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Executives

J. Patrick Kenny - President, Chief Executive Officer, Director

Jeffrey Daub - Chief Financial Officer

Jason Lazo - Chief Operating Officer

Fredrick Schulman - Director

Analysts

[Marty Elbom - Verizon Networks]

Gerald Serrano - Independent

[Fred Rustin - Rustin Partners LLC]

Brad Patterson - Private Investor

Barry Mills - Individual Investor

[Mike Galleta - Near Affiliation]

Drinks Americas Holdings, Ltd. (OTCPK:DKAM) F4Q08 Earnings Call August 4, 2008 2:00 PM ET

Operator

Welcome to the Drinks Americas fourth quarter 2008 and full year results conference call. (Operator Instructions) On our conference call we have Patrick Kenny, President and Chief Executive Officer, Jeffrey Daub, Chief Financial Officer, and Jason Lazo, Chief Operating Officer. Patrick will discuss the fourth quarter fiscal 2008 and full year results and outlook and we will then open it up for questions.

As you are aware, the company may make some forward-looking statements during the formal presentation as well as during the Q&A and these statements apply to future events which are subject to risks and uncertainties as well as other factors that could cause the actual results to differ materially from where the company is today. These factors are outlined in the press release as well as in documents filed by the company with the Securities and Exchange Commission.

With that I’ll turn it over to Patrick Kenny to start the discussion.

J. Patrick Kenny

We are very excited about the place we’re in at Drinks Americas today and the valuable trademarks we have and that we are creating. I’m pleased to tell you and excited to tell you that our business has grown 108% since the last quarter. Trump Vodka which was our main stay has grown 244% in that same time period. Drinks Americas can say today that our iconic beverage strategy is working; it’s creating trademark value; but not only is it doing that it’s doing it faster; it’s doing it more efficiently; it’s expanding nationally at an unprecedented speed. And now I can say globally with the benefit of the iconic brand recognition that we have and we’re doing this more efficiently than any business model in the beverage industry today.

When Drinks Americas created the iconic business beverage model that we have in 2006 and it’s driving the growth and the value of our company today, we believe that we’d sell more cases and generate increasingly greater revenue while having to invest fewer marketing dollars than traditional beverage enterprises. Forbes Magazine recently cited that it takes between $10 million and $100 million to launch a high end beverage spirits brand. As everyone knows we’ve spent far less than that and accomplished far more.

Drinks’ business model was created on the concept that our iconic brands would benefit from instant consumer brand recognition, trial and retail excitement, and the result would be the rapid creation of an assortment of valuable brands. We know and we’re absolutely comfortable now given our success that this will translate to shareholder value.

We think that it’s important to review the progress since inception. Since 2006 our business has grown 250% in the aggregate and 88% on an annual basis. Simply stated, there are no other companies growing multiple beverage brands across multiple beverage platforms new or established at the rate that Drinks Americas is managing today. Our business has rapidly grown from about $1.1 million in spirits and wine and $0.5 million in non-alcoholic business totaling $1.6 million in 2006 to a total at this year-end of $4.5 million.

Today Drinks Americas is the owner and the marketer of valuable brand franchises - Willie Nelson’s Old Whiskey River Bourbon, Paul Newman’s Sparkling Fruit Juices which we distribute, and the highly successful Trump Super Premium Vodka. Each of these now national brands have been highly successful and have been built in a record amount of time with a very focused marketing investment. We have said and we will confirm today that we will be adding up to four additional brands, two of which we will discuss specifically and in detail today and two of which we will be prepared to speak about in the coming months.

Based on the recent transaction values of brands like Cabo Wabo Tequila from Sammy Hagar approximately 72,000 cases purchased by Compari at a value of $100 million, Drinks is very satisfied and we feel our shareholders should be satisfied and the market will begin to recognize the value that’s begun to be created by Drinks’ iconic brands. Diageo’s recent endeavor with Diddy on Ciroc Vodka and Coca-Cola’s billion dollar purchase of Vitamin Water aligned with rapper 50 Cent validate the creation and the business model of Drinks’ brands.

Drinks will launch the first of two brands that are the result of our Universal Interscope venture with Dr. Dre as a partner in the coming quarter. It’s important to understand that the launch of Dr. Dre encompasses all the urban artists and all of the resources of Universal’s Interscope Geffen A&M Records. It’s noteworthy today prior to launch of these products prior to the unveiling to the public, prior by some definition even to their existence, that there is in excess of about a million Google mentions in anticipation of the introduction to the market. I invite everybody on the call to Google Dre Drinks Americas Cognac or Dre Drinks Americas and just see the wealth and preponderance of consumer anticipation that’s out there based on our iconic beverage model without us having spent a dime in marketing to this point. With orders beginning to be aggregated for Dre products on a pro forma basis with distributors, we think that these brands will be as impactful over time as our Trump Super Premium Vodka introduction and the continued growth of the balance of our entire portfolio. Combined with this we will continue our high percentage of growth in the coming year.

To address the obvious question most aggressively and first, the marketing and consumer programming involved in our coming brand launches to be delivered from Universal is so absolutely robust and across so many different electronic and media platforms and so completely tied into our partner’s marketing activities that there simply will be no pressure on the company’s financial resources, that is Drinks Americas financial resources, for us to execute and launch these brands. There’s simply no pressure.

Our new production relationships are true production partnerships on these brands. We are aligning our production partnerships with distribution and strategic relationships and again eliminating all the production pressure on our finances with the relationships we have with the people that we have selected to partner with us on the production and in some cases distribution of these brands. Added to this we’ve established a management team that has now operated successfully for a number of years across a number of distribution platforms succeeding and delivering these brands to market.

The unique tapestry of our media and marketing partnerships, be that Universal, Crush Management, Platinum Li, our informal relationship with CA or the power of each of our icon partners, whether it’s the globally recognized finest partner Donald Trump and Trump Super Premium Vodka or the evolving partnership with Universal and Dr. Dre and all that implies continue to power the Drinks business model.

The product categories that we’ve entered into support most importantly our margin targets. We will continue to be aggressive in our cost-cutting measures and I think that can be seen in the financials that were released today. And we’ll continue to source all of our component prices effectively and continue to implement cost-cutting measures against the back drop of sustaining our margins. Our selling and marketing costs and general administrative costs continue to be reduced. Most importantly our overhead remains generally fixed as our brands and their overall volume will continue to grow and the bulk of our other costs are variable and dependent on the correlative increase in volume for each of the products.

We’re working to take the success of the iconic brand model to date and expand that well recognized global icon products to an increased number of international markets. This area will continue to be a material avenue for our company growth. Our success and duty-free export Russia, Israel, Canada, the Dominican Republic, and a variety of other markets supports the strategic direction reinforced by our Board to take our iconic brand strategy global, and we’ll speak a little bit about this.

As you can imagine with all this we are extremely excited where we are for both our own future and for our shareholders and the value that we believe we’ve created. I want to talk about fiscal 2008. The company achieved net sales of wine and spirits of $3.8 million almost 40,000 cases and $700,000 or 75,000 cases in the aggregate of non-alcoholic beverages for net sales of $4.5 million. The company has grown $2.9 million since the year 2006. That increase is 181% in the aggregate or 68% on an annual basis. This growth has been driven by the higher margin component of the company sales of wine and spirits. Wine and spirits as a stand-alone have increased $2.7 million in revenue since 2006. This increase is 250% in the aggregate and 88% growth on an annual basis. As I said in the beginning of the call, there are no other companies driving this type of growth over a three-year time period.

The company’s growth is due predominantly to the launch of Trump Super Premium Vodka which we launched in October 2006 and Trump Flavors which we launched in February 2008, but this is combined very effectively with the continued growth of Old Whiskey River, Paul Newman’s Own Sparkly Fruit Juices, and the balance of our portfolio and creating a brand of beverages with these iconic figures. Sales of Newman’s Own lightly sparkling fruit drinks and orders have increased in the aggregate 33% or 15% on an annual basis. The Newman’s portfolio which is in place continues to provide an expansion platform for the company’s planned addition of non-alcoholic beverage brands which we believe we will see in the coming year.

The company has completed the development, formulation, packaging, branding and the first spirits products arising out of the joint venture with Universal Interscope Geffen A&M Records. It is anticipated that the first of these products, a premium cognac, through the company’s venture with music icon Dr. Dre and its Aftermath Beverage Company will be introduced to the market with samples arriving this week and shipments commencing between now and through the holidays. I note that the Aftermath Beverage Company is associated with a globally known trademark. It is well known that cognac supplies are restricted and prices are rising within the industry. With respect to the production and the supply of Aftermath cognac, the company has entered into a production, supply and very importantly European distribution agreement with the Francis Abecassis Cognac Distillery, a producer of premium cognacs and well respected throughout the cognac region. This agreement will not only give the company access to a superior and necessary inventory of fine cognac, precious in this particular stage of the cognac business, but calls for the Aftermath Beverage Company brands to be distributed by Advocacy’s in the European countries where it’s now doing business. This means that from launch Dr. Dre’s cognac will be in part an international brand as well as a well-known brand.

Following the introduction of Aftermath Beverage Company’s cognac, the company’s joint venture with Interscope will introduce a unique line of 80-proof flavored and unflavored sparkling vodkas. The company having completed the necessary formulations, bottles, label design, marketing plans and all the regulatory approvals, expects this new line to ship between now and the holidays or between now and through the holidays as well. These products will be introduced in coordination with Dr. Dre and fully supported with an integrated marketing program with the performer and his record company.

The company has taken note already of the anticipation of these brands based on the Google mentions and I urge everybody on the call just as a kind of curious thing to do, Google Dre Cognac or Drinks Dre or Drinks Americas Cognac and see just the number of pure consumer and industry and music industry and Drinks industry sites and urban interest sites that are just surrounding these brands before they’ve even come to market.

This along with our continued focus and substantial efforts for international distribution we feel set the company up at a very great juncture.

When we compare the year-end April 30, 2008 to 2007 net sales for the fourth quarter of 2008 aggregated $1.2 million compared to $800,000 for the fourth quarter of 2007 an increase of 40% and an increase of 108% over the third quarter January 2008. Net sales were $4.5 million for the year ended 2008. I will note that this compared to $6.1 million for the year ended 2007 but I think it’s absolutely important to note that we shipped close to 40,000 cases of Trump Vodka in that one year and really over a two-month period and we’re cycling the introduction of that phenomenally successful product which was all seeded within that one year.

The launch of Trump Flavored Vodka and Trump international sales both in February of 2008 enhanced our growth in the fourth quarter. The launch in the national pipeline fill of Trump Super Premium Vodka in 2008 accounted for the accentuation of sales over the product in the prior year. But again we look at the phenomenal growth over the three-year track and the sound base of a distribution and marketing platform we have in place now. And the Trump brand continues to march on. Net sales of Trump Vodka for the fourth quarter fiscal 08 rose 244%. As a participant in the spirits industry, there’s just not consistent long-term growth being delivered by many brands like this first of the prior quarter fiscal 08 and a 101 percentage increase first of the fourth quarter of the prior year 07. Sales of Trump vodka were $2.7 million for this year. Prior year volume was influenced by the sell-in but this year volume continues. Net dollar sales for the fiscal year April 30, 2008 were comprised 59% from Trump vodka sales. This is extremely important understanding that the year prior they were comprised of almost 70%. This becomes important because you see a balancing of the profile of our brands. Our brands of Old Whiskey River, Aguila Tequila, Damiana Liqueur, and Newman’s continue to grow balancing out the portfolio. And again the introduction of Dre and the Universal products will continue to strategically balance out our brands.

The gross margin for our wine and spirits remained within our target of 40% or actually 40.7% for this fiscal year compared to 42% for the prior year. Gross margin for the non-alcoholic business was 21.8% for this fiscal year compared to 24% for the prior year. We believe that this is successful when you look at some of our competitors in the industry and what we have successfully mitigated. The company as a result of environmental impact of different factors has successfully and head-on dealt with a number of issues: the weakness in the dollar versus the euro, the increase in glass costs, the constant rising fuel costs and what it costs to ship products.

Its aggressive moves when transferring spirits products from glass production to China, modifying bottle formats of Newman’s which is forthcoming, executing strategic price increases and reducing price supports across the year, all these factors have combined with volume discounts and further manufacturing and sourcing improvements that have enabled the company to continue to operate aggressively but stay within the band of our targeted margin. We think this is important and certainly speaks well to the ability to continue to manage in the premium product segment.

Our selling and general administrative expenses declined 20% to $8 million for the year April 30, 2008 compared to $10 million last year. This while we continued to grow brands. Costs are expected to increase further in fiscal 2009 as we reach normalized selling and marketing spending levels. The marketing leverage the company has with Dr. Dre and Universal Interscope and its additional favorable strategic production partners as well as the marketing machines behind the two additional brands [inaudible] we believe will continue to allow us to drive these cost increases to where they need to be. Interest expenses were further reduced by $604,000 versus last year. Interest expense was $164,000 for fiscal 2008 compared with $771,000 for the prior fiscal year. Net loss for the fiscal year was $6.3 million or $0.08 per share compared with a net loss of $9.4 million or $0.14 per share for the last fiscal year and that got better every month as the company went forward on a month-to-month basis. All our expenses on both a per case and as a percentage of revenue are being managed downward by significant percentages.

Our top line business is growing and our portfolio of iconic brands powered by significant resources now and unfolding are expanding dramatically and will do so over the coming quarter. We’re going to continue to utilize our iconic brand strategy. No other company has the depth and breadth to do and deliver consistent organic growth. We’re going to create valuable iconic trademarks and we’re going to continue sales volume increases like the 108% we’ve delivered on the last quarter. Our marketing resources are more robust with our current and imminent product offerings and sales and combined with our continued reductions in costs, the company’s an exciting place to be. Our management team has continued to streamline these costs and we will maintain our margins. Our strategy of creating premium branded beverages in partnership with icons continues to prove its foresight and long-term viability with great brand value, enhanced by reduced capital requirements, and favorable production supply contracts, and very importantly is best suited to take care of and take advantage of the convergence of media, marketing and public relations in today’s consumer savvy market. We’ve demonstrated that we can place quality brands in the market quicker and at a more cost-effective and instant brand recognition manner on a domestic and international basis leading to accelerated sales. This in conjunction with good products, great products, and great packaging we believe will ensure our future.

I think it’s important before we go to questions to outline with some degree of specificity the areas in which we think will be the drivers of near and future term growth. And there are six key areas where we continue to drive organic growth for our company. Combined with these six areas is the opportunity to review and take advantage to proceed with acquisition opportunities that allow us to impact our business model we believe will arise. Because of the economic environment Drinks has seen a significant number of these opportunities. A transaction that added substantial economic and strategic value to the company that could take advantage of our iconic model and could be incremental to the number of internal roots we have to grow would be welcome by Drinks.

Other ways that we will continue to grow the company: We’ll continue to deliver organic growth with our current portfolio. We’ll improve the quality of our distribution. It’s very important to add, a national accounts such as our recent placement with Dick’s Last Resort or the Knitting Factory on the West Coast or our relationship with Ralph’s throughout all of California and a very large grocery chain now feature Trump Vodka and Trump Flavors are growing the company.

In each of the calls in the past we’ve taken questions, “Well, how come you’re not here and how come you’re not there?” And we internally at Drinks like to view that as a positive. We like to say that Trump vodka is in year 1 where Grey Goose was in year 4 and we think that all these distribution opportunities are evident with the growth opportunity both volume and margin that we have in front of us. This week you’ll find posted on our new website, just to continue this information flow, a list of the 100 top retail accounts that we were sold in, in metropolitan New York and 150 of the most fashionable Los Angeles restaurants that our Trump vodka is sold in. There remain national accounts and sales opportunities that we’ll continue to focus on and provide large growth opportunities. But we think that as we begin to communicate with shareholders, the sheer bulk and number of places that the products are sold, they understand what we’ve accomplished in a very short period of time.

Old Whiskey River has grown dramatically in Texas and Florida. We’ll continue with focused Old Whiskey River, Willie Nelson promotional barbeque tie-ins. The sales generating response to this program has simply been unbelievably impactful. If you’re interested, I would direct all of you to an interesting site just as a piece of Americana, it’s called www.flbbq.org. It’s the Florida Barbeque Association’s website and the response of our co-promotion with them for Willie Nelson and giving away autographed guitars as a result of barbeque outlets purchasing the brand has just been a flood to our company and we believe driving significant volume.

Trump Flavors will continue to expand nationally. To date we are selling all that we can produce. Glass is continuing to arrive from China, and competitively we find time and time again that the brand tastes phenomenally and just outdoes competitive flavored vodkas. In a short period of time Trump Flavors have sold more vodka than 90% of the new product vodka entries in their totality over the last two years. Today they’re sold in only 16 states and we’ll continue to expand distribution with them.

Drinks’ two Interscope brands we’ve talked about will continue to grow the company and balance out our portfolio. Both the cognac and the sparkling vodka are high margin categories. Universal and Dre have a totally integrated plan for pushing this brand out across a number of advertising media, consumer and marketing formats. Dre is committed, the Universal marketing team of Jimmy Iovine and Steve Berman are two of the smartest and most committed executives that I’ve experienced in my career, and I think that the partnership and ownership of the brand that we share with them will be industry changing in the thrust of marketing that will go out from their side and benefit economically our side.

Drinks will have the opportunity to report back to you in the very near future with two additional iconic brand entries, one in spirits we’re contemplating a scotch aligned with classic golf partners and one in beer with an icon on par with all our other partners. We will also have the opportunity to offer our Newman’s Own distribution network, a unique and incremental product that we are working on to increase our non-alcoholic business portfolio. These entries are exciting and they will continue to add to our business.

Internationally we are negotiating with potential distribution partners in India, China, and Europe. We are confident from our progress in other international markets that our iconic branding model works and it carries well across the borders that today’s media travels. If media travels across these borders, then so do our iconic brands and our success in our international markets have confirmed that.

Drinks Americas continues to create valuable global trademarks in the beverage category with far more efficient and targeted investment that would normally be required. As examples, Willie Nelson’s six-year-old bourbon can be found in retail outlets throughout Florida. His barbeque program is accelerating it. In that market there’s a Moose Lodge that orders multiple cases monthly. Members of the Moose Lodge sign on for their own bottles, signed and kept behind the bar. In Moscow there are a number of four star hotels that feature Trump Super Premium Vodka for the equivalent of $200 a bottle. On Google as we said there are at least a million hits on our Dr. Dre product, the product that is technically yet to be introduced. We believe this is evidence that we are at a fantastic point in our future. We believe that the past quarter’s financial results confirm it. We believe that the quarter that we’re in there’s momentum continues to confirm it. We believe that coupled with the right strategic partners, prudent domestic and international expansion, continued improvement of our financial performance, the resources to move forward, the orders on hand in order to give us the resources to move forward, all this combines to make us a unique and exciting industry player and a company for the consumer of today and tomorrow. And it’s the consumer that will drive our financial success.

With that I will turn it over to any questions that our participants would have.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from [Marty Elbom - Verizon Networks].

[Marty Elbom - Verizon Networks]

Pat I want to congratulate you and your team. You did a phenomenal job. I think it’s great. I think the news is great and you’re really on the right track here. We’d like to see certainly shareholder value increase a little but I think in time that’ll happen because you’re doing the right stuff and I just called to congratulate you.

J. Patrick Kenny

Thanks Marty. I appreciate you as a shareholder and appreciate your support and I know you’re stuck with it and we appreciate your support as a shareholder.

Operator

Our next question comes from Gerald Serrano - Independent.

Gerald Serrano - Independent

Congratulations on turning things around. Obviously last quarter you got hit with some tough markets and all that and it was a big question mark for us here on this coming quarter. But I’m glad to see that things turned around. So I too congratulate you on that. I think you guys did a heck of a job.

I have just a few questions. On the balance sheet obviously you’re down to $133,000 for the April ended. There’s no question you’re going to have to turn around and raise some capital. What are your plans in that sense?

J. Patrick Kenny

Right now today given those forward orders we have in the cash flow we will not be raising equity at this point in time nor do we anticipate the need to do it in the short term. One of the things that I think that we can’t communicate enough is that the power of - Trump vodka was a phenomenal introduction and there is no parallel I’m sure globally to the recognition of the Trump trademark, but Dre and Universal Interscope is a media machine. When you go to a marketing meeting with them, 36 departments show up and the marketing I don’t want to say obligation, the marketing initiative falls to their side of the equation. We’re producing a phenomenal product, we’re producing access to distribution, we’ve got spectacular production. A production relationship on those products give us substantial access to credit and production leeway so that I don’t need to raise or even change my credit facilities in order to go to market with those products and get them started. The resources, the robust bundle of resources that Interscope gives me I’m not going to be obligated to purchase those things. So between that and the fact that this industry operates on an expenditure formula of dollars per case, we think we’re in a good position going forward. And we think that the stock has the opportunity to continue to show value and we think we’re in a good place. That’s where we are today.

Gerald Serrano - Independent

I think it’s good because the equity part obviously with 81 million shares outstanding anything beyond the 81. I have one final question.

J. Patrick Kenny

We remind people that 55% of the shares are held and continue to be held by management and founders of the company so we aren’t going anywhere. So at the end of the day, our primary investors we think continue to acquire shares, so again we’re in a good place. The company today has no debt and we run our code word for lean is efficient. There are companies in the market today that are drowning on running their business differently. We run a very, very efficient business. We don’t spend on what we don’t have to. We started this iconic business model recognizing that not only at the time I didn’t’ call it raising equity, I just knew there wasn’t enough money in the world to replicate the Seagram company, so we came up with models whether it’s the ingredient company that invested in the company or the privilege of bidding on the products or whether it’s our iconic partners, we built this model with the understanding that at a certain point we would get the critical mass, not have to continue to raise large sums of equity, and that it would become fulfilling. And that’s the critical tipping point we’re at right now. Never is a long time but right now that’s where we are.

Operator

Our next question comes from [Fred Rustin - Rustin Partners LLC].

[Fred Rustin - Rustin Partners LLC]

I see from what you have given us so far on the call exponential growth going forward compared to what we’ve had with the marketing power that we’re teamed with. A couple of questions on how it goes basically. One, on the first quarter which we just ended just in general terms, I know you can’t be too specific about it at this point, but in general terms and also on the Russian tax stamp issue, it sounds like indirectly that that has been solved just from your description of the Trump in the high end hotels in Moscow and elsewhere, but you haven’t really said much about that. And lastly, if you had a big chunk of capital to invest for Drinks, where would you put it?

J. Patrick Kenny

I’ll try to remember each of the questions. You have been dreaming Fred about the big chunk of capital but -

[Fred Rustin - Rustin Partners LLC]

You can answer that one first. That would be great.

J. Patrick Kenny

Right now we feel that we don’t need a big chunk of capital. If we had a big chunk of capital perhaps there’s an acquisition that you’d put it to use on. We wouldn’t put it into marketing because we just don’t think we need it at this point in time. So perhaps if we had a big chunk of capital there might be an acquisition that we could apply the iconic beverage model to. By that I mean there might be a product out there that we could, I’m being facetious but we could apply Elvis to the right product, maybe there’s something we could buy that isn’t working or would work more efficiently with our iconic beverage model. So if we had a big chunk of capital, that might be where we would put it. But I don’t want to get into speculation beyond that because we don’t have and we’re not looking for a big chunk of capital right now to do that.

With respect to the quarter there will always be ebb and flow based on shipments in our business and one of the things that I guess we should continue to stress is that our production shipments don’t relate to our sales out of distributors which are very hard for us to report and manage, so we don’t. But we see momentum on the brand continuing. And I think I just said that we look to continue to deliver the type of percentage growth that we have in the last quarter in the foregoing quarters.

Obviously I think the word used exponential is the best observation. We’ve gotten pretty good at this. The growth of Dre or the addition of Dre and the two other brands that we’ll talk about and come back and talk about, maybe even through a call, are going to be exponential. You don’t get a million Google hits and the anticipation with the European community of a product like that and not be able to deliver exponential growth. And we have the partnership of Universal delivering exponential resources. So we think that we are, and you have something also that is going on through Universal. One, you have the [inaudible] of that community of Dre and all the other albums and artists that he’s associated with and then you have eventually, and I’m not prepared to give a date for Universal, but you have eventually his tour which will also drive growth around that brand. So you have a lot happening around any of these iconic artists. Any artist that we continue to add will have his own media machine that just drives volume.

The other thing that we’ve done that I should speak about, I used the word tapestry in the earnings call very deliberately. We have connected and if one were to read all the contracts deliberately, we have created a tapestry that probably is unique even in the entertainment industry in that all the different relationships that we have are connected to each other. We have a relationship with Universal where they have assisted us in the sales and marketing of Trump. Obviously the Trump organization has every interest in assisting us with the sales and marketing of our other products. We have relationships with different marketing enterprises. We have an agreement with Crush Management which is a management company that handles Brit brands, band tours, concert events and promotions. The artist wants green M&Ms in the VIP room, well that contract calls for not only Dre’s products but Trumps products and Old Whiskey River products and Newman’s products. So as we continue to branch out across these different forums and media forums, the opportunity is to put the products in each of those relationships and there’s no harm in doing that and that’s where you’re going to see some of this large exponential growth and benefit to everybody. And that I think has never been done before. Companies that manage brands whether it’s the candy company or the liquor company have independent brand managers with independent budgets and every one of those people that want to put their M&M color in the backroom of an artist has to write a check for their color M&M. What we’ve done is create a media meld of our products and our strategy around those products with all our partners and we think that’s cutting edge, it’s the way marketing will be done in years to come. All these deals that you’re seeing, these critical 360 deals with Live Nation, that’s a cookie cutter, what we’ve been out ahead of for two years. So we’re very excited about that.

Operator

Our next question comes from Brad Patterson - Private Investor.

Brad Patterson - Private Investor

You stated today that Advocacy will handle the initial distribution of Dre’s cognac in Europe. Is he going to have any distribution capability of his own for any beverages or are you handling his entire line?

J. Patrick Kenny

You’ll have to explain the question.

Brad Patterson - Private Investor

You said that he has formed his own Aftermath Beverage Company.

J. Patrick Kenny

Oh no, Dr. Dre has formed what he is calling the Aftermath Beverage Company. Francis Abecassis has a large size cognac vineyard and company in France where Francis Abecassis sells his own products throughout Europe. The agreement that we have with Francis Abecassis is just to take Dre cognac and sell it through the same distribution channel that he has in Europe alongside his cognac or the trademarks that he markets, which gives us access to distribution within Europe with the Dre cognac within Francis Abecassis’ avenues for distribution in Europe.

Brad Patterson - Private Investor

My real question is: Is Dre going to have any distribution capability, in other words is Aftermath in name only for equity purposes or is he going to have any distribution of his own cognac outside of Drinks’ own distribution?

J. Patrick Kenny

No, we are exclusive partners with him. Aftermath cognac is the business enterprise. He’s very much involved from tasting to design. One of the things that we wanted to do from the very beginning, and we’ve always said we’re not a licensing company, Dre is our partner. I can’t tell you the hours we spent with him making sure that every step of the way this is a true and legitimate partnership where he’s approving the label, understanding what’s going into the product. Advocacy was chosen in large part because Dre from about a couple of dozen cognacs tasted liked the taste and thought this suited his constituencies’ tastes best. So that’s why we ended up there.

Brad Patterson - Private Investor

So you’re saying from today then you’ve obviously announced the European distribution. I’m assuming US distribution’s coming right behind it, right before [D-Dots]?

J. Patrick Kenny

We’re not authorized to say when D-Dots will launch or I’d suspect we’d have a quick end to our Universal relationship. But I will tell you that my view is that we’re starting the launch of Dre cognac today with the shipment of samples that arrive next week and the presentations to the distributors and the fact that there are approaching a million Google sites in our marketing plan and their resources will segue into the launch whenever it happens. In the meantime anticipation can sometimes be as exciting as almost anything. So we’re excited the way it’s segued.

Brad Patterson - Private Investor

Have you had anybody come up with a price per bottle per liter?

J. Patrick Kenny

First of all states and distributors can quote pricing. I can’t but I can tell you that it will be competitively priced at the fat end of the cow as our recommendation and that the most important part of the deal, just under the Murphy’s Law just about when we went to consolidate the deal with Dre, there was announced a massive cognac shortage. Whether real or contrived, it was announced. What we found when we tried the cognac was that there was no cognac shortage for Dre, that a fair number of major cognac companies wanted to be our partner. After discussing with all of them we thought that Advocacy’s had both the most consistent supply and the most consistent understanding of what we do and wanted to be partners. And partnership is a big part of what we do. You can always find a producer. You can’t always find a partner. And the financial arrangement that we have with them makes them a very good partner and that makes us very much a stronger company on a number of levels. So that’s why we chose them. Their management group is a very smart group and Frances is a very successful from my understanding business person owning large vineyards both in Argentina and his successful cognac operation. We’re very excited. What we found from doing business with Trump is that part of the story about an iconic brand is the legitimacy of the source and Advocacy’s has such a robust interesting story to tell that the fact that Dre would select them and they would partner with Dre becomes part of the legitimate consumer marketing message versus a bulk producer.

Operator

Our next question comes from Barry Mills - Individual Investor.

Barry Mills - Individual Investor

I don’t want to be the negative call but I’d just like to know what your - you’re running so tight for cash at this stage and you’re running a pretty big overhead considering your sales. This is a very, very tough environment to be raising any cash. What are your options should you need it?

J. Patrick Kenny

We have no shortage of options. The options have never been a problem. We have historically raised money with the premiums the price that the stock traded at. Our choice at this point in time is not to raise additional equity. We have and continue to have options. We prefer to manage our way through the cash flow. Remember that we have a tremendous amount of inventory that’s tied up in glass so as we ship orders we convert orders to cash; we have no debt today in the company; and at the end of the day we have a very lean management team. And in this economic environment companies that consistently perform like ours there’s no shortage of willing investors. Were we to choose to go into the market based on the calls that I get on a frequent basis and the inclination of our largest two current investors to have reinvested, I don’t want to speak for anyone but access to cash at a premium for the stock price has never been a problem for Drinks Americas. What we want to do right now is perform and continue to go forward and grow sales. And as we grow sales and grow share price, we think that should be the focus of the company today.

Barry Mills - Individual Investor

I’m not being negative but I’ve been following your company for a long time and I’d hate to see - I was a broker for 16 years and I hate to see a company that short on cash. I mean, because it’s that little cash that money could disappear very, very quickly and if you’re not prepared to raise cash in short order, you guys could be in trouble. And I hate to see that.

Frederick Schulman

I think maybe a point of clarification that’s evident even in the filings. One thing you’ll note, Patrick has said several times that we’re unleveraged and that is true. Even though we have in place the credit facility with Sovereign that theoretically could go up to the $10 million level I believe, we’re not drawn down on that. It is asset based, meaning it has to be based upon the inventory and receivables. As our sales advance, and I guess Patrick has mentioned it but just to underscore it, as our sales advance availability of that cash either through proceeds of sale of product or more immediately being able to draw down on those assets as those orders are being fulfilled frees up a lot of money that we have tied up in the components of our products and increasingly too our success that we’ve been describing today is not only recognized by the spirits and beverage industry generally, it’s also recognized frankly by our producers and other let’s call it partners and associates along the way as part of this business. That being the case, we’re getting much more let’s call it street credit available to us whereas we can come up with orders that don’t necessarily have to be advanced with cash up front to buy the components of the bottles or the labels or the corks. Increasingly we can leverage our success. As that happens, the need for cash goes down and correspondingly, as our sales advance cash comes in more quickly. We very carefully looked at those projections, very carefully seeing how that’s going to go, and we’re very confident if nothing else from our debt facilities that are either now in place or that will be refined that will be able to draw down money based upon those sales and those purchase orders.

Operator

Our next question comes from [Fred Rustin - Rustin Partners LLC].

[Fred Rustin - Rustin Partners LLC]

I asked so many questions at once you didn’t get a chance to address the Russian question. Has that been straightened out?

J. Patrick Kenny

Russia has been straightened out although Russia, as anyone who does business in Russia will tell you, remains complicated. We have succeeded in Russia and we believe in a [liter (6) 03:49.2] that will come we’re told in writing in August, we have sold I think close to depending on samples and shipments ordered 4,000 to 6,000 cases to Russia in the aggregate bridging two fiscal years. The good and bad news is that the Russian distributor went out and priced the brand at $200 a bottle. Now the good news is that speaks immeasurably to the value of American iconic brands and the good news is that it speaks immeasurably to the power of the Trump brand in Russia and they’ve sold through most of the inventory and they’re going to be ordering more. The bad news is when you price something in the Rolex price model, you end up with a little bit of a variation on the volume that we initially projected. So we’re extremely satisfied with what has gone on in Russia to date. [Reculta] who is our distributor has had we think some of their start-up bumps with their own funding. The tax stamp issue has been straightened out. With the August order that they’re assuring us will come that would be about the fourth or fifth, maybe sixth order that is coming, and Russia will proceed. The success in Russia of the brand selling through in the account that it’s in is what we look at and what gives both ourselves and the Board and I would point out that Marvin Traub and Hubert Millet, who are two individuals who have a lot of success operating with trademarks on a global landscape, have confirmed to me that they endorse the strategy of expanding this internationally. Russia speaks to the success in Russia of the brand selling through each individual account. We can never compete in Russia on a bottle of vodka to bottle of vodka, you bring mine I’ll bring yours basis in Russia. People drink a bottle of vodka with dinner and a bottle of vodka with dessert. So we’re not going to compete on a price basis there, but we are probably the [Piero Joea] or the [Shidus] Regal of vodkas sold in Russia today. They’re selling in high end Russian stores where the [Olegard’s] shop and they’re being consumed and reconsumed. On that basis we have high hope for success in other parts of the world. We’ve recently received an order to buy for both Trump and the Dre products so we know that in that very high end market they’ll succeed and we are as I said, and I have to stress, in serious conversation with respect to India and China in expanding the international portfolio. And that is all as an outgrowth of our success in Russia on a consumer basis. And that to me is the most important part to consumer success of the iconic brands. That links back to, some people have asked us, “How do you know Trump or Dre will sell in Russia?” It’s almost as silly a question as, “Do you get the Internet in Russia?” Because with the iconic brand model any place that the Internet goes our brands will go and any place where Dre, Universal Music, Trump or brands like that travel through the convergence of media, we have an advantage in starting a brand and we think if you go to Forbes Magazine recently highlighted it: $10 million to $100 million to start a brand. We’re selling through in Russia and the aggregate of our spending in Trump has not been $10 million, so we’re very happy about Russia. The tax stamp issue was a long saga and we’re glad we’re through it. We know from being sophisticated people who have done business in any number of countries that no matter what country you go to you’re going to confront a tax stamp issue somewhere along the way. Anybody who’s done international business knows that’s a fact of doing international business.

Operator

Our next question comes from [Mike Galleta - Near Affiliation].

[Mike Galleta - Near Affiliation]

I have a question for you regarding Dr. Dre’s equity partnership with you guys. Would you be able to elaborate a little bit on that in terms of, I would imagine he’s a shareholder at this point but I don’t see his name coming up anywhere on any transactions. Is he buying it on the open market?

J. Patrick Kenny

First of all let me knock down an Internet rumor. Dr. Dre is not to the best of our knowledge acquiring shares of Drinks Americas. Dre is part of our contract or our partnership with Universal, which is fully disclosed in I think a past filing. We’re in partnership with Universal which is better for me to describe to lead to the Dre partnership. Our partnership with Universal is an agreement to over the next three to five years form a series of brands in which we will be 50/50 partners and for which Universal Interscope were given warrants at $1.20 something, I don’t remember off hand, to which Jimmy Iovine, Chairman of Interscope Records, commented in Vanity Fair that he looks forward to turning Drinks Americas into a billion dollar enterprise through that partnership. That partnership calls for them to then negotiate with a series of artists and from their 50%, whatever equity they provide to the artist, they provide. And that’s how Dre gets brought into the picture or any subsequent artist gets brought into the picture through the equity in Universal. That way we don’t get diluted beyond the 50% we already gave up and we can model internally with the size and scope of what they’re bringing to the party. The returns for us vastly outweigh what we’ve given up in ownership of the brand, particularly the significant multiples that these brands trade at. And the point that I hope is not missed in these earnings calls, the rapid acceleration of the brands through a national and global selling perspective. I know that people are saying “It’s not in my liquor store,” that’s the good news. That gives us sales opportunities. But the fact of the matter is we’re being sold in all 50 states and now marching on to Russia, China, and India. There’s brands launched that don’t get to that status in 11 years. The average pull weight of a vodka brand I think is about 5,000 cases in two years and 9 states. So the rapidity with which we do things is what we’re glad to give that equity up to. Universal manages the artist side. That’s why sometimes these things take longer maybe than what our shareholders would like, but it’s a very defined science which we think we have a good handle on and also there’s some barrier to entry from operating in a large company environment. Yes, they have cash and they have a lot of it but it’s very hard for large companies to give up a percentage of themselves in the scheme of things. So we have a very unique business model that we think has some barriers to competition and that’s how we did the Interscope Dre deal. And Dre feels and I think is very much a partner and an owner and excited about this. He’s only doing one other deal apparently and that’s the headset deal Beats if you see the success of that deal as it’s going out there, just as an aside, I think the headsets will be exposed dramatically throughout US music outlets. So if we’re as successful as his headset launch, we’ll be very happy campers. I know that’s a longer answer than you wanted, but you really asked a question with a lot of things loaded into it.

[Mike Galleta - Near Affiliation]

I think that’s great exactly the way that you set that up is an incentive for them as partners. I think that’s pretty promising because I know Dre’s a pretty competitive guy.

J. Patrick Kenny

I will also note that their warrants are at $1.20 and they’re very comfortable with where this is going. So I’m very happy with my partners at Universal. I’ve spent a lot of time relative to all the things that they have on their plate with Jimmy Iovine and Steve Berman and they’re incredibly talented people who understand that the music business is increasingly a tough place to make music, they have to plant the flag somewhere or they’ve chosen to plant the flag to make money elsewhere, Dre is a perfectionist and he is their largest resource or asset. They didn’t start small. They didn’t deal from the bottom of the deck and say “Let’s see if this works.” They brought out the Howitzer and said “We’re going to make him a partner; we’re going to devote all our resources; and we’re going to make this work.” And I think somebody asked me before if I had a large sum of money what I would do, I’d direct mail that sack to every household in America. And that’s exactly what has happened. Everybody on this call understands the impact of music in today’s culture, and some of the most powerful people in music planted a flag with Drinks Americas and said “We’re bringing out the big guy, partnering with you, and going to launch a series of brands starting with Dr. Dre who is the partner/producer/publisher of every urban music artist out there, and by the way we’re taking our warrants at $1.20 and we believe in this.” The person with the question of a large sum of money is still on the line, that’s what I’d do. I’d advertise that fact.

[Mike Galleta - Near Affiliation]

Well your answer just made my day. Thanks.

Operator

Our next question comes from Brad Patterson - Private Investor.

Brad Patterson - Private Investor

I just had one last question. You really just touched on it a second ago. Jimmy obviously says he’s going to take Drinks to a billion dollar business. You’ve already said today you’ve done in half the time what Grey Goose did in four years, you’ve done in two years.

J. Patrick Kenny

I want to qualify that the [inaudible] is not guidance. It’s simply what Jimmy Iovine said.

Brad Patterson - Private Investor

I understand completely. And that’s actually where I’m headed. Now I’m starting to even see and a lot of people are seeing the references to correlation between you and Hanson’s. Of course obviously they’re an energy drink line but still in the beverage space. You’re doing globalization drinks in basically half the time. You’re even moving to profitability in half the time that Hanson’s did. Will you be the first one to come out and say “Is your business plan moving towards a billion dollar company?” Is that what you’re trying to get to?

J. Patrick Kenny

This is what I will say. I will say that the business model of drinks we’ll see employed on an increasingly frequent basis by large Fortune 500 companies and that in large part, of that amount of marketing spending today is done because somebody has a budget in a department whose power is reinforced by that budget in that department, but not necessarily correlates to consumers and products and sales. That having been said, God bless them. There’s nothing wrong with the Coca-Cola Company or any of these big companies. Our strategy was born of the reality of not having that money and the concept when we started that we knew if we were to go raise that amount of money we would be so diluted that we might as well go get a day job back at the post office. So what we did is we designed a strategy that gave us this icon model which we started with Willie and worked out the kinks, learned with Newman’s who already had an upstanding enterprise, and soared through [inaudible] heights with Trump, and then tweaked the model a little bit with the production side, the financial side, the access to celebrity and the media model side, and the equity sharing side with Universal and two great announcements that we’ll have in the near term. We tweaked the model a little bit and we think we’re on the platform of continuing to be successful. And we’re very happy about the prospects for our continued success. We don’t use the B word here.

[Fred Rustin - Rustin Partners LLC]

One last question Pat, and you’ve addressed this on previous conference calls but I think we were in such a nascent state as a company at that point that it really becomes much more realistic on this call and going forward. With the exponential growth that you expect and the tapestry that you’ve woven to date and the disconnect between shareholder value and market perception and that tapestry, how do you unlock the trademark value in the icons going forward? How do you anticipate energizing that whole trademark value unlocking?

J. Patrick Kenny

Hopefully as we deliver increased top line with each of the quarters and the revenue that will be associated with Interscope in the I guess coming quarter, there’s nothing like revenue to get the market’s attention. So not to go back to the $500,000 quarter but that was in large part related to the inability to get glass from China and some conflagrations that we faced. Now with access to glass, we’re very comfortable that we’re going to continue to have successful quarters. Those successful quarters hopefully will get people to follow the company. The international opportunity and forming an enterprise which does business with China and India we think will begin to get people’s understanding.

And those items as well as the continued progress of Trump and the introduction of Dre and then the ones that we’ll have to talk about shortly, as well as our base portfolio while it’s small it continues to grow. And there are other brands in the industry that are not growing. So we think all those things will add up to institutional investors beginning to follow the stock. I will tell you that we are getting calls and getting interviewed by the right people, so I think it all comes together. We’ve never looked in the rearview mirror or tried to figure out what’s going to lead the shotgun. We’ve simply stuck to our strategy, executed our business plan, and we think the value will become apparent. Sooner or later we’ll get an inquiry about a brand that will reinforce the value that we think are in them and the market will take notice.

But in the interim we’re going to stick to our strategy, continue to deliver results. We think that the launch of the cognacs and the sparkling vodka will be unique. The cognac business, the inquiries we’re getting from the urban market is huge, and the sparkling vodka business, no one is in the sparkling vodka category in the format that we’re going to enter it with phenomenal flavors in a champagne format bottle, and with the marketing that Dre has crafted. And again subsequent we’ll talk about some of those things but we think we’ll be in uncharted but great territory with those two enterprises and hopefully it all falls into place.

Operator

Our next question comes from Barry Mills - Individual Investor.

Barry Mills - Individual Investor

Just kind of a follow up question. Any projections on how many quarters it’s going to take before you turn the corner and become profitable?

J. Patrick Kenny

I don’t think this would be the right call to give that guidance. I think that not unlike some of the other beverage companies that have been in the place that we are that is in some ways as much a choice as it is a direction just because of all the initiatives that we have. We’re in brands that are very profitable but we know that profitability is on the horizon and we know that more importantly in the next quarter the launch of these two brands are going to accelerate that. So that’s as much guidance as I would give at this point in time. But between our access to the resources we need to continue and the offsetting creation of value, and we really think the value of Drinks Americas and the reason that I would tell my mother to invest in the stock is that we are creating valuable brands and those valuable brands will very shortly begin to be reflected within the stock price. If Grey Goose sells for $2,000 a case and Cabo Wabo sells for $1,700 a case, then what is $100,000 case Trump brand or what is $100,000 case Dre brand if it resides within Drinks Americas. We think when that gets reflected, that’s the value of Drinks and that’s the reason to own Drinks stock. And if anyone doubts that, then they merely have to look at the history of beverages whether it’s Malibu Rum, Chivas Regal & Crown Royal in the Seagram transaction, Grey Goose, Cabo Wabo, 42 Below Vodka recently, just all those transactions. There are no bad transactions in the spirits or beverage business. Sobe, Pepsi, I mean the progression is just always increased and the value of the brands mathematically has always increased as a case multiple. It’s better than gold. So that’s what we believe will be ultimately reflected.

Operator

There are no more questions at this time.

J. Patrick Kenny

Our closing remarks are that we appreciate everybody who has continued to be an investor and stay as an investor. We are very comfortable that between now and the holidays the brands that we have talked about and the ones we’ll come back to talk to you about are going to create increased tremendous value for the company. We stress and we leave you with the message that this company is about creating valuable brands that our competitors will recognize and pay a premium for or that our shareholders will be rewarded for by ownership of the stock that is the company that they reside in. We’re very comfortable with our strategy and executing our strategy. We run a lean ship on purpose but we have in the course of our existence always done exactly what we said we were going to do sooner or later and we’re very comfortable that when we say that we’re going to be successful in creating valuable brands within Drinks we’re going to continue to do that. We’re thrilled with the progress of Trump and all our other brands and we are most thrilled with your support as shareholders. So thank you very much for this afternoon and we look forward to speaking to you again shortly.

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