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From Stock Masters

Put a celebrity on a beverage, give it a clever name, sell it to the masses and you get Drinks Americas Holdings, Ltd. (DKAM.OB). The Stockmasters goes against everything it believes in by covering an "OB" stock but when you include Donald Trump, Paul Newman, and Willie Nelson we just couldn’t let it go. Before we mention anything else, let’s go over the whole Over The Counter Bulletin Board issue. OTC BB stocks are not listed or traded on any other national securities exchange including the NASDAQ or NYSE. OTC stocks are relatively not large or stable and are considered very risky. As a result, very few OTC stocks are successful in making the jump from this market to the NASDAQ or any other major exchange due to their inability to meet the listing requirements of the major exchanges. Also, because OTC stocks tend to trade infrequently, the bid-ask spread is larger, so even if you are tempted to "Get Rick Quick", don’t play these stocks.

So what’s to like about Trump Premium Vodka, Willie Nelson’s Old Whiskey River Kentucky Straight Bourbon Whiskey (do you really need a name that long?), and Newman’s Own Lightly Sparkling Fruit Juices?

Trump Super Premium Vodka, launched in October 2005, is now available in 27 states and several international duty free markets. DKAM of course has plans to expand Trump Vodka to all 50 states in 2007 so you should start practicing saying "I’ll take a Trump Cran", instead of asking for a "Vodka Cran". Drinks Americas sold Trump Super Premium Vodka for one month of the quarter ended October 31, 2006, the final month. Net sales were $2.6M for the six months ended October 31, 2006 compared to net sales of $830,820 for the six months ended October 31, 2005, an increase of 210%. The increase was due to the sales of Trump Super Premium Vodka which totaled $1.9M on 17,965 cases sold, accounting for 73.5% of total dollar sales and 47.2% of total case for the six months ended October 31, 2006 (data displayed in their 10Q Quarterly filing). In true Trump style, the Donald said on Larry King Live – "A great friend of mine was a founder of Grey Goose. And what we’re going to do is top it. I want to top them just because it’s fun to top my friends."

Well good for you Trump, but can your Vodka sales alone save Drinks America?

If you are thinking about investing in Drinks America and can overcome the OTC BB factor here’s another roadblock – Drinks America’s debt. DKAM owes more to various people and organizations than Frank Abagnale Jr. owes the IRS for all his years of check fraud (you know the guy, Leonardo Dicaprio played him in Catch Me If You Can). Kudos to Frank for playing the government and now the founder of Abagnale & Associates, which advises the business world on fraud, and organizes lecture tours. Abagnale is now a multi-millionaire through his legal fraud detection and avoidance consulting business. However Drinks America Holdings has yet to escape their debt and ride off into the sunset. That same quarterly report that pimps Trump Vodka sales is filled with borrowing $250,000 here, $400,000 there, and of course there’s that "$10 million, three-year, asset-based revolving financing facility with a financial institution to be used for working capital purposes. Interest on the line will accrue at 1.5% above the prime rate" thing in there too. Of course selling expenses directly relating to Trump Super Premium Vodka came to approximately $800,000 for the six months ended October 31, 2006. If that doesn’t take the wind out of your sails, Net losses for the six months ended October 31, 2006 and 2005 aggregated $1.8M and $1.9M respectively.

Now here’s the part I love, in plain english on their latest filling they state:
We have experienced net losses and negative cash flows from operations and investing activities from our inception in fiscal 2003. We will need substantial additional debt or equity financing in the future. We currently have no legally binding commitments with any third parties to obtain additional equity or debt financing. We may not be able to obtain any additional financing on acceptable terms or at all. Our ability to obtain debt financing may be unlikely because we have limited assets to use as collateral security for loans. As a result, we may not have adequate capital to implement future expansions, maintain our current levels of operation or to pursue strategic acquisitions. Our failure to obtain sufficient or any additional financing could result in the delay or abandonment of some or all of our development plans, which could harm our business and the value of our common stock. There is uncertainty as to our continuation as a going concern.

It almost reads like:
"You have the right to remain silent. Anything you say can and will be used against you in a court of law. You have the right to be speak to an attorney, and to have an attorney present during any questioning. If you cannot afford a lawyer, one will be provided for you…"

Just because Trump made his fortune in real estate doesn’t guarantee attaching his name to booze is going to bring DKAM to the promise land.  Trump isn’t on the board at DKAM, he’s just lending his name, if he put his name on Cool Whip or Red Vines do you think you’d rush to the store to buy some?
"Oh I love the all new Trump Cool Whip, it’s sassy and goes on apple pie perfect with a flick of the spoon, and even looks like Trump’s hairdo". 

There is potential here, don’t get me wrong, but with the recent surge in the stock price, the quick buck may have already been made. But you just have to ask yourself, hasn’t Willie Nelson had enough whisky in his life? If DKAM becomes a real stock and doesn’t get whacked in the knees over all their debt, then it may be worth your valuable savings. But chasing a pipe dream because the Donald slapped his name on a bottle doesn’t justify you making an investment in Drinks America. Besides, when you ask for your "Trump Cran" in a year, don’t be surprised if Drinks America is owned by Abagnale & Associates. Make the smart investment Masters, avoid the OTC stocks.

Article written by: Frank Lara Jr.
Article posted on: February 14th, 2007

Disclaimer: The Author does not own any shares or hold any short/long positions in DKAM.OB.

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