvin Traub, a member of the Company's board of directors. Under the
agreement the consulting company is being compensated at a rate of $100,000 per
annum.The consulting
agreement terminated April 30, 2010.As of April 30, 2010 and 2009 we were
indebted to the consulting company in the amount of $50,000 and $256,248,
respectively.On April 29, 2010, in accordance with
anagreement made in
October 2009 with the Board of Directors by the CEO to settle the outstanding
amount due of$306,243, the Company issued a
warrant to acquire 5,951,809 shares of our common
stock.




On October
20, 2009, the Company reached agreements with its Chief Executive Officer and
members of its Board of Directors to satisfy obligations owed to them, in the
aggregate amount of $1,002,450 for salary, director fees, consulting fees and
for satisfaction of a portion of an outstanding loan and the interest accrued
thereon, by issuing to them 1,763,607 shares of our common stock and warrants to
acquire 9,838,793 shares of our common stock. Under this arrangement, the
valuation of the common stock and the exercise price of the warrants was $0.15 a
share.  Fifty percent of the warrants can be exercised at anytime
during the ten-year term and the other 50 percent will only be exercisable when
the Company has achieved positive EBITDA for two successive
quarters.  If this profitably standard is not realized during the term
of the warrants, 50 percent of the warrants will be forfeited. On April 28
and 29, 2010, the Company issued 1,763,667 shares of common stock in
satisfaction of $264,550 of director fees, consulting fees and $130,000 of the
Chief Executive Officer’s past-due salary and 9,838,793 warrants in satisfaction
of$506,243 of director fees and
consulting fees.




In October
2009, upon the resignation of Brian Kenny as VP Marketing of the
Company,we entered into a marketing
consulting agreement with a company controlled by Brian Kenny to provide
marketing services to the Company at the annual rate of $144,000.Brian Kenny is the son of our CEO, J.
Patrick Kenny. For the fiscal year ended April 30, 2010, we issued 4,582,000options in aggregate which
vested 100% upon grantat avalue of$88,000 formarketingconsultingservices he provided the
Company.




Legal
Fees




On March
12, 2009, the Company granted to Fredrick Schulman, a member of our board of
directors, options to purchase 600,000 shares of our Company stock, under our
Plan, for legal services he provided the Company. The fair market value of
the options issued, which vested 100% upon grant, aggregated
$54,000.On February 11, 2010, the Company also
issued 394,853 with a fair value of $7,897 for legal services he provided the
Company.




Royalty
Fees




We
incurred royalty expenses of approximately $74,027 and $62,000 in fiscal
2010 and 2009, respectively, to Alive Sprits LLC which we own 25 percent
membership interest.




Loan
Payable




From July
2007 through April 2010, the Company has borrowed an aggregate of up to $813,035
from J. Patrick Kenny, our CEO, for working capital
purposes.   The borrowings bear interest at 12% per annum.
For the years ended April 30, 2010 and 2009 interest incurred on this loan
aggregated 38,231 and $38,204, respectively.  As of April 30,
2010 and, 2009 amounts owed to our CEO on these loans including accrued and
unpaid interest aggregated$154,670 and $305,935,
respectively.


48


Independence
of Directors





The Board
of Directors has determined that each of our directors, except Mr. Kenny and Mr.
Klein, are independent “directors” within the meaning of the applicable rules
and regulations of the SEC and the director independence standards of NASDAQ.
Neither Mr. Schulman nor Mr. Traub would be viewed as an independent member of
the Audit Committee under NASDAQ corporate governance rules





ITEM
14. PRINCIPAL ACCOUNTANTS' FEES AND SERVICES





Set forth
below are the fees billed by the Company’s independent principal accountants for
the past two
years for services provided to the Company.





Audit
and Audit-Related Fees





We
engaged Bernstein & Pinchuk, LLP as our principal accountants to perform the
audit of our financial statements for the year ended April 30, 2010. During the
year ended April 30, 2010 we were billed $102,524. The
$102,524 billed during the fiscal year ended April 30, 2010 is comprised of the
following: $65,586, for the year ended April 30,
2009 audit; $33,763, for three subsequent quarterly reviews; and $3,175, for
reviews of two Form S-8 filings.During the year ended April 30,
2009, we were billed $107,000 including amounts billed for the audit of the
Company for the year ended April 30, 2008 and fees related to quarterly reviews
for the year ended April 30, 2009. These fees include required audits and
reviews of Olifant USA, Inc. a Company which we acquired 90%
of  the common stock during our 2009 fiscal year. We have not yet been
billed for the audit of the Company for the year ended April 30,
2010.





Tax
Fees





None.





All
Other Fees










ITEM
15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES





(a)
            The
      following documents are filed as part of this
  report:





(1)
            Financial
      Statements.





See
“Index to Financial Statements” in item 8 on
page     of this Annual Report on form
10-K.





(2)
            Financial
      Statement Schedules.





All
financial statement schedules are omitted either because they are not required,
not applicable or the required information is included in the financial
statements or notes thereto.





(3)
            Exhibits.





(b)Item 16.  
Exhibits





2.1
      (7)
                  Agreement
      and Plan of Share Exchange, dated as of June 9, 2004, among Gourmet Group,
      Inc., Drinks Americas, Inc. and the shareholders of Drinks Americas,
      Inc.3.1
      (7)
                  Certificate
      of Incorporation of Drinks Americas Holdings, Ltd.3.2
      (7)
                  By-Laws
      of Drinks Americas Holdings, Ltd.3.3
      (16)
                  Amended
      and Restated Certificate of Designations of Preferences, Rights and
      Limitations of Series A Convertible Preferred Stock3.4
      (12)
                  Certificate
      of Amendment of Certificate of Incorporation of Drinks Americas Holdings,
      Ltd. dated January 16, 20093.5
      (13)
                  Certificate
      of Designation of Series B Convertible Preferred
  Stock3.6
      (16)
                  Amended
      and Restated Certificate of Designation of Preferences, Rights and
      Limitations of Series A Convertible Preferred Stock4.1
      (7)
                  Form
      of 10% Convertible Promissory Note issued by Gourmet Group, Inc.,
      including Registration Rights
provisions.




49





4.2
      (3)
              Form
      of 10% Senior Convertible Promissory Note, dated March 2005, issued by
      Drinks Americas Holdings, Ltd. issued by Drinks Americas Holdings, Ltd. to
      investors in its Bridge Notes financing.4.3
      (3)
              Form
      of Stock Purchase Warrant, dated March 2005, issued by Drinks Americas
      Holdings, Ltd to investors in its Bridge Note
financing.4.4
      (4)
              Form
      of Securities Purchase Agreement, dated as of January 30th, 2007 between
      Drinks Americas Holdings, Ltd. and certain investors.4.5
      (4)
              Form
      of Registration Rights Agreement, dated as of January 30th, 2007 between
      Drinks Americas Holdings, Ltd. and certain investors.4.6
      (4)
              Form
      of Common Stock Purchase Warrant, dated as of January 30th, 2007 between
      Drinks Americas Holdings, Ltd. and certain investors.4.7
      (4)
              Form
      of Placement Agent Agreement between Drinks Americas Holdings, Ltd. and
      Midtown Partners Co., LLC dated as of October 25th,
  2006.4.8
      (4)
              Form
      of Placement Agent Warrant, dated as of January 30th, 2007 between Drinks
      Americas Holdings, Ltd. and Midtown Partners Co., LLC.4.10
      (5)
              Form
      of Registration Rights Agreement, dated as of December 18, 2007 between
      Drinks Americas Holdings, Ltd. and certain Investors.4.11
      (5)
              Form
      of Placement Agent Agreement between Drinks Americas Holdings, Ltd. and
      Midtown Partners Co., LLC dated as of December 14,
2006.4.13
      (5)
              Form
      of Placement Agent Warrant, dated as of December 18, 2007 between Drinks
      Americas Holdings, Ltd. and Midtown Partners Co., LLC.4.14
      (11)
              Securities
      Purchase Agreement, dated as of June 18, 2009 between Drinks Americas
      Holdings, Ltd., St. George Investments, LLC, J. Patrick Kenny and certain
      other parties thereto4.15
      (11)
              Debenture,
      dated June 18, 2009 issued by Drinks Americas Holdings, Ltd. to St. George
      Investments, LLC4.16
      (11)
              Form
      of Pledge Agreement, dated June 18, 2009 between Drinks Americas Holdings,
      Ltd., St. George Investments, LLC, and J. Patrick Kenny and certain other
      parties thereto4.17
      (11)
              Form
      of Personal Guarantee, dated June 18, 2009 issued by J. Patrick Kenny to
      St. George Investments, LLC4.18
      (11)
              St.
      George 7 Month Secured Purchase Note, dated June 18, 2009 between Drinks
      Americas Holdings, Ltd. and St. George Investments, LLC4.19
      (11)
              Warrant
      issued by Drinks Americas Holdings, Ltd. to St. George Investments, LLC,
      dated June 18, 20094.20
      (13)
              Preferred
      Stock Purchase Agreement, dated as of August17, 2009, by and among Drinks
      Americas Holdings, Ltd. and Optimus Capital Partners, LLC dba Optimus
      Special Situations Capital Partners, LLC, including all material
      agreements related thereto4.21
      (13)
              Warrant,
      dated as of August 17, 2009 between Drinks Americas Holdings, Ltd. and
      Optimus Capital Partners, LLC dba Optimus Special Situations Capital
      Partners, LLC4.22
      (14)
              First
      Amendment to $4,000,000 Debenture, dated August 28, 2009, issued by
      Drinks Americas Holdings, Ltd. to St. George Investments,
    LLC4.23
      (14)
              First
      Amendment and Jointer to Pledge Agreement, dated August 28, 2009 between
      Drinks Americas Holdings, Ltd., St. George Investments, LLC, and J.
      Patrick Kenny and certain other parties thereto4.24
      (14)
              Default
      Waiver to Debenture, dated June 18, 20094.25
      (17)
              Convertible
      Promissory Note issued to Leon Frenkel10.1
      (7)
              Form
      of 10% Promissory Note issued by Drinks Americas, Inc. to Gourmet Group,
      Inc. relating to the proceeds of the Private Placement.10.2
      (7)
              Agreement,
      dated April 6, 2004, between Paul Newman, Newman's Own, Inc. and Drinks
      Americas, Inc. relating to the distribution of Newman's Own Lightly
      Sparkling Fruit Juices.10.3
      (7)
              Letter,
      dated May 12, 2003, from Interamericana de Licores, S.A. to Drinks
      Americas, Inc. relating to the production of Cohete
Rum.10.4
      (7)
              Purchase
      Agreement, dated July 29, 2003, between Drinks Americas, Inc. and Aguila
      Tequila Partners relating to Aguila Tequila.10.5
      (7)
              Agreement,
      dated June 24, 2003, between Xanadu Wines Limited and Drinks Americas,
      Inc. relating to the distribution of Xanadu Normans
  Wines.


50





10.6
      (7)
            Interest
      Purchase Agreement, dated December 9, 2002, between Drinks Americas, Inc.
      and Shep Gordon.10.7
      (7)
            Assignment,
      dated December 9, 2002, from Shep Gordon to Drinks Americas, Inc. of the
      limited liability company interests in Old Whiskey River Distilling
      Company LLC.10.8
      (7)
            Assignment,
      dated December 9, 2002, from Shep Gordon to Drinks Americas, Inc. of the
      limited liability company interests in Y Sake LLC.10.9
      (7)
            Assignment,
      dated December 9, 2002, from Alive Enterprises, Inc. to Old Whiskey River
      Distilling Company LLC of Trademark rights to Old Whiskey
      River.10.10
      (7)
            Assignment,
      dated December 9, 2002, from Alive Enterprises, Inc. to Y Sake LLC of
      Trademark rights to Y Sake.10.11
      (7)
            Trademark
      License Agreement, dated December 9, 2002, between Drinks Americas, Inc.
      and Old Whiskey River Distilling Company LLC relating to Old Whiskey River
      and Willie Nelson.10.12
      (7)
            Trademark
      License Agreement, dated December 9, 2002, between Drinks Americas, Inc.
      and Y Sake LLC relating to Y Sake and Roy Yamaguchi.10.13
      (7)
            Distributor
      Rights Agreement, dated December 9, 2002, between Old Whiskey River
      Distilling Company LLC and Drinks Americas, Inc.10.14
      (7)
            Distributor
      Rights Agreement, dated December 9, 2002, between Y Sake LLC and Drinks
      Americas, Inc.10.15
      (7)
            Consulting
      and Exclusive Referral Agreement, dated December 9, 2002, by and among
      Shep Gordon, Drinks Americas, Inc. and Maxmillian Partners,
      LLC.10.16
      (7)
            Sublease
      Agreement, dated August 12, 2002, by and between Blau Marketing
      Technologies, Inc. as Sublandlord and Maxmillian Partners, LLC as
      subtenant.10.17
      (7)
            Amended
      and Restated License Agreement, dated December 10, 2002, between Old
      Whiskey River Distilling Company, LLC and Willie
Nelson.10.18
      (7)
            Consulting
      Letter Agreement, dated March 28, 2002, between Marvin Traub Associates,
      Inc. and Maxmillian Partners, LLC.10.19
      (7)
            Letter,
      dated October 28, 2002, from DAS Communications Ltd. (David Sonenberg) to
      Drinks Americas, Inc.10.20
      (7)
            Restated
      (Demand) Promissory Note, dated as of July 9, 2004, in the amount of
      $290,000 from Drinks Americas, Inc. to Fredrick Schulman as agent for the
      payees.10.21
      (7)
            Promissory
      Note, dated May 10, 2004, in the amount of $200,000 from Drinks Americas,
      Inc. to Bank Leumi USA.10.22
      (7)
            Unlimited
      Guaranty, dated May 13, 2004, from Drinks Americas, Inc. to Bank Leumi
      USA.10.23
      (7)
            Secured
      Convertible Note and Agreement, dated April 8, 2003, in the amount of
      $200,000 from Maxmillian Partners LLC to Nexcomm International Beverages,
      LLC.10.24
      (7)
            Guaranty
      Agreement, dated April 8, 2003, between Drinks Americas, Inc. and Nexcomm
      International Beverages, LLC.10.25
      (7)
            Security
      Agreement, dated April 8, 2003, by and between Drinks Americas, Inc. and
      Nexcomm International Beverages, LLC.10.26
      (7)
            Secured
      Convertible Note and Agreement, dated July 28, 2003, in the amount of
      $200,000 from Maxmillian Partners LLC to Nexcomm International Beverages,
      LLC.10.27
      (7)
            Security
      Agreement, dated July 28, 2003, by and between Maxmillian Partners LLC and
      Kenneth H. Close.10.28
      (7)
            Security
      Agreement, dated July 28, 2003, by and between Drinks Americas, Inc. and
      Kenneth H. Close.10.29
      (7)
            Guaranty
      Agreement, dated July 28, 2003, between Maxmillian Mixers LLC and Kenneth
      H. Close.10.30
      (7)
            Promissory
      Note, dated October 15, 2004, in the amount of $155,975 from Drinks
      Americas, Inc. to Nexcomm International Beverages, LLC.10.31
      (7)
            Note,
      dated October 15, 2004, in the amount of $352,167 from Drinks Americas,
      Inc. to Kenneth H. Close.10.32
      (7)
            Promissory
      Note, dated October 15, 2004, in the amount of $44,560 from Drinks
      Americas, Inc. to Kenneth H. Close.10.33
      (7)
            Security
      Agreement, dated October 15, 2004, by and between Drinks Americas, Inc.
      and Nexcomm International Beverages,
LLC.


51





10.34
      (3)
            Form
      of Registration Rights Agreement between Drinks Americas Holdings, Ltd and
      the investors in its Bridge Notes financing.10.35
      (2)
            Amended
      and Restated Promissory Note, dated December 26, 2005, by and between
      Drinks Americas Holdings, Ltd. and Kenneth H. Close for
      $776,167.10.36
      (2)
            Asset
      Purchase Agreement, dated as of October, 2005, by and between Drinks
      Americas Holdings, ltd. and Rheingold Brewing Company,
  Inc.10.37
      (2)
            Loan
      Agreement, dated June 1, 2006, by and between D.T. Drinks, LLC and
      Production Finance International, LLC.10.38
      (2)
            Loan
      and Security Agreement, dated June 1, 2006, by and between Drinks
      Americas, Inc., Drinks Global Imports, LLC, D.T. Drinks, LLC and Business
      Alliance Capital Company.10.39
      (6)
            Licensee
      Agreement between Trump Marks, LLC and D.T. Drinks, LLC, dated November
      15, 2005.10.40
      (6)
            Agreement
      between D.T. Drinks, LLC and A.H. Wanders B.V., dated August 10,
      2006.10.41
      (6)
            Exclusive
      Distribution Agreement between Damiana Importing, Inc. and Drinks
      Americas, Inc., dated May 25, 2005.10.42
      (6)
            Requirements
      Agreement between Wynn Starr Flavors, Inc. and Drinks Americas, Inc.,
      dated February 19, 2003.10.43
      (1)
            Registrant’s
      Incentive 2007 Stock.10.44
      (8)
            Form
      of Stock Purchase Agreement dated January 15, 2009 between Drinks America
      Inc , Jack McKenzie and Paul Walraven10.45
      (8)
            Promissory
      Note in the aggregate amount of $800,000 payable to Jack McKenzie and Paul
      Walraven10.46
      (9)
            Forbearance
      and Modification Agreement





10.47
      (10)
                  Account
      Purchase Agreement10.48
      (17)
                  Stock
      Grant Agreement between Drinks Americas Holdings, Ltd and Leon Frenkel,
      dated November 9, 200910.49
      (17)
                  Registration
      Rights Agreement between Drinks Americas Holdings, Ltd. and Leon Frenkel,
      dated November 9, 200910.50
      (15)
                  Master
      Distribution and Manufacturing Agreement, dated February 15, 2010, as
      amended, by and between Drinks Americas Holdings, Ltd. and Mexcor,
      Inc.10.51
      (17)
                  Exchange
      Agreement between Drinks Americas Holdings, Ltd. and St. George
      Investments, LLC, dated November 13, 2009.10.52
      (17)
                  Note
      Purchase Agreement between Leon Frenkel and St. George Investments, LLC,
      dated November 13, 2009.10.53
      (16)
                  Agreement,
      dated as of June 24, 2010, by and among Drinks Americas Holdings, Ltd. and
      Enable Growth Partners, LP, Enable Opportunity Partners, LP, and Pierce
      Diversified Strategy Master Fund, LLC14.1
                  Code
      of Ethics21.1(2)
                  List
      of Subsidiaries of Drinks Americas Holdings, Ltd.31.1
                  Section
      302 Certification of Principal Executive Officer31.2
                  Section
      302 Certification of Principal Financial Officer32.1
                  Section
      906 Certification of Principal Executive Officer32.2
                  Section
      906 Certification of Principal Financial
Officer





(1)
            Incorporated by reference to our
      Post-Effective Amendment No.1 to Form SB-2 Filed on January 22,
      2008.


(2)
            Incorporated by reference to our
      Form 10-KSB filed on August 14,
2006.


(3)
            Incorporated by reference to our
      Form 8-K filed on March 25,
2005.


(4)
            Incorporated by reference to our
      Form 8-K filed January 31,
2007.


(5)
            Incorporated by reference to our
      Form SB-2 filed on March 19,
2007.


52


(6)
            Incorporated by reference to our
      8-K filed on December 19,
2007.


(7)
            Incorporated by reference to our
      8-K filed on March 9, 2005.


(8)
            Incorporated by reference to our
      8-K filed on January 15,
2009.


(9)
            Incorporated by reference to our
      8-K filed on February 10,
2009.


(10)
            Incorporated by reference to our
      8-K filed on April 17, 2009.


(11)
            Incorporated by reference to our
      8-K filed on June 25, 2009.


(12)
            Incorporated by reference to our
      10-K filed on August 13,
2009.


(13)
            Incorporated by reference to our
      8-K filed on August 18,
2009.


(14)
            Incorporated by reference to our
      8-K filed on September 3,
2009.


(15)
            Incorporated by reference to our
      8-K filed on April 13, 2010.


(16)
              Incorporated
      by reference to our 8-K filed on June 30, 2010.(17)
              Incorporated
      by reference to our Form S-1 filed in May 14,
  2010.


53





SIGNATURES





Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended, the registrant has duly caused this report on Form 10-K to be
signed on its behalf by the undersigned, thereunto duly authorized, on August
13, 2010.





Drinks
      Americas Holdings, Ltd.By: /s/ J. Patrick KennyJ.
      Patrick KennyChief
      Executive Officer(Principal
      Executive Officer, Principal Financial Officerand
      Principal Accounting
Officer)




Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.




Signature
                                
                                Capacities
                                
                                Date/s/
      J. Patrick KennyJ. Patrick Kenny
                                
                                Chief Executive Officer, Chairman of the Board
                                
                                August
      13, 2010Principal
      Executive Officer and Principal Financial
                                  Officer/s/
      Jason LazoJason Lazo
                                
                                Chief Operating Officer
                                
                                August
      13, 2010/s/
      Bruce KleinBruce Klein
                                
                                Director
                                
                                August
      13, 2010/s/
      Frederick SchulmanFrederick
      Schulman
                                
                                Director
                                
                                August
      13, 2010/s/
      Marvin
      TraubMarvin
      Traub
                                
                                Director
                                
                                August
      13, 2010/s/
      Hubert MilletHubert
      Millet
                                
                                Director
                                
                                August
      13, 2010/s/
      Jack KleinertJack
      Kleinert
                                
                                Director
                                
                                August
      13,
2010


54





DRINKS
AMERICAS HOLDINGS, LTD. AND AFFILIATES





FINANCIAL
STATEMENTS




PageFINANCIAL
      STATEMENTS FOR THE YEARS ENDED APRIL 30, 2010 AND 2009
                        F-1REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FINANCIAL
      STATEMENTS
                        F-2Consolidated
      Balance Sheets
                        F-3Consolidated
      Statements of Operations
                        F-4Consolidated
      Statements of Changes in the Shareholders' Equity (Deficiency)
                        F-5Consolidated
      Statements of Cash Flows
                        F-6Notes
      to Consolidated Financial Statements
                        F-7


F-1




REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  To
the Board of Directors and Shareholders of Drinks Americas Holdings,
Ltd.
  We have
audited the accompanying consolidated balance sheets of Drinks Americas
Holdings, Ltd. and Affiliates (the "Company") as of April 30, 2010 and 2009, and
the related consolidated statements of operations, changes in shareholders'
equity, and cash flows for the years ended April 30, 2010 and 2009. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
  In our
opinion, the accompanying consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of April 30, 2010 and 2009 and the results of its operations, changes in
shareholders' equity and its cash flows for the years ended April 30, 2010
and 2009, in conformity with accounting principles generally accepted in the
United States of America.
  The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 1, the
Company has incurred significant losses from operations since its inception.
This condition raises substantial doubt about the Company's ability to continue
as a going concern. Management's plans in regard to this matter are described in
Note 1. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
  /s/
Bernstein & Pinchuk LLP
 
 New York,
NY
 August
13, 2010


F-2


Cautionary
Notice Regarding Forward Looking Statements





The
disclosure and analysis in this Report contains some forward-looking statements.
Certain of the matters discussed concerning our operations, cash flows,
financial position, economic performance and financial condition, in
particular, future sales, product demand, competition and the effect of economic
conditions include forward-looking statements within the meaning of section 27A
of the Securities Act of 1933, referred to herein as the Securities Act, and
Section 21E of the Securities Exchange Act of 1934, referred to herein as the
Exchange Act.





Statements
that are predictive in nature, that depend upon or refer to future events or
conditions or that include words such as "expects," "anticipates," "intends,"
"plans," "believes," "estimates" and similar expressions, are forward-looking
statements. Although we believe that these statements are based upon reasonable
assumptions, including projections of orders, sales, operating margins,
earnings, cash flow, research and development costs, working capital, capital
expenditures, distribution channels, profitability, new products, adequacy of
funds from operations and other projections, and statements expressing general
optimism about future operating results, and non-historical information, they
are subject to several risks and uncertainties, and therefore, we can give no
assurance that these statements will be achieved.





Readers
are cautioned that our forward-looking statements are not guarantees of future
performance and the actual results or developments may differ materially from
the expectations expressed in the forward-looking statements.





As for
the forward-looking statements that relate to future financial results and other
projections, actual results will be different due to the inherent uncertainty of
estimates, forecasts and projections and may be better or worse than projected.
Given these uncertainties, you should not place any reliance on these
forward-looking statements. These forward-looking statements also represent our
estimates and assumptions only as of the date that they were made. We expressly
disclaim a duty to provide updates to these forward-looking statements, and the
estimates and assumptions associated with them, after the date of this filing to
reflect events or changes in circumstances or changes in expectations or the
occurrence of anticipated events.





We
undertake no obligation to publicly update any forward-looking statement,
whether as a result of new information, future events or otherwise. In addition,
forward-looking statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from our Company's historical
experience and our present expectations or projections. These risks and
uncertainties include, but are not limited to, those described in Part II, "Item
1A. Risk Factors" and elsewhere in this report and in our Annual Report on Form
10-K for the year ended April 30, 2009, and those described from time to time in
our future reports filed with the Securities and Exchange
Commission.  This discussion is provided as permitted by the Private
Securities Litigation Reform Act of 1995.


F-3




PART
1 - FINANCIAL INFORMATION





Item 1. Financial
Statements
 DRINKS AMERICAS HOLDINGS, LTD., AND
AFFILIATES
 Consolidated Balance
Sheets
 APRIL 30,
                  2010
                
                
                APRIL 30,
                  2009AssetsCurrent
      assets:Cash and
      equivalents
                
                $
                203,552
                
                
                $
                30,169Accounts receivable, net of
      allowances for doubtful accounts of$127,846
      and $128,751, respectively
                
                
                66,346
                
                
                
                41,796Due from
      factors
                
                
                —
                
                
                
                31,786Inventories, net of
      allowance
                
                
                222,608
                
                
                
                1,204,266Other current
      assets
                
                
                19,789
                
                
                
                374,671Total current
      assets
                
                
                512,295
                
                
                
                1,682,688Property and equipment, at cost
      less accumulated depreciation and
amortization
                
                
                32,309
                
                
                
                58,900Investment in equity
      investees
                
                
                73,593
                
                
                
                73,916Intangible assets, net of
      accumulated amortization of$577,033 and$245,678,
      respectively
                
                
                1,971,300
                
                
                
                1,892,650Deferred loan costs, net of
      accumulated amortization of$415,540
      and $335,452,
      respectively
                
                
                437,973
                
                
                
                —Note receivable,
      net
                
                
                —
                
                
                
                —Other
      assets
                
                
                85,735
                
                
                
                467,912$
                3,113,205
                
                
                $
                4,176,066Liabilities and
      Shareholders' DeficiencyNotes and loans
      payable
                
                $
                437,196
                
                
                $
                799,329Loan payable – related
      party
                
                
                154,670
                
                
                
                305,935Deferred
      revenue
                
                
                63,730
                
                
                
                —Accounts
      payable
                
                
                2,199,665
                
                
                
                2,746,181Accrued
      expenses
                
                
                2,744,058
                
                
                
                2,900,425Total current
      liabilities
                
                
                5,599,319
                
                
                
                6,751,870Long-term debt, less current
      maturities
                
                
                400,000
                
                
                
                600,000Total
      liabilities
                
                
                5,999,319
                
                
                
                7,351,870Commitments and
      ContingenciesShareholders'
      deficiency:Preferred
      stock, $0.001 par value; 1,000,000 shares authorized:Series A Convertible: $0.001 par
      value; 10,544 and 11,000 shares issued and outstanding,
      respectively.
                
                
                11
                
                
                
                11Series B: $10,000 par value;
      13.837 and -0- issued and outstanding,
      respectively.
                
                
                138,370
                
                
                
                —Common stock, $0.001 par value;
      500,000,000 and 100,000,000, respectively, authorized; issued andoutstanding        
      283,090,903 sharesand 87,662,383 shares, respectively
                
                
                283,091
                
                
                
                87,662Treasury stock, 26,075,000 and -0-
      shares held, respectively
                
                
                —
                
                
                
                —Additional paid-in
      capital
                
                
                39,847,477
                
                
                
                34,206,433Accumulated
      deficit
                
                
                (43,217,597
                )
                
                
                (37,600,854
                )Shareholders' deficiency –
      controlling interest
                
                
                (2,948,648
                )
                
                
                (3,306,748
                )Non-controlling
      Interests
                
                
                62,534
                
                
                
                130,944Total
      shareholders' deficiency
                
                
                (2,886,114
                )
                
                
                (3,175,804
                )$
                3,113,205
                
                
                $
                4,176,066
 
 See notes to consolidated financial
statements
 F-4
 DRINKS AMERICAS HOLDINGS, LTD., AND
AFFILIATES
 CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED APRIL 30, 2010 AND 2009
  2010
                
                
                2009Net
    sales
                
                $
                890,380
                
                
                $
                2,477,617Cost of
      sales
                
                
                1,289,835
                
                
                
                1,969,437Gross
      margin
                
                
                (399,455
                )
                
                
                508,180Selling, general &
      administrative expenses
                
                
                3,874,283
                
                
                
                5,720,024Loss from
      operations
                
                
                (4,273,738
                )
                
                
                (5,211,844
                )Other income
      (expense):Interest
                
                
                (1,539,536
                )
                
                
                (150,631
                )Other
                
                
                128,119
                
                
                
                319,000Other income expense,
      net
                
                
                (1,411,417
                )
                
                
                168,369Net loss before non controlling
      interests
                
                $
                (5,685,155
                )
                
                $
                (5,043,475
                )Net income non controlling
      interests
                
                
                68,410
                
                
                
                2,389Net loss
                
                $
                (5,616,745
                )
                
                $
                (5,041,086
                )Net loss per share (basic and
      diluted)
                
                $
                (0.04
                )
                
                $
                (0.06
                )Weighted average number of common
      shares (basic and diluted)
                
                
                137,512,343
                
                
                
                83,947,221
 
 See notes to consolidated financial
statements
  F-5


DRINKS
AMERICAS HOLDINGS, LTD AND AFFILIATES
 CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIENCY) YEARS ENDED APRIL 30,
2010 AND 2009
  Preferred
      Stock
                
                
                Preferred
      Stock
                
                
                Common
      Stock
                
                
                Treasury
      StockSeries
      A
                
                
                Series
      BNumber
                  ofShares
                
                
                Par
                  Value
                
                
                Number
                  of
      Shares
                
                
                Par
                  Value
                
                
                Number
                  ofShares
                
                
                Par
                  Value
                
                
                Number
                  of
      Shares
                
                
                Par
                  Value
                
                
                Non-Controlling
                  Interest
                
                
                Additional
                  Paid-In
                  Capital
                
                
                Accumulated
                  Defecit
                
                
                Total
                  Shareholders'
                  Accumulated
                  Equity
                  (Deficit)Balance,
      April 30, 2008
                
                
                11,000
                
                
                
                
                
                
                
                —
                
                
                
                —
                
                
                
                81,188,224
                
                
                
                81189
                
                
                
                
                
                
                
                
                
                —
                
                
                
                
                
                
                
                
                
                
                $
                178,116Issuances
      of shares for cash
                
                
                —
                
                
                
                —
                
                
                
                
                
                
                
                
                
                
                
                3,944,445
                
                
                
                3,944
                
                
                
                
                
                
                
                
                
                —
                
                
                
                713,981
                
                
                
                —
                
                
                
                717,926Issuance
      of shares, warrants and optionsfor
      services
                
                
                —
                
                
                
                —
                
                
                
                
                
                
                
                
                
                
                
                1,893,092
                
                
                
                1,893
                
                
                
                
                
                
                
                
                
                —
                
                
                
                702,412
                
                
                
                —
                
                
                
                704,305Issuance
      of shares in settlement of note payable
                
                
                —
                
                
                
                —
                
                
                
                
                
                
                
                
                
                
                
                350,000
                
                
                
                350
                
                
                
                
                
                
                
                
                
                —
                
                
                
                90,650
                
                
                
                —
                
                
                
                91,000Issuance
      of shares for loan extension
                
                
                —
                
                
                
                —
                
                
                
                
                
                
                
                
                
                
                
                286,622
                
                
                
                285
                
                
                
                
                
                
                
                
                
                —
                
                
                
                42,706
                
                
                
                —
                
                
                
                42,992Non- Controllinginterest in net assets of acquried acquired
      consolidated
    subsiary
                
                
                —
                
                
                
                —
                
                
                
                
                
                
                
                
                
                
                
                —
                
                
                
                —
                
                
                
                
                
                
                
                
                
                133,333
                
                
                
                —
                
                
                
                —
                
                
                
                133,333Non-Controlling
      interest in net loss ofconsolidated
      subsidiary
                
                
                —
                
                
                
                —
                
                
                
                
                
                
                
                
                
                
                
                —
                
                
                
                —
                
                
                
                
                
                
                
                
                
                (2,389
                )
                
                
                —
                
                
                
                —
                
                
                
                (2,389
                )Net
      loss for the year
                
                
                —
                
                
                
                —
                
                
                
                
                
                
                
                
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (5,041,086
                )
                
                
                (5,041,086
                )Balance,
      April 30, 2009
                
                
                11,000
                
                
                $
                11
                
                
                
                —
                
                
                
                —
                
                
                
                87,662,383
                
                
                $
                87,662
                
                
                
                —
                
                
                $
                —
                
                
                $
                130,944
                
                
                $
                34,206,434
                
                
                $
                (37,600,854
                )
                
                $
                (3,175,808
                )Issuances
      of shares and Warrants for cash
                
                
                
                
                
                
                
                
                
                
                14
                
                
                $
                138,370
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                $
                120,882
                
                
                
                
                
                
                $
                259,252Issuance
      of shares, warrants and optionsfor
      services
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                44,678,651
                
                
                
                44,679
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                2,329,140
                
                
                
                
                
                
                
                2,373,819Convert
      Preferred Shares to Common Shares
                
                
                (456
                )
                
                
                (0.46
                )
                
                
                
                
                
                
                
                
                
                
                4,558,000
                
                
                
                4,558
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (4,558
                )
                
                
                
                
                
                
                (0
                )Issuance
      of shares in settlement of note &interest
      payable
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                31,301,366
                
                
                
                31,301
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                536,671
                
                
                
                
                
                
                
                567,972Issuance
      of shares in payment of Olifant note
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                7,029,704
                
                
                
                7,030
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                134,970
                
                
                
                
                
                
                
                142,000Issuance
      Of Treasury Shares in Escrow forLegal
      Settlements
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                26,075,000
                
                
                $
                26,075
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                26,075St.
      George Debenture Conversions
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                39,580,219
                
                
                
                39,580
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                535,420
                
                
                
                
                
                
                
                575,000St.
      George Debenture Default, Pledged, Replaced,Warrants
      & Bonus Shares Issuances
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                21,005,580
                
                
                
                21,006
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                1,291,718
                
                
                
                
                
                
                
                1,312,724Mexcor
      Ageement
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                12,000,000
                
                
                
                12,000
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                228,000
                
                
                
                
                
                
                
                240,000Related
      Party - Note Payment
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                5,000,000
                
                
                
                5,000
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                95,000
                
                
                
                
                
                
                
                100,000Issuance
      Of Shares in Payment of Note
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                4,200,000
                
                
                
                4,200
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                373,800
                
                
                
                
                
                
                
                378,000Non-Controlling
      interest in net loss ofconsolidated
      subsidiary
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (68,410
                )
                
                
                
                
                
                
                
                
                
                
                (68,410
                )Net
      loss for the year
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (5,616,745
                )
                
                
                (5,616,745
                )Balance,
      April 30, 2010
                
                
                10,544
                
                
                $
                11
                
                
                
                14
                
                
                $
                138,370
                
                
                
                257,015,903
                
                
                $
                257,016
                
                
                
                26,075,000
                
                
                $
                26,075
                
                
                $
                62,534
                
                
                $
                39,847,477
                
                
                $
                (43,217,597
                )
                
                $
                (2,886,114
                )





F-6


DRINKS
AMERICAS HOLDINGS, LTD., AND AFFILIATES


CONSOLIDATED
STATEMENTS OF CASH FLOWS FOR THE


YEARS
ENDED APRIL 30, 2010 AND 2009




2010
              
              
              2009Cash
      Flows From Operating Activities:
              
              $
              (5,616,745
              )
              
              $
              (5,041,086
              )Net
      LossAdjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
      and amortization
              
              
              579,897
              
              
              
              167,610Impairment
      of intangible asset
              
              
              —
              
              
              
              90,000Allowance
      for doubtful accounts
              
              
              (16,875
              )
              
              
              119,781Inventory
      impairment charges
              
              
              797,116Issuance
      of stock for interest
              
              
              567,972Issuance
      of stock and warrants for services
              
              
              900,430
              
              
              
              311,684Gain
      on extinguishment of debt
              
              
              —
              
              
              
              (409,000
              )Earnings
      in equity method investees
              
              
              —
              
              
              
              (4,888
              )Non-controlling
      interest in loss of consolidated subsidiary
              
              
              (68,410
              )
              
              
              (2,389
              )Reduction
      in note receivable
              
              
              533,440
              
              
              
              —Accounts
      payable settlements
              
              
              270,298
              
              
              
              —Changes
      in operating assets and liabilities:Accounts
      receivable
              
              
              (7,675
              )
              
              
              510,313Due
      from factor
              
              
              31,786
              
              
              
              (31,786
              )Inventories
              
              
              184,542
              
              
              
              857,918Other
      current assets
              
              
              353,447
              
              
              
              97,678Other
      assets
              
              
              1,390,539
              
              
              
              338,047Accounts
      payable
              
              
              (446,612
              )
              
              
              391,532Accrued
      expenses
              
              
              (104,851
              )
              
              
              1,974,886Deferred
      revenue
              
              
              63,730
              
              
              
              —Net
      cash used in operating activities
              
              
              (587,971
              )
              
              
              (629,700
              )Cash
      Flows From Investing Activities:Cash
      assumed of acquired business
              
              
              —
              
              
              
              17,150Cash
      Flows From Financing Activities:Proceeds
      from issuance of common stock
              
              
              —
              
              
              
              717,926Proceeds
      from issuance of preferred stock
              
              
              138,370
              
              
              
              —Proceeds
      from debt
              
              
              732,616
              
              
              
              220,056Proceeds
      from note
              
              
              864,680
              
              
              
              (96,948
              )Repayment
      of debt
              
              
              (974,314
              )
              
              
              —Decrease
      in working capital facility
              
              
              —
              
              
              
              (306,717
              )Payments
      for loan costs
              
              
              —
              
              
              
              (25,000
              )Net
      cash provided by financing activities
              
              
              761,352
              
              
              
              509,317Net
      increase in cash and equivalents
              
              
              173,383
              
              
              
              (103,233
              )Cash
      and equivalents - beginning
              
              
              30,169
              
              
              
              133,402Cash
      and equivalents - ending
              
              $
              203,552
              
              
              $
              30,169




Supplemental
      disclosure of non-cash investing and financing
    transactions:Increase
      in  other current assets, other assets and additional paid in
      capital equal to the value of  stock and warrants
      issued
              
              $
              —
              
              
              $
              307,058Accrued
      interest capitalized to debt principal
              
              $
              —
              
              
              $
              36,623Satisfaction
      of note and interest payable by issuance of common
    stock
              
              $
              567,972
              
              
              $
              91,000Payment
      of accounts payable and accrued expenses with shares of common
      stock
              
              $
              2,373,819
              
              
              $
              273,000Payments
      of notes by issuance of common stock
              
              
              1,195,000
              
              
              
              —Interest
      paid
              
              $
              —
              
              
              $
              107,880Income
      taxes paid
              
              $
              —
              
              
              $
              —Acquisition
      of business:Current
      assets less current liabilities
              
              
              
              
              
              $
              (138,237
              )Intangible
      assets
              
              
              
              
              
              
              1,333,333Minority
      interest
              
              
              
              
              
              
              (133,333
              )Payable
      to sellers
              
              
              
              
              
              
              (1,061,763
              )$
              —




See notes
to consolidated financial statements


F-7




DRINKS
AMERICAS HOLDINGS, LTD., AND AFFILIATES





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





1.
Basis of Presentation and Nature of Business





Basis
of Presentation





On March
9, 2005 the shareholders of Drinks Americas, Inc. ("Drinks") a company engaged
in the business of importing and distributing unique, premium alcoholic and
non-alcoholic beverages associated with icon entertainers, sports figures,
celebrities and destinations, to beverage wholesalers throughout the United
States, acquired control of Drinks Americas Holdings, Ltd. ("Holdings").
Holdings and Drinks was incorporated in the state of Delaware on February 14,
2005 and September 24, 2002, respectively. On March 9, 2005 Holdings merged with
Gourmet Group, Inc. ("Gourmet"), a publicly traded Nevada corporation, which
resulted in Gourmet shareholders acquiring 1 share of Holdings' common stock in
exchange for 10 shares of Gourmet's common stock. Both Holdings and Gourmet were
considered "shell" corporations, as Gourmet had no operating business on the
date of the share exchange, or for the previous three years. Pursuant to the
June 9, 2004 Agreement and Plan of Share Exchange among Gourmet, Drinks and the
Drinks' shareholders, Holdings, with approximately 4,058,000 shares of
outstanding common stock, issued approximately 45,164,000 of additional shares
of its common stock on March 9, 2005 (the "Acquisition Date") to the common
shareholders of Drinks and to the members of its affiliate, Maxmillian Mixers,
LLC ("Mixers"), in exchange for all of the outstanding Drinks' common shares and
Mixers' membership units, respectively. As a result Maxmillian Partners, LLC
("Partners") a holding company which owned 99% of Drinks' outstanding common
stock and approximately 55% of Mixers' outstanding membership units, became
Holdings' controlling shareholder with approximately 87% of Holdings'
outstanding common stock. For financial accounting purposes this business
combination has been treated as a reverse acquisition, or a recapitalization of
Partners' subsidiaries (Drinks and Mixers).




Subsequent
to the Acquisition Date, Partners, which was organized as a Delaware limited
liability company on January 1, 2002 and incorporated Drinks in Delaware on
September 24, 2002, transferred all its shares of holdings to its members as
part of a plan of liquidation.




On March
11, 2005 Holdings and an individual organized Drinks Global, LLC ("DGI").
Holdings own 90% of the membership units and the individual, who is the
president of DGI, owns 10%. DGI's business is to import wines from various parts
of the world and sell them to distributors throughout the United States. In May
2006 Holdings organized D.T. Drinks, LLC ("DT Drinks") a New York limited
liability company for the purpose of selling certain alcoholic
beverages.





On
January 15, 2009 Drinks acquired 90% of Olifant U.S.A Inc. (“Olifant”), a
Connecticut corporation, which owns the trademark and brand names and holds the
worldwide distribution rights (excluding Europe) to Olifant Vodka and
Gin.




Our
license agreement with respect to Kid Rock’s BadAss Beer and related trademarks
currently requires payments to Drinks Americas based upon volume through the
term of the agreement.




The
accompanying consolidated balance sheets as of  April 30, 2010 and
2009 and the consolidated results of operations, consolidated changes in
shareholders’ equity (deficiency) and the consolidated cash flows for the years
ended April 30, 2010 and 2009 reflect Holdings majority-owned subsidiaries and
Partners (collectively, the "Company"). All intercompany transactions and
balances in these financial statements have been eliminated in consolidation.
The amount of common and preferred shares authorized, issued and outstanding as
of April 30, 2010 and, 2009 are those of Holdings.




The
accompanying consolidated financial statements have been prepared on a basis
that assumes the Company will continue as a going concern.  As of
April 30, 2010, the Company has a shareholders' deficiency of$2,886,114
applicable to controlling interestcompared
with $3,306,748 applicable to controlling interest for the year ended April
30, 2009, and has incurred significant operating losses and negative cash
flows since inception. For the year ended April 30, 2010, the Company sustained
a net loss of$5,616,745compared
to a net loss of  $5,041,086 for the year ended April 30, 2009 and
used cash of approximately$588,000in
operating activities for the year ended April 30, 2010 compared with
approximately $630,000 for the year ended April 30, 2009. We will need
additional financing which may take the form of equity or debt and we have
converted certain liabilities into equity.We anticipate that increased sales revenues will
help.  In the event we are not able to increase our working capital,
we will not be able to implement or may be required to delay all or part of our
business plan, and our ability to attain profitable operations, generate
positive cash flows from operating and investing activities and materially
expand the business will be materially adversely affected. The accompanying
consolidated financial statements do not include any adjustments relating to the
classification of recorded asset amounts or amounts and classification of
liabilities that might be necessary should the company be unable to continue in
existence.




F-8




Nature of Business





Through
our majority-owned subsidiaries, Drinks, DGI, DT Drinks and Olifant we
import, distribute and market unique premium wine and spirits and alcoholic
beverages associated with icon entertainers, celebrities and destinations,
to beverage wholesalers throughout the United States and
internationally.





On
February 11, 2010, the Company signed an agreement with Mexcor, Inc.,
("Mexcor") an importer and distributor for hundreds of high quality brands
nationally and internationally. Mexcor has agreed to manage the sourcing,
importing and distribution of our portfolio of brands nationally. Our Company
will continue to focus its efforts on its core business of marketing and
building a portfolio of iconic brands as well as developing, coordinating and
executing marketing and promotional strategies for its icon brands. We
anticipate that the agreement with Mexcor will rapidly drive additional royalty
revenues and substantially reduce our overhead costs.




Under the
terms of the agreement, the parties have agreed to a 15-year term. Additionally,
the Company has agreed to issue the principal of the business 12 million shares
of Company common stock in exchange for consulting services. Mexcor is
eligible to receive financial incentives provided the parties deliver and attain
certain minimum performance requirements.  Mexcor has agreed to
deliver additional new brands to the Company’s brand portfolio, which the
companies plan to jointly acquire, develop and market.




As a result of the
overhead reductions we initiated in the second quarter of fiscal 2010, our
selling, general and administrative expenses for the year ended April 30, 2010
of approximately $3,874,000 reflect a substantial reduction of 32% or $1,846,000
compared to $5,720,000 for the year ended April 30, 2009.  The fiscal
year 2010 decrease in selling, general and administrative expenses is
predominately due to our decision to reduce our operating expenses and thereby
sustain our limited working capital. The overhead reductions resulted in lower
payroll and payroll related and travel expenses. Additionally, our agreement
with Mexcor, Inc. resulted in our ability to transfer of our field sales force
and its associated sales commission costs and travel expenses to Mexcor, Inc. as
we set about restructuring our business operating model in fiscal
2010.




2.
Critical Accounting Policies and Estimates





Significant
Accounting Policies





We
believe the following significant accounting policies, among others, may be
impacted significantly by judgment, assumptions and estimates used in the
preparation of the consolidated financial statements:





Revenue
Recognition




The
Company recognizes revenues when title passes to the customer, which is
generally when products are shipped. The Company recognizes royalty revenue
based on its license agreements with its distributors which typically is the
greater of either the guaranteed minimum royalties payable under our license
agreement or a royalty rate computed on the net sales of the distributor
shipments to its customers.




The
Company recognizes revenue dilution from items such as product returns,
inventory credits, discounts and other allowances in the period that such items
are first expected to occur. The Company does not offer its clients the
opportunity to return products for any reason other than manufacturing defects.
In addition, the Company does not offer incentives to its customers to either
acquire more products or maintain higher inventory levels of products than they
would in ordinary course of business. The Company assesses levels of inventory
maintained by its customers through communications with them. Furthermore, it is
the Company's policy to accrue for material post shipment obligations and
customer incentives in the period the related revenue is
recognized.




Accounts
Receivable




Accounts
receivable are recorded at original invoice amount less an allowance for
uncollectible accounts that management believes will be adequate to absorb
estimated losses on existing balances. Management estimates the allowance based
on collectability of accounts receivable and prior bad debt experience. Accounts
receivable balances are written off upon management's determination that such
accounts are uncollectible. Recoveries of accounts receivable previously written
off are recorded when received. Management believes that credit risks on
accounts receivable will not be material to the financial position of the
Company or results of operations at April 30, 2010 and April 30, 2009 the
allowance for doubtful accountswas   $127,846and $128,751,
respectively.




Inventories





Inventories
are valued at the lower of cost or market, using the first-in first-out cost
method. The Company assesses the valuation of its inventories and reduces the
carrying value of those inventories that are obsolete or in excess of the
Company’s forecasted usage to their estimated net realizable value. The Company
estimates the net realizable value of such inventories based on analysis and
assumptions including, but not limited to, historical usage, expected future
demand and market requirements. A change to the carrying value of inventories is
recorded to cost of goods sold.


F-9


Impairment
of Long-Lived Assets





The
Company reviews long-lived assets for impairment whenever events or changes in
circumstances indicate the carrying amounts of such assets may not be
recoverable. The Company's policy is to record an impairment loss at each
balance sheet date when it is determined that the carrying amount may not be
recoverable. Recoverability of these assets is based on undiscounted future cash
flows of the related asset.For the year ended April 30, 2009, the
Company determined that based on estimated future cash flows, the carrying
amount of our Rheingold license rights exceeded its fair value by
$90,000,and accordingly,recognized an impairment loss of
$90,000. For the year ended April 30, 2010, the Company concluded that there was
no impairment as the Company is actively investing and preparing for the launch
of Rheingold Beer in August 2010.




Deferred
Charges and Intangible Assets





The costs
of intangible assets with determinable useful lives are amortized over their
respectful useful lives and reviewed for impairment when circumstances warrant.
Intangible assets that have an indefinite useful life are not amortized until
such useful life is determined to be no longer indefinite. Evaluation of the
remaining useful life of an intangible asset that is not being amortized must be
completed each reporting period to determine whether events and circumstances
continue to support an indefinite useful life. Indefinite-lived intangible
assets must be tested for impairment at least annually, or more frequently if
warranted. Intangible assets with finite lives are generally amortized on a
straight line bases over the estimated period benefited. The costs of trademarks
and product distribution rights are amortized over their related useful lives of
between 15 to 40 years. We review our intangible assets for events or changes in
circumstances that may indicate that the carrying amount of the assets may not
be recoverable, in which case an impairment charge is recognized
currently.  Our annual impairment evaluation has been examined by
management and the results of our tests indicate that there was no
impairment for the year ended April 30, 2010.





Deferred
financing costs are amortized ratably over the life of the related debt. If debt
is retired early, the related unamortized deferred financing costs are
written-off in the period debt is retired.





Income Taxes




The Company
accounts for income taxes under the asset and liability method. Deferred tax
assets and liabilities are recognized for futuretax consequences attributable to
differences between the financial statementcarrying amounts of existing assets and
liabilities and their respective taxbasis.The effect on deferred tax assets and
liabilities of a change in taxlaws is recognized in the results of
operations in the period the new lawsare enacted.A valuation allowance is recorded to
reduce the carryingamounts of deferred tax assets unless,
it is more likely than not, that suchassets will be realized. The Company
has recognized no adjustment for uncertain tax
provisions.




Stock
Based Compensation





The
Company accounts for stock-based compensation using the modified prospective
approach. The Company recognizes in the statement of operations the grant-date
fair value of stock options and other equity based compensation issued to
employees and non-employees.




Earnings(Loss)Per Share
  The Company computes earnings(loss)per share whereby basic
earnings(loss)per share is computed by dividing net
income (loss) attributable to all classes of common shareholders by the weighted
average number of shares of all classes of common stock outstanding during the
applicable period. Diluted earnings(loss)per share is determined in the same
manner as basic earnings(loss)per share except
that the number of shares is increased to assume exercise of potentially
dilutive and contingently issuable shares using the treasury stock method,
unless the effect of such increase would be anti-dilutive.For the years ended April 30, 2010 and
2009, the diluted earnings per(loss)share amounts equal basic earnings(loss)per share because the Company had net
losses and the impact of the assumed exercise of contingently issuable shares
would have been anti-dilutive.


Use
of Estimates




The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts in the financial
statements and accompanying notes. Actual results could differ from those
estimates.





Recent
accounting pronouncements




Accounting Standards Codification and GAAP
Hierarchy(“ASC”) ASC 105-10. Effective for interim and annual
periods ending after September 15, 2009, the Accounting Standards
Codification and related disclosure requirements issued by the FASB became the
single official source of authoritative, nongovernmental GAAP. The ASC
simplifies GAAP, without change, by consolidating the numerous, predecessor
accounting standards and requirements into logically organized topics. All other
literature not included in the ASC is non-authoritative. We adopted the ASC as
of September 30, 2009, which did not have any impact on our results of
operations, financial condition or cash flows as it does not represent new
accounting literature or requirements.  All references to pre-codified
U.S. GAAP have been removed from this Form 10K.


F-10


Determining Fair Value in Inactive
Markets  (ASC 820); Effective for interim and annual periods
beginning after June 15, 2009, GAAP established new accounting standards for
determining fair value when the volume and level of activity for the asset or
liability have significantly decreased and the identifying transactions are not
orderly. The new standards apply to all fair value measurements when
appropriate. Among other things, the new standards:




•
            affirm that the objective of fair
      value, when the market for an asset is not active, is the price that would
      be received in a sale of the asset in an orderly
      transaction;





•
            clarify certain factors and
      provide additional factors for determining whether there has been a
      significant decrease in market activity for an asset when the market for
      that asset is not active;





•
            provide that a transaction for an
      asset or liability may not be presumed to be distressed (not orderly)
      simply because there has been a significant decrease in the volume and
      level of activity for the asset or liability, rather, a company must
      determine whether a transaction is not orderly based on the weight of the
      evidence, and provide a non-exclusive list of the evidence that may
      indicate that a transaction is not orderly;
  and





•
            require disclosure in interim and
      annual periods of the inputs and valuation techniques used to measure fair
      value and any change in valuation technique (and the related inputs)
      resulting from the application of the standard, including quantification
      of its effects, if
practicable.





These new accounting standards must be
applied prospectively and retrospective application is not permitted. See Note2for disclosure of our fair value
measurements.




Financial Instruments
 (ASC 825-10);  Effective for interim and annual periods ending after
June 15, 2009, GAAP established new disclosure requirements for the fair
value of financial instruments in both interim and annual financial statements.
Previously, the disclosure was only required annually. We adopted the new
requirements as of September 30, 2009, which resulted in no change to our
accounting policies, and had no effect on our results of operations, cash flows
or financial position, but did result in the addition of interim disclosure of
the fair values of our financial instruments. See Note 4 for disclosure of
the fair value of our debt.





Subsequent Events  (ASC
855-10); Effective for interim and annual periods ending after
June 15, 2009, GAAP established general standards of accounting for and
disclosure of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued. The new
requirements do not change the accounting for subsequent events; however, they
do require disclosure, on a prospective basis, of the date an entity has
evaluated subsequent events. We adopted these new requirements as of September
30, 2009, which had no impact on our results of operations, financial condition
or cash flows.





Consolidation(ASC 810)Effective for interim and annual
periods beginning after November 15, 2009, with earlier application
prohibited, GAAP amends the current accounting standards for determining which
enterprise has a controlling financial interest in a Variable Interest Entity
(“VIE”) and amends guidance for determining whether an entity is a VIE. The new
standards will also add reconsideration events for determining whether an entity
is a VIE and will require ongoing reassessment of which entity is determined to
be the VIE’s primary beneficiary as well as enhanced disclosures about the
enterprise’s involvement with a VIE. We are currently assessing the future
impact these new standards will have on our results of operations, financial
position or cash flows.


3.
Accounts Receivable and Due from Factors





Accounts
Receivable and Due from Factors as of April 30, 2010 and April 30, 2009,
consist of the following:




Accounts
      Receivable
              
              April 30,
              
              
              April 30,2010
              
              
              2009Accounts
      receivable
              
              $
              194,192
              
              
              $
              170,547—Allowances
              
              
              (127,846
              )
              
              
              (128,751
              )$
              66,346
              
              
              $
              41,796




F-11




Due From
      Factors
                            
                            April 30,
                            
                            
                            April 30,2010
                            
                            
                            2009Accounts
      receivable
                            
                            $
                            —
                            
                            
                            $
                            153,444Advances
                            
                            
                            —
                            
                            
                            
                            (118,191
                            )Allowances
                            
                            
                            —
                            
                            
                            
                            (3,467
                            )$
                            —
                            
                            
                            $
                            31,786





The
Company entered into an agreement with a factor in April
2009, pursuant to which a substantial portion of the Company’s accounts
receivable were sold to the factor with recourse to bad debts and other
customer claims.  The Company received a cash advance equal to 80% of
the invoice amount and is paid the balance of the invoice less fees incurred at
the time the factor receives the final payment from the customer. The factor fee
was 1.75% for the first 30 days the invoice remains unpaid and 0.07% for each
day thereafter. The facility was to remain open until a 30 day notice
by either party of termination of the agreement.  The facility is
collateralized by all assets of the Company.    The Company also had
an agreement with a second factor which terminated in August
2009.





4. Inventories




Inventories as of April 30, 2010 and 2009 consist of the
following:




April 30, 2010
                      
                      
                      April 30, 2009Finished goods
                      
                      $
                      135,062
                      
                      
                      $
                      518,489Raw materials
                      
                      
                      87,546
                      
                      
                      
                      685,777$
                      222,608
                      
                      
                      $
                      1,204,266









All raw materials used in the production of the
Company's inventories are purchased by the Company and delivered to independent
production contractors.




5. Other Current Assets




Other Current Assets as of April 30, 2010 and 2009
consist of the following:





April 30, 2010
                    
                    
                    April 30, 2009Prepaid inventory purchases
                    
                    $
                    -
                    
                    
                    $
                    315,592Miscellaneous
                    
                    
                    19,789
                    
                    
                    
                    59,079$
                    19,789
                    
                    
                    $
                    374,671




Other current assets are comprised of prepaid inventory
purchases at April 30, 2009. Miscellaneous are comprised of prepaid employee
travel advances and expenses and prepaid marketing fees.




6. Property and Equipment




Property and equipment as of April 30, 2010 and 2009
consist of the following:




UsefulLife
                  
                  2010
                  
                  
                  2009Computer equipment
                  5
      years
                  
                  $
                  23,939
                  
                  
                  $
                  23,939Furniture
      & fixtures
                  5
      years
                  
                  
                  10,654
                  
                  
                  
                  10,654Automobiles
                  5
      years
                  
                  
                  68,337
                  
                  
                  
                  68,337Leasehold
      Improvements
                  5
      years
                  
                  
                  66,259
                  
                  
                  
                  66,259Production
      molds & tools
                  5
      years
                  
                  
                  122,449
                  
                  
                  
                  122,449291,638
                  
                  
                  
                  291,638Accumulated
      depreciation
                  
                  
                  
                  (259,329
                  )
                  
                  
                  (232,738
                  )$
                  32,309
                  
                  
                  $
                  58,900




Depreciation
expense for the years ended April 30, 2010 and 2009 was$26,591and$32,407,
respectively.
 F-12


7. Intangible Assets




Intangible assets include the acquisition costs of
trademarks, license rights and distribution rights for the Company’s alcoholic
beverages.




As of April 30, 2010 and 2009, intangible assets are
comprised of the following:




April
      30, 2 010
                      
                      
                      April
      30, 2009Trademark
      & distribution rights of Olifant vodka
      acquisition
                      
                      $
                      1,333,333
                      
                      
                      $
                      1,333,333Trademark
      and license rights of Rheingold beer
                      
                      
                      230,000
                      
                      
                      
                      230,000Mexcor
      agreement
                      
                      
                      240,000
                      
                      
                      
                      -Other
      trademark and distribution rights
                      
                      
                      575,000
                      
                      
                      
                      575,0002,378,333
                      
                      
                      
                      2,138,333Accumulated
      amortization
                      
                      
                      (407,033
                      )
                      
                      
                      (245,683
                      )$
                      1,971,300
                      
                      
                      $
                      1,892,650





For the
year ended April 30, 2009, the Company determined that based on estimated future
cash flows, the carrying amount of our Rheingold license rights exceeded its
fair value by $90,000 and accordingly recognized an impairment loss. For the
year ended April 30, 2010, the Company concluded that there was no
further impairment as the Company is actively investing and preparing for
the launch of Rheingold Beer in August 2010.





8.
Note receivable





On June
19, 2009, (the "Closing Date") we sold to one investor (the “Investor”) a
$4,000,000 non-interest bearing debenture with a 25% ($1,000,000) original issue
discount, that matures in 48 months from the Closing Date (the Drink’s
Debenture) for $3,000,000, consisting of $375,000 paid in cash at closing and
eleven secured promissory notes, aggregating $2,625,000, bearing interest at the
rate of 5% per annum, each maturing 50 months after the Closing Date (the
“Investor Notes”).  The Investor Notes, the first ten of which are in
the principal amount of $250,000 and the last of which is in the principal
amount of $125,000, are mandatorily pre-payable, in sequence, at the rate
of one note per month commencing on January 19, 2010, subject to certain
contingencies.  If the prepayment occurs, the entire aggregate
principal balance of the Investor Notes in the amount of $2,625,000 (less the
$200,000 August prepayment) together with the interest outstanding thereon,
will be paid in eleven monthly installments (ten in the amount of $230,000 and
one the amount of $125,000) such that the entire amount would be paid to us by
November 26, 2010.  As a practical matter, the interest rate on the
Investor Notes serves to lessen the interest cost inherent in the original issue
discount element of the Drinks Debenture. For the mandatory prepayment to occur,
no Event of Default or Triggering Event as defined under the Drinks Debenture
shall have occurred and be continuing and the outstanding balance due under the
Drinks Debenture must have been reduced to $3,500,000 on January 19, 2010 and be
reduced at the rate of $333,334 per month thereafter. Due to the uncertainty of
the mandatory prepayments by the Investor, the note receivable has been
classified as a long term asset as of April 30, 2010.





One of
the Triggering Events includes the failure of the Company to maintain an average
daily dollar volume of common stock traded per day for any consecutive 10-day
period of at least $10,000 or if the average value of the shares pledged to
secure the Company’s obligation under the Drinks Debenture (as subsequently
described) falls below $1,600,000.





Under the
Drinks Debenture, commencing six months after the Closing Date, the Investor may
request the Company to repay all or a portion of the Drinks Debenture by issuing
the Company’s common stock, $0.001 par value, in satisfaction of all or part of
the Drinks Debenture, valued at the Market Price,(as defined in the Drinks
Debenture), of Drink’s common stock at the time the request is made
(collectively, the “Share Repayment Requests”).  The Investor’s may
not request repayment in common stock if, at the time of the request, the amount
requested would be higher than the difference between the outstanding balance
owed under the Drinks Debenture and 125% of the aggregate amount owed under the
Investor Note.


F-13


The
Company may prepay all or part of the Drinks Debenture upon 10-days prior
written notice and are entitled to satisfy a portion of the amount outstanding
under the debenture by offset of an amount equal to 125% of the amount owed
under the Investor Notes, which amount will satisfy a corresponding portion of
the Drinks Debenture.





Also as
part of this financing, the Investor acquired warrants to purchase 2,500,000
shares of our common stock at an exercise price of $0.35 per share (the
“Investor Warrants”).  The Investor Warrants contain full ratchet
anti-dilution provisions, as to the exercise price and are exercisable for a
five year period. Management has determined that the aggregate value of the
warrants was $142,500 based on the market price per share of the Company’s
common stock on the date of the agreement.





In order
to secure waivers which the investors in our December 2007 placement
of our  Series A Preferred stock claimed were required for the
Company to consummate this financing , we allowed, and the three December
investors elected, to  convert an aggregate of $335,800 (335.8 shares)
of our preferred stock into 3,358,000 shares of our common stock.. In
addition, in August 2009 we allowed the two other holders of our
Series A Preferred Stock to convert an aggregate of $134,625 (134.6
shares) of our Series A Preferred Stock into 1,200,000 shares of our common
stock.  The book value of the preferred stock converted exceeded the
par value of the common stock received on the date of conversions. It was
subsequently agreed with the lead investor that the Company would not be
required to issue shares of our common stock for debt or employee
compensation.





Out of
the gross proceeds of this Offering, the Company paid the placement agent
$37,500 in commissions and we are obligated to pay the placement agent 10% of
the principal balance of the Investor Notes when each note is paid. We will also
issue to the Placement Agent, warrants to acquire 5% of the shares of our Common
Stock which we deliver in response to Share Repayment Requests, at an exercise
price equal to the Market Price related to the shares delivered in response to
the Share Repayment Request (the "Placement Agent Warrants"), which warrants are
exercisable for a five year period, will contain cashless exercise provisions as
well as anti-dilution provisions in the case of stock splits and similar
matters. (See Note 17. - Subsequent Events)





In March 2010, the Company delivered to the Placement
Agent, in aggregate, 4,674,126 Placement Agent Warrants as follows: effective
February 24, 2010, a warrant to purchase 425,000 shares of Company common stock
at an exercise price of $0.01594; effective February 11, 2010, a warrant to
purchase 2,000,000 shares of Company common stock at an exercise price of
$0.001; effective January 15, 2010, a warrant to purchase 1,000,000 shares of
Company common stock at an exercise price of $0.00625; effective December 30,
2009, a warrant to purchase 681,818 shares of Company common stock at an
exercise price of $0.01375; effective August 28, 2009, a warrant to purchase
192,308 shares of Company common stock at an exercise price of $0.065; effective
June 19, 2009, a warrant to purchase 250,000 shares of Company common stock at
an exercise price of $0.09375; and, effective June 19, 2009, a warrant to
purchase 125,000 shares of Company common stock at an exercise price of $0.4375.
The fair value, in the
aggregate,of the warrants determined using
Black-Scholes valuation model was determined to be $101,864 at the dates ofgrant and is recorded as
deferred financing costs a long-term asset on the balance sheet and additional
paid in capital. The warrants are being amortized over 5 years and as of April
30 2010, $10,172 has been expensed.





Our CEO
has guaranteed our obligations under the Drinks Debenture in an amount not to
exceed the lesser of (i) $375,000 or (ii) the outstanding balance owed under the
Drinks Debenture.  In addition, the Company, our CEO, COO, and three
other members of our Board of Directors, either directly, or through entities
they control, pledged an aggregate of 12,003,720 shares of our common stock (of
which 3,000,000 was pledged by the Company) to secure our obligations under the
Drinks Debenture (the “Pledged Shares”). As a direct result of the guarantees
and shares of common stock provided by the above individuals, the Company agreed
to issue shares of common stock totaling 4,501,860 with an estimated fair value
totaling $675,279.  The estimated fair value of the stock commitment
was accounted for as a deferred loan cost and a contribution to capital (due to
shareholders), with deferred loan costs being amortized ratably over 48
months.




On July
14, 2009, the value of the Pledged Shares fell below the required amount and
consequently the Investor delivered a notice of default to the
Company. On August 31, 2009, the Investor and the Company agreed to the First
Amendment to the Drink’s Debenture which waived the default. Pursuant to the
First Amendment, the outstanding balance of the debenture was increased by
$400,000 and the debenture will carry an interest rate of 12% per
annum.  Also, a member of the Company’s board of directors pledged
1,263,235 shares of our common stock as security for our obligations under the
debenture, which increased the total number of shares pledged for this
purpose.  In return, the investor has prepaid $200,000 of the notes it
issued to the Company in partial payment for the debenture and agreed that the
provisions of the debenture relating to a 10% premium and the imposition of
default interest will not apply in the event a “Triggering Event”, as defined in
the debenture, was to occur in the future.





In
response to the default, the Investor transferred 2,523,645 shares of the
non-Company Pledged Shares into its own name in order to commence sale thereof
to satisfy payment of the Drinks Debenture. Accordingly and upon the Company’s
request, the Investor agreed to waive its right under an Event of Default. The
value of the 2,523,645 shares on the date transferred to the Investor aggregated
$378,547 which when sold by the Investor will reduce the balance of the Drinks
Debenture.  The aggregate value of $378,547 of the shares transferred
has been accounted for as a reduction of the Drinks Debenture with a
corresponding increase to additional paid-in capital.




In
addition, as a result of the default, 3,000,0000 of the Company shares having an
aggregate value of  $450,000 that were issued in July, 2009 were
transferred to the Investor.




F-14


On October 27, 2009, the Investor declared a second default under
our $4,400,000 debenture as a result of the failure of the Pledged shares, to
legally secure the debenture that had been acquired by St.
George.  The Company has secured an agreement from the Investor not to
enforce the default based on any decline in value of the pledge shares that has
occurred in the past or that may occur prior to December 31,
2006.  Under the terms of such agreement, the  Investor
received title to 3,209,997 of non-Company pledged shares having a fair market
value on that date of $160,500.  The fair value of these shares
totaled $160,500 and has been reflected as a reduction of the Debenture payable
and an addition to additional paid-in capital.
 
 As a
result of the depletion of the non-Company pledged shares, the Company agreed to
issue and did issue in November 2009 and January 2010 an aggregate 18,005,590
shares of Company common stock to the individuals at a fair market value of
$720,224, or $0.04 per share.   Included in the total shares is
4,501,860 shares which represents satisfaction of the original share commitment
to the individuals at the inception of the Debenture agreement (see paragraph
above).  The difference in the fair value of the 4,501,860 issued
shares and the original estimated fair value of these shares in July
2009,  reduced, as of November 2009 deferred loan costs as originally
recorded, additional paid-in capital, and the related accumulated loan cost
amortization
 
 At April
30, 2010, offsetting of the
Drinks Debenture of $2,835,953 isunamortized
Debenture debt discount of $1,319,938and
investor notes receivable of $1,444,836and
deferred loan costs of $509,153results
in a netasset of
deferred loan costsbalance
of$437,973.  Which
balance has been reflected as a non-current asset in the accompanying
consolidated balance sheet.
 
 7.
Other long term assets
 
 In
January 2009, in accordance with an employment agreement executed with an
Olifant employee the Company issued 100,000 shares of its common stock (see Note
8). The value of the
stock on the date of grant aggregated $26,000 which is being amortized over the
five year life of the un-extended term of the agreement. At April
30, 2010 andApril 30, 2009, the unamortized balance of the stock
was $0 and $24,505, respectively.
  In August 2008, the
Company entered into a three year agreement with an unrelated entity which is to
provide marketing and promotional services for the Company.  Under the
terms of the agreement, as consideration for the services to be provided, the
Company is to issue warrants to purchase an aggregate of 350,000 shares of
Company stock at an exercise price of $.50. The Company determined, as of the
grant date the warrants had an aggregate value of $6,730 which is being
amortized over the three year benefit period. At April
30, 2010and2009, the
unamortized balance of the warrantswas $0
and$5,666,
respectively.As of
April 30, 2010 and 2009,a
warrant to purchase an aggregate of 275,000 shares of Company stock was issued
and the balance of75,000
remains to be issued.
  In August 2006, in
connection with an agreement with one of its sales consultants the Company
issued warrants to purchase 100,000 shares of Holdings common stock at an
exercise price of $0.60 per share. The agreement which was for three
years,  expiring in June 30, 2009, was
automatically  extended for a one year renewal term with an optional
renewal term of one year remaining . The warrants may be exercised at any
time up to five years from the date of the agreement. The Company determined, as
of the grant date of the warrants, that the warrants had a value of $18,000
which was amortized over the one year benefit period of such warrants. In
addition, under the terms of the agreement, the consultant received 175,000
shares of Holdings common stock which were valued at $107,000 based on the
market price of the stock at the date of the agreement. The value of stock
issued is being amortized over the five year life of the consulting agreement.
On August 28, 2008, the Company granted the consultant warrants to purchase an
additional 200,000 shares of the Company’s common stock at an exercise price of
$0.50 per share. This issuance satisfies the Company’s requirements for the
contract years ending June 30, 2008 and 2009. Management has determined that the
aggregate value of the warrants was $4,000 based on a market price of $0.28 per
share of the Company stock on the date of grant. The warrants expire five years
from the date of grant. The unamortized value of the
aggregatestock and warrants issued to the
consultant under the agreement at April 30, 2010and 2009 was $0 and $53,478,
respectively. In August 2009, the consultant converted $307,981 of past due and
future consideration into 2,053,210 shares of Company
stock.
  In February 2007, the Company entered into a five year
agreement with a consulting company to provide certain financial advisory
services. The Company prepaid $300,000 for such services. This amount is carried
as a long-term asset and was being amortized over the five year life of the
agreement. The Company determined that there was no remaining value for the
services and fully amortized the remaining unamortized balance.  At April
30, 2010 and 2009, the unamortized balance under the agreement was $0 and
$165,370, respectively.
  On June
14, 2007, in connection with an endorsement agreement, the Company issued
warrants to purchase 801,000 shares of the Company’s common stock at a price of
$1.284 per share. The warrants may be exercised at any time up to June 14, 2017.
The Company determined that the warrants had a value of $416,500, as of the date
the warrants were granted, which is being amortized over the three year term of
the endorsement agreement. The warrants have cashless exercise
provisions.At April 30, 2010
and 2009, the unamortized balance of these warrants was $16,494 and
$155,856, respectively. In addition, the Company has agreed to issue,
as partial consideration for monthly consulting services, to a principal of
one of the entities involved in the endorsement agreement, warrants to purchase
3,000 shares of the Company’s common stock per month at the monthly average
market price.Through April 30, 2010,, warrants
to purchase 108,000 shares of the Company’s stock accrued under this
agreement, of which a warrant for 54,000 shares was issued at exercise
prices ranging from $0.19 to $2.12 per share of common stock. Each warrant
issuance has an exercise period of 5 years from date of issuance. As the
agreement was terminated in the fourth quarterof
2010, the
balance of 54,000 shares will not be
issued.




F-15




10.  Acquisition





On
January 15, 2009 (the “Closing”), the Company acquired 90% of the capital
stock  of Olifant U.S.A, Inc. (“Olifant”) , pursuant to a Stock
Purchase Agreement (the “Agreement”).   Olifant has the worldwide
distribution rights (other than Europe) to Olifant Vodka and Olifant Gin
which are both produced in Holland.  The transaction was accounted for
as a business combination using the purchase method of
accounting.





The
Company agreed to pay the sellers $1,200,000 for its 90% interest: $300,000 in
cash and Company common stock valued at $100,000 to be paid 90 days from the
Closing date.  At closing the initial cash payment of $300,000 was
reduced by $138,000 because Olifant’s liabilities exceeded the amount provided
for in the Purchase Agreement. In August 2009, upon final settlement of the
consideration to be paid by the Company, the parties agreed to additional
offsets aggregating $13,000 which resulted in the Company paying the sellers
$149,000 and issuing  $100,000 (555,556 shares) of Company stock
which were released from escrow to the sellers. At Closing, the Company issued a
promissory note for the $800,000 balance. The promissory note is payable in four
annual installments, the first payment is due one year from Closing. Each
$200,000 installment is payable $100,000 in cash and $100,000 in Company common
stock, with the stock value based on the 30 trading days immediately prior to
the installment date. The cash portion of the note accrues interest at a rate of
5% per annum. The Company will also pay contingent consideration to the sellers
based on the financial performance of Olifant. The contingent consideration
terminates at the later of (i) full payment of the promissory note or (ii)
second year following Closing. The Agreement also provides for “piggyback”
registration rights relating to the shares issuable.




The
Company has tentatively assigned the excess of cost over investment
to trademarks.




The cost
of the acquisition was allocated based on management’s estimates as
follows:




Cash
                    
                    $
                    17,150Accounts
      receivable
                    
                    
                    87,850Inventory
                    
                    
                    217,770Other
      current assets
                    
                    
                    27,070Trademarks
      and brand names
                    
                    
                    1,333,333Total
      assets
                    
                    
                    1,683,173Accounts
      payable
                    
                    
                    483,173Net
      assets acquired
                    
                    $
                    1,200,000





The
operating results of Olifant are reflected in the accompanying consolidated
financial statements from the date of acquisition.


In
connection with the acquisition the Company entered into an employment agreement
with one of the sellers. The agreement is for five years with two automatic
one year extensions. The annual base compensation under the employment agreement
is $132,000 with additional compensation due based on the financial performance
of Olifant.  In accordance with the employment agreement the Company
issued to the seller 100,000 shares of its common stock in May 2009. This
agreement terminated upon the closure of the Olifant purchase.





11.
Notes and Loans Payable





Notes and
Loans Payable as of April 30, 2010 and 2009, consisted of the
following:




April 30, 2010
                          
                          
                          April 30, 2009Convertible
      note(a)
                          
                          $
                          100,000
                          
                          
                          $
                          286,623Purchase
      order  facility(b)
                          
                          
                          —
                          
                          
                          
                          1,223Olifant
      note(c)
                          
                          
                          695,260
                          
                          
                          
                          1,061,763Other
      (d)
                          
                          
                          41,938
                          
                          
                          
                          49,720837,198
                          
                          
                          
                          1,399,329Less
      current portion
                          
                          
                          437,198
                          
                          
                          
                          799,329Long-term
      portion
                          
                          $
                          400,000
                          
                          
                          $
                          600,000




(a)
              In
      October 2006, the Company borrowed $250,000 and issued a convertible
      promissory note in like amount. The due date of the loan was originally
      extended by the Company to October 2008 from October 2007 in accordance
      with the terms of the original note agreement. On March 1, 2009 the note
      was amended to extend the due date to October 18, 2009. As of March 1,
      2009, the principal amount of the amended note is $286,623, which includes
      the original $250,000 of principal plus accrued and unpaid interest of
      36,623 as of March 1, 2009. The amended note is convertible into shares of
      our common stock at $0.35 per share, a decrease from the $0.60 price under
      the original note but at a premium to the market price on the date of the
      amended agreement, with certain anti-dilution provisions. The note bears
      interest at 12% per annum which is payable quarterly. At the option of the
      lender, interest can be paid in shares of Company common stock. Under the
      terms of the amended note monthly principal payments of $20,000 were to
      commence June 1, 2009 with the balance paid at maturity. As of
      July 2009, the Company had not made any payments under the amended
      note and has reached an informal agreement with the note-holder, to issue
      50,000 shares of the Company’s common stock for each week of
      nonpayment.


F-16




OnAugust 4, 2009 and onSeptember 29, 2009, the Company issued the note-holder
200,000and 400,000shares of itscommonstock, respectivelyas payment of interest on the
notewith values of
$28,000 and $32,000, respectively.In addition, as consideration for
extending the note the Company issued the lender 286,623 shares of Company
common stock which had a value of $42,992 on March 1, 2009. On November 23,
2009, the Company issued 400,000 shares of common stock which had a value of
$12,000 in satisfaction of interest payable on the note described above in Note
9 (a). As ofApril 30,
2010 and 2009,the unamortized balance of the
286,623 shares issued was $-0- and $30,710, respectively, which is included in Other Current
Assets on the accompanying
balance sheets.




On November 9, 2009, the Company issued an unsecured
$100,000 convertible note that matures on November 9, 2010. Interest accrues at
a rate of 12.5% per annum and is payable quarterly. At the option of the note
holder, interest can be paid in either cash or shares of Company common stock
based on the convertible note’s $0.06 conversion price. As additional
consideration, the Company granted the note holder 250,000 shares of the
Company’s common stock and agreed to register the shares by January 8, 2010 or
pay to the note holder as damages additional shares of the Company’s common
stock equal to 2.0% of the common shares issuable upon conversion of the
convertible note. The Company also granted the note holder piggyback
registration rights. On June 28, 2010, the Company issued the note holder
133,333 shares of  common stock as damages for failing to timely
register the 250,000 common shares.As of April 30, 2010 interest
expense of $6,061 was accrued on the note and paid on June 30, 2010.On November 9, 2009, the Company issued the 250,000 shares valued
at $10,000 which the Company deemed a loan origination fee. As of
April 30, 2010, $5,222 has been recorded as a deferred charge on the balance
sheet and $4,778 has been amortized to interest
expense.




On November 9, 2009, an investor purchased a $309,839
past due Company Note. On November 13, 2009, the Company exchanged the past due
Company Note for a new $447,500 Convertible Promissory Note. The new convertible
promissory note is convertible at the note holder’s option using a conversion
price based on the prevailing market prices. As ofApril 30, 2010, the Company issued the note
holder a total of29,851,365shares of Company common stock in
satisfaction of conversions of noteprincipal and interest expense
of  $7,928.




(b)
              At April 30, 2009, represents the
      balance on borrowings under the purchase order financing facility with
      Hartsko Financial Services, LLC (“Hartsko”). Advances under the facility
      are subject to a 3% fee for the first 30 days they remain outstanding and
      1% for each 10 days they remain unpaid.  Hartsko has a first
      security interest in the assets of the Company to the extent of this
      advance.
 
 (c)
              On January 15, 2009, (the
      “Closing”), the Company acquired 90% of the capital stock of Olifant
      U.S.A, Inc. (“Olifant”),  pursuant to a Stock Purchase Agreement
      (the “Agreement. The Company has agreed to pay the sellers $1,200,000 for
      its 90% interest: $300,000 in cash and common stock valued at $100,000 to
      be paid 90 days from the Closing date. The initial cash payment of
      $300,000 which was due 90 days from Closing, was reduced to $149,633,
      which was paid to the sellers in August 2009 together with Company common
      stock having an aggregate value of $100,000 based on the date of the
      Agreement.   The Company issued a promissory note for the
      $800,000 balance. The promissory note is payable in four annual
      installments, the first payment is due one year from Closing. Each
      $200,000 installment is payable $100,000 in cash and Company stock valued
      at $100,000 with the stock value based on the 30 trading days immediately
      prior to the installment date. The cash portion of the note accrues
      interest at a rate of 5% per annum.
      On January 15, 2010, the Company paid the first loan installment in the
      amount of $200,000 and $5,000 in interest. The Company issued 4,950,496
      shares as payment for the stock portion of the installment, and at the
      election of the sellers, $63,000 in cash and 2,079,208 in common stock as
      payment of the cash and interest portion on the first
      installment.
 
 (d)
              At
      April 30, 2010 and 2009, -$0- and $40,000, respectively was owed to a
      shareholder of the Company in return for financial consulting services. On
      March 4, 2010, the Company issued the shareholder 2,000,000 shares of its
      common stock with a fair value of $40,000 in payment for the
      loan.




On
November 5, 2009, the Company borrowed $37,500 from an investor under an
informal agreement for working capital purposes. The loan is payable on demand
and is classified under notes and loans payable as a current liability on the
balance sheet as of April 30, 2010.


F-17


At April 30, 2009, $9,720 was owed to a member of the Company’s
board of directors under an informal agreement with the Company for amounts
advanced to the Company for working capital purposes. Amounts owed to the
shareholder accrued interest at a rate of 18% per annum.  In June
2009, the director was repaid $11,220 which included interest of
$1,500.





12.
Accrued expenses




Accrued
expenses consist of the following at April 30, 2010 and 2009:





April 30, 2010
                        
                        
                        April 30, 2009Payroll,
      board compensation, and consulting fees owed to officers, directors and
      shareholders
                        
                        $
                        1,220,392
                        
                        
                        $
                        1,565,964All
      other payroll and consulting fees
                        
                        
                        688,740
                        
                        
                        
                        470,061Interest
                        
                        
                        405,394
                        
                        
                        
                        17,465Others
                        
                        
                        429,532
                        
                        
                        
                        846,935$
                        2,744,058
                        
                        
                        $
                        2,900,425




On October 20, 2009, the Company reached agreements with
its Chief Executive Officer and members of its Board of Directors to satisfy
obligations owed to them, for salary, director fees, consulting fees and for
satisfaction of a portion of an outstanding loan and the interest accrued
thereon, by issuing to them 1,763,607 shares of our common stock and warrants to
acquire 9,838,793 shares of our common stock. Under this arrangement, the
valuation of the common stock and the exercise price of the warrants was $0.15 a
share, representing a 250% premium to the current market price of our shares.
Fifty percent of the warrants can be exercised at anytime during the ten-year
term and the other 50 percent will only be exercisable when the Company has
achieved positive EBITDA for two successive quarters.  If this
profitably standard is not realized during the term of the warrants, 50 percent
of the warrants will be forfeited. On April 28 and 29, 2010,
the Company issued 1,763,667 shares of common stock in satisfaction of $264,550
of director fees, consulting fees and $130,000 of the Chief Executive Officer’s past-due salary and 9,838,793
warrants in satisfaction of $506,243 of director fees and consulting
fees.




13.
Shareholders' Equity (Deficiency)




In addition
to those referred to inNotes
8, 9and
10additionaltransactions affecting the
Company's equity for theyear ended April 30, 2010 are as
follows:


On February 11, 2010, the Company
signed an agreement with Mexcor, Inc., an  importer and
distributor for hundreds of high quality brands nationally and internationally.
Mexcor has agreed to manage the sourcing  importing and distribution
of our portfolio of brands nationally. Our Company will continue to focus its
efforts on its core business of marketing and building a portfolio of iconic
brands as well as developing, coordinating and executing marketing and
promotional strategies for its icon brands. We anticipate that the agreement
with Mexcor will rapidly drive additional revenues and substantially reduce our
overhead costs. Under the terms of the agreement, the parties have agreed to a
15-year term. Additionally, the Company has agreed to issue the principal of the
business 12 million shares of Company common stock in exchange for consulting
services. Mexcor is eligible to receive financial incentives provided the
parties deliver and attain certain minimum performance
requirements.  Mexcor has agreed to deliver additional new brands to
the Company’s brand portfolio, which the companies plan to jointly acquire,
develop and market. The Company valued these shares at $0.02 per share for a
total value of $240,000.




F-18


On March 4, 2010, we granted 2,000,000 shares of Company
common stock under the 2009 Plan to a financial consultant in satisfaction of
payment for a $40,000 note payable (See Note 9 (d) - Notes and Loans
Payable).




On March 2, 2010, we issued 6,000,000 shares to our
Chief Executive Officer and President; 5,000,000 (aggregate value $100,000) was
a partial payment against the working capital loan he has provided to the
Company and 1,000,000 (aggregate value $20,000) was awarded by the Board of
Directors as a stock bonus for his accomplishments in the creation and launch of
one of our premier brands.





On March
2, 2010, we issued 36,150 shares of our common stock with an aggregate value of
$723 to a former employee in satisfaction of past due wages net of
advances.





On March
2, 2010, we granted 2,000,000 shares of our common stock with an aggregate value
of $40,000 under the 2009 Plan to a consultant in exchange for marketing
services. The shares vested immediately on the date of
grant.





On March
10, 2010, we issued 2,000,000 shares of our common stock with an aggregate value
of $40,000 for investor relation services provided to us under the terms to a
management consulting agreement.





On March
10, 2010, we granted 3,000,000 shares of our common stock with an aggregate
value of $60,000 under the 2009 Plan to a consultant in exchange for marketing
and promotional services. The shares vested immediately on the date of
grant.





On February 11, 2010, in connection with the June 18, 2009
Drinks Debenture financing by an investor, the investor submitted a Notice of
Conversion, to convert $108,375 of the outstanding balance of the Debenture in
exchange for 8,500,000 shares of our common
stock.


(See Note 6. – Note
Receivable).




On March 11, 2010, in connection with the June 18, 2009
Drinks Debenture financing by an investor, the investor submitted a Notice of
Conversion, to convert $100,000 of the outstanding balance of the
Debenture in exchange for7,058,824shares of our common
stock.  (See Note 6. – Note Receivable).




On March25, 2010, in connection with the June 18, 2009
Drinks Debenture financing by an investor, the investor submitted a Notice of
Conversion, to convert $120,000 of the outstanding balance
of the Debenture in
exchange for 6,493,506shares of our common
stock.  (See Note 6. – Note Receivable).




OnApril 12, 2010,in connection with the June 18, 2009
Drinks Debenture financing by an investor, the investor submitted a Notice of
Conversion, to convert $125,000 of the outstanding balance of the
Debenture in exchange for8,858,965shares of our common
stock.  (See Note 6. – Note Receivable).




OnApril 14, 2010, in connection with the June 18, 2009
Drinks Debenture financing by an investor, the investor submitted a Notice of
Conversion, to convert $121,625of the outstanding balance of the
Debenture in exchange for8,668,924shares of our common
stock.  (See Note 6. – Note Receivable).




F-19


In
connection with the June 18, 2009 Drinks Debenture financing, (See Note 6. –
Note Receivable) we agreed to issue to the Placement Agent, warrants to acquire
5% of the shares of our common stock which we would deliver in response to Share
Repayment Requests made by the Investor (described above in Note 6), at an
exercise price equal to the Market Price related to the shares delivered in
response to the Share Repayment Request (the "Placement Agent Warrants"). The
Placement Agent Warrants are exercisable for a five year period, will contain
cashless exercise provisions as well as anti-dilution provisions in the case of
stock splits and similar matters. In March 2010, the Company delivered to the
Placement Agent, in aggregate, 4,674,126 Placement Agent Warrants as follows:
effective February 24, 2010, a warrant to purchase 425,000 shares of Company
common stock at an exercise price of $0.01594; effective February 11, 2010, a
warrant to purchase 2,000,000 shares of Company common stock at an exercise
price of $0.001; effective January 15, 2010, a warrant to purchase 1,000,000
shares of Company common stock at an exercise price of $0.00625; effective
December 30, 2009, a warrant to purchase 681,818 shares of Company common stock
at an exercise price of $0.01375; effective August 28, 2009, a warrant to
purchase 192,308 shares of Company common stock at an exercise price of $0.065;
effective June 19, 2009, a warrant to purchase 250,000 shares of Company common
stock at an exercise price of $0.09375; and, effective June 19, 2009, a warrant
to purchase 125,000 shares of Company common stock at an exercise price of
$0.4375.The fair value, in the
aggregate,of the warrants determined using
Black-Scholes valuation model was determined to be $101,864 at the dates ofgrant and is recorded as
deferred financing costs a long-term asset on the balance sheet and additional
paid in capital. The warrants are being amortized over 5 years and as of April
30 2010, $10,172 has been expensed.




On April
13, 2010, the Company filed a registration statement on Form S-8 and
registered  30,000,000 shares issuable under the 2010
Plan.  The Company has issued a total of5,547,717shares of Company common stock under
the plan as compensation for legal and marketing services subsequent to April
30,2010 and 24,452,283
remain available for future issuance.




On
November 6, 2009, the Company filed a registration statement on Form S-8 filed
to register 20,000,000 shares issuable pursuant to the Drinks Americas 2009
Incentive Stock Plan (the “2009 Plan”) under which the Company has issued a
total of 13,597,353 shares of common stock for legal and marketing
services.




On November 9, 2009, the Company issued an unsecured
$100,000 convertible note that matures on November 9, 2010. Interest accrues at
a rate of 12.5% per annum and is payable quarterly. As of January 31, 2010,
interest expense of $2,882 was accrued. At the option of the note holder,
interest can be paid in either cash or shares of Company common stock based on
the convertible note’s $0.06 conversion price.  As additional
consideration, the Company granted the note holder 250,000 shares of Company’s
common and agreed to register the shares by January 8, 2010 or pay to the note
holder as damages additional shares of the Company’s common stock equal to 2.0%
of the common shares issuable upon conversion of the convertible
note.  The Company also granted the note holder piggyback registration
rights. On June 28, 2010, the Company issued the note holder
133,333 shares of  common stock as damages for failing to timely
register the 250,000 common shares.As of April 30, interest expense of
$6,061 was accrued on the note and paid on June 30, 2010.On
November 9, 2009, the Company issued the 250,000 shares valued at $10,000 which
the Company deemed a loan origination fee. As of
April 30, 2010, $5,222 has been recorded as a deferred charge on the balance
sheet and $4,778 has been amortized to interest
expense.




On November 9, 2009, an investor purchased a $309,839
past due Company Note described above in Note 9(a).  On November 13,
2009, the Company exchanged the past due Company Note for a new $447,500
Convertible Promissory Note. The new convertible promissory note is convertible
at the note holder’s option using a conversion price based on the prevailing
market prices. As ofApril 30, 2010, the Company issued the note
holder a total of29,851,365shares of Company common stock in
satisfaction of conversions of noteprincipal and interest expense
of  $7,928.




On November 23, 2009, the Company
issued 400,000 shares of common stock which had a value of $12,000 in
satisfaction of interest payable on the note described above in Note9 (a). On August4, 2009 and onSeptember 29, 2009, the Company issued the note-holder
200,000and 400,000shares of itscommonstock, respectivelyas payment of interest on the
notewith values
of  $28,000 and $32,000, respectively.In addition, as consideration for
extending the note the Company issued the lender 286,623 shares of Company
common stock which had a value of $42,992 on March 1,
2009.




On
November 17, 2009, the Company issued a total of 12,003,720 shares of Company
common stock to certain officers and directors as a replacement for the shares
they pledged pursuant to a financing transaction (including 8,000,000 to our
CEO; 906,000 to our COO and an aggregate of 3,097,720 among our three
directors.) (See Note 6 – Note Receivable.)


F-20


On
January 11, 2010, pursuant to the previously noted financing transaction, the
Company issued to those individuals who pledged their shares, 0.5
shares of Company stock for each share pledged, which aggregated 6,001,860
shares (including 4,000,000 to our CEO; 453,000 to our COO and an aggregate
of 1,548,860 to our three directors). The 6,001,860 shares had an
approximate fair value of $240,074 on January 11, 2010, the issuance date,
which amount is recorded in common stock and additional paid in capital in the
accompanying balance sheet as
of April 30, 2010. (See Note 6 –
Note Receivable.)





On
November 18, 2009, the Company retained a business advisory consultant and
agreed to issue 2,000,000 shares of Company Common Stock in exchange for
consulting services which shares the Company issued on March 10,
2010.





On
November 17, 2009, the Company issued 23,000,000 shares of Company common stock,
to be held in treasury, as they are pledged in lieu of prejudgment remedies on
two litigation matters. (See Note 16. Commitments and Contingencies –
Litigation).





On November 25, 2009, pursuant to the
August 17, 2009 Preferred Stock Purchase Agreement (described below) with
Optimus Capital Partners (the “investor”), the Company received gross proceeds
of $87,037 from the issuance to an investor of 8.7037 shares of Series B
preferred stock at $10,000.00 per share and a warrant for 4,701,167 shares of
common stock with an exercise price based on prevailing market
prices.  The warrant is exercisable upon the earlier of (a) May 25,
2010, or (b) the date a registration statement covering the warrant shares is
declared effective, but not after November 25, 2014, that number of duly
authorized, validly issued, fully paid and non-assessable shares of common stock
set forth above, provided; however, that this warrant may only be exercised for
warrant shares equal in value to not more than 135.% of the initial $0.025
initial exercise price. We have determined the warrants to have a fair value of
$66,960 using Black-Scholes pricing model described below and we will amortize
the cost over five years or until exercised. As of April 30, 2010, $5,724 has
been expensed.
  On December 17, 2009, pursuant to the
August 17, 2009 Preferred Stock Purchase Agreement (described below) with
Optimus Capital Partners (the “investor”), the Company received gross proceeds
of $51,333 from the issuance to an investor of 5.133333 shares of Series B
preferred stock at $10,000.00 per share and a warrant for 4,200,000 shares of
common stock with an exercise price based on prevailing market
prices.  The warrant is exercisable upon the earlier of (a) June 17,
2010, or (b) the date a registration statement covering the warrant shares is
declared effective, but not after December 17, 2014, that number of duly
authorized, validly issued, fully paid and non-assessable shares of common stock
set forth above, provided; however, that this warrant may only be exercised for
warrant shares equal in value to not more than 135.% of the initial $0.0165
initial exercise price.  We have determined the warrants to have a
fair value of $53,922 using Black-Scholes pricing model described below and we
will amortize the cost over five years or until exercised. As of April 30, 2010,
$3,959 has been expensed.


The fair
value of each warrant is estimated as of the respective transaction date using
the Black-Scholes pricing model and is affected by assumptions regarding a
number of highly complex and subjective variables including expected
volatility, risk-free interest rate, expected dividends and expected term.
Expected volatility is based on the historic volatility of the Company’s stock
over the expected life of the warrant. The expected term of the warrants
represents the estimated period of time until the exercise and is based on
management’s estimate and gives  consideration to the contractual
term. The risk-free interest rate is based on the U.S .Treasury 5-year Treasury
Bills in effect at the transaction date for the expected term of the warrant.
The Company has not paid dividends in the past and does not plan to pay any
dividends in the near future.





On May 9,
2009, we issued a sales consultant 85,000 shares of our common stock with an
aggregate value of $11,900 for past due fees owed to him. The value of the
shares is included in selling, general and administrative
expenses.





On July
1, 2009, we issued an aggregate of 333,333 shares of our common stock having an
aggregate value of $50,000 to a member of our board of directors for an advance
he made to a third, unrelated, entity for services they provided the
Company. The amount the Company was invoiced for these services by the third
party was equal to the value of the stock issued to the director.





On July
1, 2009, we issued 28,000 shares of our common stock having an aggregate value
of   $3,600 to a company which provides freight services to the
company.  The value of the shares is included in selling, general
and administrative expenses.





On July
1, 2009, we issued 100,000 shares of our common stock having an aggregate
value of $13,000 to a sales consultant for the Company for services he has
provided to us. The value of the shares is included in selling, general and
administrative expenses.




On July
22, 2009, we issued 2,325,000 shares of our common stock as treasury shares and
pledged the shares in lieu of a prejudgment remedy that the Plaintiff had sought
against the Company and its Chief Executive Officer.  See Note
16.




On July
31, 2009, we issued 750,000 shares of our common stock as treasury shares and
pledged the shares as collateral against payment for legal services
rendered.


F-21


On July 29, 2009 we issued 71,500 shares of our common stock
having an aggregate value of $10,000 to a consultant for the Company
for services he has performed. The value of the shares is included
in selling, general and administrative expenses.





On March
2009, the Company granted 1,175,000 shares of its common stock under its
2008 Stock Incentive Plan (the” Plan”) to several of its employees as
consideration for past services they have performed for the Company. The value
of the stock on the date of grant aggregated $188,000 which was  included
in accrued  expenses at  April 30, 2009 as  none
of these shares were issued as of  that date. In July 2009 the Company
issued 750,000 of these shares (including 250,000 each to the
Company’s Chief Operating Officer and former Chief Financial
Officer).





In August
2009, we issued a total of 2,124,710 shares of our common stock having an
aggregate value of $193,389 to vendors in satisfaction of amounts
owed.





On August
1, 2009 and September 29, 2009, we issued 200,000 and 400,000 shares of our
common stock, respectively, having an aggregate value of $59,400 to a note
holder as interest payments.





On August
5, 2009, we issued 350,000 shares of our common stock having an aggregate value
of $45,150 as payment for legal services.





In August
2009, we issued 1,200,000 shares of our common stock in satisfaction of a
conversion request for 120 shares of our Series A Preferred Stock.





In
September 2009, we issued a total of 425,000 shares to employees as bonus
payments having an aggregate value of $38,250.





On
September 23, 2009, we issued 4,200,000 shares of our common stock having an
aggregate value of $373,800 as repayment of $100,000 borrowed and promotional
services rendered for Olifant marketing.





On
September 24, 2009, we issued 50,119 shares of our common stock having an
aggregate value of $3,959 to a vendor in satisfaction of amounts
owed.





As of
August 17, 2009, we entered into a Preferred Stock Purchase Agreement (the
“Purchase Agreement”) with Optimus Capital Partners, LLC, d/b/a Optimus Special
Situations Capital Partners, LLC an unaffiliated investment fund (the “Fund”),
which provides that, upon the terms and subject to the conditions set forth
therein, the Fund is committed to purchase up to $5,000,000 of our Series B
Preferred Stock.  Under the terms of the Purchase Agreement, from time
to time until August 16, 2011 and at our sole discretion, we may present the
Fund with a notice to purchase such Series B Preferred Stock (the
“Notice”).  The Fund is obligated to purchase such Series B Preferred
Stock on the tenth trading day after the Notice date, subject to satisfaction of
certain closing conditions.  The Fund will not be obligated to
purchase the Series B Preferred Stock (i) in the event the closing price of our
common stock during the nine trading days following delivery of a Notice falls
below 75% of the closing price on the trading day prior to the date such Notice
is delivered to the Fund, or (ii) to the extent such purchase would result in
the Fund and its affiliates beneficially owning more than 9.99% of our common
stock.  Our ability to send a notice is also subject to certain
conditions.  Therefore, the actual amount of the Fund’s investment is
not certain.





In
connection with the Purchase Agreement, we also issued to the Fund five-year
warrants to purchase 6,750,000 shares of our common stock at an exercise price
equal to the closing price of our common stock on the trading day prior to the
execution of the Purchase Agreement.  The number of shares exercisable
under the warrant will be equal in value to 135% of the purchase price of the
Series B Preferred Stock to be issued in respect of the related Notice and the
exercise price of a corresponding number of shares is subject to adjustment to
equal the closing bid price of our common stock on the trading day preceding the
Notice.  Each warrant will be exercisable on the earlier of (i) the
date on which a registration statement registering for resale the shares of
common stock issuable upon exercise of such warrant becomes effective and (ii)
the date that is six months after the issuance date of such
warrant.


The
Series B Preferred Stock is redeemable at Registrant’s option on or after the
fifth anniversary of the date of its issuance.  The Series B Preferred
Stock also has a liquidation preference per share equal to the original price
per share thereof plus all accrued dividends thereon, and is subject to
repurchase by us at the Fund’s election under certain circumstances, or
following the consummation of certain fundamental transactions by us, at the
option of a majority of the holders of the Series B Preferred
Stock.





Holders
of Series B Preferred Stock will be entitled to receive dividends, which will
accrue in shares of Series B Preferred Stock on an annual basis at a rate equal
to 10% per annum from the issuance date.  Accrued dividends will be
payable upon redemption of the Series B Preferred Stock.  The Series B
Preferred Stock ranks, with respect to dividend rights and rights upon
liquidation senior to our common stock and our Series A Convertible Preferred
Stock.





In a
concurrent transaction, the Fund will borrow up to 10,000,000 shares of our
common stock from certain of our non-affiliated stockholders.




F-22




The
Series B Preferred Stock and warrants, and the shares common stock issuable upon
exercise of the warrants  have not been registered under the
Securities Act of 1933, as amended, and may not be offered or sold in the United
States absent registration or an applicable exemption from registration
requirements.





Out of
the gross proceeds of this Offering, we are obligated to pay Source Capital
Group (the "Placement Agent") 10% of the amount we realize on the sale of the
Series B Preferred Stock. We will also issue to the Placement Agent, warrants to
acquire 5% of the shares of our Common Stock which we deliver on exercise of the
Warrants with an exercise price equal to the exercise price of the Warrants that
were exercised. (the "Placement Agent Warrants"), which warrants are exercisable
for a five year period, will contain cashless exercise provisions as well as
anti-dilution provisions in the case of stock splits and similar
matters.





In order
to secure amendments to our Certificate of Designation  with respect
our Series A Convertible Preferred Stock (“Series A Shares”) which were required
in order for us to enter into the Purchase Agreement, we agreed that that upon
any issuance by the Company of any Common Stock with an effective price per
share of Common Stock of less than $0.35 per share (“Triggering
Issuances”)(subject to adjustment for reverse and forward stock splits and the
like), the holders of the Series A Shares(the “Series A Holders”) may, in their
sole discretion, at any time thereafter, pursuant to the conversion terms set
forth in the Certificate of Designation of the Series A Preferred Stock, convert
at the per share price which applied to the Triggering Issuance, such number of
shares of Preferred Stock as will result, in the aggregate, in the issuance by
the Company of the same number of shares of Common Stock to the Series A Holders
as were issued in the Triggering Issuances, which rights will be exercisable by
the Series A Holders pro rata to the number of shares of Preferred Shares held
by each of them on the date the Triggering Issuances occur.


F-23


Warrants




The
following is a summary of the Company's outstanding warrants and exercise prices
as of April 30, 2010:




Warrants
                    
                    
                    Per WarrantWarrants
      outstanding May 1, 2008
                    
                    
                    8,663,868
                    
                    
                    
                    0.78Granted
                    
                    
                    1,725,000
                    
                    
                    
                    0.50Re-price
      (a)
                    
                    
                    (3,777,778
                    )
                    
                    
                    0.50Re-price
      (a)
                    
                    
                    (166,667
                    )
                    
                    
                    1.25Re-price
      (a)
                    
                    
                    3,944,445
                    
                    
                    
                    0.20Exercised
      (a)
                    
                    
                    (3,944,445
                    )
                    
                    
                    0.20Forfeited
                    
                    
                    —
                    
                    
                    
                    —Warrants
      outstanding April 30, 2009
                    
                    
                    6,444,423
                    
                    
                    $
                    0.85




Warrants
      outstanding May 1, 2009
                  
                  
                  6,444,423
                  
                  
                  
                  0.85Granted
                  
                  
                  4,701,167
                  
                  
                  
                  0.025Granted
                  
                  
                  4,200,000
                  
                  
                  
                  0.0225Granted
                  
                  
                  9,838,793
                  
                  
                  
                  0.15Granted
                  
                  
                  2,425,000
                  
                  
                  
                  .016Granted
                  
                  
                  192,308
                  
                  
                  
                  .065Granted
                  
                  
                  1,000,000
                  
                  
                  
                  .0063Granted
                  
                  
                  681,819
                  
                  
                  
                  .014Granted
                  
                  
                  250,000
                  
                  
                  
                  .09Granted
                  
                  
                  125,000
                  
                  
                  
                  .44Exercised
                  
                  
                  —
                  
                  
                  
                  —Forfeited
                  
                  
                  —
                  
                  
                  
                  —Warrants
      outstanding April 30, 2010
                  
                  
                  29,858,510
                  
                  
                  
                  0.24




The value
of the warrants on the date of grant was calculated using the Black-Scholes
formula with the following assumptions: risk free – rate 2-4%, expected life of
warrants –  5-10 years, expected stock volatility – 20-35%, expected
dividend yield – 0%.




(a)
                Reduction
      in the exercise price pursuant to the provisions of the October 27, 2008
      warrant re-pricing. The warrants were exercised in accordance with the
      agreement (as previously disclosed in this
  Note).




F-24


14.
 Stock Incentive Plans





On April
13, 2010, the Company filed a registration statement on Form S-8 and
registered 30,000,000 shares issuable under the 2010
Plan.Subsequent to April 30,2010, the Company has issued a total of5,547,717shares of Company common stock under
the plan as compensation for legal and marketing servicesat a fair value of
$50,346and 24,452,283sharesremain available for future
issuanceunder the
2010 Plan.




On November
6, 2009, the Company filed a registration statement on Form S-8 and
registered  20,000,000 shares issuable under the 2009Stock IncentivePlan(the “2009 Plan”)The Company has issued a
total of13,597,353shares of Company common stock
under the plan as compensation for legal and marketing services as of April 30,2009at a fair value of $ 316,450 which
vested immediately upon grant. Additionally,5,740,092 were issued subsequent to
year endas compensation
for legal and marketing services at a fair value of $ 65,667 and662,555sharesremain available for futureissuance under the 2009
Plan.




In January
2009, the Company’s shareholders approved the 2008 Stock Incentive Plan (the
“2008 Plan”) which provides for awards of incentives of non-qualified stock
options, stock, restricted stock and stock appreciation rights for its officers,
employees, consultants and directors in order to attract and retain such
individuals and to enable them to participate in the long-term success and
growth of the Company. Under the 2008 Plan, 10,000,000 common shares were
reserved for distribution, of which 9,275,000 have been issued and 725,000
remain available for future issuance.Of this amount 450,000 of shares issued
to employees were subsequently canceled when the employees terminated their
service with the Company.Stock options granted under the Plan
are granted with an exercise price at or above the fair market value of the
underlying common stock at the date of grant, generally vest over a four year
period and expire 5 years after the grant
date.




On
November 9, 2009, the Company granted 3,500,000 shares under the 2008 Plan at
fair value of $132,000 to several consultants, which vested immediately upon
grant, as compensation for legal and marketing
services.




On March 12, 2009, the Company granted an aggregate
of5,775,000 options under its 2008 Stock Incentive Plan to
various employees, the directors of the Company, and to two consultants to
the Company.  The exercise price of the options granted to
employees and directors and one of the consultants was at the
market value (other than those issued to our CEO which was at a 10% premium to
the market value) of the underlying common stock at the date of grant. The
exercise price of the options granted to the other consultant, $0.35, was
above the fair market value of the underlying common stock at the date of grant.
The value of the options on the date of grant was calculated using the
Black-Scholes formula with the following assumptions: risk free frate-2%,
expected life of options –5 years, expected stock volatility -67%, expected
dividend yield -0%. The Company issued an aggregate of 4,175,000 options to
purchase shares of its common stock to its employees including 2,500,000 to its
CEO, 500,000 to its COO and 300,000 to its former CFO.





The
options granted to employees of the Company vest over a four year
period and expire five years after the grant date. The cost of the options,
$375,750, is expected to be recognized over the four year vesting period of the
non-vested options.  The options awarded to the directors of the
Company (1,000,000) and the consultants (600,000) at fair value of $129,000
vested immediately on the grant date.





The fair
value of each option  award is estimated on the date of grant using
the Black-Scholes option pricing model and is affected by assumptions regarding
a number of highly complex and subjective variables  including
expected volatility, risk-free interest rate, expected dividends and expected
term. Expected volatility is based on the historic volatility of the Company’s
stock over the expected life of the option. The expected term and vesting of the
option represents the estimated period of time until the exercise and is based
on management’s estimates, giving consideration to the contractual term, vesting
schedules and expectations of future employee behavior. The risk-free interest
rate is based on the U.S . Treasury yield curve in effect at the time of grant
for the expected term of the option. The Company has not paid dividends in the
past and does not plan to pay any dividends in the near future. SFAS 123R,
“Share Based Payment,” also requires the Company to estimate forfeitures at the
time of grant and revise these estimates, if necessary, in subsequent period if
actual forfeitures differ from those estimates.




F-25


A summary of the options outstanding under the Plan as of April
30, 2010 and 2009 is as follows:





2010
                
                
                2009Shares
                
                
                Weighted
                  Average
                  Exercise
                  Price
                
                
                Shares
                
                
                Weighted
                  Average
                  Exercise
                  PriceOutstanding
      at beginning of period
                
                
                5,775,000
                
                
                $
                0.18
                
                
                
                -0-
                
                
                $
                -Granted
                
                
                17,097,353
                
                
                
                0.03
                
                
                
                5,775,000
                
                
                
                0.18Forfeited
                
                
                (450,000
                )
                
                
                0.16
                
                
                
                -
                
                
                
                -Outstanding
      at end of period
                
                
                22,422,353
                
                
                $
                0.06
                
                
                
                5,775,000
                
                
                $
                0.18Exercisable
      at end of period
                
                
                19,628,603
                
                
                $
                0.05
                
                
                
                1,600,000
                
                
                $
                0.22Weighted
      average fair value of grants during the period
                
                
                
                
                
                $
                0.03
                
                
                
                
                
                
                $
                0.09





The
following table summarizes activity pertaining to options outstanding and
exercisable at April 30, 2010:





Options Outstanding
                
                
                Options ExercisableExercise price
                
                Shares
                
                
                Weighted Average Remaining Life
                  in Years
                
                
                Shares
                
                
                Weighted Average Exercise
                  Price
                
                
                Intrinsic
                  Value0.16
                
                
                2,325,000
                
                
                
                3.87
                
                
                
                1,100,000
                
                
                $
                0.16
                
                
                $
                -0.176
                
                
                2,500,000
                
                
                
                3.87
                
                
                
                625,000
                
                
                $
                0.176
                
                
                $
                -0.02
                
                
                7,700,000
                
                
                
                4.77
                
                
                
                7,700,000
                
                
                $
                0.02
                
                
                $
                -0.024
                
                
                500,000
                
                
                
                4.53
                
                
                
                500,000
                
                
                $
                0.024
                
                
                $
                -0.03
                
                
                5,015,000
                
                
                
                4.53
                
                
                
                5,015,000
                
                
                $
                0.03
                
                
                $
                -0.0136
                
                
                882,353
                
                
                
                4.67
                
                
                
                882,353
                
                
                $
                0.0136
                
                
                $
                -0.04
                
                
                3,000,000
                
                
                
                4.53
                
                
                
                3,000,000
                
                
                $
                0.04
                
                
                $
                -0.350
                
                
                500,000
                
                
                
                3.87
                
                
                
                500,000
                
                
                
                0.350
                
                
                
                -22,422,353
                
                
                
                4.46
                
                
                
                19,628,603
                
                
                $
                0.05
                
                
                $
                -





The
following table summarizes activity pertaining to the Company’s non-vested
options for the years ended April 30, 2010 and 2009:





Shares
                    
                    
                    Weighted
                      Average
                      Exercise
                      PriceNon-vested
      at April 30, 2008Granted
                    
                    
                    5,775,000
                    
                    
                    $
                    0.18Canceled
      or expired
                    
                    
                    -
                    
                    
                    
                    -Vested
                    
                    
                    (1,600,000
                    )
                    
                    
                    0.22Non-vested
      at April 30, 2009
                    
                    
                    4,175,000
                    
                    
                    
                    0.17Granted
                    
                    
                    17,097,353
                    
                    
                    $
                    0.03Canceled
      or expired
                    
                    
                    (450,000
                    )
                    
                    
                    0.16Vested
                    
                    
                    (18,028,603
                    )
                    
                    
                    0.03Non-vested
      at April 30, 2010
                    
                    
                    2,793,750
                    
                    
                    $
                    0.17





F-26


The fair
value of options at date of grant was estimated using the Black-Scholes option
pricing model utilizing  the following weighted average
assumptions:





2010
                  
                  
                  
                  2009Risk-free
      rate
                  
                  
                  2.0
                  %
                  
                  
                  2.0
                  %Expected
      option life in years
                  
                  
                  5.0
                  
                  
                  
                  5.0Expected
      stock price volatility
                  
                  
                  67
                  %
                  
                  
                  67
                  %Expected
      dividend yield
                  
                  
                  0
                  %
                  
                  
                  0
                  %





Also on
March 12, 2009, the Company granted 1,175,000 shares of  its common
stock under the Plan  to several of  its employees as
consideration for past services they have performed for the Company. The value
of the stock on the date of grant aggregated $188,000 which
is  included in selling, general and administrative expenses for the
year  ended April 30, 2009 and accrued expense as of April 30, 2009
as  none of these shares were issued as of  that
date.




14.
Income Taxes




No
provision for income taxes is included in the accompanying statements of
operations because of the net operating losses for the  ended April
30, 2010 and 2009, respectively.
Holdings and Drinks previously filed income tax returns on a June 30 and
December 31 tax year, respectively; however, both companies applied for and
received a change in tax year to April 30 and file a federal income tax
return on a consolidated basis. Olifant files income tax returns on a
February 28 tax year. The consolidated
net operating loss carry forward as of April 30, 2010 available to offset future
years' taxable income is approximately $34,000,000, expiring in
various years through2030.





As of
April 30, 2010 and 2009, components of the deferred tax assets are as
follows:





2010
                    
                    
                    
                    2009Net
      operating loss
                    
                    $
                    11,560,000
                    
                    
                    $
                    10,800,000Compensation
                    
                    
                    542,000
                    
                    
                    
                    496,000Other
                    
                    
                    200,000
                    
                    
                    
                    191,00012,302,000
                    
                    
                    
                    11,487,000Less
      valuation allowance
                    
                    
                    (12,302,000
                    )
                    
                    
                    (11,487,000
                    )$
                    —
                    
                    
                    $
                    —





A
valuation allowance has been provided against the entire deferred tax asset due
to the uncertainty of future profitability of the Company.


F-27


Management's
position with respect to the likelihood of recoverability of these deferred tax
assets will be evaluated each reporting period.





15.  Related
Party Transactions





Related
party transactions, in addition to those referred to in Notes 9, 10, 11 and
12 are as follows:





Consulting
and Marketing Fees





The
Company incurred fees for services rendered related to sales and marketing
payable to a limited liability company which was controlled by a member of the
Company’s board of directors and previous chairman of the board. As of
April 30, 2010 and 2009, unpaid fees owed to a director and his
firm aggregated  $91,000 and  $175,550, respectively.
On April 28, 2010, the Company issued 563,667 shares of its common stock in
satisfaction of $84,550 of consulting fees.




In fiscal 2003, we entered into a consulting agreement
with a company wholly owned by a member of the Company's board of directors.
Under the agreement, the consulting company is compensated at the rate of
$100,000 per annum. As of April 30, 2010 and 2009, we were indebted to
the consulting company in the amount of $50,000
and $256,248, respectively. On April 29,2010, in accordance with an agreement
made in October 2009 to settle the outstanding amount due of $306,243, the
Company issued a warrant to acquire 5,951,809 of our common
stock.




In
December 2002, the Company entered into a consulting agreement with one of its
shareholders which provided for $600,000 in fees payable in five fixed
increments over a period of 78 months. The agreement expired on June 9,
2009. Under
this agreement, as of April 30, 2010 and 2009, amounts owed to this
shareholder aggregated $43,151 and $30,000, respectively. The
Company has an informal agreement with the shareholder pursuant to which he has
the option of converting all or a portion of the consulting fees owed him into
shares of Holding's common stock at a conversion price to be agreed upon. In
March 2009, the consultant elected to convert $120,000 due him for
consulting fees into shares of Company stock at a price of $0.35 per share
resulting in the Company issuing 342,857 shares to him.  In
February 2008, the consultant elected to convert $190,000 due him for consulting
fees into shares of Company common stock at a price of $0.50 per share resulting
in the Company issuing 380,000 shares to him. Each of the conversions
were at a premium to the market price of the Company’s common on the
date of the elections to convert.




In October
2009, upon the resignation of Brian Kenny as VP Marketing of the
Company,we entered into a marketing
consulting agreement with a company controlled byhimto provide marketing services to
the Company at the annual rate of $144,000.  Brian Kenny is the son of
our CEO, J. Patrick Kenny. For the fiscal year ended April 30, 2010, we issued
4,582,000options in
aggregate which vested 100% upon grantat avalue of$88,000 formarketingconsultingservices he provided the
Company.




On October
20, 2009, the Company reached agreements with its Chief Executive Officer and
members of its Board of Directors to satisfy obligations owed to them, in the
aggregate amount of $1,002,450 for salary, director fees, consulting fees and
for satisfaction of a portion of an outstanding loan and the interest accrued
thereon, by issuing to them 1,763,607 shares of our common stock and warrants to
acquire 9,838,793 shares of our common stock. Under this arrangement, the
valuation of the common stock and the exercise price of the warrants was $0.15 a
share.  Fifty percent of the warrants can be exercised at anytime
during the ten-year term and the other 50 percent will only be exercisable when
the Company has achieved positive EBITDA for two successive
quarters.  If this profitably standard is not realized during the term
of the warrants, 50 percent of the warrants will be forfeited. On April 28
and 29, 2010, the Company issued 1,763,667 shares of common stock in
satisfaction of $264,550 of director fees, consulting fees and $130,000 of the
Chief Executive Officer’s past-due salary and 9,838,793 warrants in satisfaction
of$506,243 of director fees and
consulting fees.


F-28


Legal
Fees




On March
12, 2009 , the Company granted to Fredrick Schulman, a member of our board of
directors, options to purchase 600,000 shares of our Company stock, under our
Plan, for legal services he provided the Company. The fair market value of
the options issued, which vested 100% upon grant, aggregated
$54,000.  On February 11, 2010, the Company also issued
394,853sharesto our directorwith a fair value of $7,897 for legal
services he provided the Company.




Royalty
Fees




In
connection with the Company's distribution and licensing agreements with its
equity investee the Company incurred royalty expenses for the years ended April
30, 2010 and 2009 of approximately $74,027 and $62,000,
respectively.  The operations and the net assets are
immaterial.





Loan
Payable




The
Company is obligated to issue shares of its common stock to several of its
shareholders in connection with its June 2009 debt financing (see Note
5).




From July
2007 through April 30, 2010, the Company has borrowed and our CEO has loaned
various amounts up to $813,035 to the Company for working capital purposes at an
annual interest rate of 12%. As of April 30, 2010 and 2009, amounts
owed to our CEO on these loans including accrued and unpaid interest aggregated
$154,670 and $305,935, respectively. For the years ended April
30,  2010 and 2009, interest incurred on these loans aggregated
$38,231 and $38,204, respectively.




16.
Customer Concentration




For the
years ended April 30, 2010 and 2009, our largest customer accounted for 18% and
16%, respectively of our sales and for the year  ended 2010 three
other customers accounted for 10% or more of our sales.




17.
Commitments and Contingencies




Lease




The
Company leases office space under an operating lease, with minimum annual
rentals of $50,000 through September, 2009 which was renewed for a two year
period through September 2011with minimum annual rentals of $36,000. The Company
leased additional office space under an operating lease, which expired in March
2009 that required minimal annual rental payments of
$51,600.




Rent
expense for the years ended April 30, 2010 and 2009 was
approximately, $25,624and$101,000, respectively. Rent expense for 2010 is net of a
landlord credit of approximately $13,000.





Future
minimum payments for all leases are approximately as follows:





Years EndingApril 30,
                                    
                                    Amount2011
                                    
                                    $
                                    36,0002012
                                    
                                    
                                    15,000$
                                    51,000





License
Agreement





In
November 2005, the Company entered into an eight-year license agreement for
sales of Trump Super Premium Vodka. Under the agreement the Company is required
to pay royalties on sales of the licensed product. The agreement requires
minimal royalty payments through November 2012 which if not paid could result in
termination of the license. The Company is currently in default under the terms
of its license agreement with Trump Marks LLC. The Company under a
non-documented arrangement with the licensor is continuing to sell the product
both domestically and internationally. The Company and licensor are currently
engaged in active discussion to both enhance the marketing of the brand and to
amend the agreement under mutually beneficial terms.





In
2008 the Company entered into a licensing agreement with Vetrerie Bruni
S.p.A. (“Bruni”), which has the patent to the Trump Vodka bottle design.
The agreement is retroactive to January 1, 2008, and calls for annual minimum
royalties of $150,000. Royalties are due on a per bottle basis on bottles
produced by another bottle supplier of approximately 18% of the cost of such
bottles.  The agreement terminates upon the expiration of the patent
or the expiration of the Company’s license agreement with Trump Marks
LLC. Due to a dispute with respect to the pricing and quantities of glass
ordered and the source of readily available and more efficient alternative
producers the Company entered into a dispute with Bruni Glass resulting in
litigation which was resolved with a settlementin October 2009.This settlement resulted in the
reduction of the Company’s annual glass royalty obligation and a settlement of
the outstanding balance the Company owed Bruni. In conjunction with the
legal settlement, the Company has accrued $150,000,  payable in
installments over 12 months from February 2010 forward which if paid in full by
August 2010 reverts to the amount of $120,000 in satisfaction of the outstanding
balance.  As of April 30, 2010, the outstanding unpaid balance was
$125,000.  Additionally, the annual royalty going forward has been
lowered by as much as 75% depending on utilization
levels.




F-29


In February 2008, we entered into a joint venture with Grammy
Award-winning producer and artist, Dr. Dre. The Company and Dr. Dre have formed
the joint venture to identify, develop, and market premium alcoholic beverages,
The deal is under the umbrella of the agreement between the Company and
Interscope Geffen A&M Records.  Our Leyrat Cognac is the joint
ventures’ first beverage. In January 2009, the Company launched its Leyrat
Estate Bottled Cognac which it imports from a 200 year old distillery in Cognac,
France. The Company granted 10% of its 50% interest in the brand to the producer
of the product, leaving us with a 45% interest, in return for the rights to
distribute the product in the United States. The Company has 5% of the rights
for the brand in Europe. The Company continues to work toward a major product
launch agreeable between the parties.
 
 Our
license with respect to the Kid Rock related trademarks currently requires
payments to Drinks Americas based upon volume through the term of the
agreement.
 
 Other
Agreements
 
 The
Company has modified its agreement with a foreign distributor, through December
2023, to distribute our products in their country. The agreement requires the
distributor to assume procurement of component parts, production, distribution
and funding for approved marketing and promotion for the term of the agreement.
The distributor is to pay the Company a quarterly fee no less than one fourth of
$150,000 and certain incremental payments for set volume levels. In return for
the fee and assumption of all financial support in the territory, the Company
will be the exclusive distributor in Israel over the term of the agreement with
the rights to be exclusive distributor in their country. The distributor is in
the process of purchasing component parts for its own production. It is also
anticipated that the Company may purchase up to five containers of product or
5,000 cases from the Company’s current inventory as a precursor to its own
production in order to accelerate market entry. The Company received a
prepayment $84,970 and recognized $21,243 for shipments in the fourth quarter of
2010. The balance is recorded in deferred revenue on the balance sheet at April
30, 2010.
 
 Effective
February 15, 2010, the Company entered into an exclusive agreement with Mexcor,
Inc., to promote and distribute in the United States, the Company’s portfolio of
brands, as defined. The initial term of the agreement is for five years,
requires a minimum net sales performance by Mexcor, which when attained, will
automatically renew for an additional ten years. Under the terms of the
agreement, the Company has agreed to issue the principal of the business 12
million shares of Company common stock in exchange for consulting
services.
 
 Furthermore,
the Company shall earn and Mexcor shall pay, a royalty fee on a per case or case
equivalent basis on all Company products distributed by Mexcor which royalty fee
will increase by ten percent on August 12, 2011, with additional ten percent
increases (compounded) on August 15th of each successive year during the initial
term of the agreement. Additionally, the Company shall earn $10.00 for each case
of Damiana product, as defined, distributed by Mexcor. For the first full
twenty-one calendar months following the effective date, Mexcor will pay the
Company the greater of the per case royalty fees described above or the
following monthly minimum royalties; $20,000, for the first six months; $35,000,
for months 7-9 and $50,000 for months 10-21. The minimum monthly royalties are
payable on the 15th day of
that month.
 
 Additionally,
the Company will issue to Mexcor, warrants to acquire 2,000,000 shares of the
Company’s common stock at such time Mexcor realizes the minimum net sales
requirements under the initial term. The Company has further agreed to issue
Mexcor a warrant to acquire an additional 2,000,000 shares of Company common
stock at such time Mexcor attains a second net sales performance level based on
a twelve-month look-back period provided such performance criteria are satisfied
during the initial term. Finally, the Company has agreed to issue Mexcor
additional financial incentives payable in cash or stock and warrants for the
attainment of certain volume or business metrics.
 
 Litigation
 
 On July
29, 2010, we entered into a settlement agreement with Socius CG II, Ltd.
(“Socius”) pursuant to which we agreed to issue 38,800,000 shares of our common
stock in exchange for satisfaction of the claim by Socius for $334,006. This
settlement agreement required court approval before the issuance of such stock
because it involved the payment of the settlement in the form of the Company’s
common stock in reliance upon the Section 3(a)(10) exemption from the
registration requirements of Section 5 of the Securities Act of 1933, as
amended. The court ultimately approved the settlement agreement and the issuance
of the 38,800,000 shares to Socius as exempt from registration pursuant to the
Section 3(a)(10) registration exemption.
  In June
2009, Richard Shiekman, a former employee of the Company, filed an application
for prejudgment remedy against the Company and our chief Executive Officer in
Superior Court of Connecticut, Judicial District of Fairfield (Docket Number CV
09 4028895 S). The plaintiff seeks $127,250 of unpaid wages and commissions and,
$1,500 for reimbursement of expenses. The maximum exposure to the Company and
our CEO is approximately $260,000 for double damages plus attorneys’ fees and
costs. The Company believes that the claims made by the plaintiff are false and
plans to vigorously defend this suit.  In addition, the Company plans
to commence a countersuit for damage and theft of services.  As of
November 30, 2009, we pledged 10,325,000 shares of Company common stock in lieu
of a prejudgment remedy that the Plaintiff had sought against the Company and
its Chief Executive Officer. In 2009, as a matter of public record the former
employee was arrested and charged with alleged theft of Company property. Mr.
Shiekman has filed suit in court in July 2010 and the Company intends to
vigorously defend against this claim.
  In October
2009, James Sokol, a former salesperson for the Company, filed suit against the
Company and its Chief Executive Officer in the Superior Court for the Judicial
District of Fairfield (Docket Number CV 09 5027925 S) claiming unpaid
compensation of $256,000.00.The maximum exposure to the
Company and our CEO is approximately $520,000.00 fordouble damages plus attorney's fees and
costs.The Company believes that the
claims made by the plaintiff are false and plans to vigorously defend this
suit.As ofNovember 30, 2009, we
pledged15,000,000 shares of Company common
stock in lieu of a prejudgment remedy that the Plaintiff had sought against the
Company and its Chief Executive Officer.
  OnJuly 12, 2010, the Company and Mr.
Sokol reached a settlement of the suit pursuant to which Mr. Sokol withdrew the
suit on July 16, 2010 and thereafter returned the 15,000,000 shares of the
Company common stock to the Company.




F-30


In February
2009, Vetrerie Bruni S.p.A (“Bruni”) the company that has the patent to the
Trump Vodka bottle design filed a complaint against us in the U.S. District
Court, Southern District of New York for alleged breach of contract and sought
$225,000 for alleged past due invoices and royalties. The Company filed a
counterclaim. In October 2009, the case was settled, whereby we agreed to pay
Bruni $150,000 in settlement of all claims. The settlement amount was to be paid
in monthly installments of $12,500 beginning February 15, 2010. This settlement
resulted in the reduction of the Company’s annual glass royalty obligation and a
settlement of the outstanding balance the Company owed Bruni. Inconjunction with the legal settlement,
the Company has accrued $150,000,payable in installments over 12 months
from February 2010 forward which if paid in full by August 2010 reverts to the
amount of $120,000 in satisfaction of the outstanding balance.As of April 30, 2010,the outstanding unpaid balance was
$125,000.Additionally, the annual royalty going
forward has been lowered by as much as 75% depending on utilization
levels.The Company
has made timely payments through July 2010 to satisfy the settlement and plans
to continue to do so.




In June
2009, Liquor Group Wholesale, Inc. (“Liquor Group”) a company which provided
distribution services for us in several states filed a claim for damages against
us in Duval County Florida for alleged damages including breach of contract and
is seekingdamages. It is the
Company’sopinion that the claim arose out of our
termination of the agreements we had with them for their nonperformance, failure
of the plaintiffto accurately report sales to the
Company and their withholding of information required by the
agreements.The Company filed a counterclaim of
$500,000 for damages against Liquor Group and has denied their claimed breach of
contract claim previously made against it.The Company contends that it is
owed money by Liquor Group under the agreements. There is currently pending an
arbitration before the American Arbitration Association involving the dispute
between Liquor Group and Drinks Americas. A final arbitration hearing has been
scheduled for June 22, 2010, in Jacksonville, Florida. Liquor Group Wholesale,
Inc. and/or Liquor Group Holdings, LLC sought arbitration on a breach of
contract claim asserting damages in excess of $1,100,000. The claim was filed
against Drinks Americas Holding Limited, not Drink Americas, Inc., the
contracting party. Drinks America, Inc. has counter claimed against the initial
Liquor Group claimants, and has included several other Liquor Group entities
because of the considerable confusion Liquor Group has created through the use
of multiple entities with the same or virtually identical names. The
counterclaim is for $500,000 and includes claims concerning breach of contract,
civil conspiracy, fraudulent concealment and civil
theft.




Liquor Group has been authorized to conduct certain
limited discovery concerning Drinks Americas’ civil conspiracy, fraudulent
concealment and civil theft claims and the parties were scheduled to exchange
witness lists on April 23rd and exhibit lists on May 14th and to file prehearing
briefs on June 8th. The arbitration was suspended by the
Arbitrator due to Liquor Group’s failure to pay all appropriate fees or deposits
by May 24, 2010. The Arbitrator gave an extension of time until June 10, 2010
for all fees and deposits to be paid, which deadline Liquor Group again missed.
The Company has duly paid all fees and deposits and is fully prepared to go
forward with the arbitration.The
arbitrator extended the deadline again for the Liquor Group to complete its
filing and payment of past due fees to July 30tha
deadline which the Liquor Group then missed again. Liquor Group has since
notified the arbitrator that until such time as a date is reset, it does not
intend to make payment.




In
December 2009, Niche Media, Inc., an advertising vendor, filed suit against the
Company in the Connecticut Superior Court for the Judicial District of
Stamford/Norwalk (Docket Number FST-CV09-6002627-S) claiming unpaid invoices for
the approximate amount of $130,000.  The Company believes that it has
defenses to this action and is attempting to reach a resolution.




Other
than the items discussed above, we believe that the Company is currently not
subject to litigation, which, in the opinion of our management, is likely to
have a material adverse effect on the Company.


F-31


18.
Subsequent Events





In August
2010,
we
plan on launching Rheingold Beer,at first in
the Northeast predominately in the tri-state areas of New York, New Jersey and
Connecticut  and later  in Massachusetts, Florida and
Michigan. All registrations and certificates of label approval have been
submitted and approved. Label, can and body production is underway. The
Rheingold Brewery website:www.rheingoldbrewingcompany.comhas been
launched. Orders for product have been received from Metro New York, New Jersey,
Connecticut and Pennsylvania.




In August 2010, we
have entered into agreements with certain of our  employees, including
our Chief Executive Officer, our Chief Operations Officer and certain members of
our Board of Directors to satisfyaccrued debtobligations
aggregating approximately $1,582,000 owed to them for salary and consulting fees
by issuing to them our Preferred Series C Stock in exchange and satisfaction ofthose accrued
expenses.




Socius CG
II, Ltd., (“Socius”), a creditor of the Company due to the purchase of various
claims from various creditors of the Company, filed a complaint against the
Company for breach of contract to recover on the claims against the Company on
June 18, 2010 in the Supreme Court of the State of New York. On July 29, 2010,
we entered into a settlement agreement with Socius pursuant to which we agreed
to issue 38,800,000 shares of our common stock in exchange for satisfaction of
the claim for $334,006. This settlement agreement required court approval before
the issuance of such stock because it involved the payment of the settlement in
the form of the Company’s common stock in reliance upon the Section 3(a)(10)
exemption from the registration requirements of Section 5 of the Securities Act
of 1933, as amended. On July 30, 2010, a Notice of Motion for Court Order
Approving Stipulation for Settlement of Claims was submitted to the court, which
moved for an order to enforce the terms of our proposed settlement with Socius.
The court ultimately approved the settlement agreement and the issuance of the
38,800,000 shares to Socius as exempt from registration pursuant to the Section
3(a)(10) registration exemption.




In
connection with litigation matter discussed above, Mr. Shiekman has filed suit
in court in July 2010 and the Company intends to vigorously defend against this
claim.




On May 10,
2010, in connection with the June 18, 2009 Drinks Debenture financing by an
investor, the investor submitted a Notice of Conversion, to convert $75,000 of
the outstanding balance of the Debenture in exchange for 6,000,000 shares of our
common stock.(See Note 6. – Note
Receivable).




On May 25,
2010, in connection with the June 18, 2009 Drinks Debenture financing by an
investor, the investor submitted a Notice of Conversion, to convert $116,666 of
the outstanding balance of the Debenture in exchange for 11,111,048 shares of
our common stock.(See Note 6. – Note
Receivable).




On June 25,
2010, in connection with the June 18, 2009 Drinks Debenture financing by an
investor, the investor submitted a Notice of Conversion, to convert $150,000 of
the outstanding balance of the Debenture in exchange for 26,785,714 shares of
our common stock.(See Note 6. – Note
Receivable).




On July 19,
2010, in connection with the June 18, 2009 Drinks Debenture financing by an
investor, the investor submitted a Notice of Conversion, to convert $133,334 of
the outstanding balance of the Debenture in exchange for 26,666,800 shares of
our common stock.(See Note 6. – Note
Receivable).








On August
11, 2010, the Company entered into a Purchase and Satisfaction Agreement with
Frederick Schulman, Esq. (the “Seller”) and E-Lionheart Associates, LLC (the
“Purchaser”). Pursuant to the agreement, the Purchaser purchased from the Seller
the debt owed by the Company to the Seller in the amount of $56,632.75 (the
“Debt”) in the form of a convertible note (the “Note”) in connection with legal
fees owed by the Company to the Seller. The purchase price and payment for the
Debt was $42,500.00. On August 12, 2010, the Purchaser converted 11,800,000
free-trading shares of the Company's common stock underlying the Note at a
conversion price of $0.0024 per share for an aggregate amount of $28,320.00 of
debt converted.




In October 2009, James Sokol, a former
salesperson for the Company, filed suit against the Company and its Chief
Executive Officer in the Superior Court for the Judicial District of Fairfield
(Docket Number CV 09 5027925 S) claiming unpaid compensation of
$256,000.00.The maximum exposure to the
Company and our CEO is approximately $520,000.00 fordouble damages plus attorney's fees and
costs.The Company believes that the
claims made by the plaintiff are false and plans to vigorously defend this
suit.As ofNovember 30, 2009, we
pledged15,000,000 shares of Company common
stock in lieu of a prejudgment remedy that the Plaintiff had sought against the
Company and its Chief Executive Officer.




OnJuly 12, 2010, the Company and Mr.
Sokol reached a settlement of the suit pursuant to which Mr. Sokol withdrew the
suit on July 16, 2010 and thereafter returned the 15,000,000 shares of the
Company common stock to the Company.




In June
2009, Liquor Group Wholesale, Inc. (“Liquor Group”) a company which provided
distribution services for us in several states filed a claim for damages against
us in Duval County Florida for alleged damages including breach of contract and
is seekingdamages. It is the
Company’sopinion that the claim arose out of our
termination of the agreements we had with them for their nonperformance, failure
of the plaintiffto accurately report sales to the
Company and their withholding of information required by the
agreements.The Company filed a counterclaim of
$500,000 for damages against Liquor Group and has denied their claimed breach of
contract claim previously made against it.The Company contends that it is
owed money by Liquor Group under the agreements. There is currently pending an
arbitration before the American Arbitration Association involving the dispute
between Liquor Group and Drinks Americas. A final arbitration hearing has been
scheduled for June 22, 2010, in Jacksonville, Florida. Liquor Group Wholesale,
Inc. and/or Liquor Group Holdings, LLC sought arbitration on a breach of
contract claim asserting damages in excess of $1,100,000. The claim was filed
against Drinks Americas Holding Limited, not Drink Americas, Inc., the
contracting party. Drinks America, Inc. has counter claimed against the initial
Liquor Group claimants, and has included several other Liquor Group entities
because of the considerable confusion Liquor Group has created through the use
of multiple entities with the same or virtually identical names. The
counterclaim is for $500,000 and includes claims concerning breach of contract,
civil conspiracy, fraudulent concealment and civil
theft.




Liquor Group has been authorized to conduct certain
limited discovery concerning Drinks Americas’ civil conspiracy, fraudulent
concealment and civil theft claims and the parties were scheduled to exchange
witness lists on April 23rd and exhibit lists on May 14th and to file prehearing
briefs on June 8th. The arbitration was suspended by the
Arbitrator due to Liquor Group’s failure to pay all appropriate fees or deposits
by May 24, 2010. The Arbitrator gave an extension of time until June 10, 2010
for all fees and deposits to be paid, which deadline Liquor Group again missed.
The Company has duly paid all fees and deposits and is fully prepared to go
forward with the arbitration.The
arbitrator extended the deadline again for the Liquor Group to complete its
filing and payment of past due fees to July 30tha
deadline which the Liquor Group then missed again. Liquor Group has since
notified the arbitrator that until such time as a date is reset, a date that the
Liquor Group previously has twice missed and caused to be reset, it does not
intend to make payment.




On June 24,
2010, the Company entered into an agreement (the “Agreement”) with Enable Growth
Partners, LP, Enable Opportunity Partners, LP and Pierce Diversified Strategy
Master Fund, LLC (the “Holders”) pursuant to which the Company agreed, in part,
to issue the Holders an aggregate of approximately 12,000,000 shares of its
Common Stock in accordance with the terms of the Agreementwhich permitted the waiver and
lifting of certain various provisions from prior agreements.


F-32