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Delaware		2080		41-2103550
(State or Other Jurisdiction of Incorporation or Organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification Number)

John E. Schmeltzer, III, Esq. Andrew P. Beame, Esq. Patterson Belknap Webb & Tyler LLP 1133 Avenue of the Americas New York, NY 10036 Telephone: (212) 336-2000 Facsimile: (212) 336-2222		Elise M. Adams, Esq. Christin R. Cerullo, Esq. Blank Rome LLP 405 Lexington Avenue New York, NY 10174 Telephone: (212) 885-5000 Facsimile: (212) 885-5001

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The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

		Per Share				Total
Initial public offering price		$				$
Underwriting discounts and commissions (1)		$				$
Proceeds to us (before the non-accountable expense allowance and other offering expenses)		$				$

(1)	Does not include a non-accountable expense allowance payable to the underwriters in the amount of $125,000.

	ThinkEquity Partners LLC

	Ladenburg Thalmann & Co. Inc.

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		Page
Prospectus Summary			1
Risk Factors			8
Forward-Looking Statements			20
Market Data and Forecasts			20
Use of Proceeds			21
Dividend Policy			22
Capitalization			23
Dilution			25
Selected Consolidated Financial Data			27
Management’s Discussion and Analysis of Financial Condition and Results of Operations			30
Business			53
Management			72
Certain Relationships and Related Party Transactions			87
Security Ownership of Certain Beneficial Owners and Management			90
Description of Securities			94
Shares Eligible for Future Sale			99
Underwriting			101
Legal Matters			105
Experts			105
Where You Can Find Additional Information			105
Index to Financial Statements			F-1
EX-23.1: CONSENT OF EISNER LLP

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	•	difficulties in assimilating acquired operations or products;
	•	unanticipated costs that could materially adversely affect our results of operations;
	•	negative effects on reported results of operations from acquisition related charges and amortization of acquired intangibles;
	•	diversion of management’s attention from other business concerns;
	•	adverse effects on existing business relationships with suppliers, distributors and retail customers;
	•	risks of entering new markets or markets in which we have limited prior experience; and
	•	the potential inability to retain and motivate key employees of acquired businesses.

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	•	make it more difficult for us to satisfy our other obligations;
	•	require us to dedicate a substantial portion of any cash flow we may generate to payments on our debt obligations, which would reduce the availability of our cash flow to fund working capital, capital expenditures and other corporate requirements;
	•	impede us from obtaining additional financing in the future for working capital, capital expenditures, acquisitions and general corporate purposes; and
	•	make us more vulnerable in the event of a downturn in our business prospects and limit our flexibility to plan for, or react to, changes in our industry.

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	•	our history of losses and expectation of further losses;
	•	the effect of poor operating results on our company;
	•	the effect of growth on our infrastructure, resources, and existing sales;
	•	our ability to expand our operations in both new and existing markets and our ability to develop or acquire new brands;
	•	the impact of supply shortages and alcohol and packaging costs in general;
	•	our ability to raise capital;
	•	our ability to fully utilize and retain new executives;
	•	negative publicity surrounding our products or the consumption of beverage alcohol products in general;
	•	our ability to acquire and/or maintain brand recognition and acceptance;
	•	trends in consumer tastes;
	•	our ability to protect trademarks and other proprietary information;
	•	the impact of litigation;
	•	the impact of federal, state, local or foreign government regulations;
	•	the effect of competition in our industry; and
	•	economic and political conditions generally.

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	•	sales and marketing activities;
	•	capital commitments to our Gosling-Castle Partners Inc. strategic export venture (of the remaining approximately $2.8 million of funding that we owe to Gosling-Castle Partners by April 2007, we will fund $1.0 million in each of April 2006 and October 2006 and $750,000 in April 2007), see “Business – Strategic brand-partner relationships”;
	•	hiring of additional employees;
	•	repayment of €133,323 ($160,627) of the principal amount of non-interest bearing indebtedness owed by us to former stockholders of Roaring Water Bay, which is due on December 1, 2006;
	•	repayment of €255,000 ($307,224) of the principal amount of indebtedness bearing interest at a rate of 5.7% per annum owed by us to former stockholders of Roaring Water Bay, due July 11, 2007;
	•	payment of interest accrued through the closing date of this offering on the foregoing indebtedness and on each of our 5% euro denominated convertible subordinated notes and the $6.0 million of our 6% convertible notes that are converting into common stock upon the consummation of this offering, which accrued interest totaled $101,330 as of September 30, 2005 and is expected to total approximately $265,395 upon the consummation of this offering;
	•	payment of $204,952 to holders of our series A and series B convertible preferred stock for dividends accrued on their preferred membership units in our predecessor company, Great Spirits Company, LLC, through December 1, 2003; and
	•	working capital needs.

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	•	on an actual, historical basis, without any adjustments to reflect subsequent or anticipated events;
	•	on a “pro forma” basis, with adjustments to reflect the following subsequent events:

	•	our accrual of additional preferred stock dividends on our convertible preferred stock from October 1, 2005 through the estimated closing date of this offering in the aggregate amount of $390,211;
	•	repayment in December 2005 of €133,323 ($160,628) of indebtedness under our non-interest bearing notes owed to former stockholders of Roaring Water Bay;
	•	our issuance of an additional 5,355,980 shares of our common stock upon (a) the conversion of all of our preferred stock into 4,089,465 shares of common stock, (b) our payment of all of the dividends accrued on our convertible preferred stock as of the estimated closing date of this offering, including those accrued since September 30, 2005, with 146,010 shares of common stock, and (c) the conversion of $7.7 million of our indebtedness, including all of our 5% euro denominated convertible subordinated notes and $6.0 million principal amount of our 6% convertible notes, into an aggregate of 1,120,505 shares of common stock, all of which issuances will occur upon the consummation of this offering; and
	•	the reversal of previously recorded interest expense and corresponding changes in foreign exchange gain/(loss) related to the indebtedness referred to above, in the aggregate net amount of ($98,405), and the expensing of the $339,823 in deferred financing charges associated with the $6.0 million of our 6% convertible notes included in such indebtedness; and

	•	on a “pro forma as adjusted” basis, reflecting the foregoing pro forma adjustments as well as the following additional events:

	•	our adoption of an amendment to our certificate of incorporation that authorizes 45,000,000 shares of common stock and 5,000,000 shares of preferred stock upon the consummation of this offering;
	•	the sale of the 3,000,000 shares of common stock offered by us in this offering at an assumed public offering price of $9.00 per share, the midpoint of the range set forth on the cover page of this prospectus; and
	•	our receipt of the estimated net proceeds from such sale, after deducting the estimated underwriting discounts and commissions and other expenses of this offering and giving effect to our repayment from such proceeds of $569,181 of our indebtedness, including $101,330 of accrued interest, outstanding as of September 30, 2005 and the payment of $204,952 of dividends that accrued on the preferred membership units of our predecessor company, Great Spirits Company, LLC, through December 1, 2003. Does not include $164,065 of additional interest that will accrue from October 1, 2005 through the estimated closing date of this offering and that will be repaid from the proceeds of this offering.

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						As of September 30, 2005
														Pro forma
						Actual				Pro forma				as adjusted
						(in thousands, except number of shares)
Cash and cash equivalents						$	8,527			$	8,366			$	30,627
Indebtedness:
	Current, and current maturities of, notes payable:
		Ulster Bank facilities(1)				$	1,239			$	1,239			$	1,239
		Gosling’s Export agreement					585				585				585
		Roaring Water Bay notes(2)					161				—				—
	Long-term notes payable, less current maturities:
		9% senior notes					4,584				4,584				4,584
		Ulster Bank facilities(1)					92				92				92
		6% convertible subordinated notes					15,000				9,000				9,000
		Gosling’s Export agreement					1,210				1,210				1,210
		5% euro denominated convertible
			subordinated notes				1,656				—				—
		Roaring Water Bay notes(2)					440				440				—
	Obligations under capital leases						14				14				14
			Total indebtedness			$	24,981			$	17,164			$	16,724
Redeemable convertible preferred stock(3):
	Series A convertible preferred stock, $1.00 par value, 550,000 shares authorized and 535,715 shares issued and outstanding (actual); no shares authorized, issued or outstanding (pro forma and pro forma as adjusted)						3,541				—				—
	Series B convertible preferred stock, $1.00 par value, 200,000 shares authorized and 200,000 shares issued and outstanding (actual); no shares authorized, issued or outstanding (pro forma and pro forma as adjusted)						1,086				—				—
	Series C convertible preferred stock, $1.00 par value, 3,375,000 shares authorized and 3,353,750 shares issued and outstanding (actual); no shares authorized, issued or outstanding (pro forma and pro forma as adjusted)						23,674				—				—
			Total preferred stock			$	28,301			$	—			$	—
Preferred stock and preferred membership unit dividends payable						$	840			$	205			$	—
Stockholders’ equity:
	Common stock, $0.01 par value, 20,500,000 shares authorized and 3,106,666 shares issued and outstanding (actual); 20,500,000 shares authorized and 8,462,646 shares issued and outstanding (pro forma); and 45,000,000 shares authorized and 11,462,646 shares issued and outstanding (pro forma as adjusted)						31				85				115
	Additional paid-in capital						18,037				54,575				77,581
	Accumulated deficit						(36,045	)			(36,385	)			(36,413	)
	Accumulated other comprehensive loss						137				137				137
			Total stockholders’ equity (deficiency)			$	(17,840	)		$	18,412			$	41,420
				Total capitalization		$	36,282			$	35,781			$	58,144

(1)	Amounts shown are exclusive of overdraft coverages with the financial institutions.
(2)	Amounts shown are net of an aggregate of $27,479 in imputed interest ascribed to non-interest bearing notes.
(3)	Amounts shown are net of transaction costs, including the value attributed to placement agent warrants.

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	•	accrual of additional dividends on our preferred stock from October 1, 2005 through the estimated closing date of this offering in the amount of $390,212;
	•	the conversion in connection with this offering of all of our preferred stock, $1,025,304 of preferred stock dividends accrued through the estimated closing of this offering and $7.7 million principal amount of our indebtedness, into an aggregate of 5,334,505 shares of our common stock; and
	•	the reversal of previously recorded interest expense and corresponding changes in foreign exchange gain/(loss) related to the foregoing indebtedness, in the aggregate net amount of ($98,405), and the expensing of the $339,823 in deferred financing charges associated with the $6.0 million of our 6% convertible notes included in the indebtedness referred to above.

Assumed initial public offering price per share							$	9.00
	Pro forma net tangible book value per share as of September 30, 2005		$	(.91	)
	Increase in net tangible book value per share attributable to this offering			2.24
Pro forma as adjusted net tangible book value per share after this offering								1.33
Dilution in pro forma as adjusted net tangible book value per share to investors in this offering							$	7.67

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			Shares purchased								Total consideration								Average
																			price per
			Amount				Percent				Amount				Percent				share
Existing stockholders				8,462,646				73.8%			$	58,158,452				68.3%			$	6.87
Investors in this offering				3,000,000				26.2				27,000,000				31.7			$	9.00
	Total			11,462,646				100.0%			$	85,158,452				100.0%

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																							Six months ended
			Year ended March 31,																				September 30,
			2001				2002				2003				2004				2005				2004				2005
			(unaudited)
																							(unaudited)
Consolidated statement of operations data (in thousands):
	Sales, net		$	799			$	1,731			$	2,419			$	4,827			$	12,618			$	4,901			$	10,080
	Cost of sales			393				1,074				1,427				3,285				8,745				2,960				6,181
	Gross profit			406				657				992				1,542				3,873				1,941				3,899
	Selling expense			1,399				2,497				3,348				5,398				11,569				6,105				6,517
	General and administrative expense			657				1,013				818				1,960				3,637				1,504				2,302
	Depreciation and amortization			20				59				73				174				167				132				379
	Operating loss			(1,670	)			(2,912	)			(3,247	)			(5,990	)			(11,500	)			(5,800	)			(5,299	)
	Other income			11				—				0				2				124				123				39
	Other expense			—				(3	)			(3	)			(82	)			(45	)			(34	)			(19	)
	Foreign exchange gain/(loss)			—				—				(8	)			(85	)			120				(338	)			(347	)
	Interest expense, net			(118	)			(92	)			(182	)			(304	)			(998	)			(578	)			(620	)
	Current credit/(charge) on derivative financial instrument			—				—				9				26				(77	)			6				15
	Income tax benefit			–				–				–				–				–				–				74
	Minority interests											–				35				5				2				224
	Net loss		$	(1,777	)		$	(3,007	)		$	(3,431	)		$	(6,398	)		$	(12,371	)		$	(6,619	)		$	(5,933	)
Less:
	Preferred stock and preferred membership unit dividends			–				–				15				761				1,252				620				692
	Net loss attributable to common stockholders		$	(1,777	)		$	(3,007	)		$	(3,446	)		$	(7,159	)		$	(13,623	)		$	(7,239	)		$	(6,625	)
Net loss per common share basic and diluted			$	(2.60	)		$	(2.05	)		$	(1.87	)		$	(3.20	)		$	(4.39	)		$	(2.33	)		$	(2.13	)
Weighted average shares outstanding basic and diluted				683				1,469				1,841				2,237				3,107				3,107				3,107
Pro forma net loss per common share basic and diluted(1)																				$(1.61	)		$	(0.86	)		$	(0.78	)
Pro forma weighted average common shares outstanding-basic and diluted(1)																				8,463				8,463				8,463
Other data (unaudited):
	Number of case sales			3,844				9,053				21,708				64,013				170,060				72,368				131,885
	Net sales per case			$207.86			$	191.21			$	111.43			$	75.41			$	74.20			$	67.72			$	76.43
	Gross profit per case			$105.62			$	72.57			$	45.70			$	24.09			$	22.77			$	26.82			$	29.56
	Selling expense per case			$363.94			$	275.82			$	154.23			$	84.33			$	68.03			$	84.36			$	49.41

(1)

Assumes the conversion as of April 1, 2004 of: all shares of preferred stock outstanding as of September 30, 2005, including 535,715 shares of Series A convertible preferred stock, 200,000 shares of Series B convertible preferred stock and 3,353,750 shares of Series C convertible preferred stock, into an aggregate of 4,089,465 shares of common stock; the accrued and unpaid preferred stock dividends accrued through the estimated closing date of this offering into 146,010 shares of common stock, including $635,092 of accrued preferred stock dividends outstanding as of September 30, 2005 into 94,377 shares of common stock; the $1.7 million principal amount of our 5% euro denominated convertible notes outstanding as of September 30, 2005 into 263,362 shares of common stock; and $6.0 million of the $15.0 million principal amount of our 6% convertible notes that was outstanding as of September 30, 2005 into 857,143 shares of common stock; for an aggregate of 5,355,980 shares of common stock. Also assumes the reversal of previously recorded interest expense and corresponding changes in foreign exchange gain/(loss) related to the converting debt.

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																										As of September 30, 2005
		As of March 31,																				As of
																						September 30,												Pro forma
		2001				2002				2003				2004				2005				2004				Actual				Pro forma				as adjusted
		(unaudited)																				(unaudited)				(unaudited)
Cash and cash equivalents		$	71			$	170			$	236			$	3,461			$	5,676			$	1,434			$	8,527			$	8,366			$	30,627
Working capital (deficit)			(804	)			281				(229	)			4,541				5,665				2,233				11,445				11,445				34,632
Total assets			2,045				3,822				4,528				27,759				43,135				28,691				50,720				50,220				71,656
Total debt			2,150				1,666				2,158				4,095				16,362				9,013				24,981				17,164				16,724
Total liabilities			2,588				2,835				3,947				8,506				26,511				16,076				37,152				28,701				27,128
Total stockholders’ equity (deficiency)			(543	)			987				581				980				(11,917	)			(6,467	)			(17,839	)			18,412				41,421

	•	our accrual of additional preferred stock dividends on our convertible preferred stock from October 1, 2005 through the estimated closing date of this offering in the aggregate amount of $390,211;
	•	repayment in December 2005 of €133,323 ($160,628) of indebtedness under our non-interest bearing notes owed to former stockholders of Roaring Water Bay.
	•	our issuance of an additional 5,355,980 shares of our common stock upon the (a) conversion of all of our preferred stock into 4,089,465 shares of common stock, (b) the payment of all of the preferred stock dividends accrued on our convertible preferred stock as of the estimated closing date of this offering, including those accrued since September 30, 2005, with 146,010 shares of our common stock, and (c) the conversion of $7.7 million of our indebtedness into 1,120,505 shares of our common stock; all of which issuances will occur upon the consummation of this offering; and
	•	the reversal of previously recorded interest expense and corresponding changes in foreign exchange gain/(loss) related to the indebtedness referred to above, in the aggregate net amount of ($98,405), and the expensing of the $339,823 in deferred financing charges associated with the $6.0 million of our 6% convertible notes included in such indebtedness.

	•	our sale of the 3,000,000 shares of common stock in this offering at an assumed initial public offering price of $9.00 per share, the midpoint of the range set forth on the cover page of this prospectus; and
	•	our receipt of the estimated net proceeds therefrom, after deducting the underwriting discounts and commissions and other expenses of this offering and giving effect to our repayment from such proceeds of $569,181 of our indebtedness, including $101,330 of accrued interest, outstanding as of September 30, 2005 and payment of $204,952 in dividends accrued on the preferred membership units in our predecessor company, Great Spirits Company, LLC, through December 1, 2003. Does not include $164,065 of additional interest that will accrue from October 1, 2005 through the estimated closing date of this offering and that will be repaid from the proceeds of this offering.

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	•	hiring of a highly qualified and experienced sales force;
	•	continuous improvement of our product distribution network and forging of strong distributor relationships — beyond those a company of our size might be expected to maintain; and
	•	implementation of a products depletion tracking system, by both brand and SKU (enabling us to more effectively target our selling efforts).

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	•	the continued consolidation of brands among the major spirits companies is expected to result in their concentration on large market leading brands and divestitures of non-core brands, which may create an opportunity for us as we focus on smaller and emerging brands;
	•	the ongoing industry consolidation is expected to make it more difficult for smaller spirits companies and new entrants to identify and secure an attractive route to market, particularly in the United States, while we already have established extensive U.S. and international distribution;
	•	owners of small private and family-owned spirits brands will seek to partner with or be acquired by a larger company with global distribution and we expect to be an attractive alternative for brand owners as one of the few publicly traded spirits companies outside of the major spirits companies with multi-billion dollar revenues; and
	•	particular opportunities in the premium end of the spirits market in which we participate, given positive changes in customer preferences, demographics and expected growth rates in the imported spirits segments in which we participate.

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																Six months ended
				Year ended March 31,												September 30,
Case sales				2003				2004				2005				2004				2005
Cases
United States					18,482				29,116				74,190				30,002				73,972
International					3,226				34,897				95,870				42,366				57,913
		Total			21,708				64,013				170,060				72,368				131,885
Vodka					13,215				38,565				107,122				49,301				63,273
Rum					662				794				9,038				271				37,123
Liqueurs/Cordials					5,143				19,674				38,153				17,126				22,791
Whiskey					2,688				4,980				15,747				5,670				8,698
	Total				21,708				64,013				170,060				72,368				131,885
Percentage of Cases
United States					85.1	%			45.5	%			43.6	%			41.5	%			56.1	%
International					14.9				54.5				56.4				58.5				43.9
		Total			100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
Vodka					60.9	%			60.3	%			63.0	%			68.1	%			48.0	%
Rum					3.0				1.2				5.3				0.4				28.1
Liqueurs/Cordials					23.7				30.7				22.4				23.7				17.3
Whiskey					12.4				7.8				9.3				7.8				6.6
	Total				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%

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			As of March 31,								As of September 30,
			2004				2005				2004				2005
			(in thousands, except per share data)
Net loss attributable to common stockholders			$	(7,159	)		$	(13,623	)		$	(7,239	)		$	(6,625	)
Stock-based compensation expense determined under fair value method				–				(370	)			—				(61	)
Pro forma net loss			$	(7,159	)		$	(13,993	)		$	(7,239	)		$	(6,686	)
Loss per share:
	Basic and diluted – as reported		$	(3.20	)		$	(4.39	)		$	(2.33	)		$	(2.13	)
	Basic and diluted – pro forma		$	(3.20	)		$	(4.50	)		$	(2.33	)		$	(2.15	)

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															Six months
															ended
			Year ended March 31,												September 30,
			2003				2004				2005				2004				2005
															(unaudited)
Sales, net				100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
Cost of sales				59.0	%			68.1	%			69.3	%			60.4	%			61.3	%
Gross profit				41.0	%			31.9	%			30.7	%			39.6	%			38.7	%
Selling expense				138.4	%			111.8	%			91.7	%			124.6	%			64.7	%
General and administrative expense				33.8	%			40.6	%			28.8	%			30.7	%			22.8	%
Depreciation and amortization				3.0	%			3.6	%			1.3	%			2.7	%			3.8	%
Loss from continuing operations				(134.2	)%			(124.1	)%			(91.1	)%			(118.4	)%			(52.6	)%
Other income				0.0	%			0.0	%			1.0	%			2.5	%			0.4	%
Other expense				(0.1	)%			(1.7	)%			(0.4	)%			(0.7	)%			(0.2	)%
Foreign exchange gain/(loss)				(0.3	)%			(1.7	)%			1.0	%			(6.9	)%			(3.4	)%
Interest expense, net				(7.6	)%			(6.2	)%			(7.9	)%			(11.7	)%			(6.1	)%
Current credit/(charge) on derivative financial instrument				0.4	%			0.5	%			(0.6	)%			0.1	%			0.1	%
Income tax benefit				0.0	%			0.0	%			0.0	%			0.0	%			0.7	%
Minority interests				0.0	%			0.7	%			(0.0	)%			(0.0	)%			2.2	%
Net loss				(141.8	)%			(132.5	)%			(98.0	)%			(135.1	)%			(58.9	)%
Less:
	Preferred stock and preferred membership unit dividends			0.6	%			15.8	%			9.9	%			12.6	%			6.9	%
Net loss attributable to common stockholders				(142.4	)%			(148.3	)%			(107.9	)%			(147.7	)%			(65.8	)%

	•	approximately 36,805 cases related to our Gosling-Castle Partners global export venture which commenced in April 2005 and 4,810 cases related to our Pallini agency agreement which commenced in August 2004 versus no Gosling’s sales and limited Pallini sales in the prior year period; and
	•	17,402 incremental case sales of our other existing brands, particularly Boru vodka.

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			Increase in Case Sales								Percentage Increase
			Overall				U.S.				Overall				U.S.
Vodka				13,972				10,339				28.3	%			81.7	%
Rum				36,852				30,212				13,598.3	%			13,135.7	%
Liqueurs/cordials				5,665				2,400				33.1	%			154.7	%
Irish Whiskey				3,028				1,018				53.4	%			14.6	%
	Total			59,517				43,969				82.2	%			146.6	%

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	•	approximately 62,500 case sales in aggregate related to our acquisition of Roaring Water Bay, which had a full year effect in fiscal 2005 versus four months inclusion in fiscal 2004.
	•	approximately 12,500 case sales resulting from the addition of our Gosling’s and Pallini distribution agreements; and
	•	approximately 31,050 incremental case sales of our other brands.

			Increase in Case Sales								Percentage Increase
			Overall				U.S.				Overall				U.S.
Vodka				68,557				13,700				177.8	%			88.0	%
Rum				8,244				8,187				1,038.3	%			1,333.5	%
Liqueurs/cordials				18,479				22,377				93.9	%			195.2	%
Irish Whiskey				10,767				809				216.2	%			55.0	%
	Total			106,047				45,073				165.6	%			154.8	%

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			Increase in Case Sales								Percentage Increase
			Overall				U.S.				Overall				U.S.
Vodka				25,350				2,338				191.8	%			17.7	%
Rum				132				85				19.9	%			16.1	%
Liqueurs/cordials				14,531				8,278				282.5	%			259.7	%
Irish Whiskey				2,292				(67	)			85.3	%			(4.4	%)
	Total			42,305				10,634				194.9				57.5	%

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			Quarter ended
			June 30,				September 30,				December 31,				March 31,				June 30,				September 30,				December 31,				March 31,
			2002				2002				2002				2003				2003				2003				2003(1)				2004
Consolidated Statement of Operations Data (in thousands):
Sales, net			$	484			$	485			$	724			$	726			$	604			$	542			$	2,132			$	1,549
Cost of sales				270				272				434				452				396				364				1,446				1,081
Gross profit				214				213				290				274				208				178				686				468
Selling expense				673				735				972				968				755				809				1,729				2,105
General and administrative expense				149				130				234				305				348				406				536				670
Depreciation and amortization				11				11				24				26				38				43				51				41
Loss from continuing operations				(619	)			(663	)			(940	)			(1,025	)			(933	)			(1,080	)			(1,630	)			(2,348	)
Other Income				2				—				—				4				—				1				1				—
Other Expense				—				(4	)			(2	)			(3	)			(6	)			(6	)			(64	)			(6	)
Foreign currency gain/(loss)				—				5				(6	)			(7	)			(9	)			9				(309	)			224
Current credit/(charge) on derivative financial instrument				—				19				(2	)			(7	)			22				(6	)			(1	)			11
Income tax benefit				—				—				—				—				—				—				—				—
Interest expense, net				(30	)			(40	)			(56	)			(56	)			(57	)			(57	)			(97	)			(93	)
Minority Interests				—				—				—				—				—				—				5				31
Net loss				(647	)			(683	)			(1,006	)			(1,094	)			(983	)			(1,139	)			(2,095	)			(2,181	)
Less: Preferred stock and preferred membership unit dividends				—				—				—				15				45				87				137				492
Net loss attributable to common stockholders			$	(647	)		$	(683	)		$	(1,006	)		$	(1,109	)		$	(1,028	)		$	(1,226	)		$	(2,232	)		$	(2,673	)
Net loss per common share:
	Basic		$	(0.38	)		$	(0.37	)		$	(0.50	)		$	(0.62	)		$	(0.57	)		$	(0.68	)		$	(1.00	)		$	(0.86	)
	Diluted		$	(0.38	)		$	(0.37	)		$	(0.50	)		$	(0.62	)		$	(0.57	)		$	(0.68	)		$	(1.00	)		$	(0.86	)
Weighted average shares used in computation:
	Basic			1,710				1,852				2,000				1,800				1,800				1,800				2,240				3,107
	Diluted			1,710				1,852				2,000				1,800				1,800				1,800				2,240				3,107

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			Quarter ended
			June 30,				September 30,				December 31,				March 31,				June 30,				September 30,
			2004				2004				2004				2005(2)				2005(3)				2005
Consolidated Statement of Operations Data (in thousands):
Sales, net			$	2,163			$	2,738			$	4,755			$	2,962			$	4,916			$	5,175
Cost of sales				1,483				1,477				3,607				2,178				3,065				3,099
Gross profit				680				1,261				1,148				784				1,851				2,076
Selling expense				2,978				3,127				3,327				2,137				3,225				3,276
General and administrative expense				795				710				1,232				900				1,137				1,236
Depreciation and amortization				26				104				14				23				182				181
Loss from continuing operations				(3,119	)			(2,680	)			(3,425	)			(2,276	)			(2,693	)			(2,617	)
Other income				—				124				—				—				—				34
Other expense				(9	)			(26	)			(8	)			(2	)			(9	)			(9	)
Foreign currency gain/(loss)				1				(339	)			342				116				(313	)			15
Current credit/(charge) on derivative financial instrument				(9	)			14				1				(83	)			17				(2	)
Income tax benefit																				37				37
Interest expense, net				(466	)			(112	)			(259	)			(161	)			(259	)			(364	)
Minority interests				2				—				—				3				129				95
Net loss				(3,600	)			(3,019	)			(3,349	)			(2,403	)			(3,091	)			(2,811	)
Less: Preferred stock and preferred membership unit dividends				240				380				279				353				305				387
Net loss attributable to common stockholders			$	(3,840	)		$	(3,399	)		$	(3,628	)		$	(2,756	)		$	(3,396	)		$	(3,198	)
Net loss per common share:
	Basic		$	(1.24	)		$	(1.09	)		$	(1.17	)		$	(0.89	)		$	(1.09	)		$	(1.03	)
	Diluted		$	(1.24	)		$	(1.09	)		$	(1.17	)		$	(0.89	)		$	(1.09	)		$	(1.03	)
Weighted average shares used in computation:
	Basic			3,107				3,107				3,107				3,107				3,107				3,107
	Diluted			3,107				3,107				3,107				3,107				3,107				3,107

(1)	In December 2003, we acquired The Roaring Water Bay Spirits Group Limited (which we renamed Castle Brands Spirits Group Limited) and The Roaring Water Bay Spirits Marketing and Sales Company Limited (which we renamed Castle Brands Spirits Marketing and Sales Company Limited), together, with their operating subsidiaries and other related entities. Our quarterly results of operations data presented above incudes the results of operations of these entities commencing as of the December 31, 2003 closing date of the acquisition.
(2)	Our quarterly results of operations data presented above includes our sales of Gosling’s rum products in the United States and the United Kingdom under our distribution agreement with Gosling’s Export commencing as of its January 1, 2005 effective date.
(3)	Our quarterly results of operations include the results of operations of Gosling-Castle Partners, our 60%-owned strategic venture, commencing as of the February 18, 2005 closing date of our investment in such entity, with adjustments for minority interest; however, Gosling-Castle Partners had no meaningful operations prior to April 1, 2005.

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	•	an increase in working capital requirements to finance higher levels of inventories and accounts receivable;
	•	addition of administrative and sales personnel as our business expands;
	•	increases in advertising, public relations and sales promotions for existing and new brands and as we expand within existing markets or enter new markets;
	•	acquisition of additional spirits brands;
	•	financing the operations of our 60% owned Gosling-Castle Partners venture; and
	•	expansion into new markets and within existing markets in the United States and internationally.

														Six months
														ended
		Year ended March 31,												September 30,
		2003				2004				2005				2004				2005
Net cash provided by (used in):
Operating activities		$	(3,833	)		$	(5,335	)		$	(13,331	)		$	(6,243	)		$	(8,310	)
Investing activities			(21	)			(6,723	)			(598	)			(496	)			(164	)
Financing activities			3,920				15,275				16,142				4,712				11,326
Net increase (decrease) in cash and cash equivalents		$	66			$	3,217			$	2,213			$	(2,027	)		$	2,852

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	Obligations and commitments

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		$1,025,000 was due April 1, 2005 and was paid;
		$1,125,000 was due October 1, 2005 and was paid;
		$1,000,000 is due April 1, 2006;
		$1,000,000 is due October 1, 2006; and
		$750,000 is due April 1, 2007.

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For the years ending
March 31,		Amount
		(in thousands)
2006		$	3,032
2007			1,225
2008			349
2009			4
2010			9,662
Total		$	14,272
Less current portion			3,032
Non-current portion		$	11,240

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			Payments due during fiscal year ending March 31,
			2006				2007				2008				2009				2010				Thereafter				Total
			(in thousands)
Long-term notes payable, including current portion and estimated interest(1)
Ulster Bank facilities			$	1,907			$	54			$	24			$	—			$	—			$	—			$	1,985
Gosling’s export agreement				1,170				1,210				—				—				—				—				2,380
Roaring Water Bay notes				172				172				329				—				—				—				673
9% senior notes				—				—				—								4,660								4,660
6% convertible subordinated notes				—				—				—				—				5,000				—				5,000
5% euro denominated convertible notes				—				1,656				—				—				—				—				1,656
Capital leases				3				3				4				4				2								16
Operating leases				293				303				303				143				5				—				1,047
Estimated interest				856				813				737				725				371								3,502
	Total		$	4,401			$	4,211			$	1,397			$	872			$	10,038			$	—			$	20,919

(1)

Does not include an additional $10.0 million of 6% convertible subordinated notes issued in July and August 2005 or give effect to the expected conversion of $6.0 million of such 6% convertible notes and all of our 5% euro denominated convertible notes into common stock upon the consummation of this offering or the repayment of our Roaring Water Bay notes from the proceeds of, and upon the consummation of, this offering.

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	Predecessor operations

	•	obtained a federal license to import and wholesale liquor in the United States from the Alcohol and Tobacco Tax and Trade Bureau, a division of the U.S. Department of the Treasury;
	•	engaged MHW Ltd. to act as importer of record for it in the United States;
	•	created our premium Knappogue Castle single malt Irish whiskey to complement Knappogue Castle 1951 and entered into various agreements with respect to its production;
	•	established bottling arrangements with Terra Limited, which continues to act as one of our primary bottlers today;
	•	hired our first sales manager;
	•	acquired the last known existing stock of British Royal Navy Imperial Rum, one of the rarest and most historically significant commercially available rums today, upon which the flavor profile of our Sea Wynde rum was subsequently patterned; and
	•	raised $2.0 million of private equity financing, including $1.8 million of the approximately $7.2 million that has been invested in our company by Mr. Andrews and his affiliates as of the date of this prospectus.

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	Our formation and the acquisition of the Roaring Water Bay entities

	Recent developments

	•	in August 2004, we entered into an exclusive marketing agreement with I.L.A.R. S.p.A., a family owned Italian spirits company founded in 1875, pursuant to which we obtained the long-term exclusive U.S. distribution rights (excluding duty free sales) with respect to its Pallini Limoncello, a premium Italian liqueur, and related brand extensions;
	•	in January 2005, we became the exclusive U.S. distributor for Gosling’s rums, including Gosling’s Black Seal dark rum and related brands, all of which are produced by the Gosling family in Bermuda, where Gosling’s rums have been under continuous production for over 150 years. In February 2005, we expanded this relationship by acquiring a 60% controlling interest in Gosling-Castle Partners Inc., a global export venture owned by us and the Gosling family; and
	•	effective April 1, 2005, Gosling-Castle Partners secured the exclusive long-term export and distribution rights for the Gosling’s rum products for all countries other than Bermuda, including an assignment of the Gosling’s rights under our January 2005 distribution agreement with them. See “—Strategic brand-partner relationships.”

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	•	Gosling’s Black Seal – Gosling’s Black Seal is a premium dark rum, which is best known as an ingredient in the Gosling’s trademarked cocktail Dark ‘n Stormy – known as the “national drink of Bermuda.” To foster the promotion of the Dark ‘n Stormy, we also distribute its recommended mixture counterpart, Barritt’s Ginger Beer, a well known non-alcoholic ginger beer from Bermuda. Gosling’s Black Seal was awarded a Platinum Medal (the highest offered) in the World Spirits Competition, conducted by the Beverage Tasting Institute in 2000. In that competition, as part of a blind taste test conducted with respect to a selection of world class rums, Gosling’s Black Seal was rated “96” out of a possible “100” and a “Best Buy”;
	•	Gosling’s Gold Bermuda Rum – Gosling’s Gold Bermuda Rum, lighter in color than Gosling’s Black Seal, was introduced in 2004. It is often combined with Gosling’s Black Seal and fruit juices in the Rum Swizzle cocktail, a popular drink in Bermuda; and
	•	Gosling’s Old Rum – Gosling’s Old Rum is a premium “family reserve” rum that is produced in limited quantities. Gosling’s Old Rum was created based on the Gosling’s Black Seal formula and then further aged in oak barrels.

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	•	increasing consumer preference for liquor and cocktails across various age groups and demographics, as compared to wine and beer;

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	•	increasing consumption of imported premium spirits; viewed as affordable luxury products, consumers appear willing to trade up and pay more for high-end quality spirits; and
	•	increasing consumer identification with a particular liquor brand to convey status and self image; consumers are more likely to have a preference for establishing a unique brand or drink to call their own and to be aspirational in their drinking behavior.

			Number of						Number of		Projected
			case sales		5-year				case sales		5-year
Spirits category (each includes both the			for 2004		growth				for 2010		growth
domestic and imported segments)			(estimated)		1999-2004				(projected)		2005-2010
Vodka			44.8			28.0%			55.0			18.3%
Rum			19.8			33.8%			22.6			10.8%
Liqueurs/cordials			20.3			21.6%			24.5			15.6%
Whiskey			42.0			(1.9%)			42.3			0.7%
Other categories			34.8			8.1%			39.5			10.3%
	Total U.S. distilled spirits		161.7			14.3%			183.9			10.8%

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				Number of								Number of				Projected
				case sales				5-year				case sales				5-year
				for 2004				growth				for 2010				growth
Imported spirits segment				(estimated)				1999-2004				(projected)				2005-2010
Imported vodka					12.5				81.2%				17.5				29.6%
Imported rum					2.3				64.3%				2.6				8.3%
Imported liqueurs/cordials					10.5				38.2%				14.0				23.9%
Irish whiskey					0.5				66.7%				0.6				20.0%
	Total for our segments				25.8				59.3%				34.7				25.3%
Other imported whiskey					22.8				(5.5%)				22.5				(5.3%)
Other imported spirits					16.0				15.1%				19.3				16.3%
		Total imported U.S. distilled spirits			64.6				20.5%				76.5				14.2%

	•	our diverse portfolio of high quality, premium branded spirits in growing categories of the spirits industry. This portfolio, with brands in four growing spirits categories, appeals to broad consumer tastes and enables us to penetrate various retail outlets and capitalize on varying regional preferences;
	•	our extensive and established U.S. distribution network and growing international distribution network in Europe and elsewhere. We currently have distribution

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		relationships with third-party distributors or brokers in all 50 states in the United States and in six other primary international markets. We believe that establishing domestic and international distribution such as ours is a significant barrier to entry for smaller spirits producers and that our distribution network is similar to that of our significantly larger competitors. We anticipate that our distribution network will also be a differentiating factor in enabling us to continue to partner with emerging brands seeking greater market penetration;
	•	our significant sales and marketing expertise and experience. We have dedicated a significant amount of resources to establish and develop a sales and marketing infrastructure both domestically and internationally. We believe this infrastructure provides us the capacity to accommodate our anticipated future growth. We currently have a total sales force of 28 people, including six regional U.S. sales managers and two international sales managers, with an average of over 15 years of industry experience with premium spirits brands;
	•	our highly qualified and experienced management team with successful track records relating to brand development, the spirits industry, mergers and acquisitions and public companies. Mark Andrews, our chairman and chief executive officer, founded our predecessor company in 1998. Prior thereto, he served as founder, chairman and chief executive officer of American Exploration Company, a publicly traded oil and gas company, from 1980 until its sale to Louis Dreyfus Natural Gas Corp. in 1997. During his 17-year tenure there, American Exploration completed over 50 acquisitions. Keith Bellinger, our president, chief operating officer and secretary, was formerly chief financial officer of the spirits division of Allied Domecq USA and served as president of the Northern Business Unit of Allied Domecq USA. T. Kelley Spillane, our senior vice president – U.S. sales, had significant roles while at Carillon Imports in helping that company grow its Absolut Vodka and Bombay Sapphire Gin brands;
	•	our flexible and efficient supply chain. We currently coordinate the production and delivery of all of our spirits through long-term arrangements with third-party distillers, producers and transportation companies. These arrangements enable us to operate without the need to own or invest in distilleries, bottling plants, storage or transportation equipment, allowing us to focus a majority of our resources on sales and marketing activities; and
	•	our recent track record in establishing strategic partnerships. We have experienced recent successes establishing strategic partnerships with the owners of spirits brands seeking to increase sales beyond their home markets, providing the opportunity for the brands to achieve global growth. We believe this track record will allow us to attract additional brands to our portfolio.

	•	increasing market penetration of our existing spirits brands. We intend to utilize our existing distribution relationships, sales expertise and targeted marketing activities to achieve growth and gain additional market share for our brands within retail stores, bars and restaurants, and thereby with end consumers, both here and internationally; add experienced salespeople in selected markets; increase sales to national chain accounts; and expand our international distribution relationships;

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	•	building brand awareness through innovative marketing, advertising and promotional activities. We place a significant emphasis on our bottle design, labeling and packaging, as well as on our advertising and promotional activities, to establish and reinforce the image of our brands and have invested significant capital over the last several years in developing our brands. We intend to continue developing compelling campaigns for our spirits brands through the coordinated efforts of our experienced internal marketing personnel and leading third-party design and advertising firms, principally using billboards, print advertisements and in-store promotional materials, to increase consumer brand awareness. For example, we intend to position Boru vodka as the leading and one of the few premium vodkas produced in Ireland and expand the market awareness of Gosling’s rum in global markets beyond its current loyal customer following in Bermuda and the eastern United States; and
	•	selectively adding new premium brands to our spirits portfolio. We intend to continue developing new brands and pursuing strategic relationships, joint ventures and acquisitions to selectively expand our portfolio of premium spirits brands, particularly by capitalizing on and expanding our already demonstrated partnering capabilities. The spirits industry is characterized by a relatively small number of very large companies, as a result of continuing industry consolidation, and a sizable number of smaller brands, many of which are family owned. We believe that by partnering with these smaller and family-owned companies, we provide them with the potential opportunity to achieve global growth and the other benefits of a larger organization while, in many cases, maintaining their local identities and traditional distillation and production businesses. In addition, we will seek to opportunistically acquire brands divested by our larger competitors that have market presence and significant growth potential.

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	Boru vodka

	Gosling’s rums

	Knappogue Castle and Clontarf Irish Whiskeys

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	Pallini Limoncello

	Brady’s Irish cream

	Celtic Crossing liqueur

	Sea Wynde rum

	U.S. distribution

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	International distribution

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	•	New England – William Walsh (joined us in 1999) was previously with Southern Wine & Spirits, the largest wholesaler in the United States.
	•	East Coast – Robert Battipaglia (joined us in 2003) was previously the East Coast Regional Manager for the Advantage Brands division of Allied Domecq.
	•	Southeast – Louis Suffredini (joined us in 2004) was previously a Regional Sales Manager in the Southeast with Allied Domecq.
	•	Midwest – David Wyatt (joined us in 2004) was previously in charge of Control State sales for Pearl Vodka and prior to that was Central Region Manager for Allied Domecq.
	•	Southwest – Janell Eilers (joined us in 2004) was previously Texas State Sales Manager for the wine division of Diageo.
	•	West Coast – Bruce Smith (joined us in 2002) was previously with Southern Wine & Spirits, specializing in chain sales.

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	Gaelic Heritage Corporation Limited/Celtic Crossing

	I.L.A.R. S.p.A./Pallini Limoncello

	Gosling-Castle Partners Inc./Gosling’s rums

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Name		Age				Position
Mark Andrews			55			Chairman of the Board and Chief Executive Officer
Keith A. Bellinger			47			President, Chief Operating Officer and Secretary
T. Kelley Spillane			43			Senior Vice President – U.S. Sales
Matthew F. MacFarlane			52			Senior Vice President and Chief Financial Officer
John Beaudette			48			Director(1)
Robert J. Flanagan			49			Director(2)(3)
Phillip Frost, M.D.			69			Director
Colm Leen			43			Director(3)
Richard C. Morrison			65			Director(1)(2)
Frederick M. R. Smith			63			Director(2)(3)
Kevin P. Tighe			61			Director(1)

(1)	Member of the nominating and governance committee
(2)	Member of the compensation committee
(3)	Member of the audit committee

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	•	recommending to the board of directors the slate of nominees of directors to be proposed for election by the stockholders and individuals to be considered by the board of directors to fill vacancies;
	•	establishing criteria for selecting new directors; and
	•	reviewing and assessing annually the performance of the nominating and corporate governance committee and the adequacy of the nominating and corporate governance committee charter.

	•	appointing, replacing overseeing and compensating the work of the registered independent public accounting firm;
	•	reviewing and discussing with management and registered independent accounting firm our quarterly financial statements and discuss with management our earnings releases;
	•	pre-approving all auditing services and permissible non-audit services provided by our registered independent public accounting firm;
	•	engaging in a dialogue with the registered independent public accounting firm regarding relationships that may adversely affect the independence of the registered independent public accounting firm and, based on such review assess the independence of the registered independent public accounting firm;
	•	providing the audit committee report to be filed with the SEC in our annual proxy statement;
	•	reviewing with the outside auditor the adequacy and effectiveness of the internal controls over our financial reporting;
	•	establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters, including the confidential anonymous submission by our employees of anonymous concerns regarding questionable accounting or auditing matters;
	•	reviewing and pre-approving related-party transactions;
	•	reviewing and discussing with management and registered independent accounting firm management’s annual assessment of the effectiveness of the internal controls and registered independent accounting firm’s attestation and report about management’s assessment as required by the SEC;
	•	reviewing and discussing with management and registered independent accounting firm the adequacy and effectiveness of our internal controls including any significant

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		deficiencies in the design or operation of our internal controls or material weaknesses and any fraud, whether or not material, that involves our management or other employees who have a significant role in our internal controls and the adequacy and effectiveness of our disclosure controls and procedures; and
	•	reviewing and assessing annually the adequacy of the audit committee charter.

	•	reviewing and determining annually the compensation of our chief executive officer and other executive officers;
	•	providing the annual report on executive compensation to be filed with the SEC in our annual proxy statement;
	•	approving the form of employment contracts, severance arrangements, change in control provisions and other compensatory arrangements with executive officers;
	•	approving compensation programs and grants involving the use of our common stock and other equity securities; and
	•	reviewing and assessing annually the compensation committee’s performance.

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														Long-term
														compensation
		Annual compensation												Awards
														Number of
														securities
										Other annual				underlying				All other
Name and principal position		Salary				Bonus				compensation				options				compensation
Mark Andrews		$	169,998			$	50,000				—				50,000			$	—
Chairman and Chief Executive Officer
Keith Bellinger(1)			—				—				—				—				—
President, Chief Operating Officer and Secretary
T. Kelley Spillane		$	150,000			$	30,000				—				5,000			$	1,415	(2)
Senior Vice President, U.S. Sales
David Phelan(3)		$	152,875				—				—				—			$	27,788	(4)
Executive Vice President, International Sales
Matthew F. MacFarlane		$	147,177			$	22,500				—				10,000			$	2,369	(5)
Senior Vice President and Chief Financial Officer

(1)	Mr. Bellinger became our chief operating officer on May 2, 2005 and president on November 10, 2005. His initial annual base salary is $270,000 and he is eligible to receive an annual incentive performance bonus of up to 100% of his annual base salary. Mr. Bellinger currently holds options to purchase a total of 150,000 shares of our common stock.
(2)	Represents the amounts of life insurance premiums paid by us for the benefit of Mr. Spillane.
(3)	As of the date of this prospectus, Mr. Phelan is no longer one of our executive officers or an employee but is engaged as a consultant to our company through May 31, 2007.
(4)	Represents $15,288 contributed by us to our pension plan on behalf of Mr. Phelan and patent royalty payments to Mr. Phelan in the amount of $12,500.
(5)	Represents the amounts of life insurance premiums paid by us for the benefit of Mr. MacFarlane.

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																		Potential realizable value
		Individual grants																at assumed annual rates
																		of stock price
						Percent of total												appreciation for option
		Number of securities				options granted to				Exercise								(1)
		underlying options				employees in fiscal				price per				Expiration
Name		granted				year				share (2)				Date				5%				10%
Mark Andrews			50,000				13.61%			$	8.00				1/27/15			$	72,500			$	494,992
Keith Bellinger (3)			—				—				—				—				—				—
T. Kelley Spillane			5,000				1.36%			$	8.00				1/27/15			$	7,250			$	49,492
David Phelan			—				—				—				—				—				—
Matthew F. MacFarlane			10,000				2.72%			$	8.00				1/27/15			$	14,500			$	98,992

(1)	Potential gains are net of the exercise price, but before taxes associated with the exercise. Amounts represent hypothetical gains that could be achieved for the respective options if exercised at the end of the option term. The potential realizable value assumes that the stock price appreciates from the midpoint of the proposed range of the initial public offering price of $9.00 per share. The assumed 5% and 10% rates of stock price appreciation are provided in accordance with the rules of the SEC and do not represent our estimate or projection of the future price of our common stock. Actual gains, if any, on stock option exercises will depend upon the future market prices of our common stock.
(2)	The exercise prices of all stock options granted were at prices believed by our board of directors to be equal to the fair market value of our common stock on the date of grant.
(3)	Mr. Bellinger became our chief operating officer on May 2, 2005 and president on November 10, 2005. On May 2, 2005, Mr. Bellinger received options to purchase a total of 150,000 shares of our common stock at an exercise price per share of $8.00. The option vests at the rate of 25% per year commencing in May 2006 and expires on May 2, 2015.

										Number of shares								Value of unexercised
										underlying unexercised								in-the-money options
										options at fiscal year-end								at fiscal year-end
		Shares
		acquired on
Name		exercise				Value realized				Exercisable				Unexercisable				Exercisable				Unexercisable
Mark Andrews			—				—				10,000				90,000			$	30,000			$	170,000
Keith Bellinger (1)			—				—				—				—				—				—
T. Kelley Spillane			—				—				15,000				50,000			$	45,000			$	140,000
David Phelan			—				—				8,000				32,000			$	37,500			$	96,000
Matthew F. MacFarlane			—				—				12,500				47,500			$	24,000			$	122,500

(1)	Mr. Bellinger became our chief operating officer on May 2, 2005 and president on November 10, 2005. On May 2, 2005, Mr. Bellinger received options to purchase a total of 150,000 shares of our common stock at an exercise price per share of $8.00, which vest at the rate of 25% per year, commencing May 2006. As of the date hereof, Mr. Bellinger has not exercised any of his options.

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	Awards

	Administration

	Share reserve

	Term of the plan

	Stock options

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	Restricted stock

	Deferred stock

	Stock appreciation rights

	Transferability of options and stock purchase rights

	Change in control

	•	all outstanding stock options and SARs will become immediately vested and fully exercisable; and
	•	all restrictions and deferral periods applicable to restricted stock awards and deferred stock awards will lapse and become fully vested.

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	•	the reorganization, merger, consolidation of our company through which our stock is exchanged or converted into cash or property or securities not issued by us;
	•	the sale or disposition of all or substantially all of our property or assets or of more than 35% of our voting stock to any person or group, unless such person or group had a 10% beneficial ownership of the stock when this plan was established (with certain limited exceptions); or
	•	during any period of two consecutive years, a change in the composition of the majority of the board which is not supported by a 2/3 majority of the incumbent directors.

	Tax withholding

	Amendment and termination

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	•	Mr. Andrews, our chairman and chief executive officer and one of our principal stockholders, and his wife, Elizabeth Q. Andrews, purchased $250,000 of our senior notes and were issued a warrant to purchase 6,250 shares of our common stock. In addition, their children, Mark Andrews IV and Elizabeth Andrews, each purchased $125,000 of our senior notes and each were issued a warrant to purchase 3,125 shares of our common stock;
	•	CNF Investments LLC, one of our principal stockholders, purchased $500,000 of our senior notes and was issued a warrant to purchase 12,500 shares of our common stock. Robert Flanagan, one of our directors, is the manager of CNF Investments LLC. In addition, the Flanagan Family Limited Partnership purchased $100,000 of our senior notes and was issued a warrant to purchase 2,500 shares of our common stock. Mr. Flanagan is the general partner of the Flanagan Family Limited Partnership;
	•	Dr. Frost, one of our directors, is the trustee of the Frost Nevada Investment Trust, which purchased $1.0 million of our senior notes and was issued a warrant to purchase 25,000 shares of our common stock;
	•	Lafferty Limited, one of our principal stockholders, purchased $500,000 of our senior notes and was issued a warrant to purchase 12,500 shares of our common stock; and
	•	Matthew MacFarlane, our senior vice president and chief financial officer and his wife, Violeta MacFarlane, purchased $10,000 of our senior notes and were issued a warrant to purchase 250 shares of our common stock.

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	•	each of our directors;
	•	each of our named executive officers (see “Management – Executive compensation”);
	•	each person known by us to beneficially own 5% of our common stock; and
	•	all of our directors and executive officers as a group.

	•	the issuance of 4,089,465 shares of common stock upon the conversion of convertible preferred stock;
	•	the issuance of 1,120,505 shares of common stock upon conversion of the convertible notes; and
	•	the issuance of 146,010 shares of common stock in payment of accrued dividends on our preferred stock through the estimated closing date of this offering.

Shares of

Percentage beneficially owned

common stock

Name and address of

beneficially

Before

After

beneficial owner

owned

offering

offering

Mark Andrews (1)

1,235,696

14.5%

10.7%

Knappogue Corp.

1,182,114

14.0%

10.3%

Mellon HBV SPV LLC (2)

200 Park Avenue, Suite 3300

New York, NY 10166

1,321,429

14.3%

10.8%

Black River Global Credit Fund Ltd. (3)

623 Fifth Avenue, 27th Floor

New York, NY 10022

660,714

7.5%

5.6%

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				Shares of				Percentage beneficially owned
				common stock
Name and address of				beneficially				Before				After
beneficial owner				owned				offering				offering
Lafferty Limited (4)
		c/o Mr. Warren Roiter
		Roiter Zucker
		5-7 Broadhurst Gardens
		Swiss Cottage
		London NW6 3RZ, England			678,898				8.0%				5.9%
CNF Investments (5)
		c/o Clark Enterprises, Inc.
		7500 Old Georgetown Road
		15th Floor
		Bethesda, MD 20814			624,640				7.4%				5.4%
Massachusetts Mutual Life Ins. Company(6)
		1295 State Street
		Springfield, MA 10111			505,096				6.0%				4.4%
Carbery Milk Products Limited
		Ballineen Co. Cork, Ireland (7)			542,080				6.4%				4.7%
Keith A. Bellinger (8)					14,206				*				*
Matthew F. MacFarlane (9)					30,276				*				*
David Phelan (10)					330,838				3.9%				2.9%
T. Kelley Spillane (11)					60,221				*				*
John Beaudette (12)					19,222				*				*
Robert J. Flanagan (13)					641,140				7.6%				5.6%	*
Phillip Frost, MD (14)					522,118				6.2%				4.6%
Colm Leen (15)					12,000				*				*
Richard C. Morrison					—				—				—
Frederick M. R. Smith (16)					45,130				*				*
Kevin P. Tighe					126,274				1.5%				1.1%
All directors and executive officers as
	a group (11 persons) (17)				2,706,283				31.3%				23.2%

*	Less than one percent

(1)	Includes 1,182,114 shares held by Knappogue Corp. Knappogue Corp is controlled by Mr. Andrews and his family. Mr. Andrews disclaims beneficial ownership of these shares, except to the extent of his pecuniary interest. Also includes 30,000 shares of common stock issuable upon exercise of options exercisable within 60 days of January 9, 2006; 12,628 shares held jointly by Mr. Andrews’ with his wife and 6,250 shares issuable upon exercise of warrants held jointly by Mr. Andrews with his wife that are exercisable within 60 days of January 9, 2006. Also includes 3,125 shares issuable upon exercise of warrants held by Mr. Andrews’ wife that are exercisable within 60 days of January 9, 2006. Mr. Andrews disclaims beneficial ownership of these shares. Does not include 70,000 shares of common stock underlying options that are not exercisable within 60 days of January 9, 2006.
(2)	Includes 750,000 shares of common stock issuable upon conversion of $6.0 million principal amount of our 6% convertible notes that are convertible within 60 days of January 9, 2006. Based on information provided to us by Mellon HBV SPV, Mickey Harley and James P. Jenkins,

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	Chief Executive Officer and Portfolio Manager, respectively, of Mellon, exercise voting and investment control over our securities held by Mellon.

(3)	Includes 375,000 shares of common stock issuable upon conversion of $3.0 million principal amount of our 6% convertible notes that are convertible within 60 days of January 9, 2006. Based on information provided to us by Black River Global Credit Fund Ltd., Black River Asset Management LLC and Gary A. Brown, its Senior Managing Director and Senior Portfolio Manager exercise voting and investment control over our securities held by Black River Global Credit Fund, Ltd. Black River Asset Management LLC and Mr. Brown each disclaim beneficial ownership of these shares.
(4)	Includes 12,500 shares of common stock issuable upon exercise of warrants exercisable within 60 days of January 9, 2006. Based on information provided to us by Lafferty Limited, the sole director of Lafferty, Azure Limited, exercises voting and investment control over our securities held by Lafferty. The directors of Azure Limited are Gordon R.L. Snelling and Patricia M. Whitford. Each of Mr. Snelling, Ms. Whitford and Azure Limited disclaim beneficial ownership over our securities held by Lafferty.
(5)	Includes 12,500 shares of common stock issuable upon exercise of warrants exercisable within 60 days of January 9, 2006. Based on information provided to us by CNF Investments LLC, Mr. Flanagan exercises voting and investment control over our securities held by CNF Investments LLC. Mr. Flanagan disclaims beneficial ownership of these shares except to the extent of his pecuniary interest.
(6)	Based on information provided to us by Massachusetts Mutual Life Ins. Company, Babson Capital Management LLC, as investment advisor to Massachusetts Mutual Life Ins. Company, exercises voting and investment control over our securities held by Massachusetts Mutual Life Ins. Company. The executive officers of Babson Capital Management, LLC are Roger Crandall, William F. Glavin, Jr., David Brennan, James E. Masur, Jan F. Jumet, DeAnne DuPont, Bernadette Clegg, Stephen L. Kuhn, Rodney J. Dillman, John E. Deitelbaum, John A. Anderson III, Deborah L. Gatto, Robert Liguori, Kevin M. McClintock and Michael T. Rollings. Babson Capital Management LLC’s board of managers consist of Messrs. Crandall, Glavin, Brennan, Liguori, McClintock and Rollings. Babson Capital Management LLC and each of the named individuals disclaim beneficial ownership over our securities held by Massachusetts Mutual Life Ins. Company.
(7)	Based on information provided to us by Carbery Milk Products Limited, its board of directors by majority vote exercises voting and investment control over our securities that it holds. The directors of Carbery Milk Products Limited are Colm Leen, Dan McSweeney, Joe O’Sullivan, Sam Jennings, Charles McCarthy, Gus O’Brien, Teddy O’Mahony, Patrick Dineen, John O’Dolovan, Peter Dineen and Chris Coleman.
(8)	Does not include 150,000 shares of common stock underlying options that are not exercisable within 60 days of January 9, 2006.
(9)	Includes 2,526 shares of common stock held jointly by Mr. MacFarlane and his wife. Also includes 27,500 shares of common stock issuable upon exercise of options exercisable with 60 days of January 9, 2006 and 250 shares of common stock issuable upon exercise of warrants exercisable within 60 days of January 9, 2006 held jointly by Mr. MacFarlane and his wife. Does not include 32,500 shares of common stock underlying options that are not exercisable within 60 days of January 9, 2006.

(10)	Includes 9,600 shares of common stock issuable upon exercise of options exercisable within 60 days of January 9, 2006. Does not include 14,400 shares of common stock, underlying options that are not exercisable within 60 days of January 9, 2006.

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(11)	Includes 31,000 shares of common stock issuable upon exercise of options exercisable within 60 days of January 9, 2006. Also includes 29,221 shares of common stock held jointly by Mr. Spillane and his wife. Does not include 34,000 shares of common stock underlying options that are not exercisable within 60 days of January 9, 2006.
(12)	Includes 7,222 shares held by BPW LLC, an entity of which Mr. Beaudette is a principal stockholder. Mr. Beaudette disclaims beneficial ownership of these shares except to the extent of his pecuniary interest. Also includes 12,000 shares of common stock issuable upon exercise of options exercisable within 60 days of January 9, 2006.
(13)	Includes 14,000 shares of common stock issuable upon exercise of options exercisable within 60 days of January 9, 2006. Also includes 2,500 shares of common stock issuable upon exercise of warrants exercisable within 60 days of January 9, 2006 that are held by the Flanagan Family Limited Partnership, an entity of which Mr. Flanagan is the general partner. Mr. Flanagan disclaims beneficial ownership of these shares except to the extent of his pecuniary interest. Also includes 612,140 shares held by CNF Investments LLC and 12,500 shares of common stock issuable upon exercise of warrants held by CNF Investments LLC that are exercisable within 60 days as of January 9, 2006. Mr. Flanagan is a manager of CNF Investments LLC. Mr. Flanagan disclaims beneficial ownership of these shares except to the extent of his pecuniary interest.
(14)	Includes 25,000 shares of common stock issuable upon exercise of warrants exercisable within 60 days as of January 9, 2006 that are held by the Frost Nevada Investment Trust, an entity of which Dr. Frost is the trustee. Dr. Frost disclaims beneficial ownership of these shares except to the extent of his pecuniary interest.
(15)	Includes 12,000 shares of common stock issuable upon exercise of options exercisable within 60 days of January 9, 2006.
(16)	Includes 12,000 shares of common stock issuable upon exercise of options exercisable within 60 days of January 9, 2006.
(17)	Includes 138,500 shares of common stock issuable upon exercise of options, and 49,625 shares of common stock issuable upon exercise of warrants, exercisable within 60 days of January 9, 2006. Does not include 286,500 shares of common stock underlying options that are not exercisable within 60 days of January 9, 2006.

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	•	a stockholder who owns 15% or more of our outstanding voting stock (otherwise known as an interested stockholder);
	•	an affiliate of an interested stockholder; or
	•	an associate of an interested stockholder;

	•	our board of directors approves the transaction that made the stockholder an interested stockholder, prior to the date of that transaction;
	•	after the completion of the transaction that resulted in the stockholder becoming an interested stockholder, that stockholder owned at least 85% of our voting stock outstanding at the time the transaction commenced, excluding shares owned by our officers and directors; or
	•	on or subsequent to the date of the transaction, the business combination is approved by our board of directors and authorized at a meeting of our stockholders by an affirmative vote of at least two-thirds of the outstanding voting stock not owned by the interested stockholder.

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	•	beginning on the effective date of the registration statement of which this prospectus forms a part, the shares sold in this offering will be immediately available for sale in the public market;
	•	beginning 180 days after the effective date of the registration statement of which this prospectus forms a part, approximately 4,344,178 shares will be eligible for sale pursuant to Rule 144(k), none of which are held by affiliates; and
	•	beginning 180 days after the effective date of the registration statement of which this prospectus forms a part, approximately 3,752,272 shares will be eligible for sale subject to volume, manner of sale, and other limitations under Rule 144, 3,073,801 of which are held by affiliates.

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	•	1% of the number of shares of common stock then outstanding; or
	•	the average weekly trading volume of the common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale.

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Underwriters			Number of Shares
Oppenheimer & Co. Inc.
ThinkEquity Partners LLC
Ladenburg Thalmann & Co. Inc.
	Total			3,000,000

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		Total, with no				Total, with full
		over-allotment				over-allotment
Underwriting discount to be paid to the underwriters by us for the shares offered		$				$

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	•	the information set forth in this prospectus and otherwise available to the underwriters;
	•	our history and the history of the industry in which we compete;
	•	our past and present financial performance and an assessment of our management;
	•	estimates of our business potential and earnings prospects;
	•	the general condition of the securities market at the time of this offering;
	•	the recent market prices of, and demand for, publicly traded common stock of generally comparable companies; and
	•	other factors deemed relevant by us and the representative.

	•	over-allotment involves sales by the underwriters of shares of our common stock in excess of the number of shares the underwriters are obligated to purchase, which creates a syndicate short position. The short position may be either a “covered” short position or a “naked short” position. In a covered short position, the number of shares over-allotted by an underwriter is not greater than the number of shares that it may purchase in the over-allotment option. In a naked short position, the number of shares involved is greater than the number of shares in the over-allotment option. An underwriter may close out any short position by either exercising its over-

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		allotment option, in whole or in part, or purchasing shares of our common stock in the open market;
	•	syndicate covering transactions involve purchases of shares in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of shares needed to close out such short position, the representative of the underwriters will consider, among other things, the price of the shares available for purchase in the open market as compared to the price at which it may purchase the shares through the over-allotment option. If the underwriters sell more shares than could be covered by the over-allotment option, a naked short position, the position can only be closed out by buying such shares in the open market. A naked short position is more likely to be created if the representative is concerned that there could be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering;
	•	stabilizing transactions consist of various bids for or purchases of common stock made by the underwriters in the open market prior to the completion of the offering, which stabilizing bids may not exceed a specific maximum; and
	•	penalty bids permit the representative to reclaim a selling concession from a syndicate member when the shares originally sold by the syndicate member are purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions.

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		Page
Report of Independent Registered Public Accounting Firm			F-2
Consolidated Balance Sheets as of March 31, 2004 and 2005 and as of September 30, 2005 (unaudited)			F-3
Consolidated Statements of Operations for each of the years in the three year period ended March 31, 2005 and for the six-months ended September 30, 2004 and 2005 (unaudited)			F-4
Consolidated Statements of Changes in Stockholders Equity (Deficiency) for each of the years in the three year period ended March 31, 2005 and for the six-months ended September 30, 2005 (unaudited)			F-5
Consolidated Statements of Cash Flows for each of the years in the three year period ended March 31, 2005 and for the six-months ended September 30, 2004 and 2005 (unaudited)			F-6
Notes to Consolidated Financial Statements			F-7

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																			Pro Forma
															Pro Forma				Adjustment				Pro Forma
			March 31,												Adjustments				Note				Balance Sheet
											September 30,				September 2005				Reference				September 30, 2005
			2004				2005				2005				(Note 1D)				(see below)				(Note 1D)
			(See				(See				(Unaudited)				(Unaudited)								(Unaudited)
			Note 22)				Note 22)				(See
											Note 22)
ASSETS
CURRENT ASSETS
	Cash and cash equivalents		$	3,461,441			$	5,676,398			$	8,526,971			$	22,100,239				A-F,N			$	30,627,210
	Accounts receivable - net of allowance for doubtful accounts of $57,772, $80,847 and $104,306			2,005,258				3,614,816				4,888,552				—								4,888,552
	Due from related parties			—				355,161				905,425				—								905,425
	Inventories			3,696,609				5,496,978				6,901,329				—								6,901,329
	Prepaid expenses and other current assets			371,372				326,736				763,307				—								763,307
	TOTAL CURRENT ASSETS			9,534,680				15,470,089				21,985,584				22,100,239								44,085,823
EQUIPMENT - net				258,446				350,139				345,889				—								345,889
OTHER ASSETS
	Intangible assets - net of accumulated amortization of $303,503, $394,109 and $698,364			6,447,540				14,475,116				14,489,687				—								14,489,687
	Goodwill			11,305,931				11,636,051				11,649,430				—								11,649,430
	Deferred registration costs			—				—				824,856				(824,856	)			G				—
	Restricted cash			—				387,494				361,453				—								361,453
	Other assets			212,235				816,120				1,063,207				(339,823	)			H				723,384
	TOTAL ASSETS		$	27,758,832			$	43,135,009			$	50,720,106			$	20,935,560							$	71,655,666
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIENCY)
CURRENT LIABILITIES
	Current maturities of notes payable and capital leases		$	1,335,361			$	3,032,383			$	1,827,158			$	—							$	1,827,158
	Accounts payable			1,885,034				2,785,179				3,336,358				—								3,336,358
	Accrued expenses and put warrant payable			1,228,094				2,220,483				3,055,356				(926,186	)			F,G				2,129,170
	Due to related parties			347,888				1,610,155				2,161,487				—								2,161,487
	Shareholder notes payable			197,782				156,865				160,628				(160,628	)			A				—
	TOTAL CURRENT LIABILITIES			4,994,159				9,805,065				10,540,987				(1,086,814	)							9,454,173
LONG TERM LIABILITIES
	Senior notes payable			—				4,561,472				4,584,494				—								4,584,494
	Notes payable, less current maturities and obligations under capital leases			595,958				6,678,203				16,619,335				(6,307,224	)			D,I				10,312,111
	Shareholder notes payable			292,066				157,347				132,939				(132,939	)			C				—
	Convertible shareholder notes payable			1,674,171				1,775,627				1,656,299				(1,656,299	)			J				—
	Preferred stock and preferred membership units dividends payable			319,819				681,280				840,044				(840,044	)			E,L				—
	Deferred tax liability			629,444				2,851,666				2,777,591				—								2,777,591
	TOTAL LIABILITIES			8,505,617				26,510,660				37,151,689				(10,023,320	)							27,128,369
REDEEMABLE CONVERTIBLE PREFERRED STOCK
	Redeemable convertible preferred stock Series A, B, C; 4,103,750 shares designated; 2,804,465 shares issued and outstanding at March 31, 2004, 3,741,965 at March 31, 2005 and 4,089,465 at September 30, 2005, liquidation preference of $21,819,824, $29,561,285 and $32,620,049			18,270,714				25,210,297				28,301,151				(28,301,151	)			M				—
COMMITMENTS AND CONTINGENCIES
MINORITY INTERESTS				2,065				3,330,677				3,106,622				—								3,106,622
STOCKHOLDERS’ EQUITY (DEFICIENCY)
	Common stock, $.01 par value, 20,500,000 shares authorized, 3,106,666 shares issued and outstanding at March 31, 2004, March 31, 2005 and September 30, 2005, 11,462,646 pro forma			31,067				31,067				31,067				83,559				I-N				114,626
	Additional paid in capital			18,732,301				18,359,017				18,037,244				59,543,983				I-N				77,581,227
	Accumulated deficiency			(17,740,986	)			(30,112,136	)			(36,045,146	)			(367,511	)			C,H				(36,412,657	)
	Accumulated other comprehensive (loss)/ income			(41,946	)			(194,573	)			137,479				—								137,479
	TOTAL STOCKHOLDERS’ EQUITY (DEFICIENCY)			980,436				(11,916,655	)			(17,839,356	)			59,260,031								41,420,675
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIENCY)			$	27,758,832			$	43,135,009			$	50,720,106			$	20,935,560							$	71,655,666

A.	Repayment in December 2005 of short-term non-interest bearing shareholder notes ($160,628).
B.	Receipt of net proceeds from sale of shares in proposed initial public offering (see Note N below), after payment of issuance costs, including underwriting discount ($1,890,000), underwriters’ nonaccountable expense reimbursement ($125,000) and other issuance costs ($1,950,000, including $824,856 accrued as of September 30, 2005—see Note G below) ($23,035,000).
C.	Payment of balance of non-interest bearing shareholder notes payable, including $27,688 of aggregate imputed interest on the original notes, from net offering proceeds ($160,627).
D.	Payment of interest bearing shareholder notes payable, from net offering proceeds ($307,224).
E.	Payment of dividends accrued through December 1, 2003 on preferred membership units in predecessor company, from net offering proceeds ($204,952).
F.	Payment of accrued interest, from net offering proceeds ($101,330).
G.	Recognition and payment of registration costs accrued as of September 30, 2005 (see Note B above) ($824,856).
H.	Conversion into interest expense of deferred financing costs incurred in connection with the raise of the $6.0 million of 6% convertible notes referred to in Note I below ($339,823).
I.	Conversion of $6.0 million (40%) of the $15 million principal amount of 6% convertible subordinated notes outstanding into shares of common stock (857,143 shares).
J.	Conversion of all €1,374,750 ($1,656,299) principal amount of 5% euro denominated convertible subordinated notes into shares of common stock (263,362 shares).
K.	Accrual of additional preferred stock dividends from October 1, 2005 through the estimated closing date of the offering ($390,211).
L.	Issuance of shares of common stock in payment of all of the dividends accrued on preferred stock through the estimated closing date of the offering (146,010 shares).
M.	Conversion of all Series A convertible preferred stock into 535,715 shares of common stock, conversion of all Series B convertible preferred stock into 200,000 shares of common stock and conversion of all Series C convertible preferred stock into 3,353,750 shares of common stock (4,089,465 shares).
N.	Issuance of 3,000,000 shares of common stock in the proposed initial public offering at assumed offering price of $9.00 per share.

F-3

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																																											Proforma
															Pro Forma								Pro Forma				Six Months Ended								Pro Forma								Six Months
			Years Ended March 31,												Adjustments								Year Ended				September 30,								Adjustments								Ended
															March 31,				Note				March 31,												September 30,				Note				September 30,
			2003				2004				2005				2005 (Note 1D)				Reference				2005				2004				2005				2005 (Note 1D)				Reference				2005
			See				See				See												(Unaudited)				(Unaudited)				(Unaudited)												(Unaudited)
			Note 22				Note 22				Note 22																See				See
																											Note 22				Note 22
Sales, net			$	2,419,062			$	4,826,919			$	12,617,863			$	—							$	12,617,863			$	4,901,017			$	10,080,319			$	—							$	10,080,319
Cost of sales				1,427,486				3,285,467				8,744,859				—								8,744,859				2,960,023				6,181,279				—								6,181,279
Gross profit				991,576				1,541,452				3,873,004				—								3,873,004				1,940,994				3,899,040				—								3,899,040
Selling expense				3,348,279				5,397,919				11,568,997				—								11,568,997				6,105,429				6,517,137				—								6,517,137
General and administrative expense				817,837				1,960,374				3,636,626				—								3,636,626				1,504,505				2,302,354				—								2,302,354
Depreciation and amortization				72,621				173,414				167,086				—								167,086				130,582				378,929				—								378,929
Operating loss				(3,247,161	)			(5,990,255	)			(11,499,705	)			—								(11,499,705	)			(5,799,522	)			(5,299,380	)			—								(5,299,380	)
Other income				441				1,584				123,601				—								123,601				123,090				39,085				—								39,085
Other expense				(3,573	)			(82,437	)			(45,346	)			—								(45,346	)			(34,646	)			(18,607	)			—								(18,607	)
Foreign exchange gain/(loss)				(7,933	)			(84,692	)			120,500				100,504				A				221,004				(338,387	)			(347,684	)			(119,328	)			E				(467,012	)
Interest expense, net				(182,494	)			(303,516	)			(998,096	)			101,456				B,C,D				(896,640	)			(577,817	)			(619,602	)			158,775				F,G,H				(460,827	)
Current credit/(charge) on derivative financial instrument				9,482				26,493				(76,825	)			—								(76,825	)			5,524				15,047				—								15,047
Income tax benefit				—				—				—				—								—				—				74,076				—								74,076
Minority interests				—				35,339				4,721				—								4,721				2,065				224,055				—								224,055
Net loss				(3,431,238	)			(6,397,484	)			(12,371,150	)			201,960								(12,169,190	)			(6,619,693	)			(5,933,010	)			39,447								(5,893,563	)
Preferred stock and preferred membership unit dividends				14,960				761,116				1,252,118				(525,605	)							726,513				619,640				691,616				(202,579	)			I,J				489,037
Net loss attributable to common stockholders			$	(3,446,198	)		$	(7,158,600	)		$	(13,623,268	)		$	727,565							$	(12,895,703	)		$	(7,239,333	)		$	(6,624,626	)		$	242,026							$	(6,382,600	)
Net loss attributable to common stockholders per common share
	Basic		$	(1.87	)		$	(3.20	)		$	(4.39	)		$	(0.20	)						$	(1.52	)		$	(2.33	)		$	(2.13	)		$	(0.12	)						$	(0.75	)
	Diluted		$	(1.87	)		$	(3.20	)		$	(4.39	)		$	(0.20	)						$	(1.52	)		$	(2.33	)		$	(2.13	)		$	(0.12	)						$	(0.75	)
Weighted average shares used in computation
	Basic			1,840,602				2,236,739				3,106,666				5,355,980								8,462,646				3,106,666				3,106,666				5,355,980								8,462,646
	Diluted			1,840,602				2,236,739				3,106,666				5,355,980								8,462,646				3,106,666				3,106,666				5,355,980								8,462,646

A.	To reverse interest expense recorded on euro denominated convertible notes for the year ended March 31, 2005—$101,456.
B.	To reverse loss on foreign exchange recorded on euro denominated convertible notes for the year ended March 31, 2005—$86,557.
C.	To reverse interest expense recorded on $6,000,000 principal amount of the 6% convertible notes for the year ended March 31, 2005—$10,000.
D.	To reverse amortization of deferred financing costs incurred in connection with raise of the $6,000,000 6% convertible notes for the year ended March 31, 2005—$3,947.
E.	To reverse loss on foreign exchange recorded on euro denominated convertible notes for the six months ended September 30, 2005—($119,328).
F.	To reverse interest expense recorded on euro denominated convertible notes for the six months ended September 30, 2005—$42,632.
G.	To reverse interest expense recorded on $6,000,000 principal amount of the 6% convertible notes for the six months ended September 30, 2005—$90,000.
H.	To reverse amortization of deferred financing costs incurred in connection with raise of $6,000,000 of 6% convertible notes for the six months ended September 30, 2005—$26,143.
I.	Adjusted for additional dividend accrual of 51,633 shares for period October 1 through the estimated closing date of the offering and conversion to common stock at the estimated closing date of the offering.
J.	Adjusted for deemed dividends on Series C preferred stock.

F-4

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Table of Contents

																											Accumulated				Total
			Membership Interests								Common Stock								Additional								Other				Stockholders’
																			Paid in				Accumulated				Comprehensive				Equity
			Shares				Amount				Shares				Amount				Capital				Deficiency				Income/(Loss)				(Deficiency)
BALANCE, MARCH 31, 2002				325,000			$	8,900,000															$	(7,912,264	)						$	987,736
Net loss																								(3,431,238	)							(3,431,238	)
Issuance of membership interests, net				75,000				2,109,040																								2,109,040
Conversion of common shares to Series B preferred shares				(40,000	)			(1,086,339	)																							(1,086,339	)
Accrued preferred membership unit dividends																			$	(14,960	)											(14,960	)
BALANCE, MARCH 31, 2003				360,000				9,922,701												(14,960	)			(11,343,502	)			—				(1,435,761	)
Comprehensive loss
	Net loss																							(6,397,484	)							(6,397,484	)
	Foreign currency translation adjustment																										$	(41,946	)			(41,946	)
Total comprehensive loss																																(6,439,430	)
Exchange of LLC membership interests for common shares and 1-for-5 stock split				(360,000	)			(9,922,701	)			1,800,000			$	18,000				9,904,701												–
Warrants issued in connection with business acquisition																				9,500												9,500
Issuance of common shares in connection with business acquisition												1,306,666				13,067				7,826,933												7,840,000
Value ascribed to warrants issued in connection with redeemable preferred stock																				253,070												253,070
Adjustment for change in fair value of Series C preferred stock																				1,261,103												1,261,103
Accrued preferred stock and preferred membership unit dividends																				(508,046	)											(508,046	)
BALANCE, MARCH 31, 2004				—				—				3,106,666				31,067				18,732,301				(17,740,986	)			(41,946	)			980,436
Comprehensive loss
	Net loss																							(12,371,150	)							(12,371,150	)
	Foreign currency translation adjustment																											(152,627	)			(152,627	)
Total comprehensive loss																																(12,523,777	)
Warrants issued in connection with senior notes																				129,195												129,195
Imputed interest on note payable in connection with acquisition of intangible assets																				126,152												126,152
Value ascribed to warrants issued in connection with redeemable preferred stock																				164,144												164,144
Acquisition of minority interests																				(2,065	)											(2,065	)
Adjustment for change in fair value of Series C preferred stock																				297,264												297,264
Accrued preferred stock dividends																				(1,087,974	)											(1,087,974	)
BALANCE, MARCH 31, 2005				—				—				3,106,666				31,067				18,359,017				(30,112,136	)			(194,573	)			(11,916,625	)
Comprehensive loss
	Net loss																							(5,933,010	)							(5,933,010	)
	Foreign currency translation adjustment																											332,052				332,052
Total comprehensive loss																																(5,600,958	)
Vesting of stock options as compensation																				23,867												23,867
Value ascribed to warrants issued in connection with distribution agreement																				220,000												220,000
Value ascribed to warrants issued in connection with redeemable preferred stock																				43,815												43,815
Adjustment for change in fair value of Series C preferred stock																				38,346												38,346
Accrued preferred stock dividends																				(647,801	)											(647,801	)
BALANCE, SEPTEMBER 30, 2005 (unaudited)				—			$	—				3,106,666			$	31,067			$	18,037,244			$	(36,045,146	)		$	137,479			$	(17,839,356	)

F-5

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																	Six Months Ended
					Years Ended March 31,												September 30,
					2003				2004				2005				2004				2005
																	(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
	Net loss				$	(3,431,238	)		$	(6,397,484	)		$	(12,371,150	)		$	(6,619,693	)		$	(5,933,010	)
			Adjustments to reconcile net loss to net cash used in operating activities
			Depreciation and amortization			72,621				173,414				167,086				130,582				378,929
			Minority interest in net loss of consolidated subsidiary			–				(35,339	)			(4,721	)			(2,065	)			(224,055	)
			Loss on disposal of fixed assets			–				138,249				8,316				29,194				5,195
			Write-off of deferred financing costs			89,796				94,098				387,698				538,757				228,569
			Current (credit)/charge on derivative financial instrument			(9,482	)			(26,493	)			76,825				(5,524	)			(15,047	)
			Deferred tax benefit			–				–				–				–				(74,075	)
			Effect of changes in foreign currency rate			–				27,706				118,476				36,928				(194,159	)
			Changes in operations, assets and liabilities, net of effects of business acquisition in 2004
			Increase in accounts receivable			(147,103	)			1,574,553				(1,775,404	)			(1,021,103	)			(886,383	)
			Increase in due from related parties - GXB			–				–				(355,161	)			(5,111	)			(551,049	)
			Increase in inventory			(444,491	)			(25,871	)			(1,569,612	)			(1,612,109	)			(1,706,196	)
			Decrease/(increase) in prepaid expenses and supplies			11,345				35,416				51,615				62,049				(446,094	)
			Increase in deferred registration costs			–				–				–				–				(824,856	)
			Increase in other assets			(145,582	)			(85,678	)			(878,568	)			(204,334	)			(391,591	)
			Increase/(decrease) in accounts payable and accrued expenses and put warrant payable			331,479				(245,265	)			1,572,920				2,019,492				1,744,724
			(Decrease)/increase in due to related parties			–				(306,859	)			1,241,179				409,987				579,245
			Decrease in brand acquisition payable			(159,911	)			(255,879	)			–				–				–
	Total adjustments					(401,328	)			1,062,052				(959,351	)			376,743				(2,376,843	)
NET CASH USED IN OPERATING ACTIVITIES						(3,832,566	)			(5,335,432	)			(13,330,501	)			(6,242,950	)			(8,309,853	)
CASH FLOWS FROM INVESTING ACTIVITIES
	Acquisition of property and equipment					(11,439	)			(47,443	)			(165,725	)			(66,264	)			(83,349	)
	Acquisition of intangible assets					(9,626	)			(8,269	)			(25,988	)			(17,171	)			(67,359	)
	Business acquisition - net of cash acquired					–				(6,667,105	)			(406,116	)			(412,739	)			(13,379	)
NET CASH USED IN INVESTING ACTIVITIES						(21,065	)			(6,722,817	)			(597,829	)			(496,174	)			(164,087	)
CASH FLOWS FROM FINANCING ACTIVITIES
	Repayment of notes payable					(3,190,394	)			(7,634,862	)			(6,694,880	)			(7,795,116	)			(7,588,923	)
	Proceeds from notes payable and warrants					4,070,418				5,556,725				16,421,697				12,633,688				16,232,554
	Payments of obligations under capital leases					–				(211,706	)			(1,823	)			–				(2,001	)
	Increase in restricted cash					–				–				(377,828	)			–				–
	Issuance of redeemable convertible preferred stock and warrants					3,249,170				21,500,005				7,500,000				–				2,900,000
	Payments for costs of stock issuances					(209,546	)			(3,935,228	)			(705,522	)			(126,860	)			(216,023	)
NET CASH PROVIDED BY FINANCING ACTIVITIES						3,919,648				15,274,934				16,141,644				4,711,712				11,325,607
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS						66,017				3,216,685				2,213,314				(2,027,412	)			2,851,667
EFFECTS OF FOREIGN CURRENCY TRANSLATION						–				8,868				1,643				(81	)			(1,094	)
CASH AND CASH EQUIVALENTS - BEGINNING						169,871				235,888				3,461,441				3,461,441				5,676,398
CASH AND CASH EQUIVALENTS - ENDING					$	235,888			$	3,461,441			$	5,676,398			$	1,433,948			$	8,526,971
SUPPLEMENTAL DISCLOSURES
	Schedule of non-cash investing and financing activities
		Acquisition of intangible assets			$	–			$	–			$	(8,051,555	)		$	–			$	–
		Note payable - intangible assets			$	–			$	–			$	2,500,000			$	–			$	–
		Value ascribed to minority interests			$	–			$	–			$	3,329,333			$	–			$	–
		Value ascribed to deferred tax liability on intangible assets			$	–			$	–			$	2,222,222			$	–			$	–
		Acquisition of property and equipment			$	–			$	–			$	(17,821	)		$	–			$	–
		Increase in capital leases payable			$	–			$	–			$	17,821			$	–			$	–
		Reduction in cost of business acquisition			$	–			$	–			$	(120,000	)		$	–			$	–
		Surrender of redeemable convertible preferred			$	–			$	–			$	120,000			$	–			$	–
		Asset based loan			$	(282,295	)		$	–			$	–			$	–			$	–
		Fair value of put warrants issued in connection with asset based loan			$	282,295			$	–			$	–			$	–			$	–
		Senior notes			$	–			$	–			$	(129,194	)		$	(89,001	)		$	–
		Fair value of put warrants issued in connection with senior notes - net			$	–			$	–			$	129,194			$	89,001			$	–
		Investment in subsidiary			$	–			$	(9,824,710	)		$	–			$	–			$	–
		Issuance of common stock in business acquisition			$	–			$	7,840,000			$	–			$	–			$	–
		Debt issued in business acquisition			$	–			$	1,986,710			$	–			$	–			$	–
	Interest paid				$	92,700			$	139,056			$	343,236			$	80,147			$	490,351
	Income taxes paid				$	–			$	–			$	–			$	–			$	–

F-6

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NOTE 1 -	ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A.		Description of Business and Business Combination - Castle Brands Inc. is the successor to Great Spirits Company, LLC, a Delaware limited liability company (“GSC”). GSC was formed in February 1998. In May 2003, Great Spirits (Ireland) Limited, a wholly owned subsidiary of GSC, began operations in Ireland to market GSC’s products internationally. In July 2003, GSRWB, Inc. (renamed Castle Brands Inc.) and its wholly owned subsidiary, Great Spirits Corp. (renamed Castle Brands (USA) Corp.) (“CB-USA”), were formed under the laws of Delaware in contemplation of a pending acquisition. On December 1, 2003, Castle Brands Inc. acquired The Roaring Water Bay Spirits Group Limited and The Roaring Water Bay Spirits Marketing and Sales Company Limited and their related entities (collectively, “Roaring Water Bay”). The acquisition has been accounted for under purchase accounting. Simultaneously, GSC was merged into CB-USA, and Castle Brands Inc. issued stock to GSC’s shareholders in exchange for their shares of GSC. Subsequent to the acquisition, The Roaring Water Bay Spirits Group Limited was renamed Castle Brands Spirits Group Limited (“CB Ireland”) and The Roaring Water Bay Spirits Marketing and Sales Company Limited was renamed Castle Brands Spirits Marketing and Sales Company Limited (“CB-UK”).
		In February 2005, Castle Brands Inc. acquired 60% of the shares of Gosling-Castle Partners Inc. (“GCP”), which holds the worldwide distribution rights (excluding Bermuda) to Gosling’s rum and related products.
		As used herein, the “Company” refers to Castle Brands Inc. and, where appropriate, it also refers collectively to Castle Brands Inc. and its direct and indirect subsidiaries, including its majority owned GCP subsidiary.
		The Company has experienced recurring operating losses and negative cash flows from operations and has a stockholders’ deficiency of $11,916,655 as of March 31, 2005 and $17,839,356 as of September 30, 2005. The Company believes that it will be able to fund its operational cash requirements through a combination of sales of convertible notes and cash on hand through September 30, 2006.
B.		Principles of Consolidation - The March 31, 2004 and 2005 consolidated financial statements include the accounts of Castle Brands Inc., its wholly-owned subsidiaries, CB-USA and its wholly-owned foreign subsidiaries, CB Ireland and CB-UK, and its majority owned Gosling-Castle Partners, Inc. venture with adjustments for minority interest. The accounts of the subsidiaries have been included as of the date of acquisition. All significant intercompany transactions and balances have been eliminated.
C.		Unaudited Interim Information - The consolidated financial statements for the six months ended September 30, 2004 and 2005 are unaudited. The unaudited financial statements have been prepared on the same basis as the audited financial statements and, in the opinion of management, include all adjustments necessary for fair presentation, consisting of normal recurring adjustments. The results for the six months ended September 30, 2005 are not necessarily indicative of the results to be expected for the year ending March 31, 2006, or for any other interim period.

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D.		Pro Forma Consolidated Balance Sheet and Consolidated Statements of Operations (unaudited) - The Company’s Board of Directors has authorized the filing of a registration statement with the Securities and Exchange Commission to register 3,000,000 shares of its common stock in an initial public offering. A pro forma consolidated balance sheet as of September 30, 2005 and pro forma consolidated statements of operations for the year ended March 31, 2005 and the six months ended September 30, 2005 are presented in order to present the pro forma impact of certain transactions which are expected to take place upon the consummation of the offering as if these transactions had occurred at the start of the Company’s most recent fiscal year end.
		The pro forma balance sheet information gives effect to the following transactions that are expected to occur at the time of the offering:
		•      The conversion of all of the Company’s Series A convertible preferred stock into 535,715 shares of its common stock;
		•      The conversion of all of the Company’s Series B convertible preferred stock into 200,000 shares of its common stock;
		•      The conversion of all of the Company’s Series C convertible preferred stock into 3,353,750 shares of its common stock;
		•      Issuance of 146,010 shares of common stock in payment of all of the dividends accrued on its preferred stock through the estimated closing date of the offering;
		•      The conversion of all €1,374,750 ($1,656,299) principal amount of the Company’s 5% euro denominated convertible subordinated notes into 263,362 shares of its common stock;
		•      The conversion of $6.0 million of the $15.0 million principal amount of the Company’s 6% convertible notes into 857,143 shares of its common stock;
		•      The conversion into interest expense of deferred financing costs incurred in connection with the $6.0 million of 6% convertible notes referred to above;
		•      The sale of 3,000,000 shares of common stock in the proposed initial public offering at an assumed public offering price of $9.00 per share;
		•      The receipt of the estimated net proceeds from such sale, net of estimated underwriting discounts and commissions and other expenses of this offering;
		•      The repayment of €255,000 ($307,244) of subordinated notes;
		•      The payment of $101,330 of accrued interest; and
		•      The payment of $204,952 of dividends accrued on the preferred membership units of the predecessor company, Great Spirits, LLC, through December 1, 2003.

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NOTE 1 -	ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

		The pro forma consolidated statements of operations reflect the following adjustments resulting from the transactions referred to above:
		•      The reversal of previously recorded interest expense and corresponding changes in foreign exchange gain/(loss) relating to the 5% euro denominated convertible notes and 6% convertible notes that are converting into common stock upon the offering;
		•      The elimination of preferred stock dividends for all of the Company’s preferred stock which is converting into common stock upon the offering.
		The pro forma consolidated statements of operations do not include an adjustment to expense deferred financing charges. There is no pro forma effect on income tax benefit as a result of the above adjustments.
E.		Organization and Operations - The Company is principally engaged in the manufacture, marketing and sale of fine spirit brands of vodka, Irish whiskey, rums and liqueurs (the “products”) in the United States, Europe, and the Caribbean.
F.		Cash and cash equivalents - The Company considers all highly liquid instruments with a maturity at date of acquisition of three months or less to be cash and cash equivalents.
G.		Trade accounts receivable - The Company records trade accounts receivable at net realizable value. This value includes an appropriate allowance for estimated uncollectible accounts to reflect any loss anticipated on the trade accounts receivable balances and charged to the provision for doubtful accounts. The Company calculates this allowance based on its history of write-offs, level of past due accounts based on contractual terms of the receivables and its relationships with and economic status of the Company’s customers.
H.		Revenue Recognition - Revenue from product sales is recognized when the product is shipped to a customer (generally a distributor or a control state), title and risk of loss has passed to the customer in accordance with the terms of sale (FOB shipping point or FOB destination), and collection is reasonably assured. Revenue is not recognized on shipments to control states until such time as product is sold through to the retail channel.
I.		Inventories - Inventories, which consist of distilled spirits, packaging and finished goods, is valued at the lower of cost or market, using the weighted average 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 analyses and assumptions including, but not limited to, historical usage, future demand and market requirements. Reductions to the carrying value of inventories are recorded in cost of goods sold.
J.		Equipment - Equipment consists of office equipment, computers and software, transportation equipment, and furniture and fixtures. When assets are retired or otherwise disposed of, the cost and related depreciation is removed from the accounts, and any resulting gain

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NOTE 1 -	ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

		or loss is recognized in the statement of operations. Equipment is depreciated using the straight-line method over the estimated useful lives of the assets ranging from three to five years.
K.		Goodwill and other intangible assets - Goodwill represents the excess of purchase price and related costs over the value assigned to the net tangible and identifiable intangible assets of businesses acquired. As of March 31, 2004 and 2005 and September 30, 2005, goodwill and other indefinite lived intangible assets that arose from acquisitions was $11.3 million and $11.6 million and $11.6 million, respectively. On April 1, 2004, the Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets.” Under SFAS No. 142, goodwill and other intangible assets with indefinite lives are not amortized, but instead are tested for impairment annually, or more frequently if certain circumstances indicate a possible impairment may exist. The Company evaluates the recoverability of goodwill and indefinite lived intangible assets using a two-step impairment test approach at the reporting unit level. In the first step the fair value for the reporting unit is compared to its book value including goodwill. In the case that the fair value of the reporting unit is less than the book value, a second step is performed which compares the implied fair value of the reporting unit’s goodwill to the book value of the goodwill. The fair value for the goodwill is determined based on the difference between the fair value of the reporting unit and the net fair value of the identifiable assets and liabilities of such reporting unit. If the fair value of the goodwill is less than the book value, the difference is recognized as an impairment. SFAS No. 142 also requires that intangible assets with estimable useful lives be amortized over their respective estimated useful lives to the estimated residual values and reviewed for impairment in accordance with SFAS No. 144 (see Note 6). The Company performed its impairment assessment on long-lived assets, including intangible assets and goodwill, in accordance with the methods prescribed above. The Company concluded that no impairment existed during the years ended March 31, 2004 and 2005.
L.		Deferred registration costs - The costs associated with the Company’s proposed initial public offering have been recorded as deferred registration costs and will reduce additional paid-in capital if the offering is effective. Should the offering not be consummated, the deferred registration costs will be recognized as a charge to operations.
M.		Shipping and handling - The Company reflects as inventory costs freight-in and related external handling charges relating to the purchase of raw materials and finished goods. These costs are expensed to cost of sales at the time the underlying product is sold. The Company also incurs shipping costs in connection with its various marketing activities, including the shipment of point of sale materials to the Company’s regional sales managers and customers, and the costs of shipping product in connection with its various marketing programs and promotions. These shipping charges are included in selling expense. Shipping charges included in selling expense amounted to $180,500, $234,000,

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NOTE 1 -	ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

		$280,000 and $121,000 and $165,000 for the years ended March 31, 2003, 2004, 2005 and the six months ended September 30, 2004 and 2005, respectively.
N.		Excise taxes and duty - Excise taxes and duty are paid after finished goods are imported into the United States and Great Britain and then transferred out of “bond.” Excise taxes and duty are recorded to inventory as a component of the cost of the underlying finished goods. When the underlying products are sold “ex warehouse” the sales price reflects the taxes paid and the inventoried excise taxes and duties are charged to cost of sales. During the years ended March 31, 2003, 2004, 2005 and the six months ended September 30, 2004 and 2005, the captions for the Company’s revenues and cost of sales included the amounts of excise tax and duties presented in the table below:

														Six Months Ended
		2003				2004				2005				September 30, 2004				September 30, 2005
Revenues Captions		$	472,980			$	650,629			$	1,913,450			$	458,006			$	1,894,760
Cost of Sales Captions		$	472,980			$	650,629			$	1,913,450			$	458,006			$	1,894,760

O.		Distributor charges and promotional goods - The Company incurs charges from its distributors for a variety of transactions and services rendered by the distributor, including product depletions, product samples for various promotional purposes, in-store tastings and training where legal, and local advertising where legal. Such charges are reflected as selling expense as incurred. In addition, for certain of its distributors, the Company has entered into arrangements whereby the purchase of a particular product or products by a distributor is accompanied by a percentage of the sale being composed of promotional goods or as a predetermined discount percentage of dollars off invoice. In such cases, the cost of the promotional goods are charged to cost of sales and dollars off invoice are a reduction to revenue.
P.		Foreign Currency Translation - The functional currency for the Company’s foreign operations is the euro in Ireland and the British pound in the United Kingdom. The translation from the applicable foreign currencies to U.S. dollars is performed for balance sheet accounts using current exchange rates in effect at the balance sheet date and for revenue and expense accounts using a weighted average exchange rate during the period. The resulting translation adjustments are recorded as a component of capital deficiency. Gains or losses resulting from foreign currency transactions are included in other income/expenses.
Q.		Fair Value of Financial Instruments - SFAS No. 107, Disclosures About Fair Value of Financial Instruments, defines the fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties and requires disclosure of the fair value of certain financial instruments. The Company believes that there is no material difference between the fair value and the reported amounts of financial instruments in the balance sheets due to the short term maturity of these instruments, or with respect to the debt, as compared to the current borrowing rates available to the Company.

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NOTE 1 -	ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

R.		Income Taxes - The Company follows SFAS No. 109, Accounting for Income Taxes. Under the asset and liability method of SFAS No. 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. A valuation allowance is provided to the extent a deferred tax asset is not considered recoverable.
S.		Stock Based Awards - The Company accounts for stock-based compensation for its employees, officers and directors using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees”. Under the intrinsic value method, compensation costs for stock options, if any, are measured as the excess of the Company’s estimated value of the Company’s stock at the date of grant over the amount an employee must pay to acquire the stock. This method, which is permitted by SFAS No. 123 “Accounting for Stock Based Compensation”, has not resulted in employee compensation costs for stock options. The Company accounts for stock-based awards to non-employees using a fair value method in accordance with SFAS No. 123.
		Disclosure of pro forma net loss, as if all stock options were accounted for at fair value, is required by SFAS No. 123, under which compensation expense is based upon the fair value of each option at the date of grant using the Black-Scholes or a similar option pricing model. Had compensation expense for employee, officer and director options granted been determined based upon the fair value of the options at the grant date, the results would have been as follows:

				Year ended								Six months ended
				March 31,				March 31,				September 30,				September 30,
				2004				2005				2004				2005
		Net loss attributable to common stockholders, as reported		$	(7,158,600	)		$	(13,623,268	)		$	(7,239,333	)		$	(6,624,626	)
		Stock-based compensation expense determined under fair value method			–				(370,068	)			–				(60,966	)
		Pro forma net loss attributable to common stockholders		$	(7,158,600	)		$	(13,993,336	)		$	(7,239,333	)		$	(6,685,592	)
		Loss per share:
		Basic and diluted - as reported		$	(3.20	)		$	(4.39	)		$	(2.33	)		$	(2.13	)
		Basic and diluted - pro forma		$	(3.20	)		$	(4.50	)		$	(2.33	)		$	(2.15	)

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NOTE 1 -	ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

		FASB Statement 123 (Revision 2004), “Share-Based Payment,” was issued in December 2004 and is effective as of the beginning of the first interim or annual reporting periods that begin after June 15, 2005. The new statement requires all share-based payments to employees to be recognized in the financial statements based on their fair values on the grant date. Such cost is to be recognized over the period during which an employee is required to provide service in exchange for the award, which is usually the vesting period.
		The pro forma disclosures previously permitted under FAS 123 no longer will be an alternative to financial statement recognition. The Company is required to adopt FAS 123(R) beginning April 1, 2006. The Company expects that the adoption of FAS 123(R) will have a material impact on its consolidated results of operations and earnings per share. The Company has not yet determined the method of adoption or the effect of adopting FAS 123(R), and it has not determined whether the adoption will result in amounts that are similar to the current pro forma disclosures required under FAS 123. The Company has not yet determined the impact of FAS 123(R) on its compensation policies or plans, if any.
		The fair value of the stock options granted is estimated at the grant date using the Black Scholes option pricing model with the following weighted average assumptions: expected dividend yield 0.0%; risk free interest rate 4.43%; expected volatility 25%; and expected life of 7.0 years. The weighted average fair value of options granted in fiscal year 2004 and 2005 and for the six months ended September 30, 2005 was $2.17 and $2.69 and $3.05 respectively.
T.		Research and Development Costs - The costs of research, development and product improvement are charged to expense as incurred.
U.		Advertising - Advertising costs are expensed when the advertising first appears in its respective medium. Advertising expense, which is included in selling expense, was $720,183, $1,225,056 and $4,032,061, for the years ended March 31, 2003, 2004 and 2005, respectively, and $2,702,997 and $2,033,030 the six months ended September 30, 2004 and 2005, respectively.
V.		Impairment of Long-Lived Assets - The Company periodically reviews whether changes have occurred that would require revisions to the carrying amounts of its long-lived assets. When the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, an impairment loss is recognized based on the fair value of the asset.
W.		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 of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates are used when accounting for certain

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		items such as in evaluating the annual impairment tests, allowance for doubtful accounts, depreciation, amortization and expense accruals.
X.		Recent Accounting Pronouncements - In December 2004, the FASB issued a revision of SFAS No. 123, “Share-Based Payment,” referred to as SFAS 123(R), which supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees”. This statement focuses primarily on transactions in which an entity obtains employee services in exchange for share-based payments. Under SFAS 123(R), a public entity generally is required to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award, with such cost recognized over the applicable vesting period. In addition, SFAS 123(R) requires an entity to provide certain disclosures in order to assist in understanding the nature of share-based payment transactions and the effects of those transactions on the financial statements. The provisions of SFAS 123(R) are required to be applied as of the beginning of the first interim or annual reporting period of the entity’s first fiscal year that begins after June 15, 2005. As such, we are required to adopt the provisions of SFAS 123(R) at the beginning of the first quarter of fiscal 2007. While we currently disclose the pro-forma earnings effects of our stock-based awards, we are evaluating the impact the implementation guidance and revisions included in SFAS 123(R) will have on our consolidated financial statements.
		In November 2004, the FASB issued SFAS No. 151, “Inventory Costs,” an amendment of ARB No. 43, Chapter 4, referred to as SFAS No. 151. SFAS No. 151 amends Accounting Research Bulletin (“ARB”) No. 43, Chapter 4, “Inventory Pricing,” to clarify the accounting for idle facility expense, freight, handling costs and waste (spoilage). Previously, these costs were recognized as current period expenses when they were considered “so abnormal.” SFAS No. 151 requires those items be recognized as current period charges regardless of whether they meet the “so abnormal” criteria. In addition, SFAS No. 151 clarifies that fixed overhead allocations to inventory costs be based on normal capacity of production facilities. SFAS No. 151 is effective for inventory costs incurred during 2007 and earlier application is permitted. We believe our current accounting policies closely align to the new rules. Accordingly, we do not believe this new standard will have a material impact on our financial statements.
		In March 2004, the FASB issued EITF Issue No. 03-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments,” referred to as EITF 03-1. EITF 03-1 includes new guidance for evaluating and recording impairment losses on debt and equity investments, as well as new disclosure requirements for investments that are deemed to be temporarily impaired. In September 2004, the FASB issued Staff Position EITF 03-1-1, which delays the effective date until additional guidance is issued for the application of the recognition and measurement provisions of EITF 03-1 to investments in securities that are impaired. We do not believe that adoption of EITF 03-1 will have a material impact on our financial position or results of operations.

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NOTE 1 -	ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

		In November 2004, the FASB reached a conclusion with respect to EITF Issue No. 04-8, “The Effect of Contingently Convertible Instruments on Diluted Earnings per Share,” referred to as EITF 04-8. EITF 04-8 requires companies to account for contingently convertible debt using the “if converted” method set forth in SFAS No. 128 “Earnings per Share,” for calculating diluted earnings per share. Contingently convertible debt is to be included in diluted earnings per share as if the debt had been converted into common stock. The provisions of EITF 04-8 are required to be applied to reporting periods ending after December 15, 2004. Following the completion of this offering, we will no longer have contingently convertible debt instruments and EITF 04-8 will have no impact on the calculation of our diluted earnings per share.

		Basic net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per common share is computed giving effect to all dilutive potential common shares that were outstanding during the period. Diluted potential common shares consist of incremental shares issuable upon exercise of stock options and warrants, contingent conversion of debentures and preferred stock outstanding. In computing diluted net loss per share for fiscal 2004 and 2005, no adjustment has been made to the weighted average outstanding common shares as the assumed exercise of outstanding options and warrants and the assumed conversion of preferred stock and convertible debentures is anti-dilutive.
		Potential common shares not included in calculating diluted net loss per share are as follows:

		March 31,				March 31,				September 30,				September 30,
		2004				2005				2004				2005
Stock options			563,000				745,500				639,000				915,500
Stock warrants			207,118				390,493				321,118				598,618
Convertible debentures			263,215				888,375				263,362				2,245,505
Convertible preferred stock			2,804,465				3,741,965				2,804,465				4,089,465
Total			3,837,798				5,766,333				4,027,945				7,849,088

		For the year ended March 31, 2003, the Company had issued 100,000 warrants for membership interests in GSC to a lender.

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		March 31,
										September 30,
		2004				2005				2005
Inventories consist of:
Raw materials		$	903,320			$	1,154,942			$	1,475,649
Finished goods			2,793,289				4,342,036				5,425,680
Total		$	3,696,609			$	5,496,978			$	6,901,329

		Inventories are stated at the lower of average cost or market. 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 analyses and assumptions including, but not limited to, historical usage, future demand and market requirements. Reductions to the carrying value of inventories are recorded in cost of goods sold.

		Investment in Gosling-Castle Partners Inc.
		In February 2005, the Company entered into a stock subscription agreement for 60% of the stock of Gosling Partners Inc., whose name was subsequently changed to Gosling-Castle Partners Inc. (“GCP”). GCP had no operations prior to the Company entering into the stock subscription agreement. The original shareholders of GCP were E. Malcolm Gosling and Gosling’s Limited and after the Company’s purchase, ownership interests of the three parties in the venture were 60%, 20% and 20%, respectively. CB-USA had previously entered into an exclusive distribution agreement with Gosling’s Export (Bermuda) Limited (“GXB”) to distribute Gosling’s rum in the United States. Gosling Partners Inc. had originally been formed to acquire, and had acquired prior to the Company’s investment in GCP, the following:

	•	global distribution rights (excluding Bermuda) to the Gosling’s portfolio of products;
	•	appointment as the exclusive authorized global exporter for the GXB product line;
	•	an exclusive license for the use of GXB’s global trademarks for its brand portfolio;

		The Company agreed to pay GCP $5,000,000 for its 60% interest in the joint venture: $100,000 in cash and issuance of a promissory note of $4,900,000 to GCP for the balance owed. This promissory note is payable in five installments as follows:

	$1,025,000 on April 1, 2005
	$1,125,000 on October 1, 2005
	$1,000,000 on April 1, 2006
	$1,000,000 on October 1, 2006; and
	$750,000 on April 1, 2007

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		Effective with the payment of the second installment on October 1, 2005, this promissory note accrues interest on the unpaid principal amount at the rate of 4% per annum until the note is repaid in full.
		The global distribution agreement commenced on April 1, 2005 and has a 15 year term. It is renewable for additional 15 year terms as long as GCP meets certain case sale targets during the initial term as set forth in the agreement. (See Note 19 – Gosling-Castle Partners Inc. Export Agreement with Gosling’s Export (Bermuda) Limited). The Company ascribed the entire purchase of $5,000,000 to the Gosling global distribution agreement described above. In conjunction with this transaction the Company recorded a deferred tax liability of $2,222,222 to reflect the fact that the distribution agreement has a zero basis for income tax purposes (See Note 14). This deferred tax liability was recorded as an increase to the value of the distribution agreement.
		Acquisition of CB Ireland and CB-UK
		On December 1, 2003, the Company acquired CB Ireland, including 95% of its operating subsidiary Castle Brands Spirits Company Limited, and CB-UK, including its operating subsidiary, Castle Brands Spirits Company (GB) Limited. CB Ireland is the producer and primary marketer of Boru Vodka, as well as Clontarf Irish Whiskey and several Irish cream liqueurs. CB-UK and its subsidiaries operate primarily in Great Britain. As part of the acquisition, in May 2004, CB Ireland purchased the remaining shares of its operating subsidiary from minority shareholders pursuant to the terms of a put option contained within its 1999 Business Expansion Scheme (“BES 1”). The total cost of this BES 1 share purchase of €317,491 was offset, in part, by the agreement of the four former shareholders of CB Ireland’s operating subsidiary to contribute a total of €100,000 in the form of 15,000 shares of Castle Brands Inc. Series C preferred stock to defray the cost of this transaction to the Company which was recorded to goodwill. The aggregate net purchase price of the acquisition (as translated) at the effective exchange rates was as follows:

Cash		$	6,097,079
1,306,666 shares of the Company’s Common Stock			7,840,000
Convertible subordinated notes			1,650,800
Other notes payable-net of imputed interest			245,550
Deferred tax liability ascribed to intangible assets — indefinite life			629,444
Acquisition costs			1,061,742
Total		$	17,524,615

		Assets were valued at their respective estimated fair values at the acquisition date. The valuation of identifiable intangible assets and goodwill acquired was based on management’s estimates supported by an independent third party consultant valuation report. The identifiable intangible assets include trade names, formulations, patents and distribution agreements. Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired.

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		The following table summarizes the purchase price allocation for the acquisition of RWB:

Description		Amount
Net tangible assets acquired		$	210,185
Identifiable intangible assets (definite life)			825,000
Identifiable intangible assets (indefinite life)			4,840,000
Goodwill			11,649,430
Total consideration		$	17,524,615

		At the time of the acquisition, the net tangible assets acquired included cash, accounts receivable, inventory, manufacturing and transportation equipment, computers and furniture and fixtures accounts payable and contain other assumed liabilities. Identifiable intangible assets refer to the Boru and Clontarf Trinity design which is amortized over the fifteen year life of the patent which is deemed the economic life of the asset. Those identifiable intangible assets with indefinite lives include the trade names and formulations of the Company’s various products, together with the Company’s relationship with its distributor in Dublin and its supply relationship with the distiller of its vodka.
		In connection with the acquisition, the Company recorded $629,444 as a deferred tax liability representing the income tax effect of the difference between the book and tax basis of the tangible and intangible assets acquired. The Company allocated the fair value of the purchase price to the tangible and intangible assets, and the additional value ascribed above those fair values was recorded as goodwill.
		The changes in the carrying amount of goodwill for the years ended March 31, 2004 and 2005 were as follows:

			Amount
Balance as of March 31, 2003			$	–
	Acquisition			10,676,487
	Deferred tax liability			629,444
Balance as of March 31, 2004				11,305,931
	Acquisition of minority interests			330,120
Balance as of March 31, 2005				11,636,051
	Additional acquisition expenses			13,379
Balance as of September 30, 2005			$	11,649,430

		The results of CB Ireland and CB-UK have been included in the consolidated financial statements since the date of acquisition. Unaudited pro forma results of operations for the

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		year ended March 31, 2004 are included below. Such pro forma information assumes that the acquisition had occurred as of April 1, 2003.

			Year ended
			March 31, 2004
Net sales			$	8,637,596
Gross profit			$	3,513,800
Net loss			$	(6,529,718	)
Net loss per common share –
	basic and diluted		$	(2.92	)

		These pro forma results have been prepared for comparative purposes only and are not necessarily indicative of the results of operations that actually would have resulted had the acquisition been in effect at the beginning of the period or of future results.

		Equipment consists of the following:

		March 31,				March 31,				September 30,
		2004				2005				2005
Equipment and software		$	465,049			$	670,927			$	697,036
Transportation equipment			42,933				–				–
Furniture and fixtures			26,032				27,942				32,912
Leasehold improvements			–				4,733				4,733
			534,014				703,602				734,681
Less: accumulated depreciation			275,568				353,463				388,792
		$	258,446			$	350,139			$	345,889

		Depreciation expense for the years ended March 31, 2003, 2004, and 2005 and for the six months ended September 30, 2004 and 2005 totaled $6,904, $47,771, $81,724, and $65,518 and $73,411, respectively.

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NOTE 6 -	INTANGIBLE ASSETS

		Intangible assets consist of the following:

			March 31,				March 31,				September 30,
			2004				2005				2005
Definite life
Brands			$	186,978			$	188,449			$	188,448
Trademarks				133,828				198,984				269,330
Rights				765,238				8,816,792				9,036,794
Patents				825,000				825,000				825,000
Other				—				—				28,480
				1,911,044				10,029,225				10,348,052
Less: accumulated amortization				303,504				394,109				698,365
Net				1,607,540				9,635,116				9,649,687
Other identifiable intangible assets — indefinite life
	Trade names and formulations			3,692,000				3,692,000				3,692,000
	Distribution relationship			416,000				416,000				416,000
	Supply relationship			732,000				732,000				732,000
				4,840,000				4,840,000				4,840,000
			$	6,447,540			$	14,475,116			$	14,489,687

		Accumulated amortization consists of the following:

		March 31,				March 31,				September 30,
		2004				2005				2005
Brands		$	76,254			$	87,585			$	95,049
Trademarks			86,388				110,662				110,306
Rights			122,529				122,529				392,177
Patents			18,333				73,333				100,833
Accumulated amortization		$	303,504			$	394,109			$	698,365

		Amortization expense for the years ended March 31, 2003, 2004, and 2005 and the six months ended September 30, 2004 and 2005 totaled $65,717, $125,643 and $85,362, $65,064 and $305,518 respectively.

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NOTE 6 -	INTANGIBLE ASSETS (CONT’D)

		Estimated aggregate amortization expense for each of the five succeeding fiscal years is as follows:

For the years ending
March 31,		Amount
2006		$	623,414
2007			610,438
2008			609,944
2009			609,944
2010			609,944
Total		$	3,063,684

		The Company periodically reviews whether changes have occurred that would require revisions to the carrying amounts of long-lived assets. When the sum of expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, an impairment loss is recognized based on the fair value of the asset.

		In connection with the credit facilities as described in notes 9 and 10, personal guarantees of the two former managing directors of CB Ireland and CB-UK in the amount of €158,717 were cancelled and replaced with a deposit of cash collateral of €300,000, or $387,494 and $361,453 (as translated at the exchange rate in effect on March 31, 2005 and September 30, 2005, respectively).

NOTE 8 -	OVERDRAFT ACCOUNTS

		CB Ireland and CB-UK maintain overdraft coverages with a financial institution in Ireland of up to €400,000 ($508,000) and £20,000 ($37,600), respectively. Overdraft balances included in notes payable for the periods presented totalled $61,220, $742,589 and $437,651 at March 31, 2004, 2005 and September 30, 2005, respectively.

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				March 31,				March 31,				September 30,
				2004				2005				2005
		Notes payable consist of the following:
		The Company has arranged revolving credit facilities aggregating approximately €1,412,303 ($1,824,131) with a lender for working capital purposes. The facilities, which are payable on demand and renew annually subject to certain provisions, call for interest at rates ranging from prime plus 3% to 7.85%. The Company has also secured a €190,000 ($245,404) term note with the same lender. The note carries an interest rate of 5.2% and calls for monthly payments of principal and interest of €6,377 through 2006.		$	780,626			$	1,813,592			$	1,235,839
		The Company has arranged revolving credit facilities aggregating approximately £242,000 ($454,500). The facilities, which are payable on demand and renew annually subject to certain provisions, call for interest at rates ranging from prime plus 2% to prime plus 2.25%.			209,245				171,149				94,108
		At March 31, 2004, the Company maintained a revolving credit facility with a lender which outstanding balance was paid, together with a loan termination fee of $60,000 and accrued interest and fees of $4,176. The line terminated simultaneously with the issuance of the senior notes in June 2004.			630,909				–				–
		In connection with the Company’s acquisition of CB Ireland, the Company issued to the former minority shareholders of CB Ireland €255,000 ($329,358) of subordinated notes, which mature on July 11, 2007. The notes accrue interest at the rate of 5.7% per annum with the aggregate interest payable being limited to €51,000 ($66,000). The total principal and interest on the notes are due at maturity.			310,539				329,358				307,224

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				March 31,				March 31,				September 30,
				2004				2005				2005
		Notes payable consist of the following:
		On June 9, September 28 and October 13, 2004, the Company issued $3,555,000, $1,005,000 and $100,000, respectively, of senior notes collateralized by accounts receivable and inventories of CB-USA. As issued, these senior notes bore an interest rate of 8%, payable semi-annually on November 30th and May 31st, and mature on May 31, 2007. Effective August 15, 2005, the terms of these notes were modified with the consent of the note holders to mature on May 31, 2009 in exchange for an interest rate adjustment to 9%. In addition, each holder of $1,000 of senior notes received warrants to purchase 25 shares of the Company’s common shares. At March 31, 2005, there were 116,500 warrants issued and outstanding in conjunction with issuance of senior notes. These warrants have been valued at $129,195 in the aggregate and have been treated as a discount to the notes payable. Interest expense pertaining to this discount is recognized, and the notes payable accreted, over the adjusted term of the notes with a maturity of May 2009.			–				4,561,472				4,584,494

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March 31,

March 31,

September 30,

2004

2005

2005

Notes payable consist of the following:

On March 1 2005, the Company entered into an agreement to issue up to $10,000,000 of subordinated convertible notes to a single investor. As of March 31, 2005, $5,000,000 of convertible notes were issued. In June 2005, the Company issued the remaining $5,000,000 of convertible notes. The notes, which mature five years from the date of issuance, bear interest at the rate of 6% per annum which is payable quarterly. The company has the option for the first two years from the date of issuance to pay interest in kind at the rate of 7.5% per annum. To date, the Company has accrued and paid all interest in cash at the 6% percent rate pursuant to the terms of the note and has the means and intent to continue to do so. The notes may be converted into common stock at $8 per share at any time, and shall be converted at the option of the holder or automatically after the third year from the date of issuance on the 30th consecutive trading day on which the closing price of the common stock is no less than $20 per share. 40% of the notes convert automatically into common stock upon the completion of a public offering with gross proceeds of at least $15,000,000, at a price of $7.00 per share with a discount based on the level of interest savings to the Company. In the event an automatic conversion occurs, the 71,429 incremental shares valued at a minimum of $8.00 per share, will be recorded as an interest charge of $571,432. In addition, should the IPO price per share exceed $8.00 per share, the Company will record an additional interest charge equal to the excess amount over $8.00 per share times the 71,429 incremental shares.

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March 31,

March 31,

September 30,

2004

2005

2005

Notes payable consist of the following:

In July 2005, the Company entered into an agreement with an investor to issue $5,000,000 of subordinated convertible notes. The closing was completed in August 2005. The notes, which mature five years from the date of issuance, bear interest at the rate of 6% per annum. The Company has the option for the first two years from the date of issuance to pay interest in kind at the rate of 7.5% per annum. To date, the Company has accrued and paid all interest in cash at the 6% percent rate pursuant to the terms of the note and has the means and intent to continue to do so. The notes may be converted into common stock at $8 per share at any time, and shall be converted automatically after the third year from the date of issuance on the 30th consecutive trading day on which the closing price of the common stock is no less than $20 per share. 40% of the notes convert automatically into common stock upon the completion of a public offering with gross proceeds of at least $15,000,000 at a price of $7.00 per share, with a discount based on the level of interest savings to the Company. In the event an automatic conversion occurs, the 35,714 incremental shares valued at a minimum of $8.00 per share, will be recorded as an interest charge of $285,712. In addition, should the IPO price per share exceed $8.00 per share, the Company will record an additional interest charge equal to the excess amount over $8.00 per share times the 35,714 incremental shares.

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				March 31,				March 31,				September 30,
				2004				2005				2005
		Notes payable consist of the following:
		In July 2005, the original $10,000,000 of convertible notes were amended to be equivalent in terms to those of the new $5,000,000 investor. If 40% of the combined $15,000,000 of convertible notes were to convert automatically, as a consequence of a qualified public offering, the $7.00 conversion price would result in the issuance of 107,143 more shares than would have been issued at the $8.00 conversion price. If such automatic conversion occurs, the 107,143 incremental shares valued at a minimum of $8.00 per share, will be recorded as an interest charge of $857,144. In addition, should the IPO price per share exceed $8.00 per share, the Company will record an additional interest charge equal to the excess amount over $8.00 per share times the 107,143 incremental shares.			–				5,000,000				15,000,000
		On February 14, 2005, the Company, through its interest in GCP, entered into an agreement with Gosling’s Export (Bermuda) Limited (“GXB”) to acquire the global distribution rights (excluding Bermuda) to GXB’s portfolio of products in exchange for $2,500,000 in non-interest bearing notes due in four equal semi-annual installments.			–				2,380,487				1,795,325
					1,931,319				14,256,058				23,016,990
		Capital leases							16,000				13,997
		Total		$	1,931,319			$	14,272,058			$	23,030,987

		The Company financed the purchase of certain office equipment totaling $17,821 included in equipment. The leases call for monthly payments of $337 in principal and interest at the rate of 5% per annum, to be paid through July 2009. As of March 31, 2005 and September 30, 2005, the Company owed $16,000 and $13,997, respectively, under this lease. Future minimum lease payments equal $17,872 including interest.

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		Principal payments due over the next five years for the above listed notes payable and capital lease are due as follows (as translated at the exchange rate in effect on March 31, 2005):

				For the years				For the period
				ending				ending
				March 31,				September 30,
	2006			$	3,032,383			$	2,425,013
	2007				1,224,696				973,799
	2008				349,458				3,840
	2009				3,856				3,523,335
	2010				9,661,665				16,105,000
	Total				14,272,058				23,030,987
	Less current portion				3,032,383				1,827,158
	Non current portion			$	11,239,675			$	21,203,829

		In connection with the Company’s acquisition of Roaring Water Bay in December 2003 (see Note 1.A), €444,389 ($576,372) of subordinated notes were issued by CB Ireland in substitution of subordinated notes of the same amount originally issued on April 1, 2001 by CB Ireland. The original notes had a maturity date of April 1, 2006 and were non-interest bearing. The replacement notes are non-interest bearing and the terms called for annual principal payments of €177,743, €133,323 and €133,323 on December 1, 2004, 2005 and 2006, respectively. Interest of 6% was imputed on these notes resulting in an increase to goodwill at the date of acquisition of $56,653. The note discount is accreted monthly by a charge to interest expense. For the years ended March 31, 2004 and 2005 and the six months ended September 30, 2005, the Company recorded interest expense on these notes of $6,360, $19,311, and $9,510, respectively.
		Principal payments over the remaining term of the notes are due as follows (as translated at the exchange rate in effect on March 31, 2005) for the years ending March 31 and the six month periods ending September 30,

		Amount
2006		$	172,200
2007			172,200
Total		$	344,400

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		In connection with the acquisition of Roaring Water Bay (see Note 1.A) in December 2003, the former principal shareholders received €1,374,750 of convertible subordinated notes in partial consideration for their shares in CB Ireland and CB-UK. These notes are convertible into common shares of the Company at the current conversion price of €5.22, which is subject to adjustment from time to time as set forth in the note agreement. These convertible notes mature on December 1, 2006 and bear an interest rate of 5% payable quarterly on March 31st, June 30th, September 30th and December 31st. As of March 31, 2005 and September 30, 2005, the Company was indebted in the amount of $1,775,627 and $1,656,299, respectively, on the notes (as translated at the exchange rate in effect on March 31, 2005 and September 30, 2005).

NOTE 11 -	COMMON STOCK

		On March 31, 2002, Great Spirits LLC, the predecessor company to Castle Brands Inc. had 360,000 membership shares outstanding. On July 10, 2003, the Board of Directors declared a five-for-one stock split payable on December 1, 2003 and the membership shares were converted into common shares. The Company retained the current par value of $.01 for all common shares. On December 1, 2003, the Company, in connection with the acquisition of Roaring Water Bay (see Note 1.A), issued 1,306,666 shares of common stock in partial payment of the acquisition (See Note 4). At March 31, 2004 and 2005 and September 30, 2005, the Company had 3,106,666 common shares outstanding.

NOTE 12 -	REDEEMABLE CONVERTIBLE PREFERRED STOCK

		The Company had convertible preferred stock outstanding, as follows:

		March 31,								September 30,
Description		2004				2005				2005
Convertible Preferred Stock, Series A, $1 par value, 550,000 shares authorized, 535,715 shares issued and outstanding; cash dividends at 5% or accrued dividends at 7% at Company’s option paid semi-annually; 20% redemption per year commencing with sixth anniversary of issuance, automatic conversion to common stock at conversion price of $7 per share upon initial public offering of $10 million or more.		$	3,750,005			$	3,750,005			$	3,750,005

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NOTE 12 -	REDEEMABLE CONVERTIBLE PREFERRED STOCK (CONT’D)

		March 31,								September 30,
Description		2004				2005				2005
Convertible Preferred Stock, Series B, $1 par value, 200,000 shares authorized, issued and outstanding; cash dividends at 5% or accrued dividends at 7% at Company’s option paid semi-annually, 20% redemption per year commencing with sixth anniversary of issuance, automatic conversion to common stock at conversion price of $6 per share upon initial public offering of $10 million or more.			1,200,000				1,200,000				1,200,000
Convertible Preferred Stock, Series C, $1 par value, 3,353,750 shares authorized, 2,068,750 shares issued and outstanding at March 31, 2004 and 2,976,250 shares issued and outstanding at March 31, 2005 and 3,353,750 issued and outstanding at September 30, 2005; cash dividends at 4% or accrued dividends at 6% at Company’s option paid semi-annually; 20% redemption per year commencing with sixth anniversary of issuance, automatic conversion to common stock at conversion price of $8 per share upon initial public offering of $10 million or more.			16,550,000				23,930,000				26,830,000
(See Note 15 for consideration given to warrant beneficial conversion features and Note 22 to give effect to the increasing rate dividend on the Series C Preferred Stock) Less offering costs and value ascribed to warrants			(3,229,291	)			(3,669,708	)			(3,478,854	)
Total		$	18,270,714			$	25,210,297			$	28,301,151

		The following are the Series A, B, and C Preferred Stock transactions of the Company from April 1, 2002 through March 31, 2005:
		In February 2003, Great Spirits Company LLC, the predecessor to the Company, exchanged 40,000 membership shares on a one-for-one basis with a shareholder for an equivalent number of Series B Preferred Stock and the elimination of certain shareholder

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NOTE 12 -	REDEEMABLE CONVERTIBLE PREFERRED STOCK (CONT’D)

		preference rights. In December 2003, this issue was exchanged for comparable Castle Brands Inc. Series B Preferred Stock and is convertible into common shares at $6.00 per share at the option of the holder or in an automatic conversion upon an initial public offering of $10 million or more.
		In August 2003, Great Spirits Company LLC completed an offering of 535,715 shares of Series A preferred stock. In December 2003, this issue was exchanged for comparable Castle Brands Inc. Series A. The preferred stock is convertible into common shares at $7 per share at the option of the holder or in an automatic conversion upon an initial public offering of $10 million or more.
		In December, 2003, Castle Brands Inc. raised $16,525,000 issuing 2,065,625 shares of Series C preferred stock in conjunction with the acquisition of Roaring Water Bay. Series C preferred stock is convertible into common stock at the option of the holder at $8 per share or in an automatic conversion upon an initial public offering of $10 million or more.
		In January 2004, Castle Brands Inc. raised $25,000 issuing 3,125 shares of Series C preferred stock.
		In May 2004, the four former shareholders of CB Ireland’s operating subsidiary contributed 15,000 shares of Castle Brands Inc. Series C preferred stock to the company in order to defray the cost of the acquisition of the minority interest pursuant to the terms of a put option contained within its 1999 Business Expansion Scheme.
		In November 2004, Castle Brands Inc. raised $5,001,178, less $184,434 in financing charges, issuing 625,147 shares of Series C preferred stock.
		In December 2004, Castle Brands Inc. raised $888,400, less $86,845 in financing charges, issuing 111,050 shares of Series C preferred stock.
		In February 2005, Castle Brands Inc. raised $1,000,000, less $20,000 in financing charges, issuing 125,000 shares of Series C preferred stock.
		In March 2005, Castle Brands Inc. raised $610,422, less $15,958 in financing charges, issuing 76,303 shares of Series C preferred stock.
		In August 2005, Castle Brands Inc. raised $2,900,000, less $216,022 in financing charges, issuing 362,500 shares of Series C preferred stock.
		Holders of Series A and Series B preferred stock are entitled to receive semi-annual dividends at an annual rate of 5%, if paid in cash, and 7%, if accrued. The accrual rate automatically takes effect if the dividends are not paid within 90 days after the end of the relevant accrual period or if the Board of Directors elects to accrue and not pay such dividends. However, in connection with the Series C preferred stock financing, the holders of Series A and Series B preferred shares agreed that no cash dividends would be paid unless the cash dividends are paid on all three issues. The holders of Series A and

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NOTE 12 -	REDEEMABLE CONVERTIBLE PREFERRED STOCK (CONT’D)

		Series B preferred stock have the option, at any time, to convert their preferred shares into common shares at a conversion price of $7 per share and $6 per share, respectively. Commencing December 1, 2008, the Company may redeem the Series A and Series B preferred stock at any time, in whole or in part, at the redemption price of $7.00 for the Series A preferred stock and $6.00 for the Series B preferred stock, as adjusted, plus accrued but unpaid dividends. Series A preferred stock will automatically convert into common stock at the then applicable conversion price, in the event of either (a) the vote of the holders of at least two-thirds of the series A and B preferred shares, or (b) the closing of an underwritten public offering with aggregate gross proceeds of at least $10 million. The Series B preferred stock is held by a single investor and possesses similar automatic conversion features. For the years ended March 31, 2004 and 2005 and the six months ended September 30, 2005, dividends of $204,952 and $114,867, $204,952 and $476,328, and $204,952 and $635,092 in arrears, respectively, remain unpaid on the Series A and Series B preferred membership units and the Series A and Series B preferred stock. The Series A and Series B preferred membership unit dividends in arrears of $204,952 will be paid in cash at the time of the closing of an underwritten public offering.
		Commencing December 1, 2005, holders of Series C preferred stock are entitled to receive semi-annual dividends at an annual rate of 4%, if paid in cash, and 6%, if accrued. In addition, the holders of such stock have the option, at any time, to convert their preferred shares into common shares at a conversion price of $8 per share. Commencing December 1, 2008, the Company may redeem the Series C preferred stock at any time, in whole or in part, at the redemption price of $8 per share, as adjusted, plus accrued but unpaid dividends. The Series C preferred stock will automatically convert into common stock at the then applicable conversion price, in the event of either (a) the vote of a majority of the holders of the preferred shares, or (b) the closing of an underwritten public offering with aggregate gross proceeds of at least $10 million.
		On each of February 20, 2009, 2010, 2011, 2012 and 2013, the Company is obligated to redeem 20% of the outstanding shares of Series A and Series B preferred stock on a pro rata basis according to the number of such shares held by each stockholder and to pay for such stock at the redemption price. The redemption price equals $7 per share plus accrued and unpaid dividends for the Series A preferred stock and $6 per share plus accrued and unpaid dividends for the Series B preferred stock.
		On each of December 1, 2009, 2010, 2011, 2012 and 2013, the Company is obligated to redeem 20% of the outstanding shares of Series C preferred stock on a pro rata basis according to the number of such shares held by each stockholder and to pay for such stock at the redemption price. The redemption price equals $8 per share plus accrued and unpaid dividends.
		The holders of Series A, Series B and Series C preferred stock are entitled to the number of votes equal to the number of shares of common stock into which such shares of preferred stock could be converted. Each of the holders of the Series A, Series B and

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NOTE 12 -	REDEEMABLE CONVERTIBLE PREFERRED STOCK (CONT’D)

		Series C preferred stock also have, in addition to other voting rights, the right, each such class voting together as a separate class, to elect one director of the Company.
		The Series A, Series B and Series C preferred stock rank in parity in liquidation, are subordinate to the senior notes, and have a liquidation value equal to the original investment plus any unpaid dividends. As of March 31, 2005, the liquidation preference of the Series A, Series B and Series C preferred stock are equal to $4,254,310, $1,376,975 and $23,930,000, respectively. As of September 30, 2005, the liquidation preference of the Series A, Series B and Series C preferred stock are equal to $4,370,959, $1,419,090 and $26,830,000, respectively.
		The Company has fair valued the Series C preferred stock to reflect the terms of the agreement which provide that no dividends are to accrue from date of issuance to December 1, 2005. At March 31, 2004, the fair value ascribed to the Series C preferred stock from the date of issuances was $1,261,103. At March 31, 2005 subsequent rounds were fair valued at $297,263. The Company has accreted the fair value as a deemed dividend in the accompanying financial statements by increasing the carrying value of the Series C preferred stock by a corresponding amount. The Company has recorded $203,187 and $726,513 for the years ended March 31, 2004 and 2005 as preferred stock dividends, respectively.

NOTE 13 -	FOREIGN CURRENCY HEDGING

		The Company enters into forward contracts to attempt to limit its exposure to foreign currency cash flow fluctuations. The Company recognizes in the balance sheet derivative contracts at fair value, and reflects any net gains and losses currently in earnings. At March 31, 2005, the Company held outstanding forward exchange positions for the purchase of Euros, expiring through September 2005, in the amount of $1,357,030 with a weighted average conversion rate of €1 = $1.2924 as compared to the spot rate at March 31, 2005 of €1 = $1.2916. At September 30, 2005, the Company held outstanding forward exchange positions for the purchase of Euros, expiring through March 2006, in the amount of $742,350 with a weighted average conversion rate of €1 = $1.2373 as compared to the spot rate at September 30, 2005 of €1 = $1.2057. Gain or loss on foreign transactions, which was de minimus, is included in other income and expense.

NOTE 14 -	PROVISION FOR INCOME TAXES

		The Company’s income taxes benefit (expense) for the years ended March 31, 2003, 2004 and 2005 consists of federal and state and local taxes attributable to GCP, which does not join in a consolidated income tax return with the Company, and foreign taxes. As of March 31, 2005, the Company had federal net operating loss carry forwards of approximately $10,005,000 for U.S. tax purposes, which expire in 2025 and foreign net operating loss carry forwards of approximately $7,080,000 which carry forward without limit of time.

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NOTE 14 -	PROVISION FOR INCOME TAXES (CONT’D)

		The pre-tax income (loss), on a financial statement basis, from foreign sources totaled $0, ($1,062,885), and ($4,026,096), for the years ended March 31, 2003, 2004, and 2005, respectively.
		The Company does not have any undistributed earnings from foreign subsidiaries at March 31, 2004 and 2005 and September 30, 2005.
		The following table reconciles the income tax (benefit) expense and the federal statutory rate of 34%.

										For the
		For the								six months
		year ended								ended
		March 31,								September 30,
		2004				2005				2004				2005
		%				%				%				%
Computed expected tax benefit, at 34%			34.00				34.00				34.00				34.00
Increase in valuation allowance			(23.73	)			(29.70	)			(29.69	)			(30.21	)
Effect of foreign rate differential			(11.08	)			(8.61	)			(3.89	)			(3.87	)
Non-deductible interest expense			(5.19	)			(1.69	)			(6.42	)			(5.92	)
Other			6.00				6.00				6.00				6.00
State and local taxes, net of federal benefit			–				–				–				–

		On December 1, 2003, the Company recorded $629,444 as a deferred tax liability as the amount ascribed to the difference between the book and tax basis of the tangible and intangible assets acquired. The Company allocated the fair value of the purchase price to the distribution agreement, the additional value ascribed above the fair value was recorded as additional goodwill.
		In connection with the investment in Gosling Castle Partners Inc., the Company recorded a deferred tax liability on the ascribed value of the acquired intangible assets of $2,222,222, increasing the value of the asset. The deferred tax liability is being reversed and a deferred tax benefit is being recognized over the amortization period of the intangible asset (15 years). For the years ended March 31, 2004 and 2005 and the six months ended September 30, 2005, the Company has recognized $0, $0 and $74,076 of deferred tax benefit.

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NOTE 14 -	PROVISION FOR INCOME TAXES (CONT’D)

		The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities are presented below.

			March 31,				March 31,				September 30,
			2004				2005				2005
Deferred income tax asset
	Foreign currency transactions		$	54,000			$	92,000			$	59,000
	Amortization of intangibles			250,000				296,000				276,000
	Net operating loss carryforwards – U.S.			914,000				4,002,000				5,877,000
	Net operating loss carryforwards – foreign			301,000				730,000				785,000
	Other			14,000				–				–
	Total gross assets			1,533,000				5,120,000				6,997,000
	Less: Valuation allowance			(1,533,000	)			(5,120,000	)			(6,997,000	)
	Net deferred asset		$	–			$	–			$	–
Deferred income tax liability
	Intangible assets acquired in acquisition of subsidiary		$	(629,444	)		$	(629,444	)		$	(629,444	)
	Intangible assets acquired in investment in joint-venture			–				(2,222,222	)			(2,148,147	)
	Net deferred income tax liability		$	(629,444	)		$	(2,851,666	)		$	(2,777,591	)

		The Company has recorded a full valuation allowance against its deferred tax assets as it believes it is more likely that such deferred tax assets will not be realized. The valuation allowance for deferred tax assets as of March 31, 2004 and March 31, 2005 and September 30, 2005 was approximately $1,533,000, $5,120,000 and $6,997,000 respectively. The net change in the total valuation allowance for the years ended March 31, 2003, 2004 and 2005 and the six months ended September 30, 2005, was $0, $1,533,000, and $3,587,000, and $1,877,000, respectively. The Company’s deferred tax assets and liabilities are in different taxable entities, which do not join in consolidated returns.

NOTE 15 -	STOCK OPTIONS AND WARRANTS

	A.	Stock Options – In July 2003, the Company implemented the 2003 Stock Incentive Plan (“the Plan”) which provides for awards of incentive and non-qualified stock options, restricted stock and stock appreciation rights for its officers, employees, consultants and directors in order to attract and retain such individuals who contribute

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NOTE 15 -	STOCK OPTIONS AND WARRANTS (CONT’D)

		to the Company’s success by their ability, ingenuity and industry knowledge, and to enable such individuals to participate in the long-term success and growth of the Company by giving them an equity interest in the Company. There are 2,000,000 common shares reserved and available for distribution under the Plan. In January 2004, the Board of Directors approved the Plan and granted 553,000 options to its full-time U.S. and international employees at an exercise price of $6.00 per share. These options vest over a three, four or five year period and expire ten years after the grant date.
		In connection with the Company’s acquisition of CB Ireland and CB-UK, the Company granted to an individual the option to purchase up to 10,000 shares of common stock at an exercise price of $6.00 per share at any time through November 30, 2013.
		The Company continues to account for stock based compensation using the intrinsic value method prescribed in Accounting Principles Board No. 25, “Accounting for Stock Issued to Employees.” Compensation cost for stock options, if any, is measured as the excess of the quoted market price of the Company’s stock at the date of grant over the amount an employee must pay to acquire the stock.

		A summary of the options outstanding under the stock option plan is as follows:

		Year Ended March 31,
																		Six Months Ended
		2004								2005								September 30, 2005
						Weighted								Weighted								Weighted
						Average								Average								Average
						Exercise								Exercise								Exercise
		Shares				Price				Shares				Price				Shares				Price
Outstanding at beginning of year			—			$	0.00				563,000			$	6.00				745,500			$	6.47
Granted			563,000				6.00				279,500				7.26				170,000				8.00
Forfeited			—				—				(97,000	)			6.00				—				—
Outstanding at end of period			563,000				6.00				745,500				6.47				915,500				6.76
Options exercisable at period end			—			$	0.00				174,533			$	6.36				183,533			$	6.34
Weighted average fair value of options granted during the period						$	2.17							$	2.69							$	3.05

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NOTE 15 -	STOCK OPTIONS AND WARRANTS (CONT’D)

		The following table represents information relating to stock options outstanding at March 31, 2005:

				Options Outstanding								Options Exercisable
				Weighted				Weighted								Weighted
				Average				Average								Average
				Exercise				Remaining Life								Exercise
Shares				Price				in Years				Shares				Price
	569,000			$	6.00				8.68				143,533			$	6.00
	176,500				8.00				9.83				31,000				8.00
	745,500												174,533

		As of September 30, 2005, the total stock options outstanding was 915,500. The weighted average exercise price of these options was $6.76. The weighted average remaining life of these options was 8.68 years. Total stock options exercisable as of September 30, 2005 was 183,533. The weighted average exercise price of these options was $6.34.
		The fair value of options at date of grant was estimated using the Black-Scholes option-pricing model utilizing the following assumptions:

		March 31,
										September 30,
		2004				2005				2005
Risk-free interest rates			4.38%				4.38-4.59%				4.43%
Expected options life in years			6.42-6.50				6.83-7.00				7.00
Expected stock price volatility			25%				25%				25%
Expected dividend yield			0%				0%				0%

B.		Stock Warrants – The Company has entered into various warrant agreements.
		Common Stock Warrants Issued to the Financing Agent
		On December 1, 2003, in connection with the revolving credit facility, the Company granted to the lender, Keltic Financial Partners, LP (”Keltic”) warrants to acquire 100,000 shares of the Company’s common stock with an exercise price of $6. The warrants are subject to anti-dilution provisions, vest immediately and are exercisable through September 1, 2012. The Company was not obligated to register the warrants or the underlying shares, except to the extent that if the Company elected to file a registration statement Keltic could have the shares underlying its warrants included in that registration statement and the Company will assume all registration costs and other expenses in connection with such registration.
		The warrants were subsequently amended in September 2005 to amend the warrant holder’s registration rights with respect to the Company’s initial public offering, eliminate

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NOTE 15 -	STOCK OPTIONS AND WARRANTS (CONT’D)

		a cash put to the Company (described below) and provide certain penalties if the shares underlying the warrants have not been registered by June 2007 and June 2008. In connection with the amended and restated warrant agreement, the Company agreed that if on either June 1, 2007 or June 1, 2008 (a) there are shares of common stock received or issuable upon the exercise of the warrant that have not been registered and (b) it has not filed a registration statement with respect to which Keltic had the opportunity to register the unregistered shares, the Company will pay Keltic $100,000 within ten (10) days of such date.
		The value assigned to the warrants was recorded as a reduction in the value assigned to the loan’s credit facility (discount amount) and an increase in additional paid-in-capital. The discount amount of $282,295 was accreted over the three-year life of the credit facility as additional interest expense. The Company has recorded interest expense for the years ended March 31, 2003, 2004 and 2005 of $54,890, $94,098 and $133,306, respectively. The facility was closed in June 2004 and the unaccreted balance was recognized as additional interest expense in that period.
		The Company recognizes the put warrant as a derivative financial instrument in the consolidated financial statements at fair value. Changes in the fair value of the derivative are recognized in earnings. At March 31, 2003, March 31, 2004 and March 31, 2005, and September 30, 2004 and September 30, 2005 the company has recorded the fair value of the put warrant as a liability included in the caption accrued expenses and put warrants payable of $272,813, $246,320, $323,146, $240,796 and $308,096, respectively. For the years ended March 31, 2003, March 31, 2004 and March 31, 2005, and for the six-months ended September 30, 2004 and September 30, 2005 the company has recorded a charge (credit) for the change in the value of the derivative financial instrument of $(9,482), $(26,493), $76,825, $(5,524) and $(15,047), respectively.
		The warrants are exercisable at any time. The holder may convert the warrants, in whole or in part, into the number of common shares equal to the number of shares under this warrant to be converted multiplied by the amount by which (a) the fair market value of one share exceeds (b) the exercise price in effect immediately prior to such exercise of the conversion price divided by the fair market value of one share in effect immediately prior to such exercise of the conversion price. If the shares are not regularly traded in a public market, the Board of Directors in reasonable good faith judgment shall determine the fair market value as follows: the fair value of the warrant is computed at an amount equal to the Enterprise Value divided by the number of outstanding shares of common stock. If the shares are traded regularly in a public market, the fair market value of a share of common stock shall be the closing sales price of the shares reported for the business day immediately before the holder delivers its conversion notice.
		Prior to the September 2005 amendment of Keltic’s warrant agreement, the warrants had a put right that could be exercised by the holder at any time commencing as of September 2006 and prior to the expiration date. Pursuant to that put right, Keltic had the right to

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NOTE 15 -	STOCK OPTIONS AND WARRANTS (CONT’D)

		require the Company to purchase in whole or in part, for an amount equal to the number of shares as to which Keltic was exercising multiplied by the amount by which (a) the fair market value of one share exceeded (b) the exercise price in effect immediately prior to such exercise of the put right. The Company would have then been obligated to pay the put amount in immediately available funds on the date set; provided however, that if the put amount was greater than $300,000, the Company would have paid at least $300,000 on such date and had the option to pay the remainder of the put amount in four equal installments due at the end of each fiscal quarter thereafter, bearing interest at the prime rate as published by The Wall Street Journal, or in the event that The Wall Street Journal was not available, such rate published in another publication as determined by the holder plus (a) two hundred fifty (250) basis points per annum, (b) seven percent, or (c) LIBOR plus (500) basis points.
		Common Stock Warrants Issued to the Placement Agents
		In connection with the issuance of the Series C Preferred Stock, the Company granted, to the placement agents, warrants to acquire approximately 192,118 shares of the Company’s common stock with an exercise price of $8.00. The Warrants are subject to anti-dilution provisions, vest immediately and expire at various dates from December 2008 through August 2010. The Company is not obligated to register the warrants or the underlying shares, except to the extent that if the Company elects to file a registration statement, the holders can request to have the underlying shares registered. The Company will assume all registration costs and other expenses in connection with such registration.
		The proceeds upon issuance of the Series C Preferred Stock based upon Relative Fair Values were allocated as follows:

Value allocated to Preferred Stock		$	26,368,971
Value allocated to warrants			461,029
Gross proceeds of preferred stock		$	26,830,000

		The beneficial conversion feature allocated to the warrants was calculated using the Black-Scholes method as the difference between the beneficial conversion price and the fair value of the Company’s common stock, multiplied by the number of shares into which the Series C Preferred Stock was convertible, in accordance with the Emerging Issues Task Force (“EITF”) Issue No. 00-27. The beneficial conversion feature allocated to the warrants was recorded immediately as a deemed dividend and reflected in the Net Loss Attributable to Common Stockholders and an increase in additional paid-in-capital.
		The warrants have conversion rights and can be converted at any time. The holder may convert in whole or in part, into a number of common shares equal to the number of shares under this warrant to be converted, multiplied by the amount by which (a) the fair market value of one share exceeds (b) the exercise price in effect immediately prior to such exercise of the conversion price divided by the fair market value of one share in

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NOTE 15 -	STOCK OPTIONS AND WARRANTS (CONT’D)

		effect immediately prior to such exercise of the conversion price. If the shares are not regularly traded in a public market, the Board of Directors in reasonable good faith judgment shall determine the fair market value as follows: the fair value of the warrant is computed at an amount equal to the Enterprise Value divided by the number of outstanding shares of common stock. If the shares are traded regularly in a public market, the fair market value of a share of common stock shall be the closing sales price of the shares reported for the business day immediately before the holder delivers its conversion notice.
		Common Stock Warrants Issued to Senior Note Holders
		In connection with the issuance of the senior notes, the Company entered into a warrant agreement to grant the right to purchase 116,500 shares of the Company’s common stock at
		an exercise price of $8.00 per share at any time through May 31, 2009. These warrants were recorded at fair value and accounted for as a discount of the face value of the senior notes and a credit to additional paid-in capital of $129,195. This note discount will be accreted over the original term of the senior notes with a charge to interest expense and a credit to senior notes payable. For the years ended March 31, 2003, 2004 and 2005, and the six months ended September 30, 2004 and 2005, the Company recorded $0, $0, and $30,668 and $10,788 and $23,020 of senior note accretion as additional interest expense.
		Common Stock Warrants Issued to Financial Advisor
		In July 2005, the Company granted to a financial advisor warrants to purchase up to 100,000 shares of common stock at $8.00 per share. The warrants are subject to anti-dilution provisions and will vest upon the successful completion of an initial public offering. The Company will record the charge as a deduction to additional paid-in-capital.
		Common Stock Warrants Issued to Members in Joint Venture
		In connection with the acquisition of the Company’s interest in GCP it agreed to issue warrants to purchase 90,000 shares of common stock at $8.00 per share to three members of the Gosling family and an employee. The Company recorded warrants at fair value as an increase to the purchase price.

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NOTE 15 -	STOCK OPTIONS AND WARRANTS (CONT’D)

		The following is a summary of the company’s outstanding warrants:

							Weighted
							Average
							Exercise
							Price
			Warrants				Per Warrant
Warrants outstanding, April 1, 2003				–				–
	Granted			207,118			$	7.03
	Exercised			–				–
	Forfeited			–				–
Warrants outstanding, March 31, 2004				207,118				7.03
	Granted			183,375				8.00
	Exercised			–				–
	Forfeited			–				–
Warrants outstanding and exercisable, March 31, 2005				390,493				7.49
	Granted			208,125				8.00
	Exercised			–				–
	Forfeited			–				–
Warrants outstanding and exercisable, September 30, 2005				598,618				7.67

A.		The Company is operating under an agreement with MHW, Ltd. (“MHW”) whereby MHW acts as the Company’s agent in the distribution of its products across the United States. MHW’s president also serves as a director of the Company and has a de minimus indirect ownership interest in the Company. In addition, MHW has a 10% ownership interest in the Celtic Crossing brand, one of the Company’s products, in the United States and its territories, Canada, Mexico, and the Caribbean.
		Pursuant to the MHW distribution agreement, MHW receives sales orders from the Company’s domestic wholesalers at prices agreed upon with the Company. MHW simultaneously purchases Company inventory necessary to fill those orders and ships that inventory to the various wholesalers. MHW then invoices, collects, and deposits

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		remittances from those wholesalers into an MHW bank account designated for the Company. The funds are remitted to the Company on a bi-weekly basis. Although MHW is responsible for the billing function, the collected funds are the property of the Company and MHW is not liable to the Company for any unpaid balances due from wholesalers.
		In addition to the distribution services provided for the Company, MHW also provides administrative and support services on behalf of the Company. For the years ended March 31, 2003, 2004 and 2005, and the six months ended September 30, 2004 and 2005, aggregate charges recorded for all services provided were approximately $61,518, $84,450 and $121,393, and $48,796 and $115,466, respectively, which have been included in general and administrative expenses.
B.		The Company had transactions with Knappogue Corp., a shareholder in the Company. Knappogue Corp. is controlled by the Company’s CEO and his family. The transactions primarily involved rental fees for use of Knappogue Corp.’s interest in the Knappogue Castle for various corporate purposes including Company meetings and to entertain customers. For the years ended March 31, 2003, 2004 and 2005, and the six months ended September 30, 2004 and 2005, fees incurred by the Company to Knappogue Corp. amounted to $28,009, $33,000, and $18,620, and $4,000 and $7,540, respectively.
C.		Prior to the acquisition of CB Ireland, the Company purchased inventory from CB Ireland of approximately $737,000 pursuant to a 2001 distribution agreement. In addition, for the years ended March 31, 2003, 2004 and 2005, and the six months ended September 30, 2004 and 2005, the Company made payments to CB Ireland of approximately $160,000, $256,000 and $0, and $0 and $0, respectively, pursuant to their 2001 brand acquisition agreement.
D.		In April 2004, the Company contracted with BPW, Ltd., for business development services including providing introductions for the Company to agency brands that would enhance the Company’s portfolio of products and assisting the Company in successfully negotiating agency agreements with targeted brands. BPW, Ltd. is controlled by a director of the Company. The contract provides for a monthly retainer to BPW, Ltd. of $3,500, a bonus payable to BPW Ltd. in equal quarterly installments upon the finalization of an agency brand agreement based upon estimated annual case sales by the Company during the first year of operations at the rate of $1 per 9-liter case of volume, less any retainer previously paid, and a commission based upon actual future sales of the agency brand while under the Company’s management. This contract is cancelable by either party, at their convenience, upon 30 days written notice. For the year ended March 31, 2005, and the six months ended September 30, 2005, BPW, Ltd. was paid $41,802 and $33,500, respectively, under this contract.
E.		For the years ended March 31, 2004 and 2005, and the six months ended September 30, 2004 and 2005, the Company purchased goods from Tanis Investments Limited (“Tanis”) and Carbery Milk Products Limited (“Carbery”), both shareholders in the Company, of

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		approximately $595,250 and $2,501,600, and $957,749 and $1,136,945, respectively. The Company had assumed the underlying supplier agreements with Tanis and Carbery from the predecessor company. As of March 31, 2004 and 2005, and September 30, 2004 and 2005, the Company was indebted to these two shareholders in the amount of approximately $348,000 and $369,000 and $575,222 and $728,470, respectively, which is included in due to related parties on the accompanying consolidated balance sheet.
F.		For the years ended March 31, 2004 and 2005 and the six months ended September 30, 2004 and 2005, the Company made payments of approximately $25,000 and $37,500, and $18,172 and $18,654, respectively, for use of a patent, to an entity that is owned by two shareholders in the Company. The royalty agreement also includes the right to acquire the patent for the Trinity Bottle for €90,000 ($108,360) for the duration of the licensing period.
G.		In February and August 2005, the Company executed agreements with the two Co-Managing Directors of CB Ireland whereby, effective March 11, 2005 and December 1, 2005, respectively, these individuals resigned their positions in CB Ireland in exchange for a consultancy agreement consisting of fifteen monthly payments totaling €196,875, plus VAT. The balance due, net of payments made, was $233,772 and $113,462, at March 31 and September 30, 2005, respectively. In addition, under the terms of these agreements, the stock options of these individuals were deemed to have accrued two years’ vesting at the end of the consultancy period, the exercise period for their stock options was extended to December 1, 2008, and the Company agreed to pay off the outstanding balance of their 5% Convertible Subordinated Notes, each dated December 1, 2003, and each in the amount of €465,550 and their Subordinated Note, each dated December 1, 2003, and each in the amount of €133,323 at the earlier of one month following the completion of the Company’s initial public offering or in four quarterly installments beginning January 1, 2006. The Company also reimbursed these individuals the legal fees incurred in connection with their consultancy agreements in the amounts of €8,000 and €5,000, respectively, plus VAT. For the year ended March 31, 2005 and the six months ended September 30, 2005, the Company made payments of $20,000 and $108,117, respectively pursuant to these agreements. In September 2005, the Company consented to the sale of the 5% Convertible Notes held by the two Co-Managing Directors of CB Ireland and shares of common stock held by one of the Co-Managing Directors to third parties.

A.		The Company has entered into a supply agreement with Irish Distillers Limited (“Irish Distillers”), which provides for the production of Irish whiskeys for the Company through 2014, subject to automatic five year extensions thereafter. Under this agreement, the Company is obligated to notify Irish Distillers annually of the amount of liters of pure alcohol it requires for the current year and commits to purchase that amount. For the calendar year ending December 31, 2005, the Company has committed to purchase approximately €461,000 in bulk Irish whiskey. The Company has not yet taken receipt of any of the commitment. During the term of this supply agreement Irish Distillers has the right to limit additional purchases above the commitment amount.

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B.		The Company has entered into a distribution agreement with Gaelic Heritage Corporation, Ltd. (“Gaelic”), an international supplier, to be the sole-producer of Celtic Crossing, one of the Company’s products, for an indefinite period.
C.		In August 2004, Castle Brands entered into an agency agreement with I.L.A.R. S.p.A., the producer of Pallini Limoncello and its flavor extensions, to be the sole and exclusive importer of Pallini Limoncello throughout the United States and its territories and possessions. This agreement is subject to automatic renewal for as much as five years per renewal period upon Castle Brands achievement of contractual case sale targets. The agreement expires on December 31, 2009.
		Under this agreement, Castle Brands is permitted to import Pallini Limoncello at a set price, updated annually, and is obligated to set aside a portion of the gross margin toward a marketing fund for Pallini. The agreement also encompasses the hiring of a Pallini Brand Manager at Castle Brands with Pallini reimbursing the costs of this position up to stipulated annual amount.
D.		In September 2004, CB-USA entered into an exclusive distribution agreement with Gosling’s Export (Bermuda) Limited (“GXB”) to be the sole and exclusive importer of Gosling’s rum brands within the United States. Under this agreement, CB-USA is guaranteed a net sales commission on each case. In February 2005, GXB sold its interest in the distribution agreement to Gosling-Castle Partners Inc. (See Note 19).
		CB-USA is guaranteed stipulated commission per case increasing annually provided certain sales are achieved case for all sales in calendar years, under the distribution agreement. The sales commission is net of agreed reimbursements, including taxes and payment to the marketing affiliate. This distribution agreement is for fifteen years, subject to extension.
E.		In June 2004, the Company executed subleases for office space in Dublin, Ireland and midtown Manhattan. The Dublin office lease commenced on June 1, 2004 and extends through February 28, 2009. Rent is payable quarterly in advance. The New York City lease commenced on August 15, 2004 and extends through March 30, 2008. The Company has also entered into non-cancelable operating leases for certain office equipment.
		Future minimum lease payments are as follows:

For the years ending
March 31,		Amount
2006		$	292,773
2007			302,634
2008			302,634
2009			143,021
2010			5,581
Total		$	1,046,643

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		In addition to the above annual rental payments, the Company is obligated to pay its pro-rata share of utility and maintenance expenses on the leased premises. Rent expense under operating leases amounted to approximately $60,000, $70,000 and $290,000 and $129,424 and $189,229 for the years ended March 31, 2003, 2004 and 2005, and the six months ended September 30, 2004 and 2005, respectively.
F.		Pursuant to the distribution agreement signed in March 1998 between the Company and Gaelic, which has been amended and restated in April 2001, the Company, which currently owns 60% of the Celtic Crossing brand in the United States, has the option to purchase 70% of the brand outside the United States from Gaelic.
		In the event of the sale of the brand rights by either the Company or Gaelic, the non-selling party shall have the right of first refusal to purchase the interest at the same price as the proposed sale and the right to sell alongside the other party.
		Pursuant to the agreement, the Company is required to pay royalties to Gaelic for each case purchased. In addition, the Company is required to expend a certain percentage of Celtic Crossing product case sales on marketing.
G.		The Company is subject to strict federal and state government regulations associated with the marketing, import, warehouse, transport, and distributions of spirits.

		The Company maintains its cash balances at various large financial institutions that, at times, may exceed federally and internationally insured limits. As of March 31, 2004 and 2005, and September 30, 2004 and 2005, the Company exceeded the insured limit by approximately $6,100,000 and $5,700,000, and $1,371,391 and $8,746,793, respectively. Management believes the Company is not exposed to any significant credit risk because the institutions are international money center banking institutions with strong financial positions.

NOTE 19 -	GOSLING-CASTLE PARTNERS INC. EXPORT AGREEMENT WITH GOSLING’S EXPORT (BERMUDA) LIMITED

		In February 2005, Gosling-Castle Partners Inc. secured the GXB global distribution rights under an Export Agreement (“the Agreement”) with GXB. This agreement calls for GCP to pay $2,500,000 to GXB for the assignment of its global distribution rights in four equal installments at April 1, 2005, October 1, 2005, April 1, 2006 and October 1, 2006. At March 31, 2005, this note is carried on the books at a discount of $126,152 resulting from interest imputed at 6%. For the year ended March 31, 2005 and the six months ended September 30, 2005, the Company recognized interest expense of $6,640 and $39,837, respectively, on this note.

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NOTE 19 -	GOSLING-CASTLE PARTNERS INC. EXPORT AGREEMENT WITH GOSLING’S EXPORT (BERMUDA) LIMITED (CONT’D)

		In addition, under the terms of the Export Agreement, GXB has agreed to sell all brands in its portfolio to GCP at its manufacturer’s cost plus a specified producer’s profit. For the years of the agreement, the producer’s profit is a stipulated amount per case, increasing over time.
		The Export Agreement gives GCP the right of first refusal to purchase, in the event GXB decides to sell any or all of its trademarks or other intellectual property, at the same price being offered by a bona fide third party offeror. In the event GCP waives its right of first refusal, the Company has an identical right of first refusal. Furthermore, in the event GXB should decide to sell any or all of its portfolio of products either directly or indirectly through the sale of stock of GXB or its parent company to a third party, the agreement contains a formula for GCP to share in the proceeds of the sale of the brand with such share in the sale proceeds up to a stipulated percentage depending upon the number of nine liter equivalent cases of product sold by GCP in the twelve months preceding the sale.
		The Export Agreement commenced on April 1, 2005 and has a 15 year term. It is renewable for additional 15 year terms as long as GCP meets certain case sale targets during the initial term as set forth in the Agreement.

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NOTE 20 -	GEOGRAPHIC INFORMATION

		The consolidated financial statements include revenues and assets generated in or held in foreign countries. The following table sets forth the percentage of consolidated revenues from continuing operations and consolidated assets from foreign countries.

		Years Ended
																										Six
																										Months Ended
		March 31,								March 31,								March 31,								September 30,
		2003				%				2004				%				2005				%				2005				%
Consolidated Revenue:
International		$	603,596				25.0%			$	1,995,000				41.3%			$	5,891,000				46.7%			$	3,185,879				31.6%
United States			1,815,466				75.0%				2,831,919				58.7%				6,726,863				53.3%				6,894,440				68.4%
Total Consolidated Revenue		$	2,419,062				100%			$	4,826,919				100%			$	12,617,863				100%			$	10,080,319				100%
Vodka		$	1,088,022				45.0%			$	2,781,934				57.6%			$	6,984,010				55.4%			$	3,047,379				30.2%
Rum			174,913				7.2%				191,271				4.0%				827,504				6.6%				3,426,301				34.0%
Liqueurs/Cordials			540,680				22.4%				1,001,348				20.7%				2,063,631				16.4%				1,899,102				18.8%
Whiskey			615,447				25.4%				852,366				17.7%				2,742,719				21.7%				1,707,537				16.9%
Total Consolidated Revenue		$	2,419,062				100.0%			$	4,826,919				100.0%			$	12,617,863				100.0%			$	10,080,319				100.0%
Consolidated Assets:
International		$	698,246				2.5%			$	3,032,000				10.9%			$	4,823,000				11.2%			$	6,595,429				13.0%
United States			26,924,680				97.5%				24,726,832				89.1%				38,312,009				88.8%				44,124,677				87.0%
Total Consolidated Assets		$	27,622,926				100%			$	27,758,832				100%			$	43,135,009				100%			$	50,720,106				100%

NOTE 21 -	INITIAL PUBLIC OFFERING

		On September 15, 2005, the Company’s board of directors approved the filing of a registration statement with the Securities and Exchange Commission for an initial public offering of the Company’s common stock.

NOTE 22 -	ACCOUNTING FOR DERIVATIVE INSTRUMENT AND THE INCREASING RATE DIVIDEND ON THE SERIES C PREFERRED STOCK—REVISION

		The Company has revised the accompanying financial statements to reflect the fair value attributable to the derivative instrument (put warrant issued December 1, 2003) as an embedded derivative (see Note 9). Such recomputation of the fair value of the derivative instrument resulted in a change for the years ended March 31, 2005 and 2004. The fair

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NOTE 22 -	ACCOUNTING FOR DERIVATIVE INSTRUMENT AND THE INCREASING RATE DIVIDEND ON THE SERIES C PREFERRED STOCK—REVISION (CONT’D)

		value of the derivative instrument at December 1, 2003 was $282,295. The Company has recorded the changes in fair value of the derivative financial instrument at each reporting period presented in the Statement of Operations.
		The Company has revised the accompanying financial statements to reflect the fair value of Series C Preferred Stock from the date of issuance. Increasing rate preferred stock is initially recorded at fair value and the discount amortized over the period preceding the commencement of the perpetual dividend by recording a deemed dividend and increasing the carrying amount of the preferred stock by a corresponding amount. The fair value of the Series C Preferred Stock deemed dividend at December 1, 2003 was $1,261,104. The amortization on the Series C Preferred Stock resulted in a change for the years ended March 31, 2005 and 2004.
		The following table summarizes the recomputation of fair value on the derivative instrument and the increasing rate dividend on Series C Preferred Stock at December 1, 2003:

		As
		previously
		reported				As revised				Adjustment
Value of derivative instrument		$	0			$	282,295			$	282,295
Fair value of Series C Preferred Stock deemed dividend		$	0			$	1,261,103			$	1,261,103

		The summary of changes to the Company’s previously issued financial statements for all periods presented is as follows:

						Series C				Additional				Stockholders’
		Derivative				Preferred				paid-in-				(deficiency)
		instrument				Stock				capital				equity
As previously reported March 31, 2003		$	0			$	0			$	(14,960	)		$	(1,445,243	)
Adjustment of relative fair value of derivative instrument			282,295
Adjustment for changes in fair value of derivative instrument			(9,482	)											9,482
As revised, March 31, 2003		$	272,813			$	0			$	(14,960	)		$	(1,435,761	)
As previously reported March 31, 2004		$	0			$	19,328,630			$	17,956,680			$	168,840

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NOTE 22 -	ACCOUNTING FOR DERIVATIVE INSTRUMENT AND THE INCREASING RATE DIVIDEND ON THE SERIES C PREFERRED STOCK—REVISION (CONT’D)

						Series C				Additional				Stockholders’
		Derivative				Preferred				paid-in-				(deficiency)
		instrument				Stock				capital				equity
Cumulative adjustment			—				—				—				9,482
Adjustment of relative fair value of derivative instrument			272,813								(282,295	)			(282,295	)
Adjustment for changes in fair value of derivative instrument			(26,493	)											26,493
Adjustment for changes in fair value of Series C preferred stock							(1,261,103	)			1,261,103				1,261,103
Adjustment for accretion of deemed dividend							203,187				(203,187	)			(203,187	)
As revised, March 31, 2004		$	246,320			$	18,270,714			$	18,732,301			$	980,436
As previously reported March 31, 2005		$	0			$	25,838,964			$	18,012,645			$	(12,222,147	)
Cumulative adjustments			—				(1,057,916	)			775,621				811,596
Adjustment of relative fair value of derivative instrument			246,320
Adjustment for changes in fair value of derivative instrument			76,825												(76,825	)
Adjustment of changes in fair value of Series C preferred stock							(297,264	)			297,264				297,264
Adjustment for accretion of deemed dividend							726,513				(726,513	)			(726,513	)
As revised, March 31, 2005		$	323,145			$	25,210,297			$	18,359,017			($	11,916,625	)
As previously reported September 30, 2005		$	0			$	28,479,127			$	18,141,563			$	(17,709,234	)
Cumulative adjustments			—				(628,667	)			346,372				305,522
Adjustment of relative fair value of derivative instrument		$	323,145

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NOTE 22 -	ACCOUNTING FOR DERIVATIVE INSTRUMENT AND THE INCREASING RATE DIVIDEND ON THE SERIES C PREFERRED STOCK—REVISION (CONT’D)

						Series C				Additional				Stockholders’
		Derivative				Preferred				paid-in-				(deficiency)
		instrument				Stock				capital				equity
Adjustment for changes in fair value of derivative instrument			(15,047	)											15,047
Adjustment of changes in fair value of Series C preferred stock							(38,346	)			38,346				38,346
Adjustment for accretion of deemed dividend							489,037				(489,037	)			(489,037	)
As revised September 30, 2005		$	308,098			$	28,301,151			$	18,037,244			$	(17,839,356	)

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NOTE 22 -	ACCOUNTING FOR DERIVATIVE INSTRUMENT AND THE INCREASING RATE DIVIDEND ON THE SERIES C PREFERRED STOCK—REVISION (CONT’D)

		Net loss, preferred stock and preferred membership unit dividends and net loss attributable to common stockholders for all periods presented were amended as follows as a result of the above revisions:

						Preferred
						stock and				Net loss
						preferred				attributable
						membership				to common
		Net loss				unit dividends				stockholders
As previously reported March 31, 2003		$	(3,440,720	)		$	14,960			$	(3,455,680	)
Current credit/(charge) on derivative instrument			9,482								9,482
As revised, March 31, 2003		$	(3,431,238	)		$	14,960			$	(3,446,198	)
As previously reported March 31, 2004		$	(6,423,977	)		$	557,929			$	(6,981,906	)
Current credit/(charge) on derivative instrument			26,493								26,493
Accretion of deemed dividend							203,187				(203,187	)
As revised, March 31, 2004		$	(6,397,484	)		$	761,116			$	(7,158,600	)
As previously reported March 31, 2005		$	(12,294,325	)		$	525,605			$	(12,819,930	)
Current credit/(charge) on derivative instrument			(76,825	)							(76,825	)
Accretion of deemed dividend							726,513				(726,513	)
As revised, March 31, 2005		$	(12,371,150	)		$	1,252,118			$	(13,623,268	)
As previously reported September 30, 2004		$	(6,625,217	)		$	309,625			$	(6,934,842	)
Current credit/(charge) on derivative instrument			5,524								5,524
Accretion of deemed dividend							310,015				(310,015	)
As revised, September 30, 2004		$	(6,619,693	)		$	619,640			$	(7,239,333	)

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NOTE 22 -	ACCOUNTING FOR DERIVATIVE INSTRUMENT AND THE INCREASING RATE DIVIDEND ON THE SERIES C PREFERRED STOCK—REVISION (CONT’D)

						Preferred
						stock and				Net loss
						preferred				attributable
						membership				to common
		Net loss				unit dividends				stockholders
As previously reported September 30, 2005		$	(5,948,057	)		$	202,579			$	(6,150,636	)
Current credit/(charge) on derivative instrument			15,047								15,047
Accretion of deemed dividend							489,037				(489,037	)
As revised, September 30, 2005		$	(5,933,010	)		$	691,616			$	(6,624,626	)

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	ThinkEquity Partners LLC

	Ladenburg Thalmann & Co. Inc.

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Item 13.	Other Expenses of Issuance and Distribution

SEC registration fee			$	4,060.65
NASD filing fee				3,950.00
AMEX filing fee				55,000.00
Transfer agent and registrar fees				4,000.00
Accountants’ fees and expenses				600,000.00
Legal fees and expenses (including legal fees related to Blue Sky qualification and NASD filing)				850,000.00
Printing and engraving expenses				250,000.00
Miscellaneous fees and expenses				182,989.35
	Total		$	1,950,000.00

Item 14.	Indemnification of Directors and Officers

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Item 15.	Recent Sales of Unregistered Securities

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II-3

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Item 16.	Exhibits and Financial Statement Schedules

	(a)	Exhibits

Exhibit Number				Exhibit
		1**		Form of Underwriting Agreement
	2	.1**		Agreement of Merger and Acquisitions, dated as of July 31, 2003, by and among GSRWB, Inc., The Roaring Water Bay Spirits Group Limited, The Roaring Water Bay Spirits Marketing and Sales Company Limited, Great Spirits Company LLC, Great Spirits Corp., Patrick Rigney, David Phelan, Carbery Milk Products Limited and Tanis Investments Limited
	2	.2**		Amendment to Agreement of Merger and Acquisitions, dated as of October 1, 2003, by and among GSRWB, Inc., The Roaring Water Bay Spirits Group Limited, The Roaring Water Bay Spirits Marketing and Sales Company Limited, Great Spirits Company LLC, Great Spirits Corp., Patrick Rigney, David Phelan, Carbery Milk Products Limited and Tanis Investments Limited
	3	.1**		Form of Amended and Restated Certificate of Incorporation of the Registrant
	3	.2**		Form of Amended and Restated Bylaws of the Registrant
	4	.1*		Form of Common Stock Certificate
	4	.2**		Shareholders Agreement, dated as of December 1, 2003, by and among GSRWB, Inc. and the holders of shares of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock and the Common Stockholders
	5	.1*		Opinion of Patterson Belknap Webb & Tyler LLP
	10	.1***		Export Agreement, dated as of February 14, 2005 between Gosling Partners Inc. and Gosling’s Export (Bermuda) Limited
	10	.2**		Amendment No. 1 to Export Agreement, dated as of February 18, 2005, by and among Gosling-Castle Partners Inc. and Gosling’s Export (Bermuda) Limited
	10	.3***		National Distribution Agreement, dated as of September 3, 2004, by and between Castle Brands (USA) Corp. and Gosling’s Export (Bermuda) Limited
	10	.4**		Subscription Agreement, dated as of February 18, 2005, by and between Castle Brands Inc. and Gosling-Castle Partners Inc.
	10	.5**		Stockholders Agreement, dated February 18, 2005, by and among Gosling-Castle Partners Inc. and the persons listed on Schedule I thereto.
	10	.6**		Promissory Note, dated February 18, 2005, issued by Castle Brands Inc. in favor of Gosling-Castle Partners Inc.
	10	.7***		Agreement, dated as of August 27, 2004, between I.L.A.R. S.p.A. and Castle Brands (USA) Corp.
	10	.8***		Supply Agreement, dated as of January 1, 2005, between Irish Distillers Limited and Castle Brands Spirits Group Limited and Castle Brands (USA) Corp.

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Exhibit Number				Exhibit
	10	.9**		Amendment No. 1 to Supply Agreement, dated as of September 20, 2005, to the Supply Agreement, dated as of January 1, 2005, among Irish Distillers Limited and Castle Brands Spirits Group Limited and Castle Brands (USA) Corp.
	10	.10***		Amended and Restated Worldwide Distribution Agreement, dated as of April 16, 2001, by and between Great Spirits Company LLC and Gaelic Heritage Corporation Limited
	10	.11***		Bottling and Services Agreement, dated as of September 1, 2002, by and between Terra Limited and The Roaring Water Bay Spirits Company Limited
	10	.12**		Amendment to Bottling and Services Agreement, dated as of March 1, 2005, by and between Terra Limited and Castle Brands Spirit Company Limited
	10	.13**		Amended and Restated Convertible Note Purchase Agreement, dated as of August 16, 2005, by and between Castle Brands Inc., Mellon HBV SPV LLC and Black River Global Credit Fund Ltd.
	10	.14**		Amended and Restated Convertible Promissory Note, dated March 1, 2005, issued by Castle Brands Inc. in favor of Mellon HBV SPV LLC.
	10	.15**		Amended and Restated Convertible Promissory Note, dated June 27, 2005, issued by Castle Brands Inc. in favor of Mellon HBV SPV LLC.
	10	.16**		Convertible Promissory Note, dated August 16, 2005, issued by Castle Brands Inc. in favor of Black River Global Credit Fund Ltd.
	10	.17**		License Agreement, dated December 1, 2003, between The Roaring Water Bay (Research and Development) Company Limited and GSRWB, Inc.
	10	.18**		Amended and Restated Employment Agreement, effective as of May 2, 2005, by and between Castle Brands Inc. and Mark Andrews
	10	.19**		Amended and Restated Employment Agreement, effective as of May 2, 2005, by and between Castle Brands Inc. and T. Kelley Spillane
	10	.20**		Employment Agreement, dated as of May 2, 2005 by and between Castle Brands Inc. and Keith A. Bellinger
	10	.21**		Summary of employment agreement with Matthew F. MacFarlane
	10	.22**		Non-Competition Deed, dated December 1, 2003, between GSRWB, Inc. and David Phelan
	10	.23**		Letter Agreement, dated August 4, 2005, between Castle Brands Inc. and David Phelan
	10	.23.1**		Amendment, dated October 17, 2005, to the Letter Agreement, dated August 4, 2005, between Castle Brands Inc. and David Phelan
	10	.24**		Letter Agreement, dated February 15, 2005, between Castle Brands Inc. and Patrick Rigney
	10	.25**		Letter Consulting Agreement, dated August 4, 2005, between Castle Brands Inc. and David Phelan
	10	.26**		Letter Consulting Agreement, dated August 2, 2005, between Castle Brands Inc. and Patrick Rigney

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Exhibit Number				Exhibit
	10	.27***		Supply Agreement, dated January 19, 1998, by and between Carbery Milk Products Limited and The Roaring Water Bay Spirits Company Limited
	10	.28***		Amendment and Consent, dated March 1, 2003, to Supply Agreement, dated January 19, 1998, by and between Carbery Milk Products Limited and Castle Brands Inc.
	10	.29**		Castle Brands Inc. 2003 Stock Incentive Plan, as amended
	10	.30**		Amendment to Castle Brands Inc. 2003 Stock Incentive Plan
	10	.31**		Letter Agreement, dated as of December 1, 2004, between MHW, Ltd. and Castle Brands (USA) Corp.
	10	.32**		Sublease, dated as of June 24, 2004, by and between Silvercrest Asset Management Group, LLC, as successor in interest to James C. Edwards & Co., Inc. and Castle Brands (USA) Corp.
	10	.33**		Indenture of Sublease, dated June 2004, by and between Jennifer Dunne and Castle Brand Spirits Company Limited
	10	.34**		Office Lease, dated as of February 24, 2000, by and between Great Spirits Company LLC and Crescent HC Investors L.P.
	10	.35**		First Amendment to Office Lease, dated March 14, 2001
	10	.36**		Second Amendment to Office Lease, dated January 30, 2002
	10	.37**		Third Amendment to Office Lease, dated March 28, 2003
	10	.38**		Fourth Amendment to Office Lease, dated March 23, 2004
	10	.39**		Fifth Amendment to Office Lease, dated June 21, 2005
	10	.40**		First Supplemental Trust Indenture, dated as of August 15, 2005, by and between Castle Brands (USA) Corp. and JPMorgan Chase Bank, as trustee and MHW Ltd., as collateral agent
	10	.41**		First Amended and Restated Trust Indenture, dated as of August 15, 2005, by and between Castle Brands (USA) Corp., JPMorgan Chase Bank, as trustee and MHW Ltd., as collateral agent
	10	.42**		9% Secured Note dated August 15, 2005 issued by Castle Brand (USA) Corp. in favor of JPMorgan Chase Bank, as trustee
	10	.43**		General Security Agreement, dated as of June 1, 2004, by and between Castle Brands (USA) Corp. and JPMorgan Chase Bank, as trustee
	10	.44**		First Amendment to General Security Agreement, dated as of August 15, 2005, by and between Castle Brands (USA) Corp. and JPMorgan Chase Bank, as trustee
	10	.45**		Guaranty of Payment and Performance, dated June 1, 2004, from Castle Brands Inc. to JPMorgan Chase Bank, as trustee
	10	.46**		First Amendment to Guarantee of Payment and Performance, dated as of August 15, 2005, by and between Castle Brands Inc. to JPMorgan Chase Bank, as trustee
	10	.47**		Collateral Agreement, dated as of June 1, 2004, by and among MHW Ltd., Castle Brands (USA) Corp. and JPMorgan Chase Bank, as trustee

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Exhibit Number				Exhibit
	10	.48**		First Amendment to Collateral Agreement, dated as of August 15, 2005, by and among MHW Ltd., Castle Brands (USA) Corp. and JPMorgan Chase Bank, as trustee
	10	.49**		Credit Facility Agreement, dated as of December 16, 2004, by and among Ulster Bank Ireland Limited, Ulster Bank Ltd. and Castle Brands Spirits Company Limited
	10	.50**		Credit Facility Agreement, dated as of April 4, 2005, by and among Ulster Bank Ireland Limited, Ulster Bank Ltd. and Castle Brands Spirits Company (GB) Ltd.
	10	.51**		Contract, dated as of April 1, 2005, by and between Castle Brands Inc. and BPW LLC
	10	.52**		Amended and Restated Warrant Agreement, dated September 27, 2005, by and between Castle Brands Inc. and Keltic Financial Partners, LP
	10	.53**		Distribution Agreement by and between The Roaring Water Bay Spirits Company Limited and Comans Wholesale Limited dated as of September 15, 2000
	10	.54**		Form of Indemnification Agreement to be entered into with directors
	10	.55**		Agreement, dated October 26, 2000, by and between Ulster Bank Commercial Services Limited and The Roaring Water Bay Spirits Company Limited
	10	.56**		Agreement, dated May 2, 2003, by and between Ulster Bank Commercial Services Limited and The Roaring Water Bay Spirits Company (GB) Limited
	16	.1**		Letter from Grodsky Caporrino & Kaufman, PC
	21	.1**		List of Subsidiaries of the Registrant
	23	.1		Consent of Eisner LLP, Independent Registered Public Accounting Firm
	23	.4*		Consent of Patterson Belknap Webb & Tyler LLP (included in exhibit 5.1)
	24	.1**		Power of Attorney (included on the Signature Page of the Registration Statement)

*	To be filed by amendment.

**	Previously filed.

***	Confidential treatment requested for certain portions of this exhibit previously filed pursuant to Rule 406 under the Securities Act of 1933, as amended, which portions were omitted and filed separately with the Securities and Exchange Commission.

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						Additions
						Charged to
		Balance at				cost and								Balance at end
Description		beginning of period				expenses				Deductions				of period
Valuation reserve deducted in the balance sheet from the asset to which it applies (in thousands):
Accounts receivable:
9/30/05 Allowance for doubtful accounts		$	81				23				—			$	104
2005 Allowance for doubtful accounts			58				64				41				81
2004 Allowance for doubtful accounts			50				17				9				58
2003 Allowance for doubtful accounts			47				3				—				50
Inventory:
9/30/05 Allowance for excess and obsolescence		$	164				40				—			$	204
2005 Allowance for excess and obsolescence			90				74				—				164
2004 Allowance for excess and obsolescence			30				60				—				90
2003 Allowance for excess and obsolescence			—				30				—				30
Deferred Taxes:
9/30/05 Valuation reserve		$	5,180				1,797				—			$	6,977
2005 Valuation reserve			1,471				3,709				—				5,180
2004 Valuation reserve			—				1,471				—				1,471
2003 Valuation reserve			—				—				—				—

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Item 17.	Undertakings

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	CASTLE BRANDS INC.

	By:	/s/ Mark Andrews

	Mark Andrews
	Chairman of the Board and
	Chief Executive Officer

Signature				Title		Date
/s/ Mark Andrews Mark Andrews				Chairman of the Board and Chief Executive Officer (Principal Executive Officer)		January 10, 2006
/s/ Keith A. Bellinger Keith A. Bellinger				President, Chief Operating Officer and Secretary (Principal Financial Officer)		January 10, 2006
/s/ Matthew F. MacFarlane Matthew F. MacFarlane				Senior Vice President and Chief Financial Officer (Principal Accounting Officer)		January 10, 2006
* John F. Beaudette				Director		January 10, 2006
* Robert J. Flanagan				Director		January 10, 2006
* Colm Leen				Director		January 10, 2006
* Phillip Frost, M.D.				Director		January 10, 2006
* Richard Morrison				Director		January 10, 2006
* Frederick M.R. Smith				Director		January 10, 2006

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Signature				Title		Date
* Kevin P. Tighe				Director		January 10, 2006
*By: /s/ Mark Andrews Mark Andrews				Attorney-in-fact

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Exhibit Number				Exhibit
		1**		Form of Underwriting Agreement
	2	.1**		Agreement of Merger and Acquisitions, dated as of July 31, 2003, by and among GSRWB, Inc., The Roaring Water Bay Spirits Group Limited, The Roaring Water Bay Spirits Marketing and Sales Company Limited, Great Spirits Company LLC, Great Spirits Corp., Patrick Rigney, David Phelan, Carbery Milk Products Limited and Tanis Investments Limited
	2	.2**		Amendment to Agreement of Merger and Acquisitions, dated as of October 1, 2003, by and among GSRWB, Inc., The Roaring Water Bay Spirits Group Limited, The Roaring Water Bay Spirits Marketing and Sales Company Limited, Great Spirits Company LLC, Great Spirits Corp., Patrick Rigney, David Phelan, Carbery Milk Products Limited and Tanis Investments Limited
	3	.1**		Form of Amended and Restated Certificate of Incorporation of the Registrant
	3	.2**		Form of Amended and Restated Bylaws of the Registrant
	4	.1*		Form of Common Stock Certificate
	4	.2**		Shareholders Agreement, dated as of December 1, 2003, by and among GSRWB, Inc. and the holders of shares of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock and the Common Stockholders
	5	.1*		Opinion of Patterson Belknap Webb & Tyler LLP
	10	.1***		Export Agreement, dated as of February 14, 2005 between Gosling Partners Inc. and Gosling’s Export (Bermuda) Limited
	10	.2**		Amendment No. 1 to Export Agreement, dated as of February 18, 2005, by and among Gosling-Castle Partners Inc. and Gosling’s Export (Bermuda) Limited
	10	.3***		National Distribution Agreement, dated as of September 3, 2004, by and between Castle Brands (USA) Corp. and Gosling’s Export (Bermuda) Limited
	10	.4**		Subscription Agreement, dated as of February 18, 2005, by and between Castle Brands Inc. and Gosling-Castle Partners Inc.
	10	.5**		Stockholders Agreement, dated February 18, 2005, by and among Gosling-Castle Partners Inc. and the persons listed on Schedule I thereto.
	10	.6**		Promissory Note, dated February 18, 2005, issued by Castle Brands Inc. in favor of Gosling-Castle Partners Inc.
	10	.7***		Agreement, dated as of August 27, 2004, between I.L.A.R. S.p.A. and Castle Brands (USA) Corp.
	10	.8***		Supply Agreement, dated as of January 1, 2005, between Irish Distillers Limited and Castle Brands Spirits Group Limited and Castle Brands (USA) Corp.
	10	.9**		Amendment No. 1 to Supply Agreement, dated as of September 20, 2005, to the Supply Agreement, dated as of January 1, 2005, among Irish Distillers Limited and Castle Brands Spirits Group Limited and Castle Brands (USA) Corp.

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Exhibit Number				Exhibit
	10	.10***		Amended and Restated Worldwide Distribution Agreement, dated as of April 16, 2001, by and between Great Spirits Company LLC and Gaelic Heritage Corporation Limited
	10	.11***		Bottling and Services Agreement, dated as of September 1, 2002, by and between Terra Limited and The Roaring Water Bay Spirits Company Limited
	10	.12**		Amendment to Bottling and Services Agreement, dated as of March 1, 2005, by and between Terra Limited and Castle Brands Spirit Company Limited
	10	.13**		Amended and Restated Convertible Note Purchase Agreement, dated as of August 16, 2005, by and between Castle Brands Inc., Mellon HBV SPV LLC and Black River Global Credit Fund Ltd.
	10	.14**		Amended and Restated Convertible Promissory Note, dated March 1, 2005, issued by Castle Brands Inc. in favor of Mellon HBV SPV LLC.
	10	.15**		Amended and Restated Convertible Promissory Note, dated June 27, 2005, issued by Castle Brands Inc. in favor of Mellon HBV SPV LLC.
	10	.16**		Convertible Promissory Note, dated August 16, 2005, issued by Castle Brands Inc. in favor of Black River Global Credit Fund Ltd.
	10	.17**		License Agreement, dated December 1, 2003, between The Roaring Water Bay (Research and Development) Company Limited and GSRWB, Inc.
	10	.18**		Amended and Restated Employment Agreement, effective as of May 2, 2005, by and between Castle Brands Inc. and Mark Andrews
	10	.19**		Amended and Restated Employment Agreement, effective as of May 2, 2005, by and between Castle Brands Inc. and T. Kelley Spillane
	10	.20**		Employment Agreement, dated as of May 2, 2005 by and between Castle Brands Inc. and Keith A. Bellinger
	10	.21**		Summary of employment agreement with Matthew F. MacFarlane
	10	.22**		Non-Competition Deed, dated December 1, 2003, between GSRWB, Inc. and David Phelan
	10	.23**		Letter Agreement, dated August 4, 2005, between Castle Brands Inc. and David Phelan
	10	.23.1**		Amendment, dated October 17, 2005, to the Letter Agreement, dated August 4, 2005, between Castle Brands Inc. and David Phelan.
	10	.24**		Letter Agreement, dated February 15, 2005, between Castle Brands Inc. and Patrick Rigney
	10	.25**		Letter Consulting Agreement, dated August 4, 2005, between Castle Brands Inc. and David Phelan
	10	.26**		Letter Consulting Agreement, dated August 2, 2005, between Castle Brands Inc. and Patrick Rigney
	10	.27***		Supply Agreement, dated January 19, 1998, by and between Carbery Milk Products Limited and The Roaring Water Bay Spirits Company Limited

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Table of Contents

Exhibit Number				Exhibit
	10	.28***		Amendment and Consent, dated March 1, 2003, to Supply Agreement, dated January 19, 1998, by and between Carbery Milk Products Limited and Castle Brands Inc.
	10	.29**		Castle Brands Inc. 2003 Stock Incentive Plan, as amended
	10	.30**		Amendment to Castle Brands Inc. 2003 Stock Incentive Plan
	10	.31**		Letter Agreement, dated as of December 1, 2004, between MHW, Ltd. and Castle Brands (USA) Corp.
	10	.32**		Sublease, dated as of June 24, 2004, by and between Silvercrest Asset Management Group, LLC, as successor in interest to James C. Edwards & Co., Inc. and Castle Brands (USA) Corp.
	10	.33**		Indenture of Sublease, dated June 2004, by and between Jennifer Dunne and Castle Brand Spirits Company Limited
	10	.34**		Office Lease, dated as of February 24, 2000, by and between Great Spirits Company LLC and Crescent HC Investors L.P.
	10	.35**		First Amendment to Office Lease, dated March 14, 2001
	10	.36**		Second Amendment to Office Lease, dated January 30, 2002
	10	.37**		Third Amendment to Office Lease, dated March 28, 2003
	10	.38**		Fourth Amendment to Office Lease, dated March 23, 2004
	10	.39**		Fifth Amendment to Office Lease, dated June 21, 2005
	10	.40**		First Supplemental Trust Indenture, dated as of August 15, 2005, by and between Castle Brands (USA) Corp. and JPMorgan Chase Bank, as trustee and MHW Ltd., as collateral agent
	10	.41**		First Amended and Restated Trust Indenture, dated as of August 15, 2005, by and between Castle Brands (USA) Corp., JPMorgan Chase Bank, as trustee and MHW Ltd., as collateral agent
	10	.42**		9% Secured Note dated August 15, 2005 issued by Castle Brand (USA) Corp. in favor of JPMorgan Chase Bank, as trustee
	10	.43**		General Security Agreement, dated as of June 1, 2004, by and between Castle Brands (USA) Corp. and JPMorgan Chase Bank, as trustee
	10	.44**		First Amendment to General Security Agreement, dated as of August 15, 2005, by and between Castle Brands (USA) Corp. and JPMorgan Chase Bank, as trustee
	10	.45**		Guaranty of Payment and Performance, dated June 1, 2004, from Castle Brands Inc. to JPMorgan Chase Bank, as trustee
	10	.46**		First Amendment to Guarantee of Payment and Performance, dated as of August 15, 2005, by and between Castle Brands Inc. to JPMorgan Chase Bank, as trustee
	10	.47**		Collateral Agreement, dated as of June 1, 2004, by and among MHW Ltd., Castle Brands (USA) Corp. and JPMorgan Chase Bank, as trustee

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Table of Contents

Exhibit Number				Exhibit
	10	.48**		First Amendment to Collateral Agreement, dated as of August 15, 2005, by and among MHW Ltd., Castle Brands (USA) Corp. and JPMorgan Chase Bank, as trustee
	10	.49**		Credit Facility Agreement, dated as of December 16, 2004, by and among Ulster Bank Ireland Limited, Ulster Bank Ltd. and Castle Brands Spirits Company Limited
	10	.50**		Accounts Receivable Credit Facility Agreement, dated as of April 4, 2005, by and among Ulster Bank Ireland Limited, Ulster Bank Ltd. and Castle Brands Spirits Company Limited
	10	.51**		Contract, dated as of April 1, 2005, by and between Castle Brands Inc. and BPW LLC
	10	.52**		Amended and Restated Warrant Agreement, dated September 27, 2005, by and between Castle Brands Inc. and Keltic Financial Partners, LP
	10	.53**		Distribution Agreement by and between The Roaring Water Bay Spirits Company Limited and Comans Wholesale Limited dated as of September 15, 2000
	10	.54**		Form of Indemnification Agreement to be entered into with directors
	10	.55**		Agreement, dated October 26, 2000, by and between Ulster Bank Commercial Services Limited and The Roaring Water Bay Spirits Company Limited
	10	.56**		Agreement, dated May 2, 2003, by and between Ulster Bank Commercial Services Limited and The Roaring Water Bay Spirits Company (GB) Limited
	16	.1**		Letter from Grodsky Caporrino & Kaufman, PC
	21	.1**		List of Subsidiaries of the Registrant
	23	.1		Consent of Eisner LLP, Independent Registered Public Accounting Firm
	23	.4*		Consent of Patterson Belknap Webb & Tyler LLP (included in exhibit 5.1)
	24	.1**		Power of Attorney (included on the Signature Page of the Registration Statement)

*	To be filed by amendment.

**	Previously filed

***	Confidential treatment requested for certain portions of this previously filed exhibit pursuant to Rule 406 under the Securities Act of 1933, as amended, which portions were omitted and filed separately with the Securities and Exchange Commission.