UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549









FORM
10-Q







(Mark
One)


x
            QUARTERLY
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934




For
the quarterly period ended March 31, 2008




 ̈
            TRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934




For
the transition period from 
to





Commission
File Number 000-53085





HARBREW
IMPORTS LTD. CORP.


(Exact
Name of Registrant as Specified in Its Charter)





Florida
              
              13-4362274(State
      or Other Jurisdiction
              
              (I.R.S.
      Employerof
      Incorporation or Organization)
              
              Identification
      No.)





102 Buffalo Avenue,
Freeport, New York 11520


(Address
of Principal Executive Offices)





(516)
377-2636


(Registrant’s
Telephone Number, Including Area Code)







(Former
Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)


Indicate  by
check mark whether the registrant (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 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





(Do not
check if a smaller reporting company)




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




As of
December 16, 2008, the registrant had outstanding 24,592,160 shares of common
stock.







TABLE OF
CONTENTS




PagePART
      I. FINANCIAL INFORMATIONITEM
      1. Financial Statements
              1ITEM
      2. Management’s Discussion and Analysis of Financial Condition and Results
      of Operations
              14ITEM
      3. Quantitative and Qualitative Disclosures About Market
    Risk
              18ITEM
      4T. Controls and Procedures
              19PART
      II. OTHER INFORMATIONITEM
      1. Legal Proceedings
              20ITEM
      1A. Risk Factors
              20ITEM
      2. Unregistered Sales of Equity Securities and Use of
    Proceeds
              20ITEM
      3. Defaults upon Senior Securities
              21ITEM
      4. Submission of Matters to a Vote of Security Holders
              21ITEM
      5. Other Information
              21ITEM
      6. Exhibits
              21SIGNATURES
              23








PART
I. FINANCIAL INFORMATION





ITEM
1. Financial Statements





Harbrew
Imports Ltd. Corp. and Subsidiary





Consolidated
Balance Sheets





March
      31,
                            
                            
                            December
      31,2008
                            
                            
                            2007(Unaudited)AssetsCurrent
      assets:Cash
      and cash equivalents
                            
                            $
                            55,788
                            
                            
                            $
                            43,664Accounts
      receivable, net of allowance for doubtful
                            
                            
                            -
                            
                            
                            
                            -accounts
      of $ 35,000 and $ 0, respectively
                            
                            
                            246,369
                            
                            
                            
                            491,280Inventories
                            
                            
                            1,039,021
                            
                            
                            
                            1,319,426Prepaid
      expenses and other current assets
                            
                            
                            313,826
                            
                            
                            
                            310,406Total
      current assets
                            
                            
                            1,655,004
                            
                            
                            
                            2,164,776Property,
      plant and equipment, net
                            
                            
                            6,644
                            
                            
                            
                            6,994Restricted
      cash and cash equivalents
                            
                            
                            108,785
                            
                            
                            
                            108,785Total
      assets
                            
                            $
                            1,770,433
                            
                            
                            $
                            2,280,555Liabilities and Stockholders’ Equity
      (Deficiency)Current
      liabilities:Current
      portion of debt
                            
                            $
                            3,137,515
                            
                            
                            $
                            3,132,319Accounts
      payable
                            
                            
                            1,243,635
                            
                            
                            
                            1,245,640Accrued
      expenses
                            
                            
                            340,934
                            
                            
                            
                            326,520Total
      current liabilities
                            
                            
                            4,722,084
                            
                            
                            
                            4,704,479Long
      term debt
                            
                            
                            2,062,470
                            
                            
                            
                            1,979,285Total
      liabilities
                            
                            
                            6,784,554
                            
                            
                            
                            6,683,764Stockholders’
      equity (deficiency):Preferred
      stock, $.001 par value; authorized20,000,000
      shares, none issued and outstanding
                            
                            
                            -
                            
                            
                            
                            -Common
      stock, $.001 par value; authorized 100,000,000shares,
      issued and outstanding 16,898,700and
      16,336,200 shares, respectively
                            
                            
                            16,899
                            
                            
                            
                            16,336Additional
      paid-in capital
                            
                            
                            455,770
                            
                            
                            
                            379,257Retained
      earnings (deficit)
                            
                            
                            (5,486,790
                            )
                            
                            
                            (4,798,802
                            )Total
      stockholders’ equity (deficiency)
                            
                            
                            (5,014,121
                            )
                            
                            
                            (4,403,209
                            )Total
      liabilities and stockholders’ equity (deficiency)
                            
                            $
                            1,770,433
                            
                            
                            $
                            2,280,555





See notes
to consolidated financial statements


1


Harbrew
Imports Ltd. Corp. and Subsidiary





Consolidated
Statements of Operations


(Unaudited)





Three
      Months EndedMarch
      31,2008
                        
                        
                        2007(Unaudited)
                        
                        
                        (Unaudited)Sales
                        
                        $
                        512,048
                        
                        
                        $
                        173,753Cost
      of goods sold
                        
                        
                        417,041
                        
                        
                        
                        133,369Gross
      profit
                        
                        
                        95,007
                        
                        
                        
                        40,384Selling,
      general and administrative expenseSelling,
      marketing and promotion
                        
                        
                        67,700
                        
                        
                        
                        14,100Administrative
      compensation and benefits
                        
                        
                        226,624
                        
                        
                        
                        183,134Professional
      fees
                        
                        
                        70,114
                        
                        
                        
                        25,641Occupancy
      and warehousing
                        
                        
                        67,897
                        
                        
                        
                        30,901Travel
      and entertainment
                        
                        
                        16,761
                        
                        
                        
                        67,880Office
                        
                        
                        5,735
                        
                        
                        
                        16,488Licenses
      and permits
                        
                        
                        6,020
                        
                        
                        
                        34,454Other
                        
                        
                        5,228
                        
                        
                        
                        3,819Total
                        
                        
                        466,079
                        
                        
                        
                        376,417Income
      (loss) from operations
                        
                        
                        (371,072
                        )
                        
                        
                        (336,033
                        )Interest
      income
                        
                        
                        -
                        
                        
                        
                        -Interest
      expense
                        
                        
                        (316,916
                        )
                        
                        
                        (47,308
                        )Income
      (loss) before income taxes
                        
                        
                        (687,988
                        )
                        
                        
                        (383,341
                        )Income
      taxes
                        
                        
                        -
                        
                        
                        
                        -Net
      income (loss)
                        
                        $
                        (687,988
                        )
                        
                        $
                        (383,341
                        )Net
      income (loss) per share -basic
      and diluted
                        
                        $
                        (0.04
                        )
                        
                        $
                        (0.03
                        )Weighted
      average number of sharesoutstanding
      - basic and diluted
                        
                        
                        16,702,272
                        
                        
                        
                        12,457,944





See notes
to consolidated financial statements




2




Harbrew
Imports Ltd. Corp. and Subsidiary





Consolidated
Statements of Cash Flows


(Unaudited)





Three
      Months EndedMarch
      31,2008
                                  
                                  
                                  2007(Unaudited)
                                  
                                  
                                  (Unaudited)Cash
      flows from operating activities:Net
      income (loss)
                                  
                                  $
                                  (687,988
                                  )
                                  
                                  $
                                  (383,341
                                  )Adjustments
      to reconcile net income(loss)
      to net cash provided by (used in)operating
      activities:Depreciation
                                  
                                  
                                  350
                                  
                                  
                                  
                                  -Amortization
      of debt discountscharged
      to interest expense
                                  
                                  
                                  18,089
                                  
                                  
                                  
                                  -Stock-based
      compensation
                                  
                                  
                                  62,523
                                  
                                  
                                  
                                  -Changes
      in operating assets and liabilities:Accounts
      receivable, net
                                  
                                  
                                  244,911
                                  
                                  
                                  
                                  30,132Inventories
                                  
                                  
                                  280,405
                                  
                                  
                                  
                                  (7,691
                                  )Prepaid
      expenses and other current assets
                                  
                                  
                                  (3,420
                                  )
                                  
                                  
                                  (87,575
                                  )Restricted
      cash and cash equivalents
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Negative
      bank account balance
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (13,338
                                  )Accounts
      payable
                                  
                                  
                                  (2,005
                                  )
                                  
                                  
                                  (158,675
                                  )Accrued
      expenses and other currentliabilities
                                  
                                  
                                  14,414
                                  
                                  
                                  
                                  (30,389
                                  )Net
      cash provided by (used in)operating
      activities
                                  
                                  
                                  (72,721
                                  )
                                  
                                  
                                  (650,877
                                  )Cash
      flows from investing activities:Property,
      plant and equipment additions
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (3,008
                                  )Cash
      flows from financing activities:Increases
      in debt, net
                                  
                                  
                                  87,446
                                  
                                  
                                  
                                  662,315Repayment
      of debt
                                  
                                  
                                  (3,101
                                  )
                                  
                                  
                                  (28,321
                                  )Net
      cash provided by (used in)financing
      activities
                                  
                                  
                                  84,845
                                  
                                  
                                  
                                  633,994Increase
      (decrease) in cash andcash
      equivalents
                                  
                                  
                                  12,124
                                  
                                  
                                  
                                  (19,891
                                  )Cash
      and cash equivalents, beginning of period
                                  
                                  
                                  43,664
                                  
                                  
                                  
                                  26,045Cash
      and cash equivalents, end of period
                                  
                                  $
                                  55,788
                                  
                                  
                                  $
                                  6,154Supplemental
      disclosures of cash flow information:Interest
      paid
                                  
                                  $
                                  277,800
                                  
                                  
                                  $
                                  47,308Income
      taxes paid
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  -





See notes
to consolidated financial statements


3


Harbrew
Imports Ltd. Corp. and Subsidiary


Notes
to Consolidated Financial Statements


(Information
as of and for the Three Months Ended March 31, 2008 and 2007 is
Unaudited)





1.
            ORGANIZATION
      AND NATURE OF BUSINESS





Harbrew
Imports Ltd. Corp. (“Harbrew Florida”) was incorporated in Florida on January 4,
2007 under the name Stassi Harbrew Imports Corp. pursuant to the Bankruptcy
Court Approved Reorganization Plan for the Stassi Interaxx, Inc. (“Stassi”)
Reorganization approved on December 29, 2006.  On May 17, 2007,
Harbrew Florida acquired Harbrew Imports, Ltd. (“Harbrew New York”), a New York
corporation incorporated on September 8, 1999.  Pursuant to the
Amended and Restated Reorganization & Merger Agreement dated April 10, 2007,
288 creditors and shareholders of Stassi were issued 1,383,256 shares of Harbrew
Florida’s common stock and the two shareholders of Harbrew New York were issued
12,457,944 shares of Harbrew Florida’s common stock.





Prior to
the merger on May 17, 2007, Harbrew Florida had no assets, liabilities, or
business operations.  Accordingly, the merger has been treated for
accounting purposes as a recapitalization by the accounting acquirer Harbrew New
York and the financial statements reflect the assets, liabilities, and
operations of Harbrew New York from its inception on September 8, 1999 to May
17, 2007 and Harbrew Florida  and Harbrew New York
thereafter.  Harbrew Florida and its wholly-owned subsidiary Harbrew
New York are hereafter referred to as the “Company”.





The
Company sells various liquor products in North America under exclusive
distribution agreements.





2.
            INTERIM
      FINANCIAL STATEMENTS





The
unaudited financial statements as of March 31, 2008 and for the three months
ended March 31, 2008 and 2007 have been prepared in accordance with accounting
principles generally accepted in the United States for interim financial
information and with instructions to Form 10-Q.  In the opinion of
management, the unaudited financial statements have been prepared on the same
basis as the annual financial statements and reflect all adjustments, which
include only normal recurring adjustments, necessary to present fairly the
financial position as of March 31, 2008 and the results of operations and cash
flows for the periods ended March 31, 2008 and 2007.  The financial
data and other information disclosed in these notes to the interim financial
statements related to those periods are unaudited. The results for the three
months ended March 31, 2008 are not necessarily indicative of the results to be
expected for any subsequent quarter of the entire year ending December 31,
2008.  The balance sheet at December 31, 2007 has been derived from
the audited financial statements at that date.





Certain
information and footnote disclosures normally included in financials statements
prepared in accordance with accounting principles generally accepted in the
United States have been condensed or omitted pursuant to the Securities and
Exchange Commission’s rules and regulations.  These unaudited
financial statements should be read in conjunction with the Company’s audited
financial statements and notes thereto for the year ended December 31, 2007 as
included in the Company’s annual report on Form 10-KSB filed December 4,
2008.





4
 
 Harbrew
Imports Ltd. Corp. and Subsidiary
 Notes
to Consolidated Financial Statements
 (Information
as of and for the Three Months Ended March 31, 2008 and 2007 is
Unaudited)


3.
            INVENTORIES





Inventories
consist of:





Mar. 31, 2008
                    
                    
                    Dec. 31, 2007Danny
      DeVito's Premium Limoncello (liqueur) brand
                    
                    $
                    296,776
                    
                    
                    $
                    302,194Hot
      Irishman (Irish coffee) brand
                    
                    
                    130,080
                    
                    
                    
                    205,453Molly's
      (Irish cream liqueur) brand
                    
                    
                    95,431
                    
                    
                    
                    146,315Glen
      Master (scotch) brand
                    
                    
                    127,230
                    
                    
                    
                    139,618George
      Vesselle (champagne) brand
                    
                    
                    105,409
                    
                    
                    
                    110,703Other
                    
                    
                    284,095
                    
                    
                    
                    415,143Total
                    
                    $
                    1,039,021
                    
                    
                    $
                    1,319,426




4.
            PREPAID
      EXPENSES AND OTHER CURRENT ASSETS





Prepaid
expenses and other current assets consist of:





Mar. 31, 2008
                    
                    
                    Dec. 31, 2007Prepaid
      inventory purchases
                    
                    $
                    300,000
                    
                    
                    $
                    300,000Other
                    
                    
                    13,826
                    
                    
                    
                    10,406Total
                    
                    $
                    313,826
                    
                    
                    $
                    310,406




5.
            PROPERTY,
      PLANT AND EQUIPMENT, NET





Property,
plant and equipment, net consist of:





Mar. 31, 2008
                    
                    
                    Dec. 31, 2007Vehicles
                    
                    $
                    126,295
                    
                    
                    $
                    126,295Office
      equipment
                    
                    
                    15,711
                    
                    
                    
                    15,711Total
                    
                    
                    142,006
                    
                    
                    
                    142,006Accumulated
      depreciation
                    
                    
                    (135,362
                    )
                    
                    
                    (135,012
                    )Net
                    
                    $
                    6,644
                    
                    
                    $
                    6,994




5


Harbrew
Imports Ltd. Corp. and Subsidiary
 Notes
to Consolidated Financial Statements
 (Information
as of and for the Three Months Ended March 31, 2008 and 2007 is
Unaudited)


6.
            DEBT





Debt
consists of:




Mar. 31, 2008
            
            
            Dec. 31, 2007Due
      under Purchase Order FinancingAgreement
            
            $
            2,788,026
            
            
            $
            2,721,933Due
      under Discount Factoring Agreement
            
            
            173,628
            
            
            
            231,424Convertible
      notes, interest at 7%, dueJuly
      2, 2012 to March 5, 2013 - net of unamortizeddiscounts
      of $363,200 and $331,056, respectively
            
            
            663,855
            
            
            
            599,569Convertible
      promissory notes, interest at 10%,due
      October 25, 2007 to November 27, 2007
            
            
            175,000
            
            
            
            175,000Due
      Donald Chadwell (owner of 6,228,972shares
      of common stock), interest at 0%,no
      repayment terms
            
            
            763,000
            
            
            
            748,000Due
      Richard DeCicco (officer, director, andowner
      of 6,228,972 shares of commonstock)
      and affiliates, interest at 0%,no
      repayment terms
            
            
            635,615
            
            
            
            631,716Notes
      payable secured by vehicles
            
            
            861
            
            
            
            3,962Total
            
            
            5,199,985
            
            
            
            5,111,604Less
      current portion of debt
            
            
            (3,137,515
            )
            
            
            (3,132,319
            )Long
      term debt
            
            $
            2,062,470
            
            
            $
            1,979,285




The
Purchase Order Financing Agreement was dated January 22, 2007, has a term of two
years, and provides for advances of credit from Capstone Capital Group I, LLC
(the “Secured Party”) to the Company.  Among other things, the
agreement provides for fees to the Secured Party equal to 2.5% for the first 30
days (or part thereof) that each advance is outstanding and 1.25% for every 14
days (or part thereof) that such advance remains outstanding, subject to minimum
fees of $325,000 for the first year and $425,000 for the second year of the
agreement.  Repayment of the advances are due the earlier of 60 days
from the date of an advance or the day on which any of the goods which are the
subject of such advance are shipped to a buyer.  Obligations to the
Secured Party are collateralized by substantially all the assets of the Company
and have been personally guaranteed by Richard DeCicco, the Company’s chief
executive officer.  See also Note 11 to consolidated financial
statements.





The
Discount Factoring Agreement was dated January 22, 2007 and provides for
financing of certain Company accounts receivable by Capstone Business Credit,
LLC (the “Factor”).  Among other things, the agreement provides for
commissions to the Factor equal to 2% for the first 30 days (or part thereof)
that each such account receivable is outstanding and 1% for every 14 days (or
part thereof) thereafter that such account receivable remains outstanding,
subject to minimum commissions of $420,000 for the first year and $540,000 for
the second year of the agreement.  Obligations to the Factor under the
agreement are collateralized by substantially all the assets of the Company and
have been personally guaranteed by Richard DeCicco, the Company’s chief
executive officer.  The agreement may be terminated by either party
upon the giving of not less than 30 days prior written notice of termination to
the other party.  See also Note 11 to consolidated financial
statements.




Fees and
commissions charged pursuant to the Purchase Order Financing Agreement and the
Discount Factoring Agreement are included in interest expense in the
accompanying statements of operations.




6


Harbrew
Imports Ltd. Corp. and Subsidiary
 Notes
to Consolidated Financial Statements
 (Information
as of and for the Three Months Ended March 31, 2008 and 2007 is
Unaudited)


Convertible
notes consisted of:


Mar. 31, 2008
                    
                    
                    Dec. 31, 2007Convertible
      notes - face amount (convertible  into a total of up to 2,053,750 and
      1,861,250 shares of  common stock, respectively)
                    
                    $
                    1,026,875
                    
                    
                    $
                    930,625Discounts
      relating to the fair value of the warrants  included in the sale of
      Units ($155,264 and $140,711, respectively) and the  costs relating
      to the sale of Units ($243,251 and $207,751, respectively),  net of
      accumulated amortization of $35,495 and $17,406,
    respectively
                    
                    
                    (363,020
                    )
                    
                    
                    (331,056
                    )Convertible
      notes, net of unamortized discounts
                    
                    $
                    663,855
                    
                    
                    $
                    599,569





On July
20, 2007, the Company commenced a private placement offering of up to 60 Units
of securities at a price of $25,000 per Unit to accredited
investors.  Each Unit consists of (a) a 7% convertible promissory note
in the principal amount of $25,000 which is convertible into shares of the
Company’s common stock at a price of $0.50 per share and is due five years from
the date of issuance; (b) a five-year warrant to purchase 50,000 shares of
common stock exercisable at a price of $1.00 per share (the “Class A Warrant”);
and (c)  a five-year warrant to purchase 50,000 shares of common stock
exercisable at a price of  $1.50 per share (the “Class B
Warrant”).  Interest on the convertible promissory notes is payable
semiannually at the rate of 7% by issuance of additional notes.  In
the event that the Company’s common stock is not trading on the OTC Bulletin
Board, American Stock Exchange or the NASDAQ Stock Market one year from the date
of issuance of the notes, the rate of interest increases to 14% retroactive to
the date of issuance.  Basic Investors, Inc. (“Basic”), the placement
agent of the offering, is entitled to a placement agent fee of 10% of the gross
proceeds and a 3% non-accountable expense allowance.  Basic is also
entitled to receive one Unit for each ten Units sold in the
offering.





On July
2, 2007, the Company sold 10 Units to Basic and affiliates for gross proceeds of
$250,000.  The warrants (to purchase up to 1,000,000 shares of Company
common stock) included in the Units were valued at $37,800 using the
Black-Scholes option pricing model and the following assumptions: $0.10 stock
price, risk free interest rate of 4%, volatility of 100%, and term of five
years.  The discount attributable to the $37,800 fair value of the
warrants and the $12,500 costs relating to the sale are being amortized over the
convertible notes’ term of five years as interest expense.  No
compensation was due Basic in connection with these sales.





On August
27, 2007, the Company closed on the sale of an additional 10 Units for gross
proceeds of $250,000 and issued 1 Unit to Basic as part of their
compensation.  The discount attributable to the $41,580 fair value of
the warrants (to purchase up to 1,100,000 shares of Company common stock)
included in the Units (valued using the same assumptions described in the
preceding paragraph) and the $92,000 costs relating to the sale are being
amortized over the convertible notes’ term of five years as interest
expense.





On
November 27, 2007, the Company closed on the sale of an additional 14.75 Units
for gross proceeds of $368,750 and issued 1.475 Units to Basic as part of their
compensation.  The net proceeds to the Company, after deducting
$47,938 placement agent fees paid to Basic, was $320,812.  The 16.225
Units consist of a total of $405,625 face value of convertible notes
(convertible into a total of up to 811,250 shares of common stock) and warrants
to purchase up to 1,622,500 shares of common stock.  The discount
attributable to the $61,331 fair value of the warrants (to purchase up to
1,622,500 shares of Company common stock) included in the Units (valued using
the same assumptions described in the second preceding paragraph) and the
$103,251 costs relating to the sale are being amortized over the convertible
notes’ term of five years as interest expense.





7


Harbrew
Imports Ltd. Corp. and Subsidiary
 Notes
to Consolidated Financial Statements
 (Information
as of and for the Three Months Ended March 31, 2008 and 2007 is
Unaudited)




On March
5, 2008, the Company closed on the sale of an additional 3.5 Units for gross
proceeds of $87,500 and issued .35 Units to Basic as part of their
compensation.  The net proceeds to the Company, after deducting
$11,375 placement agent fees paid to Basic, was $76,125  The 3.85
Units consist of a total of $96,250 face value of convertible notes (convertible
into a total of up to 192,500 shares of common stock) and warrants to purchase
up to 385,000 shares of common stock.  The discount attributable to
the $14,553 fair value of the warrants (to purchase up to 385,000 shares of
Company common stock) included in the Units (valued using the same assumptions
described in the third preceding paragraph) and the $35,500 costs relating to
the sale are being amortized over the convertible notes’ term of five years as
interest expense.





As part
of the related agreements, the Company agreed to file a registration statement
with the SEC within 30 days to register the shares issuable upon conversion of
the Convertible notes and exercise of the warrants.  As of September
30, 2008, the Company has not filed such a registration statement since its
shares of common stock have not yet become publicly traded.  Other
than the retroactive increase in interest rate to 14% for failure to start
trading on the OTC Bulletin Board, American Stock Exchange or the NASDAQ Stock
Market one year from the date of issuance of the notes, there is no penalty
provision in these agreements for late filing of a registration
statement.





The
convertible promissory notes were sold to 5 investors in October and November
2006 and provide that, if the Company provides the respective Holders with
actual notice of completion of the merger between Harbrew Florida and Harbrew
New York (which occurred May 17, 2007), the Holders are required to convert the
notes and all accrued interest then owing into common stock at a Conversion
Price of $1.50 per share.  If the share price of the common stock on
the day that is 120 days after the commencement of trading of the shares on the
OTC Bulletin Board or other such recognized exchange is less than $1.50 per
share, then the Conversion Price will be adjusted to such price and the
respective Holders will be issued the appropriate number of additional shares of
common stock.





7.
              STOCKHOLDERS’
      EQUITY





On June
28, 2007, the Company authorized the issuance of a total of 1,250,000 shares of
common stock to designees of Basic Investors, Inc. (“Basic”) for future services
to be rendered by such designees pursuant to a Business Consulting Agreement
executed with Basic.  The Company is expensing the $125,000 estimated
fair value of these shares as professional fees (and recognizing the issuance of
the 1,250,000 shares) over the one year term of the Business Consulting
Agreement.  The fair value of the shares was estimated assuming the
shares were priced at $0.10 per share.





On
January 15, 2008, the Company issued a total of 250,000 shares of common stock
to two attorneys in consideration of legal services.  The Company
included this issuance in its statement of operations for the three months ended
March 31, 2008 in professional fees at the $25,000 estimated fair value of the
shares.





8.
              INCOME
      TAXES





No
provision for income taxes was recorded in the periods presented since the
Company incurred net losses in these periods.





Based on
management’s present assessment, the Company has not yet determined it to be more
likely than not that a deferred tax asset of $1,154,363 attributable to the
future utilization of the $3,395,185 net operating loss carry forward as of
December 31, 2007 will be realized.  Accordingly, the Company has
provided a 100% allowance against the deferred tax asset in the financial
statements at December 31, 2007.  The Company will continue to review
this valuation allowance and make adjustments as appropriate.  The
$3,395,185 net operating loss carry forward expires in 2027.




8


Harbrew
Imports Ltd. Corp. and Subsidiary
 Notes
to Consolidated Financial Statements
 (Information
as of and for the Three Months Ended March 31, 2008 and 2007 is
Unaudited)
  Current
tax laws limit the amount of loss available to be offset against future taxable
income when a substantial change in ownership occurs.  Therefore, the
amount available to offset future taxable income may be limited.


9.
              COMMITMENTS
      AND CONTINGENCIES





Rental
agreement – The Company occupies its facilities in Freeport, New York under a
month to month agreement at a monthly rent of $14,350.  For the three
months ended March 31, 2008 and 2007, rent expense was $42,626 and $35,793,
respectively.





License
agreement – On April 26, 2007 and as amended November 1, 2007, the Company
entered into an exclusive License Agreement with Seven Cellos, LLC (“DDV”),
pursuant to which the Company was granted a limited license of certain rights in
and to Danny DeVito’s name, likeness and biography for use by the Company in
connection with the Danny DeVito Premium Limoncello brand.  The term
of the Agreement continues through perpetuity unless the agreement is
terminated.  In consideration for the license, the Company agreed to
pay royalties as follows: (a) 5% of Net Profits (as defined) to Behr Abrahamson
& Kaller, LLP (“BAK”), (b) a payment of 50% of the remaining Net Profits to
DDV after the payment described above; and (c) a payment of 2% of Net Profits to
Sichenzia Ross Friedman Ference LLP after payment of 50% of Net Profits to
DDV.  In addition, the Company granted DDV and others warrants to
purchase up to a total of 145,000 shares of Company common stock at an exercise
price equal to the lower of $1.00 per share or 85% of the 30 day average bid and
ask price, provided, however, that in no event shall the exercise price be less
than $0.50 per share.  Danny DeVito agreed to use reasonable efforts
to be available for a reasonable number of promotional appearances during each
consecutive 12 month period, the duration of which shall not exceed 2
days.  Pursuant to the agreement, Danny DeVito granted the Company a
right of first refusal for a period of 5 years to license any other liquor,
spirit or alcoholic beverage which Danny DeVito may determine to endorse or
develop.  A condition precedent to Danny DeVito’s performance under
the agreement are subject to the Company applying for a trademark for the brand
name “Danny DeVito’s Premium Limoncello” with Danny DeVito being designated as
50% co-owner of such trademark.  The Company has filed for this
trademark with the U.S. Patent and Trademark Office and, as of November 30,
2008, is awaiting disposition. The $2,717 estimated fair value of the 145,000
warrants (using the Black-Scholes option pricing model and the following
assumptions: $0.10 stock price, $0.50 exercise price, 4% risk free interest
rate, and 100% volatility) is being amortized over the exercise period of the
warrants as compensation and benefits.





For the
three months ended March 31, 2008, the Company calculated “Net Profits” from the
brand to be negative and thus did not pay or accrue any royalties expense under
the License Agreement.





Employment
agreement with chief executive officer – On January 23, 2008, the Company
entered into an employment agreement with its chief executive officer Richard
DeCicco.  The agreement provides for a term of 5 years, commencing on
January 1, 2008.  The term can be extended by a written agreement of
the parties.  The agreement provides for annual compensation ranging
from $265,000 to $350,000.  In addition, if the Company enters into an
agreement and further sells any brand in the company’s portfolio, Mr. DeCicco
will receive 5% of such sale.  Mr. DeCicco is also entitled to
incentive bonus compensation, stock and/or options in accordance with Company
policies established by the Board of Directors.  The agreement
provides for the grant of a non-qualified ten year option to purchase up to
1,000,000 shares of common stock of the Company at an exercise price which shall
represent a discount to the market price.  The options shall be
granted pursuant to the 2008 incentive and non-qualified stock option plan which
the Company intends to implement.  Mr. DeCicco has the right to
terminate the agreement upon 60 days notice to the Company for any
reason.  Pursuant to the terms of the agreement, if Mr. DeCicco is
absent from work because of illness or incapacity cumulatively for more than 2
months in addition to vacation time in any calendar year, the Company may
terminate the agreement upon 30 days written notice.  The agreement
also provides that the agreement may be terminated upon 90 days notice to Mr.
DeCicco if: (A) there is a sale of substantially all of the Company’s assets to
a single purchaser or group of associated purchasers; (B) there is a sale,
exchange or disposition of 50% of the outstanding shares of the Company’s
outstanding stock; (C) the Company terminates its business or liquidates its
assets; or (D) there is a merger or consolidation of the Company in which the
Company’s shareholders receive less than 50% of the outstanding voting shares of
the new or continuing corporation.  Mr. DeCicco shall be entitled to severance
pay in the amount of 2 years compensation and medical and other benefits in the
event of a termination of the agreement under certain
circumstances.





9


Harbrew
Imports Ltd. Corp. and Subsidiary
 Notes
to Consolidated Financial Statements
 (Information
as of and for the Three Months Ended March 31, 2008 and 2007 is
Unaudited)




Employment
agreement with chief financial officer - On October 1, 2007, the Company entered
into an employment agreement with its chief financial officer William
Blacker.  The agreement provides for a term of 3 years, commencing on
October 1, 2007.  The term can be extended by a written agreement of
the parties.  The Company agreed to issue options to purchase shares
of its common stock to Mr. Blacker if and when the common stock becomes publicly
traded, as follows: (A) upon execution of the agreement, 100,000 options at an
exercise price of $0.05 per share; (B) on October 1, 2008, 100,000 options at an
exercise price of $0.15 per share; and (C) on October 1, 2009, 100,000 options
at an exercise price of $.75 per share.  Pursuant to the terms of the
agreement, Mr. Blacker is to receive an annual salary of
$150,000.  Mr. Blacker has the right to terminate the agreement upon
60 days notice to the Company for any reason.  The agreement further
provides that if the agreement is terminated for any reason other than willful
malfeasance by Mr. Blacker, Mr. Blacker shall be entitled to receive severance
pay in the amount of 6 months or the balance of the agreement’s term of
existence, whichever is greater, and shall receive all benefits under the
agreement.





The
$16,850 estimated fair value of the 300,000 options (using the Black-Scholes
option pricing model and the following assumptions: $0.10 stock price, 4% risk
free interest rate, 100% volatility, and term of 3.5 years) is being amortized
over the 3 year term of the employment agreement as compensation and
benefits.





10.
              STOCK
      OPTIONS AND WARRANTS





A summary
of stock option and warrant activity for the three months ended March 31, 2008
follows:




StockOptions
                    
                    
                    WarrantsOutstanding
      at January 1, 2008
                    
                    
                    300,000
                    
                    
                    
                    3,887,500Granted
      and issued
                    
                    
                    1,000,000
                    
                    
                    
                    385,000Exercised
                    
                    
                    -
                    
                    
                    
                    -Forfeited/expired/cancelled
                    
                    
                    -
                    
                    
                    
                    -Outstanding
      at March 31, 2008
                    
                    
                    1,300,000
                    
                    
                    
                    4,272,500




Stock
options outstanding at March 31, 2008 consist of:




Date
            
            Number
            
            
            Number
            
            
            Exercise
            
            ExpirationGranted
            
            Outstanding
            
            
            Exercisable
            
            
            Price
            
            DateOctober
      1, 2007
            
            
            100,000
            
            
            
            -
            
            
            $
            0.05
            
            April
      1, 2011October
      1, 2007
            
            
            100,000
            
            
            
            -
            
            
            $
            0.15
            
            April
      1, 2011October
      1, 2007
            
            
            100,000
            
            
            
            -
            
            
            $
            0.75
            
            April
      1, 2011January
      1, 2008
            
            
            1,000,000
            
            
            
            -
            
            
            $
            0.10
            (a)
            June
      30, 2013Total
            
            
            1,300,000
            
            
            
            -




(a)
Estimated since exercise price is to be determined based on future stock
price.





10


Harbrew
Imports Ltd. Corp. and Subsidiary
 Notes
to Consolidated Financial Statements
 (Information
as of and for the Three Months Ended March 31, 2008 and 2007 is
Unaudited)




The
1,300,000 options are not exercisable until the Company’s common stock becomes
publicly traded. The 300,000 options granted on October 1, 2007 vest 100,000 on
October 1, 2007, 100,000 on October 1, 2008, and 100,000 on October 1,
2009.  As of March 31, 2008, there was $100,207 of total unrecognized
compensation cost relating to unexpired stock options.  That cost is
expected to be recognized $17,817 in the nine months ended December 31, 2008,
$23,756 in 2009, $22,352 in 2010, $18,140 in 2011 and $18,142 in
2012.





Warrants
outstanding at March 31, 2008 consist of:




Date
                      
                      Number
                      
                      
                      Number
                      
                      
                      Exercise
                      
                      ExpirationIssued
                      
                      Outstanding
                      
                      
                      Exercisable
                      
                      
                      Price
                      
                      DateApril
      26, 2007
                      
                      
                      120,000
                      
                      
                      
                      120,000
                      
                      
                      $
                      0.50
                      
                      April
      30, 2009July
      2, 2007
                      
                      
                      500,000
                      
                      
                      
                      500,000
                      
                      
                      $
                      1.00
                      
                      July
      2, 2012July
      2, 2007
                      
                      
                      500,000
                      
                      
                      
                      500,000
                      
                      
                      $
                      1.50
                      
                      July
      2, 2012August
      27, 2007
                      
                      
                      550,000
                      
                      
                      
                      550,000
                      
                      
                      $
                      1.00
                      
                      August
      27, 2012August
      27, 2007
                      
                      
                      550,000
                      
                      
                      
                      550,000
                      
                      
                      $
                      1.50
                      
                      August
      27, 2012November
      1, 2007
                      
                      
                      45,000
                      
                      
                      
                      45,000
                      
                      
                      $
                      0.50
                      
                      November
      30, 2009November
      8, 2007
                      
                      
                      811,250
                      
                      
                      
                      811,250
                      
                      
                      $
                      1.00
                      
                      November
      8, 2012November
      8, 2007
                      
                      
                      811,250
                      
                      
                      
                      811,250
                      
                      
                      $
                      1.50
                      
                      November
      8, 2012March
      5, 2008
                      
                      
                      192,500
                      
                      
                      
                      192,500
                      
                      
                      $
                      1.00
                      
                      March
      5, 2013March
      5, 2008
                      
                      
                      192,500
                      
                      
                      
                      192,500
                      
                      
                      $
                      1.50
                      
                      March
      5, 2013Total
                      
                      
                      4,272,500
                      
                      
                      
                      4,272,500




As of
March 31, 2008, there was $1,585 of total unrecognized compensation cost
relating to 165,000 of the unexpired warrants.  That cost is expected
to be recognized $1,014 in the nine months ended December 31, 2008 and $571 in
2009.





11.
              SUBSEQUENT
      EVENTS





Litigation:





On
November 26, 2007, the Company was sued by G.S. Schwartz & Co., Inc., a
public relations company, in the Supreme Court of the State of New
York.  The Plaintiff sought recovery of $43,847 for an alleged breach
of contract.  While the Company believed that, based on its initial
analysis, some amount may have been due to the Plaintiff, it believed it had
counterclaims available which would have substantially reduced the amount
actually owed.  On August 28, 2008, the Company settled the lawsuit
for $30,000, of which the entire amount has been paid in full satisfaction of
such claim.





On or
about January 24, 2008, Connecticut Container Corp., a wholesale distributor of
packaging materials, initiated litigation against the Company in the Supreme
Court of the State of New York in Nassau County.  The Plaintiff had
demanded payment of an aggregate of $31,693 in connection with certain amounts
allegedly owed by the Company.  On August 7, 2008, the Company settled
the litigation for the full amount, by agreeing to pay one-half of such amounts
on each of August 20, 2008 and September 20, 2008.  The Company paid
$24,250 and expects to pay the remaining $7,443 in December 2008.





On
February 14, 2008, Chester Stewart, an individual, initiated a lawsuit in the
State of Connecticut Superior Court alleging breach of a promissory note in the
amount of $100,000.  The Company has retained counsel and is defending
the action.  Negotiations continue and the Company has responded to
all allegations as of the filing date of this report.





11


Harbrew
Imports Ltd. Corp. and Subsidiary
 Notes
to Consolidated Financial Statements
 (Information
as of and for the Three Months Ended March 31, 2008 and 2007 is
Unaudited)




On or
about July 24, 2008, Elite Marketing Concepts, a wholesale distributor of wine,
initiated litigation against the Company in the Supreme Court of New York in
Nassau County.  The Plaintiff has demanded payment in the amount of
$32,270 for goods sold and delivered to the Company by the
Plaintiff.  On August 15, 2008, an agreement was reached to pay Elite
$29,000 in two equal payments.  As of September 30, 2008, one payment
has been made in accordance with the agreement, leaving a remaining balance of
$14,500 due Elite.





On
October 23, 2008, Thermo Plastic Tech, Inc., a manufacturer of thermo plastic
material, initiated litigation against the Company in the Superior Court of New
Jersey Law Division, Civil Part Union County. The Plaintiff has demanded payment
in the amount of $ 30,292 for goods sold and delivered to the Company by the
Plaintiff. The Company has retained counsel and is defending the
action.





On
November 11, 2008, Albea, S.P.A d/b/a/ Agribon SRL, a wine maker in Italy,
initiated litigation against the Company in the Supreme Court of the State of
New York County of Nassau. The Plaintiff has demanded payment in the amount of
22,260 Euros (approximately $29,574). The Company has retained counsel and is
defending the action.





At March
31, 2008, the Company has included in liabilities amounts relating to the above
actions.  The Company believes that the ultimate resolution of these
matters will not have a material adverse effect on its financial condition or
operations.





Financings:





In
connection with the Company’s private placement, which was extended to August
31, 2008, the Company sold an aggregate of 2.5 Units for gross proceeds of
$62,500 during the period from May 2008 to July 2008.  Basic
Investors, the placement agent, was issued .25 Units as part of its placement
fee.





For the
period from June 2008 to September 2008, a total of $1,105,000 has been raised
through the issuance of convertible promissory notes due six months to one year
after the respective dates of issuance.





Consultants:





In June
2008, the Company engaged the services of Bentley Asset Investment Group and New
Century Capital Consultants to perform non-exclusive consulting services related
to the further development of the Company’s business and a comprehensive
marketing program.





Each
consultant has received 800,000 shares of the Company’s common stock in exchange
for consulting services.





On August
11, 2008, the Company executed an agreement to engage MLF Group LLC as a
financial consultant.  The agreement provides for MLF Group to perform
certain services for the Company, including assistance in preparing
documentation for distribution to potential investors.  The agreement
has a term of one year and provides for the issuance to MLF Group of 2,000,000
restricted shares of common stock and a five-year warrant to purchase 1,000,000
shares of common stock, exercisable at $1.00 per share, as compensation for
consulting services.





Additional
Common Stock Issuances:





On August
8, 2008, the Company issued 2,730,960 shares of common stock to its chief
executive officer in consideration of services rendered.





On August
8, 2008, the Company issued a total of 1,050,000 shares of common stock to
designees of Danny DeVito in consideration of services rendered.





12


Harbrew
Imports Ltd. Corp. and Subsidiary
 Notes
to Consolidated Financial Statements
 (Information
as of and for the Three Months Ended March 31, 2008 and 2007 is
Unaudited)




At
December 16, 2008, the Company has 24,592,160 shares of common stock issued and
outstanding.





Debt:





On August
21, 2008, the Company executed an agreement with Capstone Capital Group I, LLC
(“CCG”) and Capstone Business Credit, LLC (“CBC”) whereby the Company was to pay
$1,500,000 in full and complete satisfaction of all debts due by the Company to
both CCG and CBC (approximately $2,976,904 at August 21, 2008).  The
agreement called for an initial down payment in the amount of $150,000 (which
was paid), with the balance of $1,350,000 due on October 21, 2008.  On
November 7, 2008, the Company executed an amendment to the settlement agreement
whereby the amount of the note was increased to $2,664,406 and is due on or
before August 21, 2009. The note will bear interest at the rate of 16%. The
Company will receive 50% of all collections on sales made after November 7,
2008, less the applicable interest due within that month.




13


ITEM 2. Management’s Discussion and
Analysis of Financial Condition and Results of Operations





The
following discussion of our financial condition and results of operations should
be read in conjunction with our financial statements and related notes included
in this report. This discussion includes forward-looking statements that involve
risks and uncertainties. As a result of many factors, our actual results may
differ materially from those anticipated in these forward-looking
statements.




Overview




We were
incorporated in Florida on January 4, 2007 under the name Stassi Harbrew Imports
Corp. pursuant to the Bankruptcy Court Approved Reorganization Plan for the
Stassi Reorganization approved on December 20, 2006.  Subsequently, we
changed our name to Harbrew Imports Ltd. Corp. On May 17, 2007, we and Harbrew
Imports Ltd., a New York corporation incorporated on September 8, 1999 (“Harbrew
New York”), merged.  Pursuant to the Amended and Restated
Reorganization & Merger Agreement dated April 10, 2007, 288 creditors and
shareholders of ours were issued 1,383,256 shares of common stock and the two
stockholders of Harbrew New York were issued 12,457,944 shares of common
stock.




Prior to
the merger on May 17, 2007, we had no assets, liabilities, or business
operations.  Accordingly, the merger has been treated for accounting
purposes as a recapitalization by the accounting acquirer, Harbrew New York, and
the financial statements reflect the assets, liabilities, and operations of
Harbrew New York from its inception on September 8, 1999 to May 17, 2007 and us
thereafter.  References to our company are with respect to Harbrew New
York to May 17, 2007 and us thereafter.




We are in
the business of importing and wholesaling spirits, wine and beer to distributors
in the United States on a national basis and to retail licensees both on and off
premise in New York, through our wholesale license.  We are federally
licensed, maintaining licenses to both import and sell to wholesale licensed
distributors in 51 markets in the United States.  In addition to the
federal import and wholesale licenses, we maintain a federal customs bonded
facility license for our premises in Freeport, New York.  Within the
licensing category, we also maintain a New York State wholesale license and a
New York State warehousing license, permitting us to warehouse products of other
companies.




Results
of Operations




Three
Months ended March 31, 2008 Compared to Three Months ended March 31,
2007




Revenues





Total
revenues were $512,048 and $173,753 for the three months ended March 31, 2008
and 2007, respectively, an increase of $338,295, or 195%.  This
reflects the changing product mix, most notably the addition of Danny DeVito’s
Premium Limoncello. The introduction of Danny DeVito’s Premium Limoncello
commenced the start of an aggressive marketing campaign which yielded $234,170
of sales in the first quarter of 2008, compared to nothing in the first quarter
of 2007. Sales of Molly’s Irish Cream of approximately $87,890 during the first
quarter of 2008 was flat in comparison to the previous year The sales for the
balance of the portfolio were mixed as we prioritized our sales effort in line
with the new product launch.





Cost
of Revenues





Cost of
revenues was $417,041 and $133,369 for the three months ended March 31, 2008 and
2007, respectively, an increase of $283,672, or 212%.





The gross
profit the three months ended March 31, 2008 and 2007 was $95,007 and $40,384,
respectively, an increase of $54,623, or 135%. The inclusion of Danny DeVito’s
Premium Limoncello in this year’s period versus not in the portfolio last year
accounts for the majority of the gross profit increase as we repositioned and
pruned our portfolio in line with sales performance.


14





Selling,
General and Administrative Expenses





Selling
general and administrative expenses for the three months ended March 31, 2008
and 2007 were $466,079 and $376,417, respectively, an increase of $89,662, or
24%.





The
majority of the increase in spending consisted of advertising, marketing and
promotion of $53,600 (the promoting of DeVito Limoncello, while supporting the
existing brands); administrative compensation and benefits of $43,490;
professional fees of $44,473 (consisting of underwriting, public relations,
legal and accounting). The balance of the increase consists of the inflationary
costs of doing business, and the cost to support a direct selling effort in New
York, offset by reduced travel and entertainment of $51,119 as compared to the
same period last year.





Other
Expense





Interest
expense for the three months ended March 31, 2008 and 2007 was $316,916 and
$47,308, respectively, an increase of $269,608, or 570% This category includes
the interest expense incurred in connection with the purchase order and
receivable financing with Capstone LLC and was higher than the same period last
year as a result of the average balance owed to the financing company of
approximately $2.9 million.





Liquidity
and Capital Resources





As of
March 31, 2008, we had negative working capital of $3,067,080 compared to a
negative working capital of $2,539,703 at December 31, 2007. Our balance of cash
and cash equivalents at March 31, 2008 was $55,788.




Our
primary uses of cash have been for selling and marketing expenses, employee
compensation, new product development and working capital. The main sources of
cash have been from the financing of purchase orders and the factoring of
accounts receivable. In addition, we issued convertible notes and promissory
notes to bridge the gap between our primary lender and our working capital
requirements. All funds received have been expended in the furtherance of
growing the business and establishing the brand portfolios. The following trends
are reasonably likely to result in a material decrease in our liquidity over the
near to long term:




·
            An
      increase in working capital requirements to finance higher level of
      inventories and accounts
receivable,




·
            Addition
      of administrative and sales personnel as the business
    grows,




·
            Increases
      in advertising, public relations and sales promotions for existing and new
      brands as the company expands within existing markets or enters new
      markets,




·
            Development
      of new brands to complement our celebrity portfolio,
  and




·
            The
      cost of being a public company and the continued increase in costs due to
      governmental compliance activities.




Net
Cash Used in Operating Activities




A
substantial portion of our available cash has been used to fund operating
activities. In general, these cash funding requirements are based on operating
losses, driven principally by our sizeable investment in selling and marketing,
and general expenses. The business has incurred significant losses since
inception.


15





For
the three months ended March 31, 2008, net cash used in operating activities was
$72,721 consisting primarily of losses from operations of $687,988, offset by a
non-cash charge for stock-based compensation of $62,523, decreases in
receivables of $244,911 and decreases in inventories of $280,405.





Net
Cash Used in Investing Activities




For the
three months ended March 31, 2008 and 2007, net cash used in investing
activities was $0 and $3,008, respectively.




Net
Cash Provided by Financing Activities




For
the three months ended March 31, 2008, funds provided from financing activities
amounted to $84,845, primarily from the issuance of 7% convertible notes in the
principal amount of $87,500.





We
anticipate that we will need to make significant expenditures during the next 12
months, contingent upon raising capital.  These anticipated
expenditures are for advertising, marketing, promotional items, overhead and
working capital purposes. We cannot assure you that financing will be available
in amounts or on terms acceptable to us, if at all. We anticipate that we will
require up to $7,500,000 for funding our plan of operations for the next
twelve months, depending on revenues, if any, from operations.





By
adjusting our operations and development to the level of capitalization, we
believe we will have sufficient capital resources to meet projected cash flow
deficits.  However, if during that period or thereafter, we are not
successful in generating sufficient liquidity from operations or in raising
sufficient capital resources, on terms acceptable to us, this could have a
material adverse effect on our business, results of operations, liquidity and
financial condition.





We will
still need additional investments in order to continue operations to cash flow
break even. We are seeking additional investments, but we cannot guarantee that
we will be able to obtain such investments.  Financing transactions
may include the issuance of equity or debt securities, obtaining credit
facilities, or other financing mechanisms. However, the lack of a trading price
of our common stock and a downturn in the U.S. stock and debt markets could make
it more difficult to obtain financing through the issuance of equity or debt
securities. Even if we are able to raise the funds required, it is possible that
we could incur unexpected costs and expenses, fail to collect significant
amounts owed to us, or experience unexpected cash requirements that would force
us to seek alternative financing. Further, if we issue additional equity or debt
securities, stockholders may experience additional dilution or the new equity
securities may have rights, preferences or privileges senior to those of
existing holders of our common stock. If additional financing is not available
or is not available on acceptable terms, we will have to curtail our
operations.




Impact
of Inflation





We expect
to be able to pass inflationary increases for raw materials and other costs on
to our customers through price increases, as required, and do not expect
inflation to be a significant factor in our business.





Seasonality





Although
our operating history is limited, we do not believe our products are
seasonal.





Off-Balance
Sheet Arrangements





There are
no off-balance sheet arrangements between us and any other entity that have, or
are reasonably likely to have, a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that is
material to stockholders.


16





Critical
Accounting Policies and Estimates





Basis
of Presentation





The
financial statements have been prepared on a “going concern” basis, which
contemplates the realization of assets and liquidation of liabilities in the
normal course of business.  However, as of March 31, 2008, we had
negative working capital of $3,067,080 and a stockholders’ deficiency of
$5,014,121.  Further, from inception to March 31, 2008, we incurred
losses of $5,486,790.  These factors create substantial doubt as to
our ability to continue as a going concern.  We expect to improve our
financial condition as recently launched products mature and brand awareness
increases, thereby increasing the profitability of our
operations.  Additionally, we intend to obtain new financing which
will primarily be used to market and promote Danny DeVito’s Premium Limoncello
and other new products.  However, we cannot assure you that we will be
successful in accomplishing these objectives.





Use
of Estimates





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods.  Actual results could differ from those
estimates.





Fair
Value of Financial Instruments





Our
financial instruments consist of cash and cash equivalents, accounts receivable,
net, current portion of debt, negative bank account balance, accounts payable,
accrued expenses, and long term debt.  Except for long term debt, the
fair value of these financial instruments approximate their carrying amounts
reported in the balance sheets due to their short term maturity.





Cash
and Cash Equivalents





We
consider all liquid investments purchased with original maturities of three
months or less to be cash equivalents.





Accounts
Receivable, Net of Allowance for Doubtful  Accounts





We extend
unsecured credit to our customers in the ordinary course of business but
mitigate the associated risks by performing credit checks and actively pursuing
past due accounts.  An allowance for doubtful accounts is established
and recorded based on historical experience and the aging of the related
accounts receivable.





Inventories





Inventories
are stated at the lower of cost (first-in, first-out method) or market, with due
consideration given to obsolescence and to slow moving items.





Property,
Plant and Equipment, Net





Property,
plant and equipment, net is stated at cost less accumulated
depreciation.  Depreciation is calculated using the straight-line
method over the estimated useful lives of the respective
assets.


17





Revenue
Recognition





Revenue
from product sales is recognized when all of the following criteria are met: (1)
persuasive evidence of an arrangement exists, (2) the price is fixed or
determinable, (3) collectability is reasonably assured, and (4) delivery has
occurred.  Persuasive evidence of an arrangement and fixed price
criteria are satisfied through purchase orders.  Collectability
criteria are satisfied through credit approvals.  Delivery criteria
are satisfied when the products are shipped to a customer and title and risk of
loss pass to the customer in accordance with the terms of sale.  We
have no obligation to accept the return of products sold other than for
replacement of damaged products.  Other than quantity price discounts
negotiated with customers prior to billing and delivery (which are reflected as
a reduction in sales), we do not offer any sales incentives or other rebate
arrangements to customers.





Shipping
and Handling Costs





Shipping
and handling costs are reported as selling, general and administrative expenses
in the accompanying statements of operations.





Advertising





Advertising
costs are expensed as incurred.





Stock-Based
Compensation





Stock-based
compensation is accounted for at fair value in accordance with Statement of
Financial Accounting Standards Nos. 123 and 123R.





Foreign
Currency Transactions





Gains and
losses arising on settlement of foreign currency denominated transactions or
balances are included in other selling, general and administrative
expenses.





Income
Taxes





Income
taxes are accounted for under the assets and liability
method.  Current income taxes are provided in accordance with the laws
of the respective taxing authorities.  Deferred income taxes are
provided for the estimated future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and tax credit
carry forwards.  Deferred tax assets and liabilities are measured
using enacted tax rates in effect for the year in which those temporary
differences are expected to be recovered or settled.  Deferred tax
assets are reduced by a valuation allowance when, in the opinion of management,
it is not more likely than not that some portion or all of the deferred tax
assets will be realized.





Net
Income (Loss) per Share





Basic net
income (loss) per common share is computed on the basis of the weighted average
number of common shares outstanding during the period.





Diluted
net income (loss) per share is computed on the basis of the weighted average
number of common shares and dilutive securities (such as stock options and
convertible securities) outstanding.  Dilutive securities having an
anti-dilutive effect on diluted net income (loss) per share are excluded from
the calculation.





ITEM 3. Quantitative and Qualitative
Disclosures About Market Risk





Not
required.


18





ITEM 4T. Controls and
Procedures





Evaluation
of Disclosure Controls and Procedures





We
carried out an evaluation, under the supervision and with the participation of
our management, including our Chief Executive Officer and our Chief Financial
Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under
the Exchange Act. Based upon that evaluation, our Chief Executive Officer and
the Chief Financial Officer have concluded that our disclosure controls and
procedures were effective as of March 31, 2008, based on their evaluation of
these controls and procedures. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed by an issuer in reports it files or submits under the
Exchange Act is accumulated and communicated to management, including its
principal executive officer or officers and principal financial officer or
officers, or persons performing similar functions, as appropriate to allow
timely decisions regarding required disclosure.





Changes
in Internal Control over Financial Reporting





There
have been no significant changes in our internal control over financial
reporting identified in connection with the evaluation that occurred during our
last fiscal quarter that have materially affected, or that are reasonably likely
to materially affect, our internal controls over financial
reporting.


19


PART II. OTHER
INFORMATION





ITEM 1. Legal
Proceedings





From time
to time, we may become involved in various lawsuits and legal proceedings which
arise in the ordinary course of business.  Litigation is subject to
inherent uncertainties, and an adverse result in these or other matters may
arise from time to time that may harm our business.




On or
about January 24, 2008, Connecticut Container Corp., a wholesale distributor of
packaging materials, initiated litigation against us in the Supreme Court of the
State of New York in Nassau County (Docket No. 1458/08).  The
plaintiff had demanded payment of an aggregate of $31,693 in connection with
certain amounts allegedly owed by us.  On August 7, 2008, we settled
the litigation for the full amount. We agreed to pay one-half of such amount on
each of August 20, 2008 and September 20, 2008.  We paid $24,500 and
expect to pay the remaining $7,443 in December 2008.





On
February 14, 2008, Chester Stewart, an individual, initiated a lawsuit in the
State of Connecticut Superior Court (Docket No. D.N. HHD CV08-5018180S) alleging
breach of a promissory note in the amount of $100,000.  We have
retained counsel and are defending the action.  Negotiations continue
and we have responded to all allegations as of the filing date of this
report.





On or
about July 24, 2008, Elite Marketing Concepts, a wholesale distributor of wine,
initiated litigation against us in the Supreme Court of New York in Nassau
County (Docket No. 08-009338).  The plaintiff has demanded payment in
the amount of $32,270 for goods sold and delivered to us by the
plaintiff.  On August 15, 2008, we reached an agreement to pay Elite
$29,000 in two equal payments.  We paid the first $14,500 and expect
to pay the remaining $14,500 in December 2008.





On
October 23, 2008, Thermo Plastic Tech, Inc., a manufacturer of thermo plastic
material, initiated litigation against us in the Superior Court of New Jersey
Law Division, Civil Part, Union County (Docket No. UNN-L-3062-08). The plaintiff
has demanded payment in the amount of $30,292 for goods sold and delivered to us
by the plaintiff. We have retained counsel and are defending the
action.





On
November 11, 2008, Albea, S.P.A d/b/a/ Agribon SRL, a wine maker in Italy,
initiated litigation against us in the Supreme Court of the State of New York in
Nassau County (Docket No. 08-20104). The plaintiff has demanded payment in the
amount of 22,260 Euros (approximately $29,574). We have retained counsel and are
defending the action.





We
believe that the ultimate resolution of these matters will not have a material
adverse effect on our financial condition or operations. Apart from the legal
proceedings noted in the previous paragraphs, we are not party to any legal
proceedings, nor are we aware of any contemplated or pending legal proceedings
against us.





ITEM
1A.  Risk Factors





Not
required.





ITEM 2. Unregistered Sales of Equity
Securities and Use of Proceeds





Unregistered Sales of Equity
Securities during the Three Months ended March 31, 2008





From July
2007 to July 2008, we privately placed with accredited investors 40.75 units
consisting of (i) a 7% convertible promissory note in the principal amount of
$25,000 which is convertible into shares of common stock at a price of $.50 per
share and is due five years from the date of issuance, (ii) a five-year warrant
to purchase 50,000 shares of common stock exercisable at a price of $1.00 per
share; and (iii) a five-year warrant to purchase 50,000 shares of common stock
exercisable at a price of $1.50 per share.  Of these 40.75 units, 3.5
were sold during the three months ended March 31, 2008. Interest on the 7%
convertible promissory notes is payable semi-annually at the rate of 7% per
annum by issuance of additional notes.  In the event that our common
stock is not trading on the OTC Bulletin Board, American Stock Exchange or
Nasdaq Capital Market one year from the date of issuance of the notes, the rate
of interest increases to 14% retroactive to the date of
issuance.  Basic Investors, the placement agent of the offering,
received a placement agent fee of 10% of the gross proceeds, a 3%
non-accountable expense allowance and one unit for each ten units sold in the
offering.


20




On
January 15, 2008, we issued a total of 250,000 shares of common stock to two
attorneys in consideration of legal services.





All of
the above offerings and sales were deemed to be exempt under Rule 506 of
Regulation D and Section 4(2) of the Securities Act of 1933, as
amended.  No advertising or general solicitation was employed in
offering the securities.  The offerings and sales were made to a
limited number of persons, all of whom were accredited investors, business
associates of ours or executive officers of ours, and transfer was restricted in
accordance with the requirements of the Securities Act of 1933.  In
addition to representations by the above-referenced persons, we made independent
determinations that all of the above-referenced persons were accredited or
sophisticated investors, and that they were capable of analyzing the merits and
risks of their investment, and that they understood the speculative nature of
their investment.





ITEM 3. Defaults upon Senior
Securities





None.





ITEM 4. Submission of Matters to a
Vote of Security Holders





None.





ITEM 5. Other
Information





None.





ITEM 6. Exhibits





The
exhibits listed in the following Exhibit Index are filed as part of this
quarterly report.




Exhibit No.
                                        
                                        Description3.1
                                        
                                        Articles
      of Incorporation, as amended of Harbrew Imports Ltd. Corp.
    (1)3.2
                                        
                                        Certificate
      of Incorporation, as amended, of Harbrew Imports Ltd.
  (1)3.3
                                        
                                        Articles
      of Merger filed with the Secretary of State of the State of Florida.
      (1)3.4
                                        
                                        Amended
      and Restated Reorganization and Merger Agreement, filed May 17, 2007.
      (Included as part of Exhibit 3.3) (1)3.5
                                        
                                        Bylaws.
      (1)4.1
                                        
                                        Form
      of Note. (1)4.2
                                        
                                        Form
      of Warrants. (1)4.3
                                        
                                        Secured
      Promissory Note, dated as of August 21, 2008, issued by Harbrew Imports,
      Ltd. (2)4.4
                                        
                                        Amended
      and Restated Secured Promissory Note, dated as of November 7, 2008, issued
      by Harbrew Imports, Ltd. (3)10.2
                                        
                                        License
      Agreement between the company and Seven Cellos, LLC, dated April 26, 2007.
      (1)10.3
                                        
                                        Exclusive
      Manufacturing Agreement between Sorrento Delizie Di de Luca Antonino,
      dated August 14, 2007.
(1)
  21
  10.4
                                                
                                                Discount
      Factoring Agreement between Capstone Business Credit, LLC and Harbrew
      Imports, Ltd., dated as of January 22, 2007. (1)10.5
                                                
                                                Purchase
      Order Financing Agreement between Harbrew Imports, Ltd. and Capstone
      Capital Group, I, LLC, dated as of January 22, 2007.
(1)10.6
                                                
                                                Letter
      Agreement among Harbrew Imports, Ltd., Capstone Capital Group, I, LLC and
      Capstone Capital Group, II, LLC. (1)10.7
                                                
                                                First
      Amendment to Purchase Order Financing Agreement between Harbrew Imports,
      Ltd. and Capstone Capital Group, I, LLC, dated as of October 25, 2007.
      (1)10.8
                                                
                                                First
      Amendment to Discount Factoring Agreement between Harbrew Imports, Ltd.
      and Capstone Business Credit, LLC, dated as of October 25, 2007.
      (1)10.9
                                                
                                                Employment
      Agreement with Richard J. DeCicco, dated January 23, 2008.
    (1)10.10
                                                
                                                Employment
      Agreement with William S. Blacker, dated October 1, 2008.
    (1)10.11
                                                
                                                Addendum
      to License Agreement between Seven Cellos and Harbrew Imports, Ltd., dated
      November 1, 2007. (1)10.12
                                                
                                                Advisory
      Services Engagement Letter between The Griffin Group LLC and Harbrew
      Imports, Ltd., dated February 23, 2008. (3)10.13
                                                
                                                Consulting
      Agreement between Harbrew Imports, Ltd. and The Bentley Asset Investment
      Group, dated July 7, 2008. (3)10.14
                                                
                                                Consulting
      Agreement between Harbrew Imports, Ltd. and New Century Capital
      Consultants, Inc., dated July 7, 2008. (3)10.15
                                                
                                                Agreement
      to Engage MLF Group LLC as a Financial Consultant between Harbrew Imports,
      Ltd. and MLF Group LLC, dated July 31, 2008. (3)10.16
                                                
                                                Settlement
      Agreement, dated as of August 21, 2008, by and among Harbrew Imports,
      Ltd., Capstone Business Credit, LLC and Capstone Capital Group I, LLC.
      (2)10.17
                                                
                                                First
      Amendment to the Settlement Agreement, dated as of November 7, 2008, by
      and among Harbrew Imports, Ltd., Capstone Business Credit, LLC and
      Capstone Capital Group I, LLC. (3)31.1*
                                                
                                                Certification
      of Chief Executive Officer required by Rule
13(a)-14(a).31.2*
                                                
                                                Certification
      of Chief Financial Officer required by Rule
13(a)-14(a).32.1*
                                                
                                                Certifications
      pursuant to Sec.
906.









*
            Filed
      herewith.




(1)
            Incorporated
      by reference to the exhibits included with our Form 10, File No.
      000-53085, filed with the U.S. Securities and Exchange Commission on
      February 7, 2008.




(2)
            Incorporated
      by reference to the exhibits included with our Current Report on Form 8-K,
      dated August 21, 2008, and filed with the U.S. Securities and Exchange
      Commission on August 27, 2008.





(3)
            Incorporated
      by reference to the exhibits included with our Annual Report on Form
      10-KSB for the year ended December 31, 2007, filed with the U.S.
      Securities and Exchange Commission on December 4,
  2008.


22





SIGNATURES




In
accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.




Dated:
 December 16, 2008




HARBREW
      IMPORTS LTD. CORP.By:
              /s/Richard J.
      DeCiccoRichard
      J. DeCiccoPresident,
      Secretary and Director(principal
      executive officer)By:
              /s/William S.
      BlackerWilliam
      S. BlackerChief
      Financial Officer and VicePresident-
                Finance
      and Administration(principal
      financial and accounting
officer)




23