UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended January 31, 2013
OR
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to ____________

Commission File Number:  000-19086

Drinks Americas Holdings, Ltd.

(Exact name of registrant as specified in its charter)

Delaware	87-0438825
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
4101 Whiteside St.
Los Angeles, Ca.	90063
(Address of principal executive offices)	(Zip Code)

(323) 266-8765

(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) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   x   No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). 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.

¨   Large accelerated filer	¨    Accelerated filer	¨   Non-accelerated filer	x   Smaller reporting company
		(Do not check if 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 June 3, 2013, the number of shares outstanding of the registrant’s common stock, $0.001 par value, was 29,485,304

DRINKS AMERICAS HOLDINGS, LTD. AND SUBSIDIARY

FORM 10-Q

FOR THE QUARTER ENDED JANUARY 31, 2013

TABLE OF CONTENTS

		Page
PART 1     FINANCIAL INFORMATION		3
Item 1.	Financial Statements	3
	Consolidated Balance Sheets as of January 31, 2013 and April 30, 2012 (Unaudited)	3
	Consolidated Statements of Operations for the Three and Nine Months Ended January 31, 2013 and 2011 (Unaudited)	4
	Consolidated Statements of Cash Flows for the Nine Months Ended January 31, 2013 and 2012 (Unaudited)	5
	Notes to Consolidated Financial Statements (Unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22
Item 4.	Controls and Procedures	22
PART II   OTHER INFORMATION		23
Item 1.	Legal Proceedings	23
Item 1A	Risk Factors	23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 3.	Defaults Upon Senior Securities	23
Item 4.	Mine Safety Disclosures	24
Item 5.	Other Information	24
Item 6.	Exhibits	25
SIGNATURES		26

 PART I – FINANCIAL INFORMATION

Item 1.   Financial Statements

DRINKS AMERICAS HOLDINGS, LTD., AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	January 31,			April 30,
	2013			2012
ASSETS
Current assets:
Cash and cash equivalents	$	22,119		$	295,403
Accounts receivable, net		103,112			739,565
Inventory		--			841,401
Other current assets		34,358			61,574
Total current assets		159,589			1,937,943
Property and equipment, net		--			13,518
Investment in equity investees		--			102,345
Intangible assets		--			5,193,355
Deposits		--			6,225
Other assets		--			48,550
		--			5,363,993
Total assets	$	159,589		$	7,301,936
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable	$	2,244,461		$	2,889,969
Accrued expenses		237,923			900,929
Preferred stock redemption liability		8,983,524			--
Commitments and contingencies		1,417,390			--
Line of credit, related party		785,945			215,946
Convertible note payable, net of debt discount of $0 and $0		325,000			--
Investor note payable		410,000			793,000
Notes and loans payable, related party		1,660,000			145,008
Notes and loans payable		499,500			247,000
Total current liabilities		16,563,743			5,191,852
Long term debt
Deferred rent payable		--			2,735
Total liabilities		16,563,743			5,194,587
Stockholders' equity:
Preferred stock: $0.001 par value; 1,000,000 shares authorized;
Series A Convertible: $0.001 par value; 2,884 and 10.544 shares issued and   outstanding as of January 31, 2013 and April 30, 2012		3			11
Series B: $10,000 par value; 13,837 issued and outstanding as of   January 31, 2013 and April 30, 2011		-			-
Series C: $1.00 par value; 773,497 and 635,835 issued and outstanding   as of January 31, 2013 and April 30, 2012		-			-
Series D Convertible: $0.001 par value; 114,000 and 0 shares issued and   outstanding as of January 31, 2013 and April 30, 2012		114			-
Common stock, $0.001 par value; 900,000,000 shares authorized; 29,485,304 and   21,279,339 issued and outstanding as of January 31, 2013 and April 30, 2012		29,485			21,279
Additional paid-in capital		43,648,951			50,672,809
Accumulated deficit		(60,082,707	)		(48,586,318	)
Total Drinks Americas Holdings, Ltd. stockholders' equity		(16,404,154	)		2,107,781
Equity attributable to non-controlling interest		--			(432	)
Total equity		(16,404,154	)		2,107,349
Total liabilities and stockholders' deficit	$	1,576,979		$	7,301,936

The accompanying notes are an integral part of these consolidated financial statements.

3

DRINKS AMERICAS HOLDINGS, LTD., AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	For the three months ended January 31, 2013			For the three months ended January 31, 2012			For the nine months ended January 31, 2013			For the nine months ended January 31, 2012
Sales		1,204,671			1,117,000			4,426,065			2,535,669
Cost of sales		862,216			884,659			3,383,149			1,985,653
Gross margin		342,455			232,341			1,042,916			550,016
Operating expenses
Selling, general and administrative		1,679,868			345,365			6,542,603			1,591,027
Impairment losses		-			-			5,295,700			-
Loss on settlement of royalty agreement		-			-			-			250,000
Total operating expenses		1,679,868			345,365			11,838,303			1,841,027
Net loss from operations		(1,337,413	)		(113,024	)		(10,795,387	)		(1,291,011	)
Other income (expense)
Interest		(705,724	)		11,332			(1,073,471	)		(157,342	)
Gain on change in fair value of derivative		-			-			-			1,671
Other expense		-			(3,488	)		-			(8,884	)
Gain on settlement of accounts payable		-			288,172			372,469			627,609
Gain on disposal of product line		-			-			-			280,478
Total other income (expense)		(705,724	)		296,016			(701,002	)		743,532
Net loss before non-controlling interest		(2,043,137	)		182,992			(11,496,389	)		(547,479	)
Net loss attributable to non-controlling interest		-			-			(432	)		-
Net loss attributable to Drinks America Holdings, LTD	$	(2,043,137	)	$	182,992		$	(11,496,821	)	$	(547,479	)
Basic loss per common share	$	(0.07	)	$	0.04		$	(0.40	)	$	(0.19	)
Basic weighted average common shares outstanding		28,332,554			5,175,777			29,101,054			2,954,563

The accompanying notes are an integral part of these consolidated financial statements.

4

DRINKS AMERICAS HOLDINGS, LTD., AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the nine months ended January 31, 2013			For the nine months ended January 31, 2012
Cash flows from operating activities:
Net loss	$	(11,496,389	)	$	(547,479	)
Adjustments to reconcile net loss to net  cash used in operating activities:
Depreciation and amortization		13,518			223,402
Impairment losses		5,295,700			-
Bad debt expense		-			9,709
Stock-based compensation for services		714,162			190,778
Non-controlling interest		432			-
Gain (loss) on settlement of debts		(372,469	)		(627,609	)
Non-cash interest income		-			(9,876	)
Non-cash interest expense		812,524			54,541
Gain on sale of interest in products line		-			(280,478	)
Gain on change in fair value of derivative liability		-			(1,671	)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable		636,453			(414,646	)
(Increase) decrease in inventories		841,401			(432,084	)
(Increase) decrease in other current assets		27,216			(3,692	)
(Increae) decrease in deposits		6,225			(6,225	)
Decrease in other assets		48,550			-
Increase in commitments and contingencies		1,417,390			-
Decrease (increase) in accounts payable		1,131,795			682,823
Decrease (increase) in accrued expenses		(22,449	)		33,497
Decrease (increase) in deferred rent payable		(2,735	)		-
Net cash used in operating activities		(948,676	)		(1,129,010	)
Cash flows from financing activities:
Proceeds from line of credit		444,991			219,891
Proceeds from common stock subscription		-			1,440,000
Net repayments of related party loans		(27,500	)		(657	)
Retirement of Series B Preferred Stock		-			-
Proceeds from the issuance of notes payable		360,901			227,475
Repayments of notes repayable		(383,000	)		(528,913	)
Proceeds from notes payable, related party		30,000			-
Proceeds from convertible notes payable related party		250,000			-
Net cash provided by financing activities		675,392			1,357,796
Net change in cash		(273,284	)		228,786
Cash, beginning of period		295,403			1,923
Cash, end of period	$	22,119		$	230,709
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest	$	17,747		$	8,005
Cash paid for taxes	$	-		$	-
Non-cash investing and financing activities:
Redemption of Series A Convertible Preferred Shares as a liability	$	8,426,000		$	-
Shares of common stock issued for settlement of notes payable	$	274,892		$	150,756
Warrants issued for settlement of note payable	$	241,000		$	-
Accounts payable reclassified as notes payable	$	1,630,000		$	-
Payment of accounts payable and accrued expense with shares of common stock	$	-		$	337,922
Common stock issuance to acquire investment	$	-		$	39,000
Common stock issued to acquire trademark	$	-		$	4,870,391

The accompanying notes are an integral part of these consolidated financial statements.

5

DRINKS AMERICAS HOLDINGS, LTD. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JANUARY 31, 2013

(Unaudited)

1. BASIS OF PRESENTATION AND NATURE OF BUSINESS

Basis of Presentation

On March 9, 2005 the shareholders of Drinks Americas, Inc., ("Drinks") a company engaged in the business of importing and distributing unique, premium alcoholic and non-alcoholic beverages to beverage wholesalers throughout the United States, acquired control of Drinks Americas Holdings, Ltd. ("Holdings" or the "Company "). Holdings and Drinks were incorporated in the State of Delaware on February 14, 2005 and September 24, 2002, respectively. On March 9, 2005 Holdings merged with Gourmet Group, Inc. ("Gourmet"), a publicly traded Nevada corporation, which resulted in Gourmet shareholders acquiring 1 share of Holdings' common stock in exchange for 10 shares of Gourmet's common stock. Both Holdings and Gourmet were considered "shell" corporations, as Gourmet had no operating business on the date of the share exchange, or for the previous three years. Pursuant to the June 9, 2004 Agreement and Plan of Share Exchange among Gourmet, Drinks and the Drinks' shareholders, Holdings, with approximately 16,232 shares of outstanding common stock, issued approximately 180,656 of additional shares of its common stock on March 9, 2005 (the "Acquisition Date") to the common shareholders of Drinks and to the members of its affiliate, Maxmillian Mixers, LLC ("Mixers"), in exchange for all of the outstanding Drinks' common shares and Mixers' membership units, respectively. As a result Maxmillian Partners, LLC ("Partners") a holding company which owned 99% of Drinks' outstanding common stock and approximately 55% of Mixers' outstanding membership units, became Holdings' controlling shareholder with approximately 87% of Holdings' outstanding common stock. For financial accounting purposes this business combination has been treated as a reverse acquisition, or a recapitalization of Partners' subsidiaries (Drinks and Mixers).

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

On January 15, 2009, Drinks acquired 90% of Olifant U.S.A Inc. (“Olifant”), a Connecticut corporation, which owns the trademark and brand names and holds the worldwide distribution rights (excluding Europe) to Olifant Vodka and Gin.  During the year ended April 30, 2012, the Company reduced its ownership to 48% of Olifant recognizing a gain on disposal of product line of $280,478. In conjunction with the ownership reduction to 48%, the Company eliminated the remaining outstanding debt obligation of $600,000 and transitioned to the equity method of accounting.

Nature of Business

Through our wholly owned subsidiary, Drinks Americas Holdings, Inc. (“Drinks”), Drinks distributes and markets unique premium alcoholic beverages to beverage wholesalers throughout the United States and internationally.

In June of 2011, the Company entered into an agreement to license and distribute the brands of Worldwide Beverage Imports ("WBI") in the eastern United States with brands to include KAH Tequila, Agave 99, Ed Hardy Tequila, Mexicali Beer, Chili Beer and Red Pig ale as well as various other products produced and imported by Worldwide Beverage Imports in return for the shares in the Company that would be no greater than 49% of the Company.

On November 1, 2011, the Company amended its agreement with Worldwide Beverage Imports. The Company was granted worldwide distribution rights on both the spirits and beer products of WBI.  In connection with the agreement, the Company agreed to issue 1,500,000 in additional restricted shares of common stock (the “Additional Shares”) to Worldwide at a purchase price of $0.50 per share in exchange for Worldwide forgiving a $300,000 loan owed by the Company to Worldwide and Worldwide delivering $1,200,000 in Inventory to the Company, the sale proceeds of which are to be contributed to the capital of the Company.

Upon the completion of the purchase of the Initial Issuance and the Additional Shares and until one (1) year from the date of the completion of the close of the transaction, the Company agreed not to issue any additional shares of the Company without prior written consent of the Purchaser, provided that the Company may issue certain exempt issuances without the prior written consent of the Purchaser in accordance with the terms of the Purchase Agreement.

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DRINKS AMERICAS HOLDINGS, LTD. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JANUARY 31, 2013

(Unaudited)

As of January 31, 2013, the Company defaulted on its license agreement with WBI and subsequently WBI stopped shipping its KAH tequila products as of January 31, 2013.

As of February 15, 2013, the Company entered into a Beer brokerage agreement with WBI to distribute Rio Bravo and other future brands nationally.  Rio Bravo is a craft brewed beer that meets the current growing demand for IPA’s and other highly sought after beer styles.   Rio Bravo is one of the first craft brewed beers to be imported from Mexico.

2. SIGNIFICANT ACCOUNTING POLICIES

Principles of consolidation

The accompanying unaudited consolidated financial statements have been prepared in accordance with Rule S-X of the Securities and Exchange Commission (the “SEC”) and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. However, the results from operations for the nine months ended January 31, 2013, are not necessarily indicative of the results that may be expected for the year ending April 30, 2013. These unaudited consolidated financial statements should be read in conjunction with the consolidated April 30, 2012 financial statements and footnotes thereto included in the Company's Form 10-K filed with the SEC.

The consolidated financial statements as of April 30, 2012 have been derived from the audited consolidated financial statements at that date but do not include all disclosures required by the accounting principles generally accepted in the United States of America.

The unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidary, Drinks Americas, Inc. (collectively, the "Company"). All significant inter-company transactions and balances have been eliminated in consolidation.

Revenue Recognition

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

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

Accounts Receivable

Accounts receivable are recorded at the original invoice amount less an allowance for uncollectible accounts that management believes will be adequate to absorb estimated losses on existing balances. Management estimates the allowance based on collectability of accounts receivable and prior bad debt experience. Accounts receivable balances are written off upon management's determination that such accounts are uncollectible. Recoveries of accounts receivable previously written off are recorded when received. Management believes that credit risks on accounts receivable will not be material to the financial position of the Company or results of operations at January 31, 2013 and April 30, 2012. The allowance for doubtful accounts was $0 and $138,491 at January 31, 2013 and April 30, 2012, respectively.

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DRINKS AMERICAS HOLDINGS, LTD. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JANUARY 31, 2013

(Unaudited)

Inventories

Inventories are valued at the lower of cost or market, using the first-in first-out cost method. The Company assesses the valuation of its inventories and reduces the carrying value of those inventories that are obsolete or in excess of the Company’s forecasted usage to their estimated net realizable value. The Company estimates the net realizable value of such inventories based on analysis and assumptions including, but not limited to, historical usage, expected future demand and market requirements. A change to the carrying value of inventories is recorded to cost of goods sold.  During the nine months ended January 31, 2013, the Company ceased carrying inventory and ships directly from manufacturer/wholesaler to the customer.

Impairment of Long-Lived Assets

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amounts of such assets may not be recoverable. The Company's policy is to record an impairment loss at each balance sheet date when it is determined that the carrying amount may not be recoverable. Recoverability of these assets is based on undiscounted future cash flows of the related asset. During the nine months ended January 31, 2013, the Company recorded impairment losses of $5,193,355 and $102,345 for intangible assets and investment in equity investees, respectively.

Intangible Assets

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

Income Taxes

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

Stock Based Compensation

The Company recognizes stock-based compensation in accordance with ASC Topic 718 “Stock Compensation”, which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors including employee stock options and employee stock purchases related to an Employee Stock Purchase Plan based on the estimated fair values.

For non-employee stock-based compensation, we have adopted ASC Topic 505 “Equity-Based Payments to Non-Employees”, which requires stock-based compensation related to non-employees to be accounted for based on the fair value of the related stock or options or the fair value of the services on the grant date, whichever is more readily determinable in accordance with ASC Topic 718.

The fair value of options to be granted are estimated on the date of each grant using the Black-Scholes option pricing model and amortized ratably over the option’s vesting periods, which approximates the service period.

Earnings (Loss) Per Share

The Company computes earnings (loss) per share whereby basic earnings (loss) per share is computed by dividing net income (loss) attributable to all classes of common shareholders by the weighted average number of shares of all classes of common stock outstanding during the applicable period. Diluted earnings (loss) per share is determined in the same manner as basic earnings (loss) per share except that the number of shares is increased to assume exercise of potentially dilutive and contingently issuable shares using the treasury stock method, unless the effect of such increase would be anti-dilutive. For the three and nine months ended January 31, 2013 and 2012, the diluted earnings (loss) per share amounts equal basic earnings (loss) per share because the Company had net losses or the impact of the assumed exercise of contingently issuable shares would have been anti-dilutive.

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DRINKS AMERICAS HOLDINGS, LTD. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JANUARY 31, 2013

(Unaudited)

Use of Estimates

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

Fair Value

Accounting Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”) requires disclosure of the fair value of certain financial instruments. The carrying amount reported in the consolidated balance sheets for accounts receivables, accounts payable and accrued expenses approximates fair value because of the immediate or short-term maturity of these financial instruments. The carrying amount reported in the accompanying consolidated balance sheets for notes payable approximates fair value because the actual interest rates do not significantly differ from current rates offered for instruments with similar characteristics.

Recent accounting pronouncements

There are various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company's consolidated financial position, results of operations or cash flows.

3. GOING CONCERN

The accompanying consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern.  As of January 31, 2013, the Company has a stockholders' deficit of $(16,404,154) and current liabilities exceeded current assets (working capital deficit) by $16,404,154 as of January 31, 2013. The Company has incurred significant operating losses and negative cash flows from operating activities since inception. For the nine months ended January 31, 2013, the Company sustained a net loss of $11,496,389 compared to a net loss of $547,479 for the nine months ended January 31, 2012 and used cash of approximately $948,676 in operating activities for the nine months ended January 31, 2013 compared with approximately $1,129,010 for the nine months ended January 31, 2012.

Our business plan includes increasing our sales from beverages and the issuance of additional equity securities of the Company for cash. If we are unable to implement our business plan or if we are delayed all or part of our business plan, our ability to attain profitable operations, generate positive cash flows from operating and investing activities and materially expand the business will be adversely affected.

The accompanying consolidated financial statements do not include any adjustments relating to the classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.

4. ACCOUNTS RECEIVABLE

Accounts Receivable as of January 31, 2013 and April 30, 2012 consist of the following:

	January 31, 2013		April 30, 2012
Accounts receivable	$	103,112	$	878,056
Allowances		-		(138,491	)
	$	103,112	$	739,565

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DRINKS AMERICAS HOLDINGS, LTD. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JANUARY 31, 2013

(Unaudited)

5. INVENTORY

Inventory as of January 31, 2013 and April 30, 2012 consist of the following:

	January 31, 2013		April 30, 2012
Raw materials	$	-	$	20,431
Finished goods		-		820,970
	$	-	$	841,401

All raw materials used in the production of the Company's inventories are purchased by the Company and delivered to independent production contractors.  During the nine months ended January 31, 2013, the Company ceased carrying inventory and ships directly from manufacturer/wholesaler to the customer.

6. OTHER CURRENT ASSETS

Other current assets as of January 31, 2013 and April 30, 2012 consist of the following:

	January 31,  2013		April 30,  2012
Employee advances	$	-	$	46,659
Prepaid other		34,358		14,915
	$	34,358	$	61,574

Prepaid other are comprised of prepaid marketing fees, employee travel advances and expenses.

7. PROPERTY AND EQUIPMENT

Property and equipment as of January 31, 2013 and April 30, 2012 consist of the following:

	Useful Life	January 31, 2013		April 30, 2012
Computer equipment	5 years	$	-	$	8,401
Furniture & fixtures	5 years		-		44,028
Automobiles	5 years		-		27,136
Production molds & tools	5 years		-		92,400
			-		171,965
Accumulated depreciation			-		(158,447	)
		$	-	$	13,518

Property and equipment are stated at cost. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings. For financial statement purposes, property and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives of 5 years.

Depreciation expense for the nine months ended January 31, 2013 and 2012 was $13,518 and $8,896, respectively.

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DRINKS AMERICAS HOLDINGS, LTD. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JANUARY 31, 2013

(Unaudited)

8. INTANGIBLE ASSETS

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

As of January 31, 2013 and April 30, 2012, intangible assets are comprised of the following:

	January 31, 2013		April 30, 2012
Trademark and license rights of Rheingold beer	$	-	$	230,000
Worldwide Beverages agreement		-		4,870,391
Other trademark and distribution rights		-		475,000
		-		5,575,391
Accumulated amortization		-		(382,036	)
	$	-	$	5,193,355

Amortization expense for the nine months ended January 31, 2013 and 2012 was $0 and $44,109, respectively.

9. INVESTMENT IN EQUITY INVESTEES

Investment in equity investees represents the Company's investment in Old Whiskey Rivers and is recorded at fair value.  During the nine months ended January 31, 2013, the Company recorded an impairment loss of $102,345 in the investment in equity investees.

10. INVESTOR NOTES PAYABLE

On June 19, 2009, (the "Closing Date") we sold to one investor (the “Investor”) a $4,000,000 non-interest bearing debenture with a 25% ($1,000,000) original issue discount, that matures in 48 months from the Closing Date (the "Drink’s Debenture") for $3,000,000, consisting of $375,000 paid in cash at closing and eleven secured promissory notes, aggregating $2,625,000, bearing interest at the rate of 5% per annum, each maturing 50 months after the Closing Date (the “Investor Notes”).  The Investor Notes, the first ten of which are in the principal amount of $250,000 and the last of which is in the principal amount of $125,000, are mandatorily pre-payable, in sequence, at the rate of one note per month commencing on January 19, 2010, subject to certain contingencies.    

On December 13, 2011, the Company and the Investor entered into a Forbearance Agreement (the “Forbearance Agreement”) whereby the Investor agreed to forbear from enforcing the Investor’s remedial rights under the Loan Documents until January 1, 2013 (the “Forbearance Agreement”).  Pursuant to the Forbearance Agreement, the Debenture will remain in full force and effect and, as a result of certain defaults under the Loan Documents, the outstanding amount owed under the Debenture, including interest, fees, penalties and legal fees, was agreed to be no less than $2,000,000, with interest, fees and penalties continuing to accrue (the “Debenture Balance”).  Notwithstanding the Debenture Balance, the Company and the Investor agreed to a payoff balance of $1,126,360 (the “Forbearance Amount”), which Forbearance Amount shall accrue interest at a rate of 8% per annum, commencing on December 13, 2011.  So long as the Company complies with the terms of the Forbearance Agreement and no further defaults occur under the Loan Documents, the Company’s obligation will be entirely satisfied upon due payment of the Forbearance Amount in accordance with the following schedule of fixed cash payments:

·$285,360 upon execution of the Forbearance Agreement, which payment was made on December 13, 2011;

·$50,000 to be paid on or before March 1, 2012, which payment was made on February 27, 2012;

·$283,000 to be paid on or before June 1, 2012, which payment was made on May 31, 2012;

·$50,000 to be paid on or before September 1, 2012, which payment was made on September 6, 2012;

·$50,000 to be paid on or before November 1, 2012, which payment as of January 31, 2013 has not been made; and

·$408,000 plus all accrued and unpaid interest to be paid on or before January 1, 2013, which payment was not made (See Note 21).

11

DRINKS AMERICAS HOLDINGS, LTD. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JANUARY 31, 2013

(Unaudited)

On October 5, 2011 the Company paid the Investor $50,000 and shortly thereafter a final issuance of 77,280 shares of Common Stock which payment and issuance were credited to the Debenture Balance and the Forbearance Amount and were reflected in the amounts owed under the Debenture Balance and the Forbearance Amount.

In the event that the Company does not comply with all of its obligations or a default occurs under the Forbearance Agreement or the Loan Documents (a “Future Default”), the outstanding balance under the Debenture will be deemed to be the Debenture Balance with all accrued interest, fees and penalties, less any payments made in accordance with the payment schedule.  In the event of a Future Default, the Investor will have a right to convert all or part of the Debenture Balance for shares of Common Stock.  Accordingly, the Company agreed to reserve 400,000 shares of Common Stock for issuance to the lender upon such conversion.  In addition, the Company entered into an Escrow Agreement whereby the Company agreed to deliver 400,000 shares (the “Forbearance Conversion Shares”) to be held in escrow.  In the event of certain defaults under the Forbearance Agreement or the Debenture, the Investor will have the right to receive the Forbearance Conversion Shares, which right was memorialized in that certain letter containing Irrevocable Instructions to Transfer Agent dated December 13, 2011.  Pursuant to the Forbearance Agreement, the Company also consented to a Judgment by Confession whereby the Company agreed to allow a court of proper jurisdiction to enter a Judgment against the Company in favor of the Investor.

The Company failed to make its payment of $408,000 due January 1, 2013.  As a result, the Company received a default notice on January 15, 2013, and currently in negotiations with the Investor to remedy any defaults.

11. LINE OF CREDIT, RELATED PARTY

As of January 31, 2013 and April 30, 2012, the Company has outstanding $785,945 and $215,946 on a $660,000 line of credit, unsecured at 15% per annum and due upon demand, respectively.  The line of credit is provided by a current note holder and a former director of the Company.     

12. CONVERTIBLE DEBENTURE

On October 12, 2012, the Company issued a convertible debenture for total cash proceeds of $250,000 and a face value of $325,000. The face value of $325,000, which includes all principal and interest, is due in full on January 15, 2013. The debenture is convertible, at the option of the holder, into shares of common stock of the Company at a fixed conversion price of $0.50 and is secured under the terms of the Security Interest and Pledge Agreement. The convertible debenture was converted at a 38% discount to market through the issuance of 2,000,000 shares of common stock on January 17, 2013, for a fair value of $180,000.   This debenture has been satisfied in full.

On November 1, 2012, the Company issued, in lieu of cash payment for past due accounts payables equal to $1,630,000, two convertible debentures to Worldwide Beverage Imports in the aggregate principal amount of $1,630,000 (the “WBI Debentures”).  On January 31, 2013, the Company and WBI memorialized their agreement to cancel $1,630,000 of past due accounts payable owed to WBI in exchange for the issuance of the WBI Debentures.  The WBI Debentures accrue interest at 8% per annum. The WBI Debentures, which includes all principal and interest, are due in full on May 1, 2013. The WBI Debentures are convertible, at the option of the holder, into shares of common stock of the Company at the lesser of (i) the closing price of the Company’s common stock on November 1, 2012; or (ii) the closing price of the Company’s common stock on the date immediately prior to the date the holder of the WBI Debentures requests their conversion.  However, in the event of a default under the WBI Debentures, the WBI Debentures will be convertible at a 38% discount to market.   The WBI Debentures are currently in default.

12

DRINKS AMERICAS HOLDINGS, LTD. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JANUARY 31, 2013

(Unaudited)

13. NOTES AND LOANS PAYABLE

Notes and loans payable as of January 31, 2013 and April 30, 2011 consisted of the following: 

	January 31, 2013		April 30,  2012
Note payable (a)	$	192,000	$	192,000
Note payable (b)		27,500		55,000
Note payable (c)		280,000		--
		499,500		247,000
Less current portion		499,500		247,000
Long-term portion	$	-	$	-

(a)   On December 13, 2010, in connection with the settlement of accrued but unpaid salary compensation due to our former Vice President of Sales, we issued a promissory note for $192,000. The note accrues interest at the annual rate of 6% and is due the earliest of thirty business days following the successful completion and receipt of a financing equal to or greater than one million dollars or January 1, 2012. At January 31, 2013, the Company accrued interest payable of $15,960.

(b)   In December 2011, in connection with the settlement of accrued but unpaid salary compensation due to an ex-employee, we agreed to a payment plan containing fourteen payments with the final payment due September 1, 2012 for a total of $140,000. Balance due under this agreement as of January 31, 2013 and April 30, 2012 was $27,500 and $55,000, respectively.

(c) $280,000 prior quarter adjustments to accommodate advances.

14. NOTES AND LOANS PAYABLE – RELATED PARTY

Notes and loans payable – related party, due to a former director of the Company, as of January 31, 2013 and April 30, 2012 consisted of the following: 

	January 31, 2013		April 30,  2012
Note payable (a)	$	-	$	145,008
Note payable (b)		1,630,000		-
Note payable (c)		30,000
		1,660,000		145,008
Less current portion		1,660,000		145,008
Long-term portion	$	-	$	-

(a)           As of January 31, 2013, the Company has paid of a $250,000 note from an investor under an informal agreement for working capital purposes.   The note was converted at a 38% discount to market through the issuance of 2,000,000 shares of common stock on January 17, 2013, for a fair value of $248,400.  This note has been satisfied in full.

(b)           On November 1, 2012, the Company agreed (which agreement was memorialized on January 31, 2013) to convert various past due accounts payables owed by the Company to WBI in the aggregate amount of $1,630,000 into the WBI Debentures (see Note 12) in the same amount as the WBI payables into two notes:

1.  $230,000 @ 8% with a 6-month maturity date.

2.  $1,400,000 @ 8% with a 6-month maturity date.

(c)           WBI provided a short-term loan to the Company for $30,000, with no interest.  The loan was subsequently paid off in the next quarter.

13

DRINKS AMERICAS HOLDINGS, LTD. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JANUARY 31, 2013

(Unaudited)

15. DUE TO FACTOR

On June 18, 2012, the Company entered into a recourse factoring agreement expiring six months from execution.  The factoring agreement advances 80% of approved invoices.  The factoring agreement is secured by continuing lien on accounts receivable, contract rights, instruments, chattel paper, general intangibles and inventory.  As of January 31, 2013, the factoring agreement had been cancelled.

16. ACCRUED EXPENSES

Accrued expenses consist of the following at January 31, 2013 and April 30, 2012:

	January 31, 2013		April 30,  2012
Payroll, board compensation and consulting fees owed to officers,  directors and shareholders	$	-	$	770,690
Other payroll and consulting fees		-		6,563
Interest		237,923		40,850
Other		-		82,826
Royalties		-		-
	$	237,923	$	900,929

17. STOCKHOLDERS’ EQUITY (DEFICIT)

Preferred Stock

(i)   Series A Convertible Preferred Stock

On September 24, 2012 and on October 9, 2012, the Company received a notice from Enable Opportunity Partners, LP, a holder of approximately 7,660 shares the Company’s Series A Convertible Preferred Stock, electing a full redemption of its Preferred A holdings. The total redemption price of $8,426,000 is 110% of the stated value of $1,000 per share of the Series A Convertible Preferred Shares. Interest is payable at 18% per annum on the unpaid redemption price.  At January 31, 2013, interest payable of $557,524 was accrued. The total redemption liability of $8,983,524 is recorded as a current liability on the balance sheet.

(ii)   Series D Convertible Preferred Stock

On August 30, 2012, the Company entered into Amendment No. 2 (the “Amendment”) to that certain License Agreement dated  June 27, 2011 with Worldwide Beverage Imports, LLC.  Pursuant to the Amendment (i) the Company is now permitted to sell and distribute WBI licensed spirits in all states of the United States, including California; and (ii) the Company’s right to an exclusive license to use and display certain trademarks, service marks, and trade names which are applicable to WBI products was made into a non-exclusive license.  The exclusive distribution license for WBI products was not altered.

In consideration for and as an inducement to enter into the Amendment, the Company agreed to transfer 2,750,000 shares of the Company’s common stock and 114,000 shares of the Company’s Series D Preferred Stock, which was newly designated on August 30, 2012, to WBI (the “Holder”). The Holder is a related party and, as such, the transaction was valued at the cost basis of the Holder which was $0.

The Series D Preferred Stock vote as a single class with the common stock of the Company and the holders of the Series D Preferred Stock hold the number of votes equal to 100 times the number of shares of Series D Preferred Stock.  Upon liquidation, the holders of the Series D Preferred Stock have the right to receive, prior to any distribution with respect to the Company’s common stock, but subject to the rights of the holders of the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, the Stated Value (plus any other fees or liquidated damages payable thereon).

14

DRINKS AMERICAS HOLDINGS, LTD. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JANUARY 31, 2013

(Unaudited)

Provided that the Holder and the Holder’s affiliates have been relieved of their personal guarantees on behalf of the Company and all debt to the Holder and the Holder’s affiliates is paid in full, the Series D Preferred Stock shall automatically be converted into 250,000 shares of the Company’s Common Stock, if, at any time, (i) the Holder and the Holder’s affiliates reduces its ownership of the Company’s Common Stock below 50% of 10,229,602 shares, the number of shares the Holder and the Holder’s affiliates held on August 23, 2012 and the concentration of Common Stock has not exceeded 20% of 10,229,602 shares by any other individual or affiliate group; or (ii) the total number of the Company’s common stock shareholders exceeds 1,000 shareholders.

Common Stock

On July 12, 2012, the Company issued 25,000 warrants to a consultant with an exercise price of $0.70 and a life of five years which vest immediately. The warrants were measured at their fair value on July 12, 2012 using the following Black-Scholes Model Assumptions: risk free interest (0.63%); expected volatility (96%); expected life (60 months) and no dividends. These warrants were valued at $12,565 and expensed immediately.

On August 9, 2012, the Company entered into an agreement to settle accounts payable in the amount of $83,194 by issuing 250,000 shares of common stock. The fair value of the shares was $140,000, of which $56,806 was recognized as a loss on accounts payable settlement in the statement of operations.

On August 9, 2012, the Company entered into an agreement to settle accounts payable in the amount of $10,000 for consulting fees due to Timothy J. Owens, the CEO of the Company, by issuing 100,000 shares of common stock. The fair value of the shares was $56,000, of which $46,000 was recognized as a loss on accounts payable settlement in the statement of operations.

On August 9, 2012, the Company issued 80,000 shares of its common stock to a consultant for services rendered with a fair value of $44,800 based on the quoted market price of the shares at time of issuance.

On August 9, 2012, the Company entered into an agreement to settle accounts payable in the amount of $43,145 by issuing 142,148 shares of common stock. The fair value of the shares was $78,892, of which $35,747 was recognized as a loss on debt settlement in the statement of operations.

On August 9, 2012, the Company issued 571,000 warrants to a consultant with an exercise price of $0.56 and a life of five years which vest immediately. The warrants were measured at their fair value on August 9, 2012 using the following Black-Scholes Model Assumptions: risk free interest (0.74%); expected volatility (116%); expected life (60 months) and no dividends. These warrants were valued at $270,257 and expensed immediately.

On September 12, 2012, the Company entered into an agreement to settle accounts payable and debts of $752,422 by issuing 1,596,000 warrants. The fair value of the warrants was $241,400, of which $511,022 was recognized as a gain on debt settlement in the statement of operations. The warrants have an exercise price of $0.30 and a life of five years which vest immediately. The warrants were measured at their fair value on September 12, 2012 using the following Black-Scholes Model Assumptions: risk free interest (0.70%); expected volatility (128%); expected life (60 months) and no dividends.

On October 1, 2012, the Company issued 150,000 shares of its common stock to a consultant for services rendered with a fair value of $45,000 based on the quoted market price of the shares at time of issuance.

On October 12, 2012, the Company issued 75,000 shares of its common stock to consultant for services rendered with a fair value of $24,000 based on the quoted market price of the shares at time of issuance.

On November 27, 2012, the Company issued 140,000 shares of its common stock to various consultants for services rendered, in November 2012, with a fair value of $28,000 based on the quoted market price of the shares at time of issuance.

On November 27, 2012, the Company entered into an agreement to settle accounts payable in the amount of $90,084 for legal fees due to Sichenzia Ross Friedman Ference, LLP for services thru November 15, 2012, by issuing 450,421 shares of common stock.  The fair value of the shares was $90,084.

On December 6, 2012, the Company entered into an agreement to settle accounts payable in the amount of $12,072 for legal fees due to Lovallo Law Group for November, 2012, by issuing 92,860 shares of common stock.  The fair value of the shares was $12,072.

15

DRINKS AMERICAS HOLDINGS, LTD. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JANUARY 31, 2013

(Unaudited)

On January 4, 2013, the Company issued 1,250,000 shares of its common stock to the Board of Director for services already rendered in the quarter, with a fair value of $100,000 based on the quoted market price of the shares at time of issuance.

On January 17, 2013, the Company issued 2,000,000 shares of its common stock to Frederico Cabo’s company, Jomex, LLC for his company giving up 2,000,000 shares of the Company’s common stock as security to a defaulted debenture in this quarter.  The fair value of the shares was $180,000 based on the quoted market price of the shares at time of issuance.

On January 30, 2013, the Company entered into an agreement to settle accounts payable in the amount of $58,043 for legal fees due to Sichenzia Ross Friedman Ference, LLP thru the end of the quarter, by issuing 725,536 shares of common stock.  The fair value of the shares was $58,043.

Stock option expense related to executive and employee options granted resulting in a charge to operations during the nine month period ended January 31, 2013 of $41,906.

18. WARRANTS AND OPTIONS

Warrants

The following table summarizes the warrants outstanding and related prices for the shares of the Company’s common stock issued as of January 31, 2013:

				Warrants Outstanding Weighted Average						Warrants Exercisable
				Remaining		Weighted				Weighted
		Number		Contractual		Average		Number		Average
Exercise Price		Outstanding		Life (years)		Exercise price		Exercisable		Exercise Price
$	0.30		1,596,000		4.87	$	0.30		1,596,000	$	0.30
	0.56		571,000		4.78		0.56		571,000		0.56
	0.70		25,000		4.70		0.70		25,000		0.70
	23.44		213		2.21		23.44		213		23.44
	51.56		182		2.17		51.56		182		51.56
	59.78		647		2.14		59.78		647		59.78
	84.38		1,120		2.13		84.38		1,120		84.38
	93.75		1,254		2.07		93.75		1,254		93.75
	234.38		53		1.83		234.38		53		234.38
	243.75		51		1.83		243.75		51		243.75
	351.56		67		4.62		351.56		67		351.56
	562.50		2,624		7.50		562.50		2,624		562.50
	1,312.50		667		1.64		1,312.50		667		1,312.50
	1,640.00		33		1.64		1,640.00		33		1,640.00
	1,875.00		620		0.65		1,875.00		620		1,875.00
	4,815.00		213		4.62		4,815.00		213		4,815.00
Total			2,199,744		4.84	$	2.60		2,199,744	$	2.60

Transactions involving the Company’s warrant issuance are summarized as follows:

	Number of Shares			Weighted Average Price Per Share
Outstanding at April 30, 2011		8,225		$	812.50
Issued		-			-
Expired		(81	)		(697.50	)
Canceled		-			-
Outstanding at April 30, 2012		7,744			812.50
Issued		2,192,000			0.37
Expired		-
Canceled		-			-
Outstanding at January 31, 2013		2,199,744		$	2.60

16

DRINKS AMERICAS HOLDINGS, LTD. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JANUARY 31, 2013

(Unaudited)

Options

The following table summarizes the options outstanding and related prices for the shares of the Company’s common stock issued as of January 31, 2013:

				Options Outstanding Weighted Average						Options Exercisable
				Remaining		Weighted				Weighted
		Number		Contractual		Average		Number		Average
Exercise Price		Outstanding		Life (years)		Exercise price		Exercisable		Exercise Price
$	600.00		620		1.37	$	600.00		465	$	600.00
	660.00		667		1.37		660.00		500		660.00
	1,312.50		133		1.37		1,312.50		133		1,312.50
Total			1,420		1.37				1,098

Transactions involving the Company’s options issuance are summarized as follows:

	Number of Shares		Weighted Average Price Per Share
Outstanding at April 30, 2011		1,420	$	695.00
Issued		-		-
Exercised		-		-
Canceled or expired		-		-
Outstanding at April 30, 2012		1,420		695.00
Issued		-		-
Expired		-
Canceled		-		-
Outstanding at January 31, 2013		1,420	$	695.00

The Company did not issue options during the nine months ended January 31, 2013.

19.  RELATED PARTY TRANSACTIONS

Due to Stockholders

The Company is obligated to issue shares of its common stock to several of its stockholders in connection with its June 2009 debt financing (see Note 10).

During the nine months ended January 31, 2013, the Company incurred $117,086, net of repayments of $16,185, to the Company's CEO for incurred past expenses.   

As described in Notes 11 and 14 above, a note holder and former director of the Company provided a $660,000 line of credit, of which $785,945 is being utilized. For the nine months ended January 31, 2013, the Company has paid $12,705 of interest on the credit line.

As described in Notes 12 and 14 above, a convertible promissory note valued at $1,630,000 was issued at 8% interest to Worldwide Beverage Imports (“WBI”), for past due payables.  The Note is currently in default.

On January 17, 2013, the Company issued 2,000,000 shares of its common stock to Frederico Cabo’s company, Jomex, LLC for his company giving up 2,000,000 shares of the Company’s common stock as security due to a defaulted debenture in this quarter.  The fair value of the shares was $180,000 based on the quoted market price of the shares at time of issuance.

17

DRINKS AMERICAS HOLDINGS, LTD. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JANUARY 31, 2013

(Unaudited)

20. CUSTOMER CONCENTRATION

For the nine months ended January 31, 2013 and 2012, five customers accounted for 52% and 66%, of the Company's sales, respectively, and five customers accounted for 55% and 68%, respectively of the Company's accounts receivable as of January 31, 2013 and April 30, 2012, respectively.

The Company’s national spirits sales are generally done through the top five spirits and wine distributing companies in the nation, Glazers, Southern Wine and Spirits, Republic National Distributing Company, Johnson Brothers Distributing Company and Youngs Market. The Company’s beer business is done primarily through a network of Anheuser Busch and Miller and Coors Brewing company distributors in 15 states.

21. SUBSEQUENT EVENTS

On February 15, 2013, the Company entered into a Beer Brokerage Agreement with Worldwide Beverage Importers (“WBI”), to sell WBI’s beer inventory on a commission basis.

June 19, 2009 Debenture

As previously reported on the Company’s Current Reports on Form 8-K, filed with the SEC on June 25, 2009 and on December 20, 2011, the Company sold to one accredited investor (the “Investor”) a $4,000,000 non-interest bearing debenture (the “Debenture”) pursuant to a Securities Purchase Agreement (the “SPA”).  The Company’s obligations under the Debenture and the SPA were secured by a Pledge Agreement (the “Pledge Agreement” and, the Pledge Agreement together with the Debenture, the SPA and all other documents entered into in conjunction therewith or as an amendment thereto, the “Loan Documents”).  Additionally, on December 13, 2011, the Company and the Investor entered into a Forbearance Agreement (the “Forbearance Agreement”) whereby the Investor agreed to forbear from enforcing the Investor’s remedial rights against certain defaults under the Loan Documents until January 1, 2013 (the “Forbearance Agreement”).  Pursuant to the Forbearance Agreement, the Debenture remained in full force and effect and, as a result of certain defaults under the Loan Documents, the outstanding amount owed under the Debenture, including interest, fees, penalties and legal fees, was agreed to be no less than $2,000,000, with interest, fees and penalties continuing to accrue (the “Debenture Balance”).  Notwithstanding the Debenture Balance, the Company and the Investor agreed to a payoff balance of $1,126,360 (the “Forbearance Amount”).  Pursuant to the Forbearance Agreement, the Company made various scheduled payments towards the Forbearance Amount.  However, the Company was unable to pay the final payment for $408,000 plus all accrued and unpaid interest on or prior to its due date, January 1, 2013, or within the five business day cure period. Currently, the Company is negotiating a settlement with the Investor.

October 15, 2012 Debenture

On October 15, 2012, the Company sold a $325,000 convertible debenture (the “Convertible Debenture”) to one accredited investor (the “Holder”).  The proceeds to the Company were $250,000 and the Convertible Debenture contained an original issue discount of $75,000.  The Convertible Debenture bears a 0% interest rate, an 18% default interest rate and matured on January 15, 2013 (the “Maturity Date”).  In connection with the sale of the Convertible Debenture, the Company, the Holder and JoMex, LLC, (the “Pledgor”), an entity owned by the Company’s former Chief Executive Officer and Chairman, Federico Cabo, entered into a security interest and pledge agreement (the “Security Agreement”) whereby the Pledgor, deposited 2,000,000 shares (the “Pledge Shares”) of the Company’s common stock owned by JoMex as security for the performance of the Company under the Convertible Debenture.

On January 15, 2013, the Company received a letter of default (“Letter of Default”) for the nonpayment of the $325,000 due to the Holder on the Maturity Date.  In the Letter of Default, the Holder declared the Company’s default under the Convertible Debenture and demanded the release of the Pledge Shares pursuant to the Security Agreement.  The Company and JoMex, LLC (“Pledgor”) released on February 5, 2013, the Pledge Shares to the Holder.

November 1, 2012 Debenture

On November 1, 2012, the Company issued a convertible debenture to Worldwide Beverage Imports (“WBI”) for delinquent accounts payable of $1,630,000 and interest of 8% per annum. The debenture, which includes all principal and interest, is due in full on May 1, 2013. The debenture is convertible, at the option of the holder, into shares of common stock of the Company at a fixed conversion price of $0.50 and is secured under the terms of the Security Interest and Pledge Agreement. The convertible debenture will be convertible at a 38% discount to market.   This debenture is currently in default.

18

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

Unless otherwise indicated or the context otherwise requires, all references in this Report on Form 10-Q to “we”, “us”, “our” and the “Company” are to Drinks Americas Holdings, Ltd., a Delaware corporation and formerly Gourmet Group, Inc., a Nevada corporation, and its majority owned subsidiaries Drinks Americas, Inc., Drinks Beers, Drinks Global Imports, LLC, D.T. Drinks, LLC, Rheingold Brewing Company and Maxmillian Mixers, LLC and Maxmillian Partners, LLC.

Cautionary Notice Regarding Forward Looking Statements

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

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

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

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

We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our Company's historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to, those described in Part II, "Item 1A. Risk Factors" and elsewhere in this report and in our Annual Report on Form 10-K for the year ended April 30, 2012, and those described from time to time in our future reports filed with the Securities and Exchange Commission.  This discussion is provided as permitted by the Private Securities Litigation Reform Act of 1995.

Introduction

The following discussion and analysis summarizes the significant factors affecting: (1) our consolidated results of operations for the three and nine months ended January 31, 2013, compared to the three and nine months ended January 31, 2012, and (2) our liquidity and capital resources. This discussion and analysis should be read in conjunction with the consolidated financial statements and notes included in Item 1 of this Quarterly Report on Form 10-Q, and the audited consolidated financial statements and notes included in our Annual Report Form 10-K, filed on August 14, 2012.

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Results of Operations

Three months Ended January 31, 2013 Compared to Three months Ended January 31, 2012

Net Sales: Net sales were approximately $1,204,671 for the three months ended January 31, 2013 compared to net sales of approximately $1,117,000 for the same period last year, an increase of 8% as a result of the Company’s sales of products from the license agreement with Worldwide Beverage Imports.  KAH Tequila was the primary driver of revenue growth for the Company.

Gross Margin:  Gross margin was $342,455, or 28.4% of net sales for the three months ended January 31, 2013 compared to gross margin of $232,341, or 20.8% of net sales for the three months ended January 31, 2012. 

Selling, General and Administrative Expenses: Selling, general and administrative expenses totaled approximately $1,679,868 for the three months ended January 31, 2013, compared to $345,365 for the three months ended January 31, 2012, an increase of approximately $1,334,503, or 386%, is primarily the result of increased accrued expenses for consulting fees and contingent liabilities, and increased promotion expenses.

Interest expense:  Interest expense for the three months ended January 31, 2013 was approximately $705,724 compared to $11,332 for the same period last year, a net increase of $694,392 or 98%.  This increase is predominantly due to increased short term debt and interest of $431,134 accrued for a redemption liability.

Loss (gain) on settlement of debt:  During the three months ended January 31, 2013 and 2012, we negotiated and settled outstanding debt, primarily trade vendors.  As such, we recognized a gain on settlement of debt of approximately $0 for the three months ended January 31, 2013 compared to a gain of approximately $288,172 the same period last year.

Nine months Ended January 31, 2013 Compared to Nine months Ended January 31, 2012

Net Sales: Net sales were approximately $4,426,065 for the nine months ended January 31, 2013 compared to net sales of approximately $2,535,669 for the same period last year, an increase of 74.6% as a result of the Company’s sales of products from the license agreement with Worldwide Beverage Imports.  KAH Tequila was the primary driver of revenue growth for the Company.

Gross Margin:  Gross margin was $1,042,916, or 23.6% of net sales for the nine months ended January 31, 2013 compared to gross margin of $550,016, or 21.7% of net sales for the nine months ended January 31, 2012. 

Selling, General and Administrative Expenses: Selling, general and administrative expenses totaled approximately $6,542,603 for the nine months ended January 31, 2013, compared to $1,591,027 for the nine months ended January 31, 2012, an increase of approximately $4,951,576, or 311%, is primarily the result of increased consulting fees and contingent liabilities, and increased promotion expenses.

Impairment Losses: For the nine months ended January 31, 2013, the Company recorded impairment losses of $5,295,700 for intangible assets and investment in equity investees, respectively.

Interest expense:  Interest expense for the nine months ended January 31, 2013 was approximately $1,073,471 compared to $157,342 for the same period last year, a net increase of $916,129 or 582%.  This increase is predominantly due to increased short term debt and interest of $431,134 accrued for a redemption liability.

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Gain on settlement of debt:  During the nine months ended January 31, 2013 and 2011, we negotiated and settled outstanding debt, primarily with trade vendors.  As such, we recognized a gain on settlement of debt of approximately $372,469 for the nine months ended January 31, 2013 compared to a gain of approximately $627,609 the same period last year.

Gain on disposal of product line:  During the nine months ended January 31, 2012, we exchanged 42% of our interest in Olifant U.S.A, Inc. for the cancellation of our remaining outstanding debt obligation and related accrued interest.  With the exchange, we reduced our ownership to 48% and realized a gain on sale of the product line of approximately $280,478 compared to $0 for the nine months ended January 31, 2013.

Financial Liquidity and Capital Resources

Our accompanying consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern. As of January 31, 2013, the Company has stockholders' deficit of approximately $(16,404,154) and working capital deficiency of approximately $16,404,154 as of January 31, 2013 and has incurred significant operating losses and negative cash flows since inception. For the nine months ended January 31, 2013, the Company sustained operating net loss of approximately $11,496,8389 compared to operating net loss of $547,479 for the nine months ended January 31, 2012 and used cash of approximately $948,676 in operating activities for the nine months ended January 31, 2013 compared with approximately $1,122,785 for the nine months ended January 31, 2012. We have converted certain liabilities into equity.   The accompanying consolidated financial statements do not include any adjustments relating to the classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the company be unable to continue in existence. Without substantial inflows of cash from the sale of our equity, together with successful negotiations with our legacy creditors to convert our debts to equity, the Company will be unable to continue as an ongoing concern.

We will need to continue to manage carefully our working capital and our business decisions will continue to be influenced by our working capital requirements.

Net Cash Used in Operating Activities: Net cash used in operating activities for the nine months ended January 31, 2013 was approximately $948,676, primarily from our loss of approximately $11,496,821 net with non-cash activities of approximately $13,518 depreciation, $714,162 stock based compensation, $5,295,700 impairment losses, $1,559,845 changes in operating assets and sundry other non-cash activities (primarily decreases in our accounts receivable and inventory). We have to date funded some of our operations predominantly through loans from shareholders, officers and investors. 

Net Cash provided by Financing Activities: Net cash provided by financing activities for the nine months ended January 31, 2013 was approximately $675,392 primarily from net proceeds from related party line of credit, convertible debt and notes payable.

Based on our current operating activities and plans, we believe without new sources of financings the Company will not have sufficient cash for its requirements over the next twelve months.

Impact of Inflation

Although management expects that our operations will be influenced by general economic conditions, we do not believe that inflation has had a material effect on our results of operations.

Seasonality

Generally, the second and third quarters of our fiscal year (August-January) are the periods that we realize our greatest sales as a result of sales of alcoholic beverages during the holiday season. During the fourth quarter of our fiscal year (February-April), we generally realize our lowest sales volume as a result of our distributors decreasing their inventory levels, which typically remain on hand after the holiday season.

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Item 3.    Quantitative and Qualitative Disclosures About Market Risk.

Not applicable to smaller reporting companies.

Item 4.    Controls and Procedures.

Disclosure Controls and Procedures  

We have adopted and maintain disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to provide reasonable assurance that information required to be disclosed in our reports under the Exchange Act, is recorded, processed, summarized and reported within the time periods required under the SEC's rules and forms and that the information is gathered and communicated to our management, including our Chief Executive Officer (Principal Executive Officer) and our Chief Financial Officer (Principal Financial Officer), as appropriate, to allow for timely decisions regarding required disclosure.

Our Chief Executive Officer and our Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures as of January 31, 2013, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of January 31, 2013, our Chief Executive Officer and our Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were ineffective due to the Company’s inability to file this quarterly report within the period specified by the SEC.  

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting as defined in Rule 13a-15 under the Exchange Act that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1.    Legal Proceedings.

There have been no material changes in legal proceeds previously disclosed in our Annual Report on Form 10-K for the year ended April 30, 2012.

Item 1A.  Risk Factors.

There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended April 30, 2012.

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

On November 1, 2012, the Company issued, in lieu of cash payment for past due accounts payables equal to $1,630,000, two convertible debentures to Worldwide Beverage Imports in the aggregate principal amount of $1,630,000 (the “WBI Debentures”).  On January 31, 2013, the Company and WBI memorialized their agreement to cancel $1,630,000 of past due accounts payable owed to WBI in exchange for the issuance of the WBI Debentures.  The WBI Debentures accrue interest at 8% per annum. The WBI Debentures, which includes all principal and interest, are due in full on May 1, 2013. The WBI Debentures are convertible, at the option of the holder, into shares of common stock of the Company at the lesser of (i) the closing price of the Company’s common stock on November 1, 2012; or (ii) the closing price of the Company’s common stock on the date immediately prior to the date the holder of the WBI Debentures requests their conversion.  However, in the event of a default under the WBI debentures, the WBI Debentures will be convertible at a 38% discount to market.   The WBI Debentures are currently in default.

Item 3.    Defaults Upon Senior Securities.

 June 19, 2009 Debenture

As previously reported on the Company’s Current Reports on Form 8-K, filed with the SEC on June 25, 2009 and on December 20, 2011, the Company sold to one accredited investor (the “Investor”) a $4,000,000 non-interest bearing debenture (the “Debenture”) pursuant to a Securities Purchase Agreement (the “SPA”).  The Company’s obligations under the Debenture and the SPA were secured by a Pledge Agreement (the “Pledge Agreement” and, the Pledge Agreement together with the Debenture, the SPA and all other documents entered into in conjunction therewith or as an amendment thereto, the “Loan Documents”).  Additionally, on December 13, 2011, the Company and the Investor entered into a Forbearance Agreement (the “Forbearance Agreement”) whereby the Investor agreed to forbear from enforcing the Investor’s remedial rights against certain defaults under the Loan Documents until January 1, 2013 (the “Forbearance Agreement”).  Pursuant to the Forbearance Agreement, the Debenture remained in full force and effect and, as a result of certain defaults under the Loan Documents, the outstanding amount owed under the Debenture, including interest, fees, penalties and legal fees, was agreed to be no less than $2,000,000, with interest, fees and penalties continuing to accrue (the “Debenture Balance”).  Notwithstanding the Debenture Balance, the Company and the Investor agreed to a payoff balance of $1,126,360 (the “Forbearance Amount”).  Pursuant to the Forbearance Agreement, the Company made various scheduled payments towards the Forbearance Amount.  However, the Company was unable to pay the final payment for $408,000 plus all accrued and unpaid interest on or prior to its due date, January 1, 2013, or within the five business day cure period.

On January 15, 2013, the Investor delivered a notice of default (“Default Notice”) to the Company.  The Default Notice contained, among other things, (i) a termination of the Forbearance Agreement; (ii) a request for partial repayment of the Debenture Balance by release, pursuant to the Forbearance Agreement, of 400,000 shares of the Company’s Common stock held in escrow; (iii) a demand for the immediate and accelerated payment of all amounts due under the Debenture and/or Forbearance Agreement equal to $2,149,888.

October 15, 2012 Debenture

On October 15, 2012, the Company sold a $325,000 convertible debenture (the “Convertible Debenture”) to one accredited investor (the “Holder”).  The proceeds to the Company were $250,000 and the Convertible Debenture contained an original issue discount of $75,000.  The Convertible Debenture bears a 0% interest rate, an 18% default interest rate and matured on January 15, 2013 (the “Maturity Date”).  In connection with the sale of the Convertible Debenture, the Company, the Holder and JoMex, LLC, (the “Pledgor”), an entity owned by the Company’s former Chief Executive Officer and Chairman, Federico Cabo, entered into a security interest and pledge agreement (the “Security Agreement”) whereby the Pledgor, deposited 2,000,000 shares (the “Pledge Shares”) of the Company’s common stock owned by JoMex as security for the performance of the Company under the Convertible Debenture.

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On January 15, 2013, the Company received a letter of default (“Letter of Default”) for the nonpayment of the $325,000 due to the Holder on the Maturity Date.  In the Letter of Default, the Holder declared the Company’s default under the Convertible Debenture and demanded the release of the Pledge Shares pursuant to the Security Agreement.  The Company and JoMex, LLC (“Pledgor”) released on February 5, 2013, the Pledge Shares to the Holder.  

Item 4.    Mine Safety Disclosures.

Not Applicable.

Item 5.    Other Information.

On November 1, 2012, the Company issued, in lieu of cash payment for past due accounts payables equal to $1,630,000, two convertible debentures to Worldwide Beverage Imports in the aggregate principal amount of $1,630,000 (the “WBI Debentures”).  On January 31, 2013, the Company and WBI memorialized their agreement to cancel $1,630,000 of past due accounts payable owed to WBI in exchange for the issuance of the WBI Debentures.  The WBI Debentures accrue interest at 8% per annum. The WBI Debentures, which includes all principal and interest, are due in full on May 1, 2013. The WBI Debentures are convertible, at the option of the holder, into shares of common stock of the Company at the lesser of (i) the closing price of the Company’s common stock on November 1, 2012; or (ii) the closing price of the Company’s common stock on the date immediately prior to the date the holder of the WBI Debentures requests their conversion.  However, in the event of a default under the WBI Debentures, the WBI Debentures will be convertible at a 38% discount to market.   The WBI Debentures are currently in default.

The preceding description of the WBI Debentures does not purport to be complete and is qualified in its entirety by reference to Exhibit 4.1 and Exhibit 4.2 to this Quarterly Report.

Item 6.    Exhibits.

4.1	$230,000 8% Convertible Debenture
4.2	$1,400,000 8% Convertible Debenture
31.1	Certification of Principal Executive Officer
31.2	Certification of Principal Financial Officer
32.1	Certification of Timothy J. Owens, Chief Executive Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Timothy J. Owens, Chief Financial Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101 INS	XBRL Instance Document*
101 SCH	XBRL Taxonomy Extension Schema Document*
101 CAL	XBRL Taxonomy Extension Calculation Linkbase Document*
101 DEF	XBRL Taxonomy Extension Definition Linkbase Document*
101 LAB	XBRL Taxonomy Extension Label Linkbase Document*
101 PRE	XBRL Taxonomy Extension Presentation Linkbase Document*

*Pursuant to Rule 405(a)(2) of Regulation S-T, the registrant is relying upon the applicable 30-day grace period for the initial filing of its first Interactive Data File required to contain detail-tagged footnotes or schedules. The registrant intends to file the required detail-tagged footnotes or schedules by the filing of an amendment to this Quarterly Report on Form 10-Q within the 30-day period.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	DRINKS AMERICAS HOLDINGS, LTD.
June 3, 2013	By:	/s/ Timothy J. Owens
		Timothy J. Owens Chief Executive Officer

June 3, 2013	By:	/s/ Timothy J. Owens
		Timothy J. Owens Chief Financial Officer (Principal Accounting Officer)

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